True/False
Indicate whether the sentence or statement is true
or false.
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1.
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Economic growth refers to a steady increase in the production of goods and services in
an economic system.
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2.
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One
component of gross domestic product is the value of a country’s exports plus the value of the
imports into the country.
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3.
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The
more goods and services produced, the healthier an economy is considered to be.
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4.
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Mikayla is a 14-year-old student. She would not be considered part of the labor force
in the United States.
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5.
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In
the United States, all people over the age of 21 who do not have a full-time, paying job are
considered “unemployed.”
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6.
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An
ability to produce more goods and services makes it possible to reduce the number of hours in a
workweek.
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7.
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Stanley receives a monthly social security check from the U.S. government. This would
not be counted when measuring Stanley’s personal income.
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8.
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Business cycles are the recurring ups and downs of gross national
product.
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9.
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During periods of deflation, prices drop so demand increases greatly.
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10.
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The
money for capital projects comes from two main sources: stock investments and bonds.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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11.
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GDP
measures a country’s economic output during a. | one week. | b. | one
month. | c. | one year. | d. | five
years. | | |
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12.
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GDP
does not include a. | consumer
spending for food. | b. | the value of the work you do for
yourself. | c. | government spending to pay employees. | d. | business
spending for equipment. | | |
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13.
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Which
of these items would be counted when measuring GDP? a. | tomatoes still
growing on the vine | b. | sheets of steel | c. | rolls of raw
fabric | d. | a fully assembled washing machine | | |
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14.
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Dividing GDP by the total population of a country results in that
country’s a. | GDP per
capita. | b. | gross GDP rate. | c. | unemployment
rate. | d. | personal income per capita. | | |
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15.
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All
of the following people are part of the labor force EXCEPT a. | Martin, who was
laid off from his accountant job last week and has answered three want ads this
week. | b. | Cody, who works as a supervisor in a nonprofit
organization. | c. | Lindsay, a stay-at-home mom with two
children. | d. | Marie, a 17-year-old who works part-time at the corner drug
store. | | |
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16.
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If
wages increase faster than gains in productivity, prices will rise. Why? a. | Business owners
will demand higher prices because they know workers have more money to
spend. | b. | Because demand will increase for all
products. | c. | Because the cost of producing goods
decreases. | d. | Because the cost of producing goods
increases. | | |
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17.
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In
the early 1890s, the average employee in the United States worked about how many hours per
week?
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18.
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Which
of the following probably would result in a DECREASE in worker productivity? a. | An office
replaces its 10-year-old computers with brand-new machines and the latest
software. | b. | A company pays for raises for top management by laying off 60
percent of its employees. | c. | A factory trains workers how to use shop equipment more
efficiently. | d. | The boss promises a bonus to all employees who come into work
over the weekend to finish an important project. | | |
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19.
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Retail sales a. | usually remain stable in times of economic
growth. | b. | indicate general consumer spending patterns in the
economy. | c. | include the sales of services bought by
businesses. | d. | all of the above | | |
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20.
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At
the peak of the business cycle is a. | recovery. | b. | depression. | c. | recession. | d. | prosperity. | | |
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21.
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Which
of the following is NOT a characteristic of a depression? a. | high demand for
goods and services | b. | a prolonged period of high
unemployment | c. | business failures | d. | GDP falls
rapidly | | |
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22.
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If
GDP growth slows for at least ____ quarter(s) in a calendar year, the economy is probably in a
recession.
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23.
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A
recession often affects some groups of workers in related businesses. The drop in related businesses
is called a. | the ripple
effect. | b. | the business cycle. | c. | the placebo
effect. | d. | the halo effect. | | |
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24.
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Inflation a. | increases the buying power of the
dollar. | b. | always discourages economic growth. | c. | tends to
decrease wages. | d. | is most harmful to people living on fixed
incomes. | | |
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25.
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Suppose wages are going up faster than prices. What is the most likely
effect? a. | Consumers will
begin to buy more products, businesses will need to hire more workers, and unemployment will go
down. | b. | A time of economic recovery will begin
soon. | c. | Unemployment will worsen because businesses will tend to hire
fewer workers. | d. | A period of deflation will begin
soon. | | |
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26.
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The
interest rate banks charge their best business customers is the a. | discount
rate. | b. | prime rate. | c. | mortgage
rate. | d. | T-bill rate. | | |
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27.
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The
major influence on the level of interest rates is a. | the supply and demand for money. | b. | the unemployment
rate. | c. | the consumer price index. | d. | the rate of
inflation. | | |
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28.
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Which
of the following is an example of a capital project? a. | A large
corporation gives all employees a 5 percent wage increase. | b. | A small office
buys several boxes of paper for the printer. | c. | A mid-size
company restocks the supply cabinet with pencils and markers. | d. | A small business
purchases two new pickup trucks. | | |
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29.
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If
you purchase a corporate or government bond, you are a(n) a. | creditor. | b. | stockholder. | c. | entrepreneur. | d. | partner. | | |
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30.
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The
money people deposit in banks and other financial institutions a. | is lent to
businesses to fund capital projects. | b. | generally earns interest for the
depositors. | c. | is an important factor in the economic growth of a
country. | d. | all of the above | | |
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Completion
Complete each sentence or
statement.
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31.
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____________________ is the production output in relation to a unit of input, such as
a worker.
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32.
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Personal ____________________ refers to salaries and wages as well as investment
income and government payments to individuals.
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33.
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____________________ is a period in the business cycle when demand begins to decrease,
businesses lower production, and GDP growth slows for two or more quarters of the calendar
year.
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34.
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A
bond represents ____________________ for an organization.
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35.
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When
a government spends less than it takes in, a budget ____________________ is the result.
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Short Answer
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36.
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Briefly explain the difference between a recession and a depression.
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