11 final

Question 1

business cycle

Answer 1

cyclic fluctuation in the level of economic activity; the four stages of the cycle are expansion, peak, recession, and trough

Question 2

GDP

Answer 2

the value of all finished goods and services produced within a country during a year’s time; includes the value of goods made by all citizens and foreigners located within that country

Question 3

GNP

Answer 3

the value of all finished goods and services produced by a nation’s citizens during a year’s time; includes items produced by citizens outside the nation’s borders, but does not include items produced by foreigners within the country

Question 4

depression

Answer 4

an unusually severe or long-lasting recession

Question 5

leading indicator

Answer 5

component of the economy that usually changes before the rest of the economy

Question 6

CPI

Answer 6

a tool used to measure the growth of inflation, based on the average price consumers pay for specific goods and services; prices are compared to a base period arbitrarily

Question 7

Base Period

Answer 7

a period that serves as a reference point to which prices are compared in the Consumer Price Index

Question 8

Stagflation

Answer 8

economic condition in which high inflation is combined with high unemployment, resulting in stagnation of productivity

Question 9

expansion

Answer 9

that part of the business cycle in which the economy is growing, characterized by an increased in GNP and low unemployment rates; also known as the boom

Question 10

peak

Answer 10

that part of the business cycle at which expanding economy reaches its high point before declining into a recession

Question 11

recession

Answer 11

a period in which the economy declines, or recedes; an economy usually has to slide at least six months before economists classify it as being in a recession; that part of a business cycle following a peak

Question 12

trough

Answer 12

that part of the business cycle at which a receding economy reaches its lowest point before recovering

Question 13

demand-pull inflation

Answer 13

Inflation caused by demand becoming greater than supply, forcing up the prices that consumers must pay

Question 14

Cost-push inflation

Answer 14

inflation caused by rising production costs that result in businesses increasing their prices

Question 15

The american economy continued to decline from 1930-1980 until President Reagan implemented policies based on supply-side economics

Answer 15

the theory that reduction of taxes makes more money available for private investment in capital and research, thereby increasing productivity

Question 16

causes of modern prosperity

Answer 16

1. it is based on competition, a rivalry which lowers the prices and improves the quality of goods
2. it offers personal, individual rewards for hard, intelligent work
3. it permits and encourages entrepreneurs to invest in industry and commerce
4. it makes possible private saving and the acquiring of private property
5. it functions without the stifling control used by central political bureaucracies
6. it encourages inventions and the development of technology