ECON - Unit 4 Practice Test

The U.S Air Force buys 5 new fighter jets for $2 billion Which sector of the GDP equation would include this purchase?

• Consumer Spending

• Investment Spending

• Government Spending

• Net Exports

Comparing real GDP between two consecutive years is MOST useful in determining which economic measurement?

• Economic growth

• Equity

• Exchange rates

• Equilibrium price

Point #2 on the graph indicates a __________ of the business cycle.

• Peak

• Trough

• Contraction

• Expansion

A sales tax has a lower impact on a person who earns a larger income. Therefore, a sales tax is a ________________.

• progressive tax

• proportional tax

• regressive tax

• excise tax

The best definition of inflation is:

• No changes in the price level

• Fluctuations in the price level

• A rise in the price level

• A decrease in the price level

Point #4 on the graph indicates a __________ of the business cycle.

• Peak

• Trough

• Contraction

• Expansion

A market basket is generally used to

• advertise new products for companies.

• compare prices of goods between years to calculate the consumer price index.

• determine the total amount of real gross domestic product.

• compare prices of goods between competing stores.

With regards to economic growth, what is the goal of an expansionary fiscal policy?

• Decrease economic growth

• Increase economic growth

• Increase trade deficits

• Maintain current economic levels

Bob the Barber makes $400 cutting hair for the week. Is this service included in the GDP calculation?

• Yes

• No

Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?

• Consumption, Investment, Government, Net Exports

• Consumption, Investment, Government, Business expenditures

• Consumption, Interest Rates, Government, Net Exports

• Wages, Rent, Interest, Profit