BEC Economics and Business Cycles 3

Question 1

Monetary policy is conducted primarily by:

Accepted Answer

The Federal Reserve

Answer

In the United States, monetary policy — controlling the money supply and interest rates — is the responsibility of the Federal Reserve System.

Question 2

Price elasticity of demand measures:

Accepted Answer

How sensitive the quantity demanded is to a change in price

Answer

Price elasticity of demand quantifies the percentage change in quantity demanded resulting from a one-percent change in price, indicating consumer sensitivity to price changes.

Question 3

An expansionary fiscal policy involves:

Accepted Answer

Increasing government spending or cutting taxes to stimulate the economy

Answer

Expansionary fiscal policy uses increased government spending or tax reductions to inject demand into the economy, typically employed during recessions.

Question 4

The Phillips curve illustrates the short-run trade-off between:

Accepted Answer

Inflation and unemployment

Answer

The Phillips curve depicts the inverse short-run relationship between inflation and unemployment — as unemployment falls, inflation tends to rise, and vice versa.

Question 5

Which of the following is classified as a leading economic indicator?

Accepted Answer

Building permits for new housing construction

Answer

Building permits are a leading indicator because they signal future construction activity and economic expansion before it actually occurs.

BEC - Business Environment and Concepts Practice Test

BEC - Business Environment and Concepts Practice Test

BEC Economics and Business Cycles 3