Measuring the Economy

Increasing spending and _____ are examples of fiscal policies.

• cutting jobs

• cutting stocks

• cutting welfare

• cutting taxes

To keep track of inflation, the government uses the

• gross national product.

• consumer price index.

• real GDP.

• NYSE.

The economy grows

• at a constant rate.

• at a constant increase.

• at a constant decrease.

• in alternating periods of growth and decline.

In response to high unemployment, the government may spend more on goods and services. This is an example of

• fiscal policy.

• inflation.

• workfare.

• public goods.

How are stock prices determined?

• supply and demand

• the New York Stock Exchange

• the Dow Jones Industrial Average

• government spending

During which ten-year period did the average cost of items grow the most?

• 1975–1985

• 1965–1975

• 1935–1945

• 1925–1935

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?

• unemployment

• store inventory

• interest rates

• inflation

Which stage of the business cycle has the highest inflation rate?

• Expansion

• Peak

• Recession

• Trough

Which statement explains how an income tax increase would help to serve an economic policy goal?

• It would increase productivity by reducing inefficiency.

• It would promote employment by encouraging investment.

• It would slow price inflation by reducing demand.

• It would reduce price levels by encouraging competition.

Which explanation best explains the effects of inflation?

• Consumers have more products to choose from.

• Inflation erodes (take away from) the purchasing power of the dollar.

• Inflation results in lower prices.

• Demand increases because prices are higher.