The economy has gone through three consecutive quarters of economic decline with no immediate end in sight, and therefore could be said to be:

A) in a Recovery.

B) Lagging.

C) in a Recession.

D) in a Depression.

Answer: D) in a Depression.

Which of the following fundamental analysis theories might rely on lowering and raising taxes to stimulate or cool down an economy?

A) Short interest.

B) Breakout.

C) Keynesian.

D) Supply side.

Answer: C

A recession is defined as a drop in GDP for:

A) 2 consecutive quarters.

B) 3 consecutive quarters.

C) 4 consecutive quarters.

D) 6 consecutive quarters.

Answer: A

Which of the following choices does NOT influence the level of interest rates?

A) Inflation expectations.

B) Federal Reserve's monetary policy.

C) New housing starts.

D) Amount of loanable funds in the financial markets

Answer: C) New housing starts.

The economic theory that says economic growth results from lower tax rates and lower government spending is:

A) demand-side theory.

B) supply-side theory.

C) monetary theory.

D) Keynesian theory.

Answer: B) supply-side theory.

You note that "help wanted" advertisements in "The Wall Street Journal" have been increasing. This economic measure is a:

A) coincident indicator.

B) none of these.

C) leading indicator.

D) lagging indicator.

Answer: C) leading indicator.

Which of the following is the CORRECT order of the stages in a business cycle?

A) Expansion, peak, contraction, trough.

B) Peak, expansion, contraction, trough.

C) Contraction, trough, peak, expansion.

D) Trough, contraction, expansion, peak.

Answer: A) Expansion, peak, contraction, trough.

Expansions in the business cycle are characterized by:

A) increase in want ads in newspapers, decrease in nonfarm jobs.

B) increasing college enrollments and enlistment in military service.

C) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.

D) higher consumer debt, rising inventories.

Answer: C) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.

The Conference Board releases information about the economy on a periodic basis. Included are a number of different indicators. These indicators can be used to predict how the economy as a whole might change. Which of the following would be considered a leading indicator?

A) Stock prices as measured by a broad index such as the S&P 500.

B) Gross domestic product.

C) Corporate profits.

D) Industrial production.

Answer: A) Stock prices as measured by a broad index such as the S&P 500.

Industrial production is what kind of economic indicator?

A) Lagging.

B) Coincident.

C) Leading.

D) Coterminous.

Answer: B) Coincident.

Statistics from which of the following industries are considered a leading indicator of economic growth?

A) Natural gas.

B) Automotive.

C) High technology.

D) New housing.

Answer: D) New housing.

Which of the following indicators reflects the current level of business activity?

A) Level of inventories.

B) Personal incomes.

C) Building permits.

D) Expenditures on plant and capital equipment.

Answer: B) Personal incomes.

Which of the following is a NOT a leading economic indicator?

A) Orders for durable goods.

B) Duration of unemployment.

C) New housing permits.

D) Money supply.

Answer: B) Duration of unemployment.

The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. New orders for durable goods is what kind of economic indicator?

A) Leading.

B) Coincident.

C) Coterminous.

D) Lagging.

Answer: A) Leading.

According to Keynesian economic theory, an economy's health can be ensured if the government:

A) cuts taxes for businesses and the wealthy.

B) increases the money supply.

C) does not interfere.

D) increases aggregate demand.

Answer: D

What term do economists use to describe a downturn in the economy that is characterized by both unemployment and rising prices?

A) Depression.

B) Recession.

C) Stagflation.

D) Inflation.

Answer: C) Stagflation.

Which of the following economists supports demand-side economics?

A) Adam Smith.

B) Arthur Laffer.

C) Milton Friedman.

D) John Maynard Keynes.

Answer: D

In what order do the following economic phases typically occur?

Recovery.

Trough.

Decline.

Prosperity.

A) IV, III, I, II.

B) I, IV, III, II.

C) II, I, III, IV.

D) III, IV, I, II.

Answer: B) I, IV, III, II.

During the past 2 quarters, the GDP declined by 3%, unemployment rose by .7%, and the Consumer Price Index fell off by 1.3%; this economic condition is called:

A) stagflation.

B) recession.

C) inflation.

D) depression.

Answer: B) recession.

To reflect a more accurate picture of economic results, gross domestic product is adjusted:

A) downward by the balance of payments.

B) for inflation.

C) to match foreign GDP.

D) to include bank reserves.

Answer: B) for inflation.