Question 1

Which word does not describe a phase of a business cycle?

Accepted Answer

Inflation is not a phase of the business cycle, but rather a measure of the general increase in prices of goods and services in an economy over a period of time. The correct choices are A, B, C, and D as they are all phases of the business cycle.

Question 2

The concept of creative destruction was introduced by Adam Smith.

Accepted Answer

The concept of creative destruction was introduced by economist Joseph Schumpeter in his book "Capitalism, Socialism and Democracy".

Question 3

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Accepted Answer

The answer of In Beyonceland, real GDP fell continuously from...

Question 4

Planners in Canukistan hope to double real GDP per person in 20 years. The Rule of 70 suggests that Canukistan needs an average growth rate of at least 3.5 percent per year.

Accepted Answer

The Rule of 70 states that to find the number of years it will take for a variable to double, divide 70 by the annual growth rate of the variable. Therefore, to double real GDP per person in 20 years, Canukistan needs an average growth rate of approximately 3.5 percent per year (70 divided by 20 equals 3.5).

Question 5

In Gagaland, real GDP is $200 billion and potential GDP is $160 billion. Gagaland has a(n)

Accepted Answer

An inflationary gap occurs when the real GDP exceeds the potential GDP, indicating an economy is overheating. In this case, real GDP ($200 billion) is $40 billion more than the potential GDP ($160 billion), hence an inflationary gap of $40 billion.

Question 6

Improvements in the quality of capital through innovation, research, and development are called technological change.

Accepted Answer

Technological change refers to improvements in the quality of capital through innovation, research, and development.

Question 7

Improvements in productivity from better management techniques are called technological change.

Accepted Answer

Improvements in productivity from better management techniques are called managerial change. Technological change refers to improvements in productivity from advances in technology or the use of new and improved methods of production.

Question 8

In Gagaland, real GDP is $200 billion and potential GDP is $160 billion. Gagaland has a(n)

Accepted Answer

The output gap is the difference between real GDP and potential GDP. In this case, real GDP is $200 billion and potential GDP is $160 billion, meaning there is an output gap of $40 billion. Therefore, choice A is the correct answer. Choices C, D, and E are incorrect because there is no information given about the growth rate.

Question 9

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Accepted Answer

The real GDP fell from $200 billion to $160 billion, indicating a contraction. However, since potential GDP remained constant at $180 billion, Beyonceland went from a positive output gap to a negative output gap, which is not described by any of the given options.

Question 10

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Accepted Answer

The answer of In Beyonceland, real GDP fell continuously from...

Question 11

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Accepted Answer

A) The growth rate is calculated as the change in GDP divided by the initial GDP. The change is $160 billion - $200 billion = -$40 billion. The growth rate is -$40 billion / $200 billion = -0.2 or -20%. B) A contraction in the economy is indicated by a decrease in real GDP, and a recession is typically defined by a continuous decline in GDP over two or more quarters. C) An inflationary gap occurs when actual GDP is above potential GDP, and a deflationary gap occurs when actual GDP is below potential GDP. The economy moved from being above potential GDP ($200 billion > $180 billion) to below potential GDP ($160 billion < $180 billion). D) A positive output gap occurs when actual GDP exceeds potential GDP, indicating an economy operating above its sustainable capacity. A negative output gap occurs when actual GDP is less than potential GDP, indicating underutilization of resources. The transition from $200 billion to $160 billion while potential GDP remained at $180 billion shows this shift.

Question 12

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Accepted Answer

Beyonceland experienced a contraction as real GDP decreased, and since real GDP was below potential GDP for two consecutive years, it was also in a recession.

Question 13

Which word does not describe a phase of a business cycle?

Accepted Answer

Expansion, contraction, peak and trough are all phases of a business cycle. Retraction is not commonly used to describe a phase in a business cycle.

Question 14

The lowest possible annual growth rate is 0 percent.

Accepted Answer

The lowest possible annual growth rate is negative, indicating a decrease rather than an increase in the value being measured (e.g., population, economy).

Question 15

The population of West Moreland is 200,000 persons. There are 180,000 persons in the labour force. The labour force participation rate is 36 percent.

Accepted Answer

The labour force participation rate is calculated by dividing the number of people in the labour force by the total population, and then multiplying by 100.

Labour force participation rate = (Labour force / Total population) x 100

Using the given information:

Labour force participation rate = (180,000 / 200,000) x 100 = 90%

Therefore, the statement is false, and the correct labour force participation rate is 90%, not 36%.

Question 16

In Gagaland, real GDP is $160 billion and potential GDP is $200 billion. Gagaland has a(n)

Accepted Answer

A recessionary gap occurs when actual GDP is lower than potential GDP, which is the case in Gagaland where real GDP is $160 billion and potential GDP is $200 billion. The gap is $40 billion, indicating a shortfall in economic output.

Question 17

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Accepted Answer

Real GDP fell continuously, indicating a decline in economic activity. Meanwhile, potential GDP remained constant, so the output gap, which is the difference between real GDP and potential GDP, became more negative. Therefore, Beyonceland went from a positive output gap (when real GDP was above potential GDP) in 2015 to a negative output gap (when real GDP was below potential GDP) in 2016.

Question 18

In Gagaland, real GDP is $160 billion and potential GDP is $200 billion. Gagaland has a(n)

Accepted Answer

The output gap is defined as potential GDP minus real GDP. Therefore, in Gagaland: potential GDP - real GDP = $200 billion - $160 billion = $40 billion. Since the result is positive, the country has a negative output gap of $40 billion.

Question 19

According to the concept of creative destruction, businesses create innovations that destroy living standards.

Accepted Answer

According to the concept of creative destruction, businesses create innovations that may initially disrupt established industries but ultimately improve overall living standards by introducing higher quality products, more efficient processes, and new job opportunities.

Question 20

The concept of creative destruction was introduced by Joseph Schumpeter.

Accepted Answer

The concept of creative destruction was indeed introduced by Joseph Schumpeter, an Austrian economist and political scientist, in his book "Capitalism, Socialism and Democracy" published in 1942.

Quiz 6: Up Around the Circular Flow: Gdp, Economic Growth, and Business Cycles

Which word does not describe a phase of a business cycle?

The concept of creative destruction was introduced by Adam Smith.

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Planners in Canukistan hope to double real GDP per person in 20 years. The Rule of 70 suggests that Canukistan needs an average growth rate of at least 3.5 percent per year.

In Gagaland, real GDP is $200 billion and potential GDP is $160 billion. Gagaland has a(n)

Improvements in the quality of capital through innovation, research, and development are called technological change.

Improvements in productivity from better management techniques are called technological change.

In Gagaland, real GDP is $200 billion and potential GDP is $160 billion. Gagaland has a(n)

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

Which word does not describe a phase of a business cycle?

The lowest possible annual growth rate is 0 percent.

The population of West Moreland is 200,000 persons. There are 180,000 persons in the labour force. The labour force participation rate is 36 percent.

In Gagaland, real GDP is $160 billion and potential GDP is $200 billion. Gagaland has a(n)

In Beyonceland, real GDP fell continuously from $200 billion in 2015 to $160 billion in 2016. Potential GDP remained constant at $180 billion. Between 2015 and 2016, Beyonceland

In Gagaland, real GDP is $160 billion and potential GDP is $200 billion. Gagaland has a(n)

According to the concept of creative destruction, businesses create innovations that destroy living standards.

The concept of creative destruction was introduced by Joseph Schumpeter.