ECON - Unit 4 Practice Test

Point #1 on the graph indicates a __________ of the business cycle.

• Peak

• Trough

• Contraction

• Expansion

Point #2 on the graph indicates a __________ of the business cycle.

• Peak

• Trough

• Contraction

• Expansion

Point #4 on the graph indicates a __________ of the business cycle.

• Peak

• Trough

• Contraction

• Expansion

Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?

• Consumption, Investment, Government, Net Exports

• Consumption, Investment, Government, Business expenditures

• Consumption, Interest Rates, Government, Net Exports

• Wages, Rent, Interest, Profit

A market basket is generally used to

• advertise new products for companies.

• compare prices of goods between years to calculate the consumer price index.

• determine the total amount of real gross domestic product.

• compare prices of goods between competing stores.

The best definition of inflation is:

• No changes in the price level

• Fluctuations in the price level

• A rise in the price level

• A decrease in the price level

Generally speaking, inflation is beneficial to ________ and harmful to _________.

• sole proprietors; partnerships

• lenders; borrowers

• government; individuals

• borrowers; lenders

Comparing real GDP between two consecutive years is MOST useful in determining which economic measurement?

• Economic growth

• Equity

• Exchange rates

• Equilibrium price

Fiscal policy refers to the power of the federal government to

• Regulate interstate commerce

• Control credit

• Print money

• Tax and spend

Due to a global economic downturn, individuals are deciding to hold onto their money and delay major purchases. What is the immediate impact on aggregate demand and price level?

• Aggregate demand will increase, while price level decreases.

• Aggregate demand will decrease, lowering both real GDP and the price level.

• Aggregate demand will decrease, raising the price level and lowering real GDP.

• There will be no change.