Measuring the Economy Econ Quiz

What is GDP?

The market value of all final goods and services produced within a nation’s borders in a given time period.

What do economists use GDP for?

To see how well a country’s economy is doing.

What happens when GDP is growing?

It creates more jobs and more business opportunities.

What happens when GDP declines?

Jobs and business opportunities decrease.

What must a good/service meet to count in GDP?

It must be a new final good, produced during the time period measured, and produced within the nation’s borders.

What is a final good?

A good not used in another product and sold for the first time.

What is an intermediate good?

A good used in the production of another good.

What is GNP?

The value of all products produced by a country’s companies, no matter where production occurs.

How is GDP calculated?

By grouping spending into the four sectors of the economy and adding them together.

Name the four sectors of the economy.

Consumption, Investment, Government Spending, Net Exports.

What is consumption?

Spending by households.

What is investment?

Spending by businesses.

What is government spending?

Products purchased by national, state, and local governments.

What are net exports?

The value of exports minus the value of imports.

What is per capita GDP?

GDP divided by total population.

What does per capita GDP show?

Each citizen’s share of GDP if divided equally.

What does per capita GDP measure?

A country’s standard of living.

What is standard of living?

The level of material comfort based on goods and services available.

What are those countries like?

More developed, better educated, and healthier.

What is the business cycle?

Periods of expanding and contracting economic activity measured by GDP changes.

What is the correct order of the business cycle stages?

Expansion → Peak → Contraction → Trough.

Name the four stages of the business cycle.

Expansion, Peak, Contraction, Trough.

What is expansion?

When GDP is growing, unemployment is low, and spending/prices increase.

What is a peak?

The highest point of GDP where growth stops.

What is contraction?

When GDP is shrinking, unemployment rises, and production decreases.

What is a trough?

The lowest point of GDP where decline stops.

What is a recession?

A contraction lasting two or more quarters (6+ months).

What is a depression?

A long period of high unemployment and low business activity.

What affects the business cycle?

Business decisions, interest rates, consumer expectations, external issues.

How do business decisions affect the cycle?

One decision can ripple through the economy and affect many other businesses.

How do interest rates affect the cycle?

Higher rates reduce spending; lower rates increase spending.

How do expectations affect the cycle?

Confidence increases spending; fear decreases spending.

How do external issues affect the cycle?

Events like natural disasters, trade restrictions, or war impact the economy.