Macroeconomics Reading Quizzes (UWL Michels)

Stagflation is a combination of reduced output and a falling price level. True False

False

The economy always produces at its potential output. True False

False

The factors that cause the demand curve for an individual product to slope negatively are the same factors that cause the aggregate demand curve to slope negatively. True False

False

The production possibilities frontier of a nation cannot shift outwards or inwards. True False

False

Trade deficits are clearly bad and we should strive to always avoid them. True False

False

When a currency becomes more valuable in terms of other currencies, it depreciates. True False

False

When a good is an inferior good, an increase in income causes an increase in demand. True False

False

When one country gains from trading, another must lose. True False

False

Macroeconomics deals with the actions of individuals and firms. True False

False

Because Tom Brady is faster at mowing his lawn than others, he should always mow his own lawn. True False

False

The production possibilities frontier, as shown in the text, involves how many goods at once? 1 4 3 2

2

If the U.S. dollar were replaced with a "new dollar" at an exchange rate of 1 new dollar for 5 old dollars, then a loan of $10,000 would become a debt of _____ new dollars. 50,000 2,000 9,995 10,000

2,000

Even with trade, a country must still consume along its PPF. True False

False

GDP per capita is a thorough reflection of the welfare and happiness of individuals in the United States. True False

False

Inflation makes everyone poorer. True False

False

_____ illustrates a positive relationship between price and quantity. -A supply curve -A demand curve -Equilibrium -A production possibility frontier

A supply curve

Which of the following can influence the demand for a good? -Changes in the number of consumers -Changes in the prices of related goods. -All of the other answer choices are correct. -Changes in income

All of the other answer choices are correct.

Which statement illustrates the law of demand? -Oil companies drill for new sources because prices are higher. -Fewer people play golf because incomes are lower. -An increase in tuition encourages more students to enroll in college because the quality of education has risen. -Consumers buy more personal computers because prices have fallen.

Consumers buy more personal computers because prices have fallen.

0 unemployment is obtainable and our goal as a society. True False

False

A nation's production possibilities frontier is always linear in reality. True False

False

A shortage of a good can also be called excess supply. True False

False

The economist whose writings in the 1930s argued that the cause of an economic depression is inadequate spending was: -Herbert Hoover. -Andrew Mellon. -John Maynard Keynes. -Joseph Schumpeter.

John Maynard Keynes

In 1936 economic theory changed dramatically with the publication of: -The General Theory of Employment, Interest, and Money, by John Maynard Keynes. -Principles of Economics, by Paul Samuelson. -The Wealth of Nations, by Adam Smith. -The Road to Serfdom, by F. A. Hayek.

The General Theory of Employment, Interest, and Money, by John Maynard Keynes.

A change in the aggregate price level is a movement along the aggregate demand curve. True False

True

A change in the price level is a movement along the aggregate supply curve and not a shift of it. True False

True

Consumer spending is the largest component of U.S. GDP. True False

True

Differences in factor endowments is one source of comparative advantage. True False

True

Economists use different terms to refer to a shift of the demand curve vs. a movement along a demand curve. True False

True

Generous unemployment benefits destroy incentive to quickly find work. True False

True

In the long run the economy is self correcting from a fall in aggregate demand. True False

True

Intermediate goods and services are not included in GDP. True False

True

Jobs are continuously being created and destroyed, which creates a naturally occurring amount of unemployment. True False

True

People sometimes say a currency is getting "stronger" or "weaker" when they really mean appreciating or depreciating against another currency. True False

True

Similar to demand, economists have different terms for a shift of the supply curve and a movement along the supply curve. True False

True

The equilibrium price can also be called the market-clearing price. True False

True

The long-run aggregate supply curve defines the trend around which actual aggregate output fluctuates year to year. True False

True

The production possibilities frontier shows that if we are producing efficiently, in order to produce more of one good, we must give up some of the other. True False

True

The unemployment rate can vary between demographic groups and so the unemployment rate merely acts as an overall indicator of job market conditions. True False

True

Unexpected inflation helps some people but hurts others. True False

True

Unions, which are created in the interests of workers, can contribute to unemployment. True False

True

When analyzing a specific relationship in economics it is important to hold other factors constant. True False

True

When countries trade with the U.S., the U.S. can be better off and its trading partners can be better off too. True False

True

Efficiency wages are: -above equilibrium to encourage better performance and are responsible for all structural unemployment. -above equilibrium to encourage better performance. -responsible for all structural unemployment. -below equilibrium to encourage better performance to get a raise.

above equilibrium to encourage better performance

A good produced ______________ and sold domestically is called an import. -abroad -in the U.S. -domestically -all of the other answers are incorrect

abroad

A recessionary gap occurs if: -actual real GDP is greater than potential output. -unemployment is less than the natural rate. -actual real GDP is less than potential output. -actual real GDP is equal to potential output.

actual real GDP is less than potential output

Choose the best answer. A price index: -is normalized to 100 for the base year. -measures the cost of purchasing a market basket of output across different years. -always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year. -always includes a base year.

always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

Gains from trade -are based off of comparative advantage -are based off of absolute advantage -are not possible. We shouldn't trade. -none of the above are correct.

are based off of comparative advantage

To be counted as unemployed, one must: -have had a job previously. -have had a job before and be actively looking for work. -be out of work and be actively looking for a job during the past four weeks. -be actively looking for a job and have at least a high-school diploma or its equivalent.

be out of work and be actively looking for a job during the past four weeks.

The consumer price index reflects: -the level of prices for intermediate goods and services purchased by businesses. -the prices of all goods and services computed from the ratio of nominal GDP to real GDP. -the level of prices for raw materials. -changes in the prices of goods and services typically purchased by consumers.

changes in the prices of goods and services typically purchased by consumers.

The ability to produce a good at a lower opportunity cost than another producer is: -comparative advantage -complete advantage -none of the other options are correct -absolute advantage

comparative advantage

Which factor is not a determinant of supply? -expectations regarding future prices -the technology of production -consumer tastes -the cost of production

consumer tastes

If the price level rises by 10%, the purchasing power of $10,000 will: increase to $11,000. decrease to $9,000. decrease to $1,000. remain constant.

decrease to $9,000.

If the price level increases, real wages will: -increase. -fluctuate randomly. -remain constant. -decrease.

decrease.

Deflation is a -decline in wages. -decrease in unemployment. -recession. -decreasing aggregate price level.

decreasing aggregate price level.

When a market is in equilibrium, the quantity: -demanded is equal to zero. -supplied is zero. -demanded is greater than quantity supplied. -demanded is equal to quantity supplied.

demanded is equal to quantity supplied.

Graphically, a recessionary gap is measured as the: -vertical distance between aggregate demand and aggregate supply at potential output. -difference between actual GDP and potential output. -difference between the actual price level and the equilibrium price level. -vertical distance between aggregate demand and aggregate supply at actual real GDP.

difference between actual GDP and potential output

The term autarky refers to a situation when a country: -does not trade with other countries. -trades goods and services based on the principle of absolute advantage. -trades goods and services based on the principle of comparative advantage. -trades goods and services based on the principle of Ricardian advantage

does not trade with other countries.

A person who spends time looking for work is: -counted as out of the labor force. -usually counted as a discouraged worker. -usually counted as a marginally attached worker. -engaged in job search.

engaged in job search.

The money spent on domestically produced final goods and services is: -equal to GDP. -equal to exports minus imports. -equal to GDP, equal to exports minus imports, and subtracted in the circular-flow model. -subtracted in the circular-flow model.

equal to GDP.

The three consequences of the decline in demand during the Great Depression were _____ prices, _____ output, and a surge in unemployment. -rising; declining -falling; declining -falling; increasing -rising; increasing

falling; declining

Currencies can be exchanged for each other in the _____ market. -goods and services -loanable funds -foreign exchange

foreign exchange

Unemployment that is due to the time workers spend in job search is _____ unemployment. structural natural cyclical frictional

frictional

Nominal GDP: -has not been adjusted for changes in prices over time. -excludes the international sector. -has been adjusted for changes in prices over time. -is a small or nominal amount of output.

has not been adjusted for changes in prices over time.

Discouraged workers: -do not like their job. -have given up looking for a job. -are getting paid too little. -are working part-time but are looking for a full-time job.

have given up looking for a job.

Goods and services purchased from abroad are _____, while goods and services sold abroad are _____. -imports; exports -exports; imports -quotas; factors -exports; quotas

imports; exports

Sticky wages and prices occur: -in both the short and long run. -only when the economy is operating above its potential real GDP. -in the short run. -in the long run.

in the short run.

When a currency appreciates, the prices of its exports to other countries will: -fluctuate randomly. -remain constant. -decrease. -increase.

increase

A shift to the right of the short-run aggregate supply curve may be caused by a(n): increase in the price of inputs. increase in productivity. increase in wages. decrease in productivity.

increase in productivity.

The law of demand states that, other things equal, as the price: -decreases, the demand curve will shift to the right. -increases, the quantity demanded will decrease. -increases, demand will decrease. -increases, the quantity demanded will increase.

increases, the quantity demanded will decrease.

In the short run, a positive demand shock _____ aggregate output and _____ the aggregate price level. reduces; increases increases; increases reduces; reduces increases; reduces

increases; increases

In contrast to the conclusions drawn from microeconomics, many economists argue that in macroeconomics, government: -intervention in markets usually leaves society as a whole worse off. -taxation of goods and services does not cause a deadweight loss of economic welfare. -control of rent prices increases overall economic activity. -intervention in markets can prevent or reduce the effects of adverse events on the macroeconomy.

intervention in markets can prevent or reduce the effects of adverse events on the macroeconomy.

A laptop computer that is purchased by an accounting firm is considered to be: -investment spending. -consumption spending. -a pretax dividend. -private saving.

investment spending.

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas. -Few; few -many; many -many; few -few; many

many; many

An inflationary gap: -is generally regarded as desirable, especially by people living on a fixed income. -means that there are pressures for wages to fall. -means that the economy is operating beyond its potential output. -means that SRAS will soon shift rightward.

means that the economy is operating beyond its potential output.

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve a _____ slope. vertical positive negative horizontal

negative

Purchasing power parity refers to the: -amount of U.S. assets a foreign country is buying. -amount of foreign assets the United States is buying. -nominal exchange rate for which a market basket would cost the same in each country. -number of units of foreign currency a dollar will buy.

nominal exchange rate for which a market basket would cost the same in each country.

You are a college student and NOT working or looking for work. You are: -unemployed. -in the labor force but not employed. -not part of the labor force. -counted in the labor force as underemployed.

not part of the labor force.

Employment is the total: -labor force. -number of people actively working, either full time or part time. -number of people not unemployed. -population of working age.

number of people actively working, either full time or part time.

The aggregate price level is the: -average price of commodities. -overall level of prices. -same as the average price of gasoline. -average price of shares on the stock market.

overall level of prices.

The belief that importing goods from low-wage countries will hurt the standard of living of workers in the importing country is known as the: -theory of absolute advantage. -Heckscher-Ohlin theory. -pauper labor fallacy. -sweatshop labor fallacy.

pauper labor fallacy.

Profit per unit equals: -price per unit minus the nominal wage rate. -cost per unit minus price per unit. -price per unit minus cost per unit. -price per unit divided by cost per unit.

price per unit minus cost per unit.

The producer price index is often regarded as a warning sign of inflation because: -producers are likely to have monopoly control over prices. -commodity producers can sell whatever they want at higher prices. -prices of inputs will ultimately be reflected in prices of final products. -consumers have to pay the prices charged.

prices of inputs will ultimately be reflected in prices of final products.

Menu costs are the: -increase in the transaction costs caused by inflation. -costs of money becoming less reliable. -real costs of changing listed prices. -adjustments to the cost of living.

real costs of changing listed prices.

The inflation-adjusted measure of aggregate output typically used by economists is called: -nominal gross national product. -real gross domestic product. -aggregate output. -net domestic product.

real gross domestic product.

If money income remains the same while the average price level doubles: -interest rates will fall. -purchasing power will increase. -real income will fall. -nominal income will fall.

real income will fall.

According to the aggregate demand curve, when the aggregate price level _____, the quantity of aggregate output _____. -rises; demanded does not change -rises; supplied falls -falls; demanded falls -rises; demanded falls

rises; demanded falls

For a normal good a decrease in income would cause a decrease in demand. True False

true

A business cycle is a: -very deep and prolonged economic downturn. -period in which output and employment are falling. -period in which output and employment are rising. -short-run shift between economic upturns and downturns.

short-run shift between economic upturns and downturns.

The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the _____ fallacy. -pauper labor -sweatshop labor -Nike -third-world country

sweatshop labor

The view that the government should take an active role in the macro-economy dates to: -the Great Depression. -the Civil War. -the Vietnam War. -World War I.

the Great Depression.

The topics studied in macroeconomics include: -the wages of engineers. -how much ice cream consumers buy. -the price of a motorcycle. -the general price level in the economy.

the general price level in the economy.

Keynesian economics promotes ideas that: -the government can help a depressed economy via fiscal and monetary policies. -the private sector is perfectly capable of regulating itself. -the free market system will always prevail. -government intervention can be destabilizing.

the government can help a depressed economy via fiscal and monetary policies.

Which price index is used to measure changes in the prices that firms pay for goods and services? -the cost of living index -the producer price index -the consumer price index -the GDP deflator

the producer price index

In a market basket of goods: -the quantities stay constant and the prices may change. -both the prices and the quantities are held constant. -the quantities may change and the prices are held constant. -both the prices and the quantities may change.

the quantities stay constant and the prices may change

The aggregate supply curve shows the relationship of prices to: -sales. -both the amount of output people want to buy and the amount of output producers want to provide. -the quantity of output producers are willing to provide. -the quantity of output people want to buy.

the quantity of output producers are willing to provide.

Which definition best describes GDP? -the total value of all goods and services produced and sold in the economy during a given year -the total value of all primary, intermediate, and final goods and services produced in the economy during a given year -the total value of all final goods and services produced in the economy during a given year -the total value of all goods and services produced in the economy during a given year

the total value of all final goods and services produced in the economy during a given year

Real GDP is: -the value of the production of all final goods and services measured in current prices. -the value of the production of all final goods and services adjusted for price changes. -calculated by adding up only the real number of all items sold in the United States, regardless of their prices. -the projected future value of GDP.

the value of the production of all final goods and services adjusted for price changes.

The models that economists construct: -usually make simplifying assumptions. -attempt to precisely replicate the real world. -often rely on physical constructs, such as those used by architects. -rarely use mathematical equations or graphs.

usually make simplifying assumptions.

The short-run aggregate supply curve is positively sloped because: -business people are subject to money illusion. -of diminishing returns to labor. -wages are sticky. -workers care about nominal wages, not real wages.

wages are sticky.

If the rate of exchange is €1 = US$2, then US$1 = $0.50. €2. $2.00. €0.50.

€0.50.