Economic Indicators

The business cycle describes the fact that

• unemployment levels are constantly changing
• an economy's level of output fluctuates between times of recession and expansion.
• inflation rates are constantly changing.
• politicians usually pass laws that cause the economy to react in unpredictable ways.

In the long run, the economy of the United States has

• steadily grown over time.
• steadily declined over time.
• behaved in ways that cannot be explained by modern macroeconomists.
• experienced drastic fluctuations, but it is back to its old levels now.

The general relationship between GDP and unemployment can be described as

•  direct; meaning that an increase in one variable usually signals an increase in the other variable.
• direct; meaning that an increase in one variable usually signals no change in the other variable.
• inverse; meaning that a decrease in one variable usually signals a decrease in the other variable
• d) inverse; meaning that an increase in one variable usually signals a decrease in the other variable.

During recessions all of the following usually happen EXCEPT

• GDP decreases.
• unemployment increases.
• inflation increases.
• inflation decreases.

When the economy experiences an expansion, it is most likely the case that

• GDP is increasing, unemployment is increasing, and inflation is decreasing.
• GDP is increasing, unemployment is decreasing, and inflation is increasing.
• GDP is decreasing, unemployment is decreasing, and inflation is increasing.
• GDP is decreasing, unemployment is decreasing, and inflation is decreasing.

It is important to control the strength of expansions because

• long run growth is not desirable.
• it will help prevent recessions from happening.
• it is important to keep unemployment from getting too high.
• it is important to keep inflation from getting too high.

GDP is an important economic measurement because it 

• provides valuable data on unemployment rates
• measures the combined total of all intermediate and final goods produced. 
• measures all final goods and services produced by a country.
• includes all economic activity, including financial transactions and purchases of used goods

 Suppose a miner harvests a ton of iron ore, an iron smelter turns the iron ore into steel, and a car manufacturer turns the steel into a car.  If the miner adds a value of $1000, the iron smelter sells the steel for $3500, and the car manufacturer sells the car for $9000, how much has been added to GDP? 

• $4500
• $8000
• $9000
• $13500

 Which of the following is NOT included when calculating GDP for the United States? 

• Cars manufactured in Japan, but sold in the United States.
• Cars manufactured in the United States, but sold in Japan.
• Cars manufactured in Michigan, but sold in Minnesota
• Cars manufactured in Michigan, but sold to the government.

In order to accurately compare GDP between different years, what must be removed from GDP?

• Investment spending
• The value added amount
• Government spending
• Changes in price caused by inflation