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Questions and Answers
What primarily causes changes in the business cycle?
What primarily causes changes in the business cycle?
- External factors like calamities
- Interest rates (correct)
- Increased consumer spending
- Fluctuations in effective demand
How do businesses contribute to an economic expansion?
How do businesses contribute to an economic expansion?
- By reducing the level of consumer spending
- By keeping interest rates high
- By cutting back on manufacturing
- By boosting the overall supply through expanding production (correct)
What is one effect of increased interest rates on borrowing?
What is one effect of increased interest rates on borrowing?
- Only firms are less likely to borrow
- Decreased likelihood of borrowing for both firms and consumers (correct)
- Increased likelihood of borrowing for both firms and consumers
- No impact on borrowing behavior
How does a decrease in consumer expectations affect the economy?
How does a decrease in consumer expectations affect the economy?
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What causes a downward spiral in an economy according to the text?
What causes a downward spiral in an economy according to the text?
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How do high investments impact the business cycle?
How do high investments impact the business cycle?
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