economics test

If a country has a trade deficit, does it indicate that the country has a serious problem?

No. Trade deficits occur when a country's investment spending is higher than its level of saving.

When the value of a nation's imports exceeds the value of that nation's exports, the nation is said to have:

a trade deficit

When an economy is operating between the business cycle trough and the business cycle peak, it is called:

an expansion

Fiscal and monetary policies:

are used to correct for short-term economic fluctuations.

A contraction in the business cycle is:

called a recession

Fiscal policy involves:

deliberate changes in taxation and/or government spending

The trade balance is the difference between the value of the:

goods and services that a country sells to other countries and the value of the goods and services it buys in return.

The paradox of thrift highlights:

how individual decisions to save more may worsen a recession.

During a recession, one will often observe

rising unemployment rates and falling aggregate output.

When an economy is in an expansion, unemployment

tends to fall, and overall prices tend to rise