Economic Cycle Stages Quiz

The phase of the business cycle following a recession, characterized by rising economic activity, increasing consumer confidence, and growing investment. It is often marked by a decline in unemployment and a pickup in exports.

The phase of the business cycle where the economy experiences sustained growth in output, employment, and consumer spending. It is characterized by low inflation and a strong stock market. However, this peak activity may eventually lead to inflationary pressures.

A phase of the business cycle where the economy slows down after a period of rapid expansion. This can be recognized by declining economic growth, slowing job creation, and a possible downturn in consumer spending.

A decline in economic activity often distinguished by negative growth in output, income, and employment. It's commonly associated with high unemployment, low consumer confidence, and a drop in market prices.

A central bank's strategy to stimulate economic activity during a recession or economic slowdown. It involves lowering interest rates, increasing the money supply, or taking other measures to make it easier for businesses and individuals to borrow money and invest.

A central bank's strategy to control inflation or cool down an overheated economy during periods of strong economic growth. This involves raising interest rates, reducing the money supply, and making borrowing more expensive.

Government policies used to influence the economy, particularly through spending and taxation. During recession, they often increase spending to boost demand and lower taxes to encourage spending. During expansion, they may decrease spending and raise taxes to curb inflation.

The stock building stage of the economic cycle can be characterized by increased inventory investment. This usually occurs when the economy is on an upswing with high sales and optimistic business expectations.

When GDP increases, demand for goods and services rises, leading to higher prices. However, a moderate rise in prices is considered normal during economic growth as wages and spending increase.

Rapid economic growth can lead to very high inflation. This occurs because increased demand for goods and services outpaces the economy's ability to produce them.

This occurs when there's a general decrease in price levels due to low demand, often associated with economic downturns. It's the opposite of inflation.

This describes a situation where high inflation coincides with stagnant growth and unemployment. This is a complex scenario where the economy seems to be stuck in a rut.

These indicators are designed to help predict future economic conditions, as they often change before the general economy does. They're crucial for forecasting and making proactive decisions.

Investing in companies with low valuations compared to their historical performance or industry peers. This strategy seeks undervalued stocks with strong fundamentals.

Focuses on companies with high growth potential, even if their valuations are high. This strategy aims to capture future earnings growth, often in rapidly developing sectors.

A combination of value and growth investing strategies to create a more balanced portfolio. It seeks to balance risk and reward by investing in both undervalued and high-growth companies.

Invest in companies with strong potential for above-average earnings or revenue growth, regardless of current valuation. This strategy often focuses on companies with innovative products or services.

Utilizes metrics like low price-to-earnings ratio, low price-to-book ratio, high dividend yield, and high earnings yield. Aims to identify undervalued companies with strong fundamentals.

A valuation metric that measures the ratio of a company's market capitalization to its net income. A lower P/E ratio generally indicates a more undervalued stock.

A valuation metric that compares a company's market capitalization to its operating cash flow. A lower PCF ratio suggests that the company is generating more cash flow relative to its market value.

A valuation metric that compares a company's market capitalization to its book value. A lower PBV ratio indicates that the market is valuing the company at a discount to its book value.

A financial metric that represents the percentage of a company's earnings that are paid out to shareholders as dividends. A higher dividend yield suggests a more attractive investment for income-seeking investors.

A direct relationship means that as one indicator increases, GDP growth also tends to increase. For example, higher consumer spending usually leads to higher GDP growth.

An indirect relationship doesn't always follow a clear pattern. It's more complex and might even have a negative impact on GDP growth. For example, rising inflation can hurt GDP growth.

A positive correlation means that as one indicator changes, GDP growth changes in the same direction. For example, higher consumer confidence often leads to higher GDP growth.

A negative correlation means that as one indicator increases, GDP growth tends to decrease. An example is how rising inflation can lead to lower GDP growth.

The Purchasing Managers Index (PMI) measures business activity in the manufacturing sector. A higher PMI suggests businesses are optimistic and expanding, which is good for GDP growth.

Durable goods orders are orders for products designed to last a long time, like cars or appliances. These orders are a good indicator of future economic activity and can impact GDP growth.

Consumer spending is a major driver of GDP, so changes in consumer confidence can have a big impact on GDP growth. Higher consumer confidence tends to lead to more spending and therefore stronger GDP.

The balance of trade (exports minus imports) affects a country's GDP through net exports. A trade surplus (more exports than imports) is good for GDP, while a deficit (more imports than exports) hurts GDP.

The current account balance encompasses a country's trade in goods and services, investment income, and current transfers. A surplus can boost GDP indirectly by attracting foreign investment, while a deficit might put downward pressure on GDP.

Inflation, measured by the Consumer Price Index (CPI), can indirectly affect GDP. Low inflation is generally good for GDP growth, as it allows for more consumer spending. But high inflation can hurt GDP by reducing purchasing power.

Earnings Before Taxes (EBT) reflects a company's profitability before taxes, considering operating expenses and interest.

Measures a stock's price volatility compared to the overall market. A beta of 1 means the stock moves in line with the market, above 1 signifies greater volatility, and below 1 indicates less volatility.

The portion of a company's shares available for public trading, excluding shares held by insiders or major shareholders.

A method of valuing a company by multiplying its current share price by the total number of outstanding shares. It gives a quick estimate of the company's total value.

The first currency in a currency pair, representing the amount of the base currency needed to buy one unit of the counter currency.

The second currency in a currency pair, representing the currency being bought.

Transactions with a delivery date two days after the trade date.

Transactions with a delivery date more than two days after the trade date.