Understanding Economic Policies and Concepts

Which phase of the business cycle is characterized by increasing economic activity and employment?

• Recession

• Trough

• Expansion

• Peak

Scarcity in economics refers to:

• Unlimited resources

• Limited wants

• Limited resources and unlimited wants

• Unlimited resources and limited wants

Which of the following is an example of opportunity cost?

• The money spent on a new car

• The time spent studying instead of going out with friends

• The salary earned from a job

• The interest earned on savings

Which of the following is a characteristic of a command economic system?

• Prices determined by supply and demand

• Government ownership of resources

• Private ownership of resources

• Free market competition

Which of the following is NOT a tool of monetary policy?

• Discount rate

• Reserve requirements

• Government spending

• Open market operations

What is the effect of contractionary fiscal policy?

• Increase in government spending

• Decrease in taxes

• Decrease in aggregate demand

• Increase in inflation

During which phase of the business cycle does the economy experience a decline in GDP?

• Expansion

• Peak

• Recession

• Recovery

What does the concept of scarcity force individuals and societies to do?

• Ignore opportunity costs

• Make choices

• Increase resources

• Eliminate wants

If a student chooses to spend time working instead of studying, what is the opportunity cost?

• The money earned from working

• The time spent working

• The knowledge gained from studying

• The leisure time lost

Which type of economic system is characterized by private ownership and free markets?

• Command economy

• Traditional economy

• Market economy

• Mixed economy