Economic Indicators Quiz

Which indicator will probably rise when the economy is in a recession?

• real GDP growth

• unemployment

• industrial production

• real retail sales

The broadest measure of economic activity is:

• the stock market.

• business confidence.

• real GDP.

• nonfarm payrolls.

According to Okun's rule of thumb, for every 1% fall in actual output below potential output, the unemployment rate:

• rises by 1%.

• falls by 1%.

• rises by 0.5%.

• falls by 0.5%.

Which indicator might be a good predictor of investment?

• initial unemployment claims

• consumer confidence

• business confidence

• nonfarm payrolls

Periodic fluctuations of a country's real gross domestic product (GDP) are known as:

• a recession.

• the business cycle.

• an expansion.

• a trough.

Recessions tend to be _____, and expansions tend to be _____.

• short; short

• long; long

• short; long

• long; short

Suppose that aggregate output is equal to potential output; the actual unemployment rate is:

• equal to the equilibrium unemployment rate.

• higher than the equilibrium unemployment rate.

• lower than the equilibrium unemployment rate.

• unrelated to the equilibrium unemployment rate.

Okun's rule of thumb predicts that the output gap and the unemployment rate are _____ related in a _____ ratio.

• a. positively; one-to-one

• b. negatively; less than one-to-one

• c. positively; less than one-to-one

• d. negatively; one-to-one

Analysts in your consulting firm concluded that the current rate of unemployment is less than the equilibrium rate, which leads you to conclude that:

• a. actual GDP is equal to potential GDP.

• b. actual GDP is greater than potential GDP.

• c. actual GDP is less than potential GDP.

• d. the economy is in recession.

Suppose that an economy is overheating. You would expect to see the unemployment rate:

• a. rise above the equilibrium unemployment rate.

• b. fall below the equilibrium unemployment rate.

• c. be equal to the equilibrium unemployment rate.

• d. be zero.