Chapter 12, 13, and 14
Review on GDP, Business Cycle,
Unemployment, Inflation, and Taxes
Question 1
What do Social Security taxes pay for?
a. benefits to federal workers and military
personnel
b. benefits to those who are unemployed
c. transportation and training expenses for lowincome people
d. benefits to older citizens, surviving family
members of wage earners, and people with
certain disabilities
Question 1
What do Social Security taxes pay for?
a. benefits to federal workers and military
personnel
b. benefits to those who are unemployed
c. transportation and training expenses for lowincome people
d. benefits to older citizens, surviving family
members of wage earners, and people with
certain disabilities
Question 2
A recession is
(a) a period of steady economic growth.
(b) a prolonged economic expansion.
(c) an especially long or severe economic
contraction.
(d) a prolonged economic contraction.
Question 2
A recession is
(a) a period of steady economic growth.
(b) a prolonged economic expansion.
(c) an especially long or severe economic
contraction.
(d) a prolonged economic contraction.
Question 3
When the economy is working properly,
what is the unemployment rate?
 A. 0 to 3 percent
 B. 8 to 10 percent
 C. 4 to 6 percent
 D. 10 to 12 percent
Question 3
When the economy is working properly,
what is the unemployment rate?
 A. 0 to 3 percent
 B. 8 to 10 percent
 C. 4 to 6 percent
 D. 10 to 12 percent
Question 4




An example of a durable good would be
A. a used car.
B. a box of cereal.
C. a paperback book.
D. a pack of baseball cards.
Question 4




An example of a durable good would be
A. a used car.
B. a box of cereal.
C. a paperback book.
D. a pack of baseball cards.
Question 5
Which of the following is an example of a final good or
service?
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A. Wheat a bakery purchases to make bread
B. Coffee beans a coffee shop purchases to make coffee
C. Lumber purchased by a construction company to use
in building houses
D. A cake purchased from a bakery for a wedding
Question 5
Which of the following is an example of a final good or
service?




A. Wheat a bakery purchases to make bread
B. Coffee beans a coffee shop purchases to make coffee
C. Lumber purchased by a construction company to use
in building houses
D. A cake purchased from a bakery for a wedding
Question 6
GDP expressed in constant, or unchanging,
prices is called

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A. real GDP.
B. nominal GDP.
C. price level.
D. net national product.
Question 6
GDP expressed in constant, or unchanging,
prices is called




A. real GDP.
B. nominal GDP.
C. price level.
D. net national product.
Question 7
If Bob loses his job at the GM plant because car
manufacturing is slow due to a downturn in the
economy, you can conclude that he is


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
A. cyclically unemployed.
B. structurally unemployed.
C. seasonally unemployed.
D. frictionally unemployed.
Question 7
If Bob loses his job at the GM plant because car
manufacturing is slow due to a downturn in the
economy, you can conclude that he is




A. cyclically unemployed.
B. structurally unemployed.
C. seasonally unemployed.
D. frictionally unemployed.
Question 8
How is the federal income tax a progressive tax?
(a) The higher the income a person has, the higher the
percentage that person pays as tax.
(b) A person with a higher income pays more money in
taxes, although the percentage he or she pays as tax is
less.
(c) Two married people who file their taxes together will
pay more taxes than a single person will.
(d) Children pay no taxes, regardless of whether they earn
a large income.
Question 8
How is the federal income tax a progressive tax?
(a) The higher the income a person has, the higher the
percentage that person pays as tax.
(b) A person with a higher income pays more money in
taxes, although the percentage he or she pays as tax is
less.
(c) Two married people who file their taxes together will
pay more taxes than a single person will.
(d) Children pay no taxes, regardless of whether they earn
a large income.
Question 9
The lowest point in an economic contraction
is called
 A. a peak.
 B. a recession.
 C. a trough.
 D. a depression.
Question 9
The lowest point in an economic contraction
is called
 A. a peak.
 B. a recession.
 C. a trough.
 D. a depression.
Question 10
How does the Bureau of Labor Statistics determine
how the market basket should change over time?
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A. by evaluating the census
B. by conducting a Consumer Expenditure Survey
C. by calculating the inflation rate
D. by computing the Consumer Price Index
Question 10
How does the Bureau of Labor Statistics determine
how the market basket should change over time?




A. by evaluating the census
B. by conducting a Consumer Expenditure Survey
C. by calculating the inflation rate
D. by computing the Consumer Price Index
Question 11
An example of a nondurable good is

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A. a new car.
B. a paperback book.
C. a used car.
D. a washing machine.
Question 11
An example of a nondurable good is


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
A. a new car.
B. a paperback book.
C. a used car.
D. a washing machine.
Question 12
What do taxes collected under the Federal Insurance
Contribution Act (FICA) fund?

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A. Social Security and Medicaid
B. Social Security and Medicare
C. Medicare and Medicaid
D. Medicaid and Supplemental Security Income
Question 12
What do taxes collected under the Federal Insurance
Contribution Act (FICA) fund?

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A. Social Security and Medicaid
B. Social Security and Medicare
C. Medicare and Medicaid
D. Medicaid and Supplemental Security Income
Question 13
Which is an example of discretionary spending?

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A. Social Security
B. Medicaid
C. Medicare
D. Education
Question 13
Which is an example of discretionary spending?

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A. Social Security
B. Medicaid
C. Medicare
D. Education
Question 14
What is an entitlement?

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A. a social welfare program providing benefits to
people who meet certain eligibility requirements
B. a social welfare program paying bills for government
spending such as supplies and utilities
C. a social welfare program spending funds over which
legislators have direct control
D. a social welfare program providing payments that
the government receives for certain services
Question 14
What is an entitlement?




A. a social welfare program providing benefits to
people who meet certain eligibility requirements
B. a social welfare program paying bills for government
spending such as supplies and utilities
C. a social welfare program spending funds over which
legislators have direct control
D. a social welfare program providing payments that
the government receives for certain services
Question 15
In a typical business cycle, what stage
immediately follows a peak?

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A. contraction
B. trough
C. expansion
D. growth
Question 15
In a typical business cycle, what stage
immediately follows a peak?

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A. contraction
B. trough
C. expansion
D. growth
Question 16
Which term matches this definition:
A general increase in prices
Question 16
Which term matches this definition:
A general increase in prices
Inflation
Question 17
Which term matches this definition:
Taking tax payments out of an employee’s
pay before he or she receives it
Question 17
Which term matches this definition:
Taking tax payments out of an employee’s
pay before he or she receives it
Withholding
Question 18
Which term matches this definition:
Spending on certain programs that is
required by existing law
Question 18
Which term matches this definition:
Spending on certain programs that is
required by existing law
Mandatory Spending