AnswersEconomics and Personal FinanceMacroeconomics

Practice Test Answers

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1
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The graph demonstrates that changes in investment

A
have no relation to changes to the GDP.
B
can show if the economy is growing or shrinking.
C
occur only when the economy is growing.
D
occur only when the economy is shrinking.
2
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In the circular flow model, factors of production flow to firms. Which are the primary factors of production? Choose three correct answers.

A
goods
B
land
C
capital
D
services
E
labor
3

Does a depression always follow a recession?

A
No, a depression is indicated when the recession is exceptionally long.
B
Yes, for recovery to occur, the trough must be reached.
C
No, the economy could decline quickly and bypass recession.
D
Yes, the trough is always considered a depression.
4

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

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

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 are totally unpredictable.
D
All investments involve major risks.
6

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.
7

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

A
Positive consumer attitudes inspire increased production.
B
Positive consumer attitudes increase job prospects.
C
Positive consumer attitudes can end a depression.
D
Positive consumer attitudes influence spending habits.
8

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
education to reduce unemployment and increase production.
C
new technologies to produce goods that are in great demand.
D
research to develop goods that can be sold on a global scale.
9

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

A
The economy suffers because people have less money to spend.
B
The economy suffers because banks have less money to loan to others.
C
The economy suffers because people are scared to take out loans.
D
The economy suffers because businesses are scared to take out loans.
10

How do bank loans help the nation’s economy?

A
They ensure consumer spending and confidence.
B
They allow consumers to quickly pay off debts.
C
They ensure the success of new businesses.
D
They allow businesses to expand and improve.
12

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

A
When GDP falls, unemployment rises.
B
When GDP rises, unemployment rises as well.
C
GDP and unemployment have little to do with each other.
D
GDP and unemployment rise at times of world crises.

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