Chapter 2 – Economic Activity Practice Test

Only final goods are counted when GDP is measured. Which of the following best explains why?

• To avoid counting imports

• To prevent double-counting of production

• Because services are excluded

• To limit the role of government spending

The main cause of unemployment is:

• Too much competition in the labor force

• Reduced demand for goods and services

• Excessive worker productivity

• High inflation

If wages increase faster than gains in productivity, the result is:

• Decrease in production cost and falling prices

• Increase in production cost and rising prices

• Lower unemployment

• Higher GDP

Inflation can sometimes occur when:

• The supply of goods is greater than demand

• Wages are frozen

• The demand for goods and services exceeds supply

• Businesses cut prices to increase sales

Which of the following would NOT be included in GDP?

• A company exports books overseas

• The government buys office supplies

• You repair your own car

• A lawn service mows your yard for pay

In the U.S., the labor force consists of people above the age of:

• 21

• 18

• 16

• 14

The interest rate charged to banks by the Federal Reserve is called:

• Discount rate

• Prime rate

• Certificate of deposit rate

• T-bill rate

People who buy bonds are considered:

• Debtors

• Owners

• Creditors

• Consumers

The total amount owed by the federal government is called:

• Budget surplus

• Budget deficit

• Balanced budget

• National debt

Which type of business sells stock?

• Partnership

• Corporation

• Sole proprietorship

• All businesses sell stock