1. Chapter 2 Test Review
Test is Thursday

2. Question 1
The movement of the economy between good and bad times over many years is often referred to as:
a. Inflation and deflation.
b. the economic flow.
c. economic transitions.
d. the business cycle. D

3. Question 2
We always go through each state of the business cycle and each stage lasts the same amount of time.
True False
False

4. Question 3
________ occurs when a business or government spends less than it receives in income.
a. budget deficit
b. budget shortage
c. budget over-run
d. budget surplus D

5. Question 4
________ is the measure of output in relation to a unit of input.
a. Yield
b. Profit
c. Return
d. Productivity D

6. Question 5 In the GDP formula, GDP=C+I+G+ (X-M), the M stands for
a. Net exports
b. Consumer spending
c. Value of all imports
d. Value of intermediate goods
Redo this one

7. Question 6
The most watched measure of inflation is called the ________.
a. Consumer Price Index (CPI)
b. Cost of Living Index (CLI)
c. Producer Cost Index (PCI)
d. Retail Price Index (RPI) A

8. Question 7
A person is considered unemployed if: a. They have a job that does not pay as much as they would like b. Is out of work but not looking c. Is not working, but is willing to work and is looking for work d. If they have been out of work for more than 3 months C

9. Question 8 Gross domestic product is the:
a. dollar value of all final goods and services produced in a country during one year.
b. dollar value of all goods and services produced in a country during one year.
c. price-adjusted value of all goods and services produced in a country during one year.
d. value of all final goods and services produced in, or imported to, a country during one year. A

10. Question 9
A ________ is a period of time in which demand begins to decrease, businesses lower production, unemployment begins to rise and GDP growth slows for two or more quarters of the calendar year.
a. slump
b. downturn
c. recession
d. trough c

11. Question 10 GDP divided by the population gives you what number?
a. GNP
b. GDP
c. GDP per capita
d. Productivity C

12. Question 11
What happens to the GDP formula (and the GDP) in the following situation?
A foreign government imposes a tariff that discourages its citizens from buying goods from the US.
Net exports increase causing GDP to go up
Net exports decrease causing GDP to go down
Net exports decrease causing GDP to go up
Net imports increase causing GDP to go up B

13. Question 12
What happens in the GDP formula and the GDP in the following situation?
To stimulate the economy and provide jobs, the government builds more bridges in California.
Consumer spending increases causing GDP to go up
Government spending increases causing GDP to go up
Government spending increases causing GDP to go down
Nothing—Government spending is not part of GDP B

14. Question 13
What happens in the GDP formula and the GDP in the following situation?
Due to increased incomes, Europeans buy more US goods and services.
C because Exports go up

15. Question 14 The savings rate in the United States is closest to:
b %
c %
d. 3-5% D

16. Question 15
What is the approximate GDP of the US (most recent data—not in the book)
$2 trillion
$5 trillion
$16 trillion
$30 trillion C

17. Question 16
Based on the following data—including trends, what part of the business cycle does this country appear to be in:
GDP Change
Unemployment rate
Consumer Demand
2009
+0.2%
3.1%
2010
+0.8%
3.0%
+0.5%
2011
+1.1%
2.8%
+1.2%
2012
2.6%
+1.6%
Best answer would be a recovery-slow changes

18. Question 17
Based on the following data—including trends, what part of the business cycle does this country appear to be in:
GDP Growth or decline
Unemployment Rate
Total consumer demand
2009
+0.5%
4.5%
+0.1%
2010
-0.1%
4.7%
No change
2011
4.8%
-1.2%
2012
4.9%
-2.1%
Best answer: recession

19. Question 18
This is a period in which most people who want to work are working businesses produce goods and services in record numbers, wages are good and GDP growth increases
Recession
Depression
Recovery
Prosperity
D--Prosperity

20. Question 19
What is this part of the cycle?
Recovery

21. Question 20
What is this part of the cycle?
Recovery