Economics Test 12-14
Which year shows a trough in the business cycle?
2009
Consumption + Investment + Government + Net Exports = ?
Gross Domestic Product
Based on this information, which change occurred between Year 1 and Year 2?
Inflation increased.
How does a high unemployment rate sustained over a long period of time affect the economy?
It leads to a decrease in the amount of currency circulating in the economy.
How would the flows in this diagram most likely be affected by higher personal income tax rates?
Line 3 would decrease.
How would this diagram most likely be affected by taxes that are taken out of workers' wages and given to the government?
Money available to businesses would decrease.
Which stage of the business cycle has the highest inflation rate?
Peak
Which phrase best explains the difference between nominal and real Gross Domestic Product (GDP)?
Real GDP is adjusted for inflation.
A country's unemployment rate increased to 9.3%. Inflation grew at an average of just 0.2%. Where is this country in the business cycle?
Recession
The U.S. Department of Defense purchases a new fighter plane. Which statement best describes how the circular economic flow will be affected by this action?
Revenue for businesses will increase.
Which statement describes the relationship between the consumer price index (CPI) and the business cycle?
The CPI decreases during periods of contraction.
How is the standard of living affected when inflation occurs rapidly?
The standard of living declines because wages fail to keep up with rising prices.
Use the information to answer the question. According to the Bureau of Labor Statistics, unemployment in the United States rose steadily from a low of 4.4% in March 2007 to a peak of 10.2% in October 2009. Which statement best supports this information?
The trend indicated that the country was experiencing a period of economic recession.
Which stage of the business cycle describes the period when the real gross domestic product (GDP) stops falling?
Trough
Which economic indicator best shows that deflation is occurring?
a decline in prices due to the lack of consumer spending
Which statement best defines deflation?
a persistent fall in the general price level of goods and services
Which government action would most likely increase the flow of money from households to businesses?
a reduction of personal income tax
Which option best matches a gross domestic product (GDP) trend with a stage in the business cycle?
accelerating GDP growth - period of expansion
If the U.S. economy has been in recession for ten months, how can the Federal Reserve most quickly expand the money supply?
by purchasing government bonds
How are the real prices of these items determined?
by using the consumer price index for 1962
Which term is defined as unemployment that occurs during a recession?
cyclical
What is the most likely cause of the change in the CPI between 2008 and 2009?
decrease in inflation
Which action by the government is an expansionary monetary policy?
decreasing the reserve requirement
Use the excerpt below to answer the question. Real gross domestic product—the output of goods and services produced by labor and property located in the United States—increased at an annual rate of 3.1 percent in the third quarter of 2012. . . . In the second quarter, real GDP increased 1.3 percent. —Bureau of Economic Analysis, "National Income and Product Accounts," 2012 Which part of the business cycle is described by this excerpt?
expansion
What does the information on this graph show?
fluctuations of a nation's economy
What is the most likely result of adopting polices to achieve full employment?
increase in inflation rates
If the Federal Reserve chooses to buy bonds, which additional action by the Federal Reserve would be consistent with this strategy?
increasing the discount rate
Nominal prices, sometimes called current dollar prices, measure the dollar value of a product at the time it was produced. Real prices are adjusted for general price-level changes over time. Based on this information, which economic measure is best applied to determine real prices?
inflation
What is one factor that led to the trend shown in this table?
participation in a global economy
Inflation would benefit which group of people the most?
people who are in debt
Which measurement best indicates the economic growth of a country?
per capita Real Gross Domestic Product
This scenario describes which part of the business cycle?
recession
Which term completes the list? The Five Stages of ? 1. Growth 2. Peak 3. Recession 4. Trough 5. Recovery
the Business Cycle
Which economic indicator will be affected by a change in long-term interest rates?
the number of new homes purchased by consumers
What is one characteristic of a period of recession?
unemployment tends to rise