True/False
Indicate whether the sentence or statement is true
or false. |
| | 1. | The purpose
of national income accounting is to determine how healthy the American economy is. |
| | 2. | The
statistics used in computing GDP are completely accurate. |
| | 3. | Gross
domestic product disregards depreciation. |
| | 4. | National
income measures all the money people have available to save or spend. |
| | 5. | Personal
income includes welfare payments and unemployment compensation. |
| | 6. | Aggregates
are the sum of individual parts in the economy. |
| | 7. | Aggregate
demand may decrease if higher taxes are imposed. |
| | 8. | Deflation
increases foreign demand for U.S. goods. |
| | 9. | Inflation
causes the purchasing power of your money to go up. |
| | 10. | If the price
of a specific product goes up, and all other prices stay the same, producers will want to supply less
to the marketplace. |
Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question. |
| | 11. | In
determining the GDP, a. | a dollar is used as the common measure. | b. | the quantity of items
produced is added up. | c. | the quality of goods is considered. | d. | both new and used goods
are included. | | |
|
| | 12. | In computing
the GDP, which category of the economy represents expenditures on tools, machines, and buildings used
to produce goods? a. | consumer
sector | c. | government
sector | b. | investment sector | d. | net exports | | | | |
|
| | 13. | Net Domestic
Product (NDP) is a better measure of the economy's productivity than GDP because it accounts
for a. | unpaid
work. | c. | quality of
goods. | b. | depreciation. | d. | government spending. | | | | |
|
| | 14. | Welfare
payments and other assistance payments that a state or the federal government makes to individuals
are called a. | net
exports. | c. | wages. | b. | corporate profits. | d. | transfer payments. | | | | |
|
| | 15. | The economic
indicator that measures the actual amount of money income that people have to save or spend is
called a. | national
income. | c. | disposable personal
income. | b. | personal income. | d. | net domestic product. | | | | |
|
| | 16. | When
inflation occurs, the purchasing power of the dollar a. | goes
down. | c. | is not
affected. | b. | goes up. | d. | cannot be measured. | | | | |
|
| | 17. | Which of the
following provides a point of comparison for current prices? a. | market
basket | c. | base
year | b. | price
deflator | d. | price
index | | | | |
|
| | 18. | The consumer
price index compares a. | quality of goods. | c. | price levels. | b. | income
levels. | d. | quantity of
goods. | | | | |
|
| | 19. | Which of the
following is likely to follow an increase in the producer price index ? a. | deflation | c. | shortages of
goods | b. | increase in the consumer price index | d. | increase in purchasing power | | | | |
|
| | 20. | Gross
domestic product that has been adjusted for inflation is called a. | a base
year. | c. | real
GDP. | b. | a price
deflator. | d. | deflation. | | | | |
|
| | 21. | Aggregate
demand is related to a. | price. | c. | supply. | b. | price level. | d. | savings. | | | | |
|
| | 22. | As the price
level in the nation's economy decreases, a. | purchasing power increases. | c. | supply increases. | b. | purchasing power
decreases. | d. | foreign demand on goods
decreases. | | | | |
|
| | 23. | With
inflation, the purchasing power of money a. | goes up. | c. | is nonexistent. | b. | is not
affected. | d. | goes
down. | | | | |
|
| | 24. | Which of the
following describes what happens when the price level goes up and wages do not? a. | producers will want to
supply less to the marketplace | b. | producers will want to supply more to the
marketplace | c. | overall profits will decrease | d. | profits will not be
affected | | |
|
| | 25. | What is
determined when the aggregate demand curve crosses the aggregate supply curve? a. | equilibrium
price | c. | aggregate
demand | b. | aggregate supply | d. | GDP price deflator | | | | |
|
| | 26. | An economic
boom is a. | a period of
prosperity. | c. | a sudden drop in stock
prices. | b. | the same thing as a trough. | d. | a downward trend in the economy. | | | | |
|
| | 27. | When GDP
levels off and begins to decline, the economy is entering a. | a peak part of the
business cycle. | b. | an economic boom. | c. | the contraction part of
the business cycle. | d. | a depression. | | |
|
| | 28. | Any period
of at least six months, during which real GDP does not grow is a. | an
expansion. | c. | a
trough. | b. | a recession. | d. | a depression. | | | | |
|
| | 29. | The increase
in economic activity that follows the lowest point in the business cycle is called a a. | recovery. | c. | depression. | b. | trough. | d. | peak. | | | | |
|
| | 30. | Which of the
following describes the United States economy in the 1990s? a. | small ups and
downs | c. | prolonged
growth | b. | recurring recessions | d. | serious downturn | | | | |
|
Completion
Complete each sentence or
statement. |
| 31. | ____________________ is the prolonged rise in the general price level of goods and
services.
|
| 32. | ____________________ is the real goods and services that money can buy.
|
| 33. | The group of
items used to compile the consumer price index is called a ____________________.
|
| 34. | Most of the
prices included in the ____________________ are in mining, manufacturing, and
agriculture.
|
| 35. | The
____________________ includes prices for food, housing, transportation, clothing, education,
recreation, and medical care.
|
| 36. | A
____________________ is a period when millions are out of work and many businesses
fail.
|
| 37. | Peaks and
troughs are clear phases of a ____________________.
|
| 38. | The ups and
downs in an economy are called _________________________.
|
| 39. | If the real
GDP does not grow for at least six months, the economy is in a ____________________.
|
| 40. | The increase
in total economic activity that follows a trough is called ____________________.
|
Matching |
| | Match
each item with the correct statement below. a. | national income accounting | b. | gross domestic
product | c. | net domestic product | d. | national
income | e. | personal income | | |
|
| | 41. | total dollar
value of all final goods and services produced in a nation in a single year |
| | 42. | total income
that individuals receive before personal taxes are paid |
| | 43. | measurement
of the national economy's performance |
| | 44. | value of the
nation's total output minus the total value lost through depreciation on equipment |
| | 45. | total income
earned by everyone in the economy |
| | Match
each item with the correct statement below. a. | inflation | b. | purchasing power | c. | consumer price
index | d. | market basket | e. | producer price
index | | |
|
| | 46. | real goods
and services that money can buy |
| | 47. | measure of
the change in price over time that U.S. producers charge for goods and services |
| | 48. | prolonged
rise in the general price level of goods and services |
| | 49. | representative group of goods and services used to compile the consumer price
index |
| | 50. | measure of
the change in price over time of a specific group of goods and services used by the average
household |
| | Match
each item with the correct statement below. a. | aggregates | b. | aggregate demand | c. | aggregate demand
curve | d. | aggregate supply | e. | aggregate supply
curve | | |
|
| | 51. | total
quantity of goods and services in the entire economy that all citizens will demand at any single
time |
| | 52. | sum of all
the individual parts in the economy |
| | 53. | graph
showing the relationship between aggregate quantity supplied and the average of all
prices |
| | 54. | real
domestic output of producers based on the rise and fall of the price level |
| | 55. | graph
showing the relationship between the aggregate quantity demanded and the average of all
prices |
| | Match
each item with the correct statement below. a. | business cycle | b. | peak | c. | recession | d. | depression | e. | expansion | | |
|
| | 56. | part of the
business cycle in which economic activity slowly increases |
| | 57. | major
slowdown of economic activity |
| | 58. | period of
prosperity in which economic activity is at its highest point |
| | 59. | irregular
changes in the level of total output measured by real GDP |
| | 60. | part of the
business cycle in which the nation's output does not grow for at least six months |