UNIT 11 CHECKPOINT EXAM Flashcards
The nation is experiencing a rapid increase in the cost of living, but wages are not keeping pace with the increase in cost. The nation is experiencing
A) stagflation.
B) disinflation.
C) stagnation.
D) inflation.
A) stagflation.
Explanation
When prices are increasing but the economy is not growing, it is stagflation.
The most common way of measuring purchasing power risk is
A) the GNP.
B) the CPI.
C) the GDP.
D) the DND.
B) the CPI.
Explanation
The Consumer Price Index measures the increase or decrease in consumer prices. GDP and GNP are both measures of economic activity. DND is a fictional acronym, which has nothing to do with this test. Do not pick things you do not recognize just because it is unfamiliar to you.
An extended period of little or no growth in GDP, wages, and prices is a period of
A) inflation.
B) stagflation.
C) stagnation.
D) indignation.
C) stagnation.
Explanation
An extended period of little or no growth period is normally referred to as stagnation. Inflation simply refers to rising prices and normally accompanies an expanding economy. Stagflation occurs when prices are rising but the economy is not expanding. Indignation is an emotional state and has nothing to do with the topic.
An economic indicator that tends to change direction following a change in the direction of GDP is a
A) leading indicator.
B) flagging indicator.
C) lagging indicator.
D) coincident indicator.
C) lagging indicator.
Explanation
Lagging indicators tend to change direction after a change in the overall economy. GDP is the most common indicator for economic activity. When you have studied for eight hours straight and can not keep your eyes open; that is a flagging indicator. Take a break, flagging indicator is not on the exam.
An economic event where consumers experience an extreme increase in the cost of goods in a short period is
A) suprainflation.
B) deflation.
C) stagnation.
D) hyperinflation.
D) hyperinflation.
Explanation
This describes hyperinflation. This is most likely experienced in nations that have dramatically increased the money supply beyond what the economy can absorb.
All of these are leading economic indicators except
A) manufacturer’s new orders.
B) duration of unemployment.
C) building permits.
D) the stock market as measured by the S&P 500.
B) duration of unemployment.
Explanation
Duration of unemployment (i.e., how long unemployed people stay unemployed) is a lagging indicator. All of the others tend to change direction before the economy changes direction.
The monthly unemployment figure is considered a
A) coincident indicator.
B) leading indicator.
C) dragging indicator.
D) lagging indicator.
A) coincident indicator.
Explanation
Unemployment is a coincident indicator. There is no dragging indicator.
When consumer prices are increasing at a steady but reasonable rate this is considered a healthy level of
A) inflation.
B) growth.
C) stagnation.
D) wage increases.
A) inflation.
Explanation
Some level of inflation is considered inevitable in a healthy economy. If inflation becomes extreme, and is out of line with economic growth, it becomes a concern.
The most commonly referenced indicator of economic activity is
A) Dow.
B) GNP.
C) GDP.
D) CPI.
C) GDP.
Explanation
The most commonly referenced economic indicator that measures overall economic activity is gross domestic product. Gross national product is not covered with anywhere near the frequency of GDP. CPI is a measure of inflation, not activity. Dow is a company or a set of indices, but not a measure of economic activity.
The economic indicator that reflects activity of U.S. entities without regard to where the activity takes place is
A) GDP.
B) CPI.
C) FUN.
D) GNP.
D) GNP.
Explanation
This is a description of gross national product. GDP measures activity within the U.S., regardless if it is domestic entity or not. CPI is the primary inflation measure. FUN is just a word. Do not pick something you do not recognize just because it is unfamiliar.
