Tackle the Test: Free-Response Questions

1. Question

   Define an expansion and economic growth, and explain the difference between the two concepts.

   Rubric for FRQ 1 (3 points)

   1 point: An expansion is the period of recovery after an economic downturn.

   1 point: Economic growth is an increase in the productive capacity of the economy.

   1 point: An expansion can occur regardless of any increase in the economy’s long-term potential for production, and it only lasts until the next downturn, while economic growth increases the economy’s ability to produce more goods and services over the long term.

2. Question

   Define inflation, and explain why an increase in the price of donuts does not indicate that inflation has occurred. (2 points)

   Rubric for FRQ 2 (2 points)

   1 point: Infl ation is an overall increase in the price of goods and services throughout an economy.

   1 point: If infl ation occurs, the price of donuts may increase, but an increase in the price of one good does not necessarily indicate infl ation. For example, the price of donuts might have increased due to an increase in the price of sugar, while the prices of most other goods in the economy have remained unchanged.