Ch. 6 - Lori

The central mission of modern macroeconomics is to prevent: a) a deep recession like the Great Depression. b) high gas prices. c) shortages. d) surpluses.

a deep recession like the Great Depression.

Fiscal policy refers to changes in _____ to affect overall spending in the economy: a) interest rates b) government spending and taxation c) interest rates and of government spending d) the quantity of money

government spending and taxation

The topics studied in macroeconomics include: Question 13 options: a) the price of a motorcycle. b) the average price level in the economy. c) how much ice cream consumers buy. d) the wages of engineers.

the average price level in the economy.

According to official statistics for the United States, since the Great Depression: a) economists are confