1. Economic Ups & Downs Activity Test Review

2. What is real gross domestic product? O Total market value of all final goods and services produced within the borders of a country during a specific year, adjusted for price changes.

3. Why is it important adjust GDP for price changes when measuring the economy? O Production, consumption & income are ultimately determined by levels of real output not prices

4. Desribe the three types of unemployment O Frictional O Structural O Cyclical

5. Why is unemployment considered undesirable? O It lower production, income & consumption levels

6. Why are inflation and deflation undesirable? O Both arbitrarily redistribute income. They affects different people in different ways, depending largely on how difficult or easy it is for the dollar level of their income to change as price level changes

7. What happens to unemployment during recessions? O It increases

8. What generally happens to prices as the economy approaches a peak? O They rise

9. What are two types of fiscal policy? O Automatic stabilizers O Discretionary fiscal policy

10. What is Fiscal Policy? O Changes in the overall level of government spending and/or taxes designed to lower unemployment and inflation

11. Why does the federal government engage in fiscal policy? O To reduce unemployment and inflation, and encourage economic growth

12. What are the US economic goals? O Full employment O Price stability O Economic Growth