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Practice Test Answers

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1
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Which statement most accurately describes the trends shown on this graph?

A
When GDP falls, unemployment rises.
B
GDP and unemployment have little to do with each other.
C
When GDP rises, unemployment rises as well.
D
GDP and unemployment rise at times of world crises.
2
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The graph demonstrates that changes in investment

A
can show if the economy is growing or shrinking.
B
have no relation to changes to the GDP.
C
occur only when the economy is growing.
D
occur only when the economy is shrinking.
3

Which best describes the economic impact of defaulting on bank loans?

A
The economy suffers because businesses are scared to take out loans.
B
The economy suffers because people have less money to spend.
C
The economy suffers because people are scared to take out loans.
D
The economy suffers because banks have less money to loan to others.
4

What are the signs of low inflation? Choose three correct answers.

A
Prices continue to increase.
B
The economy stagnates and struggles.
C
Demand steadily rises.
D
Demand steadily falls.
E
The economy grows in a healthy way.
F
Prices continue to decrease.
5

Which is an example of how a denomination is divisible?

A
Five American dollars may be worth less next year.
B
An American dollar may equal one-half of one Euro.
C
An American dollar is equal to four quarters.
D
Three American dollars may buy a small snack.
6

One fact about all currency is that it

A
grows increasingly valuable.
B
maintains a stable value.
C
has a changing value.
D
loses value over time.
7

What is the difference between inflation and deflation?

A
Inflation can result from rising demand and reduces the value of money. Deflation can result from falling demand and boosts the value of money.
B
Inflation can result from falling demand and boosts the value of money. Deflation can result from rising demand and reduces the value of money.
C
Inflation can result from rising demand and boosts the value of money. Deflation can result from falling demand and reduces the value of money.
D
Inflation can result from falling demand and reduces the value of money. Deflation can result from rising demand and boosts the value of money.
8

How do bank loans help the nation’s economy?

A
They ensure the success of new businesses.
B
They allow consumers to quickly pay off debts.
C
They ensure consumer spending and confidence.
D
They allow businesses to expand and improve.
9

Which best describes the circular flow model?

A
The model represents the changing relationships between actors.
B
The model represents the movement of money throughout the economy.
C
The model represents the flow of goods and services between sectors.
D
The model represents the interactions within sectors.
10

Which best describes why investing can be such a challenge?

A
There is never a sure way to protect investments.
B
There are no guaranteed investments.
C
All investments involve major risks.
D
All investments are totally unpredictable.
11

How do consumers’ feelings about the economy help contribute to growth?

A
Positive consumer attitudes can end a depression.
B
Positive consumer attitudes inspire increased production.
C
Positive consumer attitudes increase job prospects.
D
Positive consumer attitudes influence spending habits.
12

Does a depression always follow a recession?

A
Yes, the trough is always considered a depression.
B
No, the economy could decline quickly and bypass recession.
C
Yes, for recovery to occur, the trough must be reached.
D
No, a depression is indicated when the recession is exceptionally long.
13

Read the paragraph. Government officials in Country M have determined that they need to take action to encourage the growth of their economy. To do this, they have introduced an incentive policy that offers citizens free education. This is extended to all individuals who sign a contract agreeing to work within their specific industry for the next ten years. Country M hopes to encourage economic growth by investing in

A
resources that can be traded with other nations.
B
new technologies to produce goods that are in great demand.
C
research to develop goods that can be sold on a global scale.
D
education to reduce unemployment and increase production.
14

In the circular flow model, factors of production flow to firms. Which are the primary factors of production? Choose three correct answers.

A
capital
B
labor
C
goods
D
land
E
services

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