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Quiz 5
Economics: Unit 5
Name: __________________________________________
Date: ______________
Score: ____/30
1. What are the six macroeconomic indicators?
a) ___________________________________________
b) ___________________________________________
c) ___________________________________________
d) ___________________________________________
e) ___________________________________________
f)
___________________________________________
2. Explain what the term GDP means.
3. GDP does not include all economic activity. List two items that are not counted when measuring GDP.
a) ___________________________________________
b) ___________________________________________
4. List a nonmarket activity not counted in the GDP.
5. What is mandatory spending?
6. List a program that requires federal government spending.
7. What is discretionary spending?
8. List a program that routinely receives money from the federal government by choice.
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Quiz 5
Economics: Unit 5
9. The typical business cycle consists of the four phases. Match the correct definition with the correct business cycle
term listed below.
Expansion
______
A. A period of economic growth as measured by a rise in real GDP
Contraction
______
B. The height of an economic expansion , when real GDP stops rising
Peak
______
C. A period of economic decline marked by falling real GDP
Trough
______
D. The lowest point in an economic contraction, when real GDP stops falling
10. What phase of the business cycle can lead an economy into recession?
11. Why is the stock market considered a leading indicator of economic change?
12. Why do economists measure real GDP per capita?
13. What is capital deepening and how does it contribute to economic growth?
14. How do frictional and structural unemployment differ? Give an example of each.
15. Why isn’t full employment the same as zero unemployment?
16. What is the purpose for the Consumer Price Index (CPI)?
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Quiz 5
Economics: Unit 5
17. Identify five reasons that help account for poverty.
a) ___________________________________________
b) ___________________________________________
c) ___________________________________________
d) ___________________________________________
e) ___________________________________________
18. What is a balanced budget?
19. Printing large amounts of money could cause this type of inflation.
20. Fiscal policy is the means by which a government adjusts its _______ levels and ________ rates to monitor and
influence a nation's economy.
21. How might a budget deficit be related to the national debt?
22. Classical economics states that the free market can regulate itself, whereas Keynesian economics supports this type
of interaction in the market system.
23. What was the reasoning behind the creation of the Federal Reserve?
24. The process where banks record whose account gives up money and whose account receives money when a
customer writes a check is known by this term?
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Quiz 5
Economics: Unit 5
25. The following tables list GDP data for a fictional economy in two different years. Pretend this economy only
produces these three items. What is the nominal GDP each year? Place answers in Table 1
26. Now calculate the real GDP for Year 2 using Year 1 as the base year. This means to use the Year 1 prices with the
Year 2 quantities. Use the table to the right to fill in your calculations. Place answers in Table 2
27. How much did nominal GDP for Year 2 overstate the growth in this economy? (How much larger was the Year 2
Nominal GDP than the Year 2 Real GDP?) Place answers in Table 3
Table 1: Year 1 (Nominal GDP)
Good
Price
Cookies
$2
Doughnuts
$5
Cake
$10
Quantity
50
35
15
GDP
A. _______
B. _______
C. _______
Total D.
Table 2: Year 2 (Nominal GDP)
Good
Price
Cookies
$3
Doughnuts
$7
Cake
$11
Quantity
45
40
25
GDP
A. _______
B. _______
C. _______
Total D. _______
Table 3: Year 2 (Real GDP)
Good
Cookies
Doughnuts
Cake
Quantity
45
40
25
GDP
D. _______
E. _______
F. _______
Total G. _______
Price
A. _______
B. _______
C. _______
28. Each group of words below lists one final good and some intermediate goods. Circle the one that gets included in
GDP.
a) Wheat
Flour
Bread
b) Potato Chips
Potatoes
Salt
Oil
c) Steel
Lawnmower
Plastic
Wiring
d) Lumber
Shingles
House
Concrete
e) Leather
Baseball Glove
Stitching
f) Book
Paper
Ink
Binding Material
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Quiz 5
Economics: Unit 5
29. Each item below describes an item that is part of GDP. Which component of GDP does it fit into?
(Remember: Expenditure = Consumption + Investment + Government + Net Exports)
a) ___________________
A college student buys new textbooks.
b) ___________________
A bottling company sells its soda to Japan.
c) ___________________
A new water treatment facility is purchased by the city.
d) ___________________
A business purchases a new set of computers.
30. Each item below describes an item that is part of GDP. Which component of GDP does it fit into?
(Remember: Income = Wages + Interest + Rent + Profit)
a) ___________________
After a CEO has paid all of his costs, he gets to keep $3.5 million.
b) ___________________
A manufacturing plant must make a monthly payment for its loans.
c) ___________________
Employees must work a minimum of 40 hours to get paid a salary.
d) ___________________
A coal mining business pays for the land it uses to mine from.
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