Module 3 Exam Review

Which point of the business cycle represents a peak?

• B
• C
• D
• E

Which part of the cycle represents a period of contraction?

• A
• B
• C
• D

Which statement best explains the relationship between points A and B?

• Production reaches its highest point, and then the economy begins to contract.
• Consumption reaches its highest point, and then supply begins to fall.
• Inflation reaches its highest point, and then the economy begins to expand.
• Unemployment reaches its highest point, and then inflation begins to decrease.

Which of the following most likely occurs during C?

• High inflation and high unemployment
• High production and low inflation
• Low inflation and low unemployment
• Low production and high unemployment

Which of the following describes a key difference between B and D?

• Employment rises in B but falls in D.
• Gross domestic product rises in B but falls in D.
• Inflation rises in B but falls in D.
• Unemployment rises in B but falls in D.

The inflation rate is increasing and unemployment is decreasing. The economy is likely in

• contraction
• expansion
• a peak
• a trough

Inflation is low but the unemployment rate is the highest seen in several years. Economists report signs that show in six months the economy is likely to improve. The economy is likely in

• contraction
• expansion
• a peak
• a trough

Unemployment is low and inflation is rising, but slowly. Gross Domestic Product is also rising. The Federal Reserve may increase the reserve requirement at this point in order to

• ensure that the growth continues at a brisk pace
• raise unemployment to levels that indicate a mobile workforce
• protect the public from the potential of inflation rising out of control
• encourage banks to give out more loans, fostering further economic growth

Use this image to answer the following question. When the economy is operating at point B, the U.S. Congress is most likely to follow

• expansionary fiscal policy
• contractionary fiscal policy
• expansionary monetary policy
• contractionary monetary policy

Use this image to answer the following question. When the economy is operating at point C, the U.S. Congress is most likely to follow

• expansionary fiscal policy
• contractionary fiscal policy
• expansionary monetary policy
• contractionary monetary policy