Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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According to the principle of cyclical unemployment, what will occur when the demand
for goods and services drops during a recession? a. | No frictional unemployment exists. | b. | The demand for
labor drops. | c. | The business cycle resumes an upward
trend. | d. | The demand for labor rises. | | |
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2.
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"I ain't sayin' I'm like Jesus. But I got tired like Him, an' I got mixed
up like Him, an' I went into the wilderness like Him, without no campin'
stuff."
Identify the speaker of the preceding quotation? a. | Al
Joad | c. | Tom
Joad | b. | Jim
Casy | d. | Ma
Joad | | | | |
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3.
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What
does the Lorenz Curve show about the distribution of income in 1999? a. | The lowest 40
percent received 20 percent of total income. | b. | The distribution
of income was not equal. | c. | Two-fifths of households received 10.5 percent of
income. | d. | The distribution of income was roughly
equal. | | |
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4.
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The
calculation of GDP would include a. | the income of a person who pays rent by babysitting for the
homeowner’s children. | b. | the sale of a 25-year-old house. | c. | the income of a high
school English teacher. | d. | the price of the steel used to build a new
hotel. | | |
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5.
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According to
the cost-push theory, what is responsible for inflation? a. | Too much money is in
circulation. | b. | Producers raise prices to meet increased
costs. | c. | The economy is operating as though there was a
war. | d. | Demand for goods and
services exceeds existing supply. | | |
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6.
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Who
proposed “The New Deal” after being elected President in 1932? a. | Herbert
Hoover | c. | Dwight
Eisenhower | b. | Franklin Roosevelt | d. | Alf Landon | | | | |
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7.
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An accurate
statement about the Great Depression would be that a. | it ended largely
because of an increase in defense spending related to World War II. | b. | it was a normal part of
the business cycle. | c. | it was caused primarily by overspending on government
programs. | d. | while its effects were severe among the lowest income levels, it had
little impact on the wealthy. | | |
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8.
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"'Maybe,' I figgered,' maybe it's all men an' all women we love; maybe that's the
Holy Sperit--the human sperit--the whole shebang. Maybe all men got one big soul ever'body's a
part of.'"
What epistemological position do these lines
reflect? a. | hedonism | c. | Christianity | b. | Islam | d. | transcendentalism | | | | |
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9.
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During a war, the government puts pressure on producers for heavy equipment, supplies,
and services, making each more valuable. What theory about inflation does this condition
represent? a. | cost-push | c. | cost-pull | b. | demand-pull | d. | quantity | | | | |
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10.
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What is the Consumer Price Index? a. | an index of the
cost of living for all U.S. consumers | b. | an index determined by measuring the price of standard goods
bought by urban consumers | c. | an index of prices of items used by manufacturers and
retailers | d. | a measure of prices of housing and rental costs all over the
country | | |
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11.
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Granola Bar says the problem with the U.S. economy is that the government is too
big. Government taxing and regulations are strangling the economy. She wants to cut
income taxes, slash the capital gains tax, increase the depreciation allowance for capital goods, and
cut government spending enough to balance the budget so the government won't have to borrow
money. Granola Bar is a ________________. a. | supply-sider | c. | rational expectationist | b. | monetarist | d. | Keynesian | | | | |
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12.
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The purpose
of expansionary fiscal policy is to a. | increase output. | b. | slow the growth of the
GDP. | c. | increase the separation
between government and private industry. | d. | prevent hyperinflation. | | |
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13.
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"'Maybe,' I figgered,' maybe it's all men an' all women we love; maybe that's the
Holy Sperit--the human sperit--the whole shebang. Maybe all men got one big soul ever'body's a
part of.'"
Who said these lines? a. | Tom
Joad | c. | Ma
Joad | b. | Muley
Graves | d. | Jim
Casy | | | | |
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14.
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The lowest
point in an economic contraction is called a. | a depression. | c. | a trough. | b. | a recession. | d. | a peak. | | | | |
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15.
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An example
of a nondurable good is a. | a used car. | c. | a new car. | b. | a washing machine. | d. | a paperback book. | | | | |
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16.
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What
happened following the stock market crash in 1929 to account for the change in real GDP in the 1930s
shown in this graph? a. | A tax rebate miscalculated the elasticity of the market, and
thousands lost money in stocks, lost their homes, and became unemployed. | b. | During the Great
Depression, overproduction of goods by factories led to layoffs and
unemployment. | c. | The rapid economic downturn did not recover until World War II,
when the government boosted defense spending. | d. | During the Great
Depression, factories were idle, and thousands of Americans lost their jobs and
homes. | | |
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17.
