chap 8 and special 6 questions

chap 8 and special 6 questions - The time periods between...

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Econ 202 Page 171 #1 Swings in the rate of output are referred to as the business cycle. Periods of growth in the real output followed by periods of decline are characteristics. The first major phase is known as the business peak, which is when the business is operating at capacity level and GDP is growing rapidly. The second phase, which is the contraction step, occurs as business conditions slow. Here, sales decline, GDP slows, and unemployment increases. The bottom of the contraction phase is called the recessionary trough. Economic conditions improve, and then the economy enters the expansion phase. Here sales rise, GDP grows fast, and the rate of unemployment declines. Then, the expansion turns into another business peak as the cycle repeats.
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Unformatted text preview: The time periods between phases are very unpredictable and it is often hard to tell where a company is during the cycle. Page 480 #3 There would be many consequences if legislation was passed requiring all employers in the U.S. to pay dismissed workers one week of severance pay for every year they were employed. A regulation such as this makes it more costly to dismiss workers as well as making it more costly for firms to hire them. The dismissal rate of employees would decrease, along with the rate of new-hires. Firms will expand output without the help of extra workers, causing productivity to decrease. The unemployment among younger workers will increase as well....
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