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    Recession and expansion

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    1) Explain what a recession is.
    2) Explain what an expansion is.
    3) Explain what Disposable Income is.
    4) Explain what an endogenous variable is.
    5) Explain what an exogenous variable is.
    6) Explain what an "autonomous" component is
    7) Explain why I= S is an equilibrium in the goods market.
    8) Explain the paradox of the Thrift.
    9) An increase in Investment will increase the multiplier. TRUE OR FALSE?
    10) Consider the IS/LM model. After a monetary expansion, list three variables that have changed.
    11) Discuss the uncontroversial final effect of a contractionary monetary policy and an expansionary fiscal policy.
    12) If IS were vertical and G increased, the crowding out were zero. TRUE OF FALSE? Explain your answer.

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    1) Explain what a recession is.
    A recession is a situation of falling National income or the aggregate demand consistently in the preceding years. It also leads to the loss of business confidence.
    Recession is a significant decline in activity spread across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP).

    2) Explain what an expansion is.
    Expansion means increase in the activity of the economy. It means increase in the business confidence and the transactions, stock market sentiment, increase in the demand for industry and service sector. Overall there is a growth in the economy.
    It also leads to employment and increase in inflation.

    3) Explain what Disposable Income is.

    If you add all the transactions in an economy you will get GDP. It will include all the value added transactions within an economy.
    Disposable income consists of all wages and salaries received by persons, self-employed and other unincorporated business income, interest and dividend income received by persons, plus unemployment insurance benefits and other transfers paid from governments to persons, minus income taxes (but not customs or sales taxes on commodities) and social security premiums paid to governments.

    Thus disposable income is the amount of an individual's total income availaible for spending left after taxes, plus any transfer payments (grants) received from the government or elsewhere.

    4) Explain what an endogenous variable is.
    An endogenous variable is an economic variable that is related to other economic variables and determines their equilibrium levels. (mathworld.com)

    An exogenous variable is an economic variable which is independent of the relationships determining the equilibrium levels, but nonetheless affects the equilibrium.

    Resource. http://mathworld.wolfram.com/EndogenousVariable.html

    Thus endogenous variable are dependent variables. These variables are explained by the other variables.

    5) Explain what an exogenous variable is.
    An exogenous variable ...

    Solution Summary

    This discusses the concepts related to recession and expansion.