The Business Cycle and Gross Domestic Product

Which of the following is not a component of the business cycle?

• expansion
• recession
• peak
• decline

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.

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.

During recessions all of the following usually happen EXCEPT

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

GDP is an important economic measurement because it

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

What would you conclude about an economy characterized by increased real gross domestic product, low unemployment, and increasing inflationary pressures?

• the economy is in a slow down
• the government needs to address the unemployment problem
• the economy is in the expansion phase of a business cycle
• the Fed should expand the money supply

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

When calculating GDP, which of the following is subtracted from the total?

• Consumer spending
• Business investment spending
• Imports
• Government spending

Which of the following is NOT an economic indicator used to measure the economy?

• Gross Domestic Product
• Consumer Price Index
• National Inflation Level
• Unemployment Rate