Questions and Answers
What does speculative behavior in financial markets during the peak phase of the business cycle contribute to?
Asset bubbles
What measures may central banks take during a recession to tighten the money supply?
Raising interest rates or reducing monetary stimulus
What impact does reduced borrowing and investment have during a recession?
Job losses and decline in economic output
What is a consequence of a lack of confidence in the economy during a recession?
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What type of measures may central banks implement to combat a recession?
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What happens as the money supply expands and interest rates decrease during the trough phase of the business cycle?
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What is the role of central banks in shaping the various phases of the business cycle?
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How are money and credit conditions related to the business cycle?
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What impact does asset price recovery have as the economy stabilizes during a business cycle trough?
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How do businesses and consumers typically respond when credit becomes less accessible and more expensive?
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During the peak phase of the business cycle, speculative behavior can contribute to asset bubbles.
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Central banks may implement monetary policies to tighten the money supply during the peak phase of the business cycle.
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As the economy stabilizes during the trough phase, asset prices start to decline further.
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