Chapter 2 Test Review

What does GDP stand for in economic terms?

• Gross Domestic Product

• General Domestic Product

• Global Domestic Product

• Gross Development Product

Which of the following is a component of GDP?

• Personal Savings

• Government Spending

• Stock Market Investments

• Foreign Aid

What is the primary difference between inflation and deflation?

• Inflation is a decrease in prices, while deflation is an increase in prices.

• Inflation is an increase in prices, while deflation is a decrease in prices.

• Inflation and deflation both refer to price increases.

• Inflation and deflation both refer to price decreases.

Which phase of the business cycle is characterized by increasing economic activity and employment?

• Recession

• Trough

• Expansion

• Peak

How does a high unemployment rate typically affect personal income trends?

• Increases personal income

• Decreases personal income

• Has no effect on personal income

• Stabilizes personal income

What is the impact of increased retail sales on the economy?

• It indicates a slowing economy.

• It suggests economic growth.

• It leads to higher unemployment.

• It causes deflation.

Which of the following is NOT a component of GDP?

• Consumer Spending

• Net Exports

• Business Investments

• Stock Market Prices

What typically happens to inflation during a recession?

• Inflation increases

• Inflation decreases

• Inflation remains constant

• Inflation becomes unpredictable

Which of the following best describes a peak in the business cycle?

• The lowest point of economic activity

• The highest point of economic activity

• A period of economic decline

• A period of economic recovery

How can personal income trends affect consumer spending?

• Higher personal income leads to decreased consumer spending.

• Lower personal income leads to increased consumer spending.

• Higher personal income leads to increased consumer spending.

• Personal income trends have no effect on consumer spending.