QUESTION Who are “underemployed” workers? What will be an ideal response? ANSWER Answer: People who have part-time jobs but want to work full time, or are working for jobs they are overqualified for, are known as underemployed workers. Explanation: These people are not factored into determining the unemployment rate.
QUESTION Which of the following did NOT occur during the Great Recession? A) Homeowners lost wealth. B) Banks lost capital. C) Foreclosures decreased. D) Unemployment increased. E) Consumer demand decreased. ANSWER Answer: C Explanation: C) Foreclosure rates increased significantly as homeowners could not meet their mortgage debt obligations.
QUESTION What type of policy does the Federal Reserve System use to influence economic activity? A) fiscal B) tax C) monetary D) regulatory E) financial ANSWER Answer: C Explanation: C) Using monetary policy, the Fed can expand or limit the money supply and raise or lower interest rates.
QUESTION When considering consumers, which of the following did NOT play a role in the subprime bubble? A) the right to own property B) the right to free choice C) buyer-seller irrationality D) high interest rates E) low interest rates ANSWER Answer: D Explanation: D) Low interest rates were put in place by the […]
QUESTION At the beginning of May, Chanda paid $100 for her standard weekly grocery order. At the beginning of June, the same order cost $175. What would be the cause for this change? A) inflation B) economic stability C) hyperinflation D) deflation E) disinflation ANSWER Answer: C Explanation: C) Hyperinflation is defined as a […]
QUESTION Which of the following is NOT a likely driver for an economic bubble? A) sound logic B) desire for wealth C) irrational exuberance D) fast-growing business sector E) extensive availability of capital ANSWER Answer: A Explanation: A) If people operated on pure logic, they could see risks of a potential bubble and their […]
QUESTION Which of the following is NOT often identified as a potential trigger of economic contraction? A) rise in exports B) decline in consumer spending C) rise in taxes D) decrease in government spending E) decrease in investment ANSWER Answer: A Explanation: A) A rise in exports triggers economic expansion.
QUESTION Which of the following did NOT play a role in creating the housing bubble that preceded the Great Recession? A) subprime mortgage loans B) rising home prices C) mortgage-backed securities D) foreclosures E) low interest rates ANSWER Answer: D Explanation: D) Home foreclosures began as the bubble collapsed; they were a result of […]
QUESTION The United States is the world’s largest economy. What was the World Bank’s estimate for U.S. GDP in 2010? A) $754 billion B) $921 billion C) $6.2 trillion D) $14.7 trillion E) $45.7 trillion ANSWER Answer: D Explanation: D) This is the total value of all goods and services produced within U.S. borders […]
QUESTION As the economy started to recover from the Great Recession, businesses began to sell down inventories of overstocked goods. Under this scenario, demand eventually grows to be in line with available supply. As the economy strengthens and consumer demand continues to grow, what happens next? A) Prices drop. B) Prices rise. C) Supply increases. […]