1.

(02.07 MC) If the consumer price index begins to increase dramatically, which of the following is likely true? (5 points)

	The output gap is positive and near the peak.
	The output gap is positive and near the trough.
	There is no output gap and the economy is growing.
	The output gap is negative and near the peak.
	The output gap is negative and near the trough.

2.

(02.07 LC) An economy operating at a trough in its business cycle is by definition (5 points)

	experiencing deflation
	experiencing inflation
	in a recession
	in an expansion
	between a recession and an expansion

3.

(02.07 LC) At which point in the business cycle is there the largest inflationary gap? (5 points)

	The peak
	The trough
	During expansion
	During contraction
	At full employment

4.

(02.07 HC) Use the graph below to answer the following question.

Real GDP Potential Real GDP Actual Real GDP 0 2000 2004 2010 2015 2019 Time