MACROECONOMICS-REVIEW: CYCLE 2-UNIT 4

Point #1 on the graph indicates a __________ of the business cycle. (The point at which real GDP is at its height of economic activity.)

• Peak

• Trough

• Contraction

• Expansion

Point #2 on the graph indicates a __________ of the business cycle. (The point at which real GDP declines after the peak.)

• Peak

• Trough

• Contraction

• Expansion

Point #4 on the graph indicates a __________ of the business cycle. (The point at which real GDP begins to increase from a low point.)

• 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

Concern about an international crisis has caused consumers to save their money and postpone big purchases. What is the immediate effect on aggregate demand, price level, and aggregate supply?

• Aggregate demand will decrease, price level decreases, and aggregate supply will decrease.

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

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

• There will be no change.