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An example
of a durable good would be a. | a used car. | c. | a box of cereal. | b. | a paperback
book. | d. | a pack of baseball
cards. | | | | |
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18.
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"The people in flight from the terror behind--strange things happen to them, some
bitterly cruel and some so beautiful that the faith is refired
forever."
The faith referred to is a faith in ______________. a. | Jesus | c. | Jehovah | b. | human beings | d. | government | | | | |
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19.
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The
notion that the government should do nothing affecting macroeconomic policy because any thing it does
do is counterproductive is most closely associated with which school of macroeconomic
thought? a. | supply-side | c. | Keynesian | b. | monetarism | d. | rational expectationism | | | | |
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20.
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What is the
difference between seasonal unemployment and structural unemployment? a. | Seasonal unemployment
is generally among low-paid workers, whereas structural is among the highly
paid. | b. | Seasonal unemployment occurs because of schedules, whereas structural
occurs because people lack skills. | c. | Seasonal unemployment occurs only in the summer, whereas structural
can occur all year round. | d. | Seasonal unemployment is rare in a modern society, whereas structural
is not. | | |
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21.
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Bert
Nation is afraid Congress and the president will cut spending; he says that will cause a recession,
which is threatening anyway. He proposes the government spend an extra $20 billion next year on
a new export development corporation designed to open new markets for the products of U.S.
corporations. Bert Nation is a __. a. | supply-sider | c. | Keynesian | b. | loser | d. | monetarist | | | | |
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22.
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An example
of contractionary fiscal policy would be a. | increasing production of consumer goods. | b. | decreasing government
spending. | c. | expanding the government’s role in regulating private
industry. | d. | cutting taxes. | | |
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23.
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"There ain't no sin and there ain't no virtue; there's just stuff people
do."
This quotation reflects ___________. a. | the realization
of equality of opinions | c. | the ignorance of
the Okies | b. | Ma’s belief system | d. | loss of faith in a sovereign God | | | | |
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24.
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GDP
expressed in constant, or unchanging, prices is called a. | net national
product. | c. | price
level. | b. | real GDP. | d. | nominal GDP. | | | | |
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25.
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The
number of people on the Hudson indicates that Steinbeck was alluding to
__________________. a. | Snow White and the seven dwarfs | c. | the three stooges | b. | Jesus and His
disciples | d. | the Biblical
number of completion | | | | |
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26.
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All of the
following are characteristics of classical economics EXCEPT a. | the idea of achieving
market equilibrium. | b. | a free market economy. | c. | a significant role for
government in the running of the economy. | d. | the law of supply and demand. | | |
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27.
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An example
of expansionary fiscal policy would be a. | cutting prices of consumer goods. | c. | cutting taxes. | b. | cutting production of
consumer goods. | d. | cutting government
spending. | | | | |
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28.
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Supporters
of supply-side economics believe that a. | demand for goods increases when prices rise. | b. | taxes have a strong
negative influence on economic output. | c. | tax cuts have little impact on worker
productivity. | d. | government should be used as a tool to increase demand for
goods. | | |
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29.
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According to
the demand-pull theory, what is responsible for inflation? a. | The economy is in a
wage-price spiral. | b. | Demand for goods and services exceeds existing
supply. | c. | Too much money is in circulation. | d. | Producers raise prices
to meet existing demand. | | |
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30.
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An accurate
statement about the Great Depression would be that a. | its effects and
duration would have been even worse if it weren’t for a strong economy in Japan and Europe at
the time. | b. | it was a recession that became a depression because of World War
II. | c. | it was the most severe
economic downturn in the history of industrial capitalism. | d. | it was set off because
of a sharp and unexpected rise in interest rates. | | |
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31.
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The
difference between what individuals take home to spend and what they earn is called by supply-siders
______. a. | the federal
differential | c. | leakage | b. | tax wedge | d. | fiscal loss | | | | |
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32.
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"In the souls of the people the grapes of wrath are filling and growing heavy,
growing heavy for the vintage."
In this context, what does Steinbeck mean by
"vintage?" a. | California wine | c. | the end of the growing season | b. | revolution | d. | the anger of the
people | | | | |
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33.
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"I got thinkin' how we was holy when we was one thing, an' mankin' was holy when
it was one thing. An' it on'y got unholdy when one mis'able little fella got the bit in his
teen an' run off his own way, kickin' an' draggin' an' fightin'. Fella like that bust the
holiness. But when they're all workin' together, not one fella for another fella, but one fella
kind of harnessed to the whole shebang--that's right, that's holy."
What type of
economic order does Casey believe is "holy?" a. | socialism | c. | capitalism | b. | nazism | d. | communism | | | | |
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34.
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Why
couldn't Muley find someone to shoot? a. | He didn’t know where to
look. | c. | He didn’t
want to blame his friends. | b. | The forecloser wouldn’t show up in
person. | d. | Nobody took
responsibility. | | | | |
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35.
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Which
one of these people lost his or her job because of structural unemployment?
· | Jordan graduated from law school and is interviewing with
various law firms. | · | Thomas’s
job as a landscaper is on hold until the spring. | · | Sonya dropped out of school and now fails to meet the minimum
requirements for her job. | · | Eva lost her job at a major interior design firm during the
recession in the 1980s. | | |
a. | Eva | c. | Jordan | b. | Sonya | d. | Thomas | | | | |
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36.
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According to the graph, how do expansionary fiscal policies affect the
economy? a. | The government
increases spending to raise output of goods and services and create jobs in the short
term. | b. | The government decreases spending to save more
money. | c. | The government decreases demand to reduce the growth of
economic output. | d. | The government increases supplies to increase inflation and
raise prices. | | |
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37.
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What
is one important distinction between classical economics and Keynesian economics? a. | Classical
economics teaches that free markets regulate themselves, and Keynesian economics teaches that
government action affects the economy. | b. | Keynesian economics describes how free markets regulate
themselves, and classical economics teaches economists and politicians how to regulate the
economy. | c. | Keynesian economics teaches that economic disasters like the
Great Depression should never happen, and classical economics argues that these disasters are
inevitable. | d. | Classical economics advocates government regulation in every
aspect of the economy, and Keynesian economics removes all government involvement in the
economy. | | |
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Matching
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a. | neutral | d. | investment | b. | government | e. | balance | c. | goods | | | | |
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38.
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GDP =
consumption + ____ + government spending
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39.
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Classical economics said there would always be a ___ between aggregate demand and
aggregate supply
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40.
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Classical economics says that goods always exchange for ____.
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41.
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Keynes said ___ must ensure the proper level of aggregate demand.
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42.
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Classical economics said that money is ___.
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Identifying Key Terms
Match each term with
the correct statement below. a. | chronic inflation | f. | block grant | b. | deflation | g. | quantity theory | c. | frictional
employment | h. | creeping
inflation | d. | wage-price spiral | i. | purchasing power | e. | poverty
threshold | j. | market
basket | | | | |
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43.
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the idea
that too much money in the economy causes inflation
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44.
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a sustained
drop in the price level
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45.
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the income
level below which income is insufficient to support a family or a household
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46.
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what occurs
when people take time to find a job
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a. | taxes | d. | monetary | b. | government spending | e. | potential | c. | fiscal | | | | |
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47.
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Monetarists believe that ____ policy is the key to economic stability
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48.
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taxing and spending policy
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49.
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Keynes suggested increasing ___ to end a recession.
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50.
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Keynes said decreasing ____ will stimulate private sector demand.
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51.
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The
amount of GDP the economy is capable of is ____ GDP.
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a. | Jean Baptiste
Say | d. | John Maynard
Keynes | b. | Joseph Schumpeter | e. | Milton Friedman | c. | Arthur
Laffer | | | | |
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52.
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Father of monetarism.
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53.
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“Supply creates its own demand.” So said ____.
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54.
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Capitalism is “a gale of creative destruction.”
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55.
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His
graph shows how taxes effect government revenue.
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56.
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Author of The General Theory of Employment, Interest, and Money.
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Identifying Key Terms
Match each term with
the correct statement below. a. | aggregate supply | f. | national income accounting | b. | aggregate
demand | g. | recession | c. | depreciation | h. | stagflation | d. | gross domestic product | i. | technological progress | e. | gross national
product | j. | trough | | | | |
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57.
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a decline in
GDP combined with a rise in the price level
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58.
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the total
amount of goods and services in the economy available at all possible price levels
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59.
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a prolonged
economic contraction
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60.
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the dollar
value of all final goods and services produced within a country’s borders in a given
year
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Identifying Key Terms
Match each term with
the correct statement below. a. | census | f. | food stamps | b. | inflation | g. | fixed income | c. | discouraged
worker | h. | full
employment | d. | unemployment rate | i. | price index | e. | enterprise zone | j. | hyperinflation | | | | |
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61.
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a general
increase in prices
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62.
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percentage
of the nation’s labor force that is not employed
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63.
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a
measurement that shows how the average price of a standard group of goods changes over
time
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