Business cycle forecasting in general, and turning-point forecasting in particular, is normally based on data adjusted with respect to seasonal and trend components. Thus, the analysis might focus on cyclical properties; in fact, many procedures require stationary data.
Business Cycles and Forecasting Questions and Answers Grade 12
Activity 1
Study Figure 2.5 below and answer the questions that follow
Figure 2.5 Business cycles
- Define the term business cycle. (3)
- Indicate which indicator is represented by T. (2)
- What is measured by the horizontal axis? (2)
- At which point did the economy reach a peak and a trough? (4)
- Identify the four phases into which the business cycle is divided in the above illustration. (8)
- How is the length measured in the above business cycle? (2)
- Explain lagging and coincident indicators used in the forecasting of business cycles. (2 × 4) (8)
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Activity 2
Study the cartoon below and answer the questions that follow:
- What is the message behind the cartoon? (2)
- Why do you think that unemployment will not lead to an economic lift off? (2)
- To which forecasting indicator does unemployment refer? (2)
- How would you describe the recovery phase of a typical business cycle? (2)
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Activity 3
Discuss the monetarist approach as a cause of business cycles. [8]
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Activity 4
Discuss the trend line in the forecasting of business cycles. [8]
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