Chapter 3: Economic Activity in a Changing World
Chapter Practice Review Quiz
1.. Which is the current emphasis in the U.S. 7. What is the main source of income for economy? governments?
A) agriculture A) taxes
B) service B) education
C) industry C) budget surplus
D) information D) Social Security
2. When did the Industrial Revolution lead to the 8. Which term applies when a government makes industry-based economy? more money than it spends in a year? A) 1600s A) budget deficit
B) 1700s B) national debt
C) 1800s C) budget surplus
D) 1900s D) revenue
3. Which is NOT an indicator of a country's 9. Which is NOT a job that the Federal Reserve economic health? does?
A) GDP. A) passes laws about tax policies B) standard of living B) controls the circulation of money C) environmental awareness C) sets interest rates
D) inflation D) controls the amount of money loaned
4. Which is NOT considered an indicator of a 10. In the business cycle, what generally comes higher standard of living? after a period of depression? A) increasing availability of goods A) prosperity
B) decreasing availability of goods B) recession
C) increasing availability of services C) recovery
D) increasing purchase of luxury goods D) another depression
5. What should happen to unemployment if the 11. What is another term for a period of economic
economy is picking up? prosperity?
A) It increases. A) downturn
B) It decreases. B) demand
C) It reverts to previous levels. C) decline
D) It remains the same. D) peak
6. Which is NOT a cause of inflation? 12. Which is true of a recession? A) increased defense spending for a war A) businesses produce less B) increased supply of goods in excess of B) wages are higher
demand C) new businesses open
C) increased taxation D) more people buy houses
D) increased production costs
13. What is another term for depression?
B) Black Tuesday
C) bank holiday
D) deep recession
14. Which would NOT characterize a depression? A) high unemployment
B) low wages
C) less goods and services produced
D) decreased capacity in manufacturing plants
15. Which would NOT help during a period of recovery?
B) renewed recession
C) business innovation
D) increased consumer purchasing
Answer Keys: 12. A
Feedback: During a recession, the economy 1. D
Feedback: Although we still rely on aspects of slows down. the other economies, we live in the 13. D
information age. Feedback: A depression follows a recession
and has high unemployment and even lower 2. C
Feedback: In the mid-1850s, the Industrial production of goods and services Revolution started the industry-based 14. D
economy. Feedback: During a depression,
unemployment is high, there are many 3. C
Feedback: Indicators of economic health shortages of goods, and there is excess
include GDP, standard of living, capacity in manufacturing plants.
unemployment, and rate of inflation. 15. B
Feedback: Anything that gets people to spend 4. B
Feedback: When a country has a higher more money will help the economy recover
standard of living, more goods and services from a depression.
Feedback: Falling unemployment during good times is another indicator of a healthy economy.
Feedback: Deflation occurs when there are more goods than people want.
Feedback: The main source of income for most countries is taxation.
Feedback: Surplus means extra or left over. If a government takes in more money than it spend that year, it ends up with a budget surplus.
Feedback: "The Fed" is not involved in passing laws, but it does control the federal banks.
Feedback: After a period of depression, the nation will recover and eventually prosper again.
Feedback: Prosperity is the peak of the economic cycle, when production of goods and services are at the highest.