Unit 11 Quiz Deck Flashcards

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1
Q

Several months of slow economic growth and rising unemployment have characterized the economy. Market analysts would describe this as a period of

A) inflation.
B) deflation.
C) stagnation.
D) stagflation

A

C) stagnation.

Stagnation is defined as prolonged periods of slow or little economic growth accompanied by high unemployment.

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2
Q

Economic reports show that there is a general rise in prices for consumer goods and a high unemployment rate occurring simultaneously. This combination can best be described as

A) stagnation.
B) deflation.
C) stagflation.
D) inflation.

A

C) stagflation

Stagflation is the term used to describe the unusual combination of inflation (a rise in prices) and high unemployment (stagnation). This generally occurs when the economy isn’t growing (there is a lack of consumer demand and business activity), yet prices for goods are still rising.

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3
Q

Which of the following is a leading indicator?

A) Wages
B) Corporate profits
C) Gross domestic product
D) New orders for consumer goods

A

D) New orders for consumer goods

New orders for consumer goods is a leading indicator, foretelling future economic activity (the actual purchase of those goods). Wages and gross domestic product are coincident indicators. Corporate profits are lagging indicators.

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4
Q

The measure of the inflation rate is

A) the S&P 500 Index.
B) the EAFE Index.
C) the business cycle.
D) the Consumer Price Index.

A

D) the Consumer Price Index.

Inflation is an increase in prices over time. The consumer price index measures the price of a basket of goods. When comparing the value of this basket of goods, we can identify whether there’s inflation or deflation occurring.

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5
Q

A measure of a nation’s citizen’s economic activity is

A) gross national product.
B) Consumer Price Index.
C) gross domestic product.
D) S&P 500 Index.

A

A) gross national product.

The gross national output is a measure of only the economic output of a country’s citizens and companies, regardless of location. The gross domestic product measures all the output only within a nation’s border

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6
Q

An analyst is trying to determine upcoming economic activity to better determine her recommended investment strategy. She would be most interested in

A) coincident indicators.
B) coterminous indicators.
C) lagging indicators.
D) leading indicators.

A

D) leading indicators.

When someone wants to know what future economic activity may be, she would be most interested in leading indicators. These indicators move in advance of economic activity. Coincident indicators move along with economic activity, and lagging indicators follow economic activity. There is no such thing as a coterminous indicator.

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7
Q

The U.S. gross domestic product is best described as

A) all goods and services produced within the nation.

B)all goods and services produced domestically but sold overseas.

C) all services produced in the nation only.

D) all goods produced in the nation minus the value of all services produced

A

A) all goods and services produced within the nation.

The U.S. gross domestic product is best described as all goods and services produced within the nation. Consumption or sales of the goods and services domestically or overseas is not a factor when calculating GDP.

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8
Q

All the following are leading indicators except

A) stock prices.
B) personal income.
C) the money supply.
D) new orders.

A

B) personal income.

The money supply, new orders, and stock prices are all leading indicators. These increase in advance to an increase in economic activity. Personal income, however, is a coincident indicator moving along with economic activity.

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9
Q

The consumer price index is a measure of

A) the change in prices.
B) the change in bond yields.
C) the change in the value of equities.
D) the change in economic output.

A

A) the change in prices.

The consumer price index is a measure of the prices of goods. When compared over time, if the prices are increasing, the economy is experiencing inflation. If the prices are decreasing, the economy is experiencing deflation

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10
Q

Economic growth has slowed to a halt with little consumer demand, but prices for goods and services are still rising. This is known as economic

A) deflation.
B) contraction.
C) stagflation.
D) stagnation.

A

C) stagflation.

When prices for goods and services are rising (inflation) during times when the economy isn’t growing (stagnation), the economy is known to be in a period of stagflation

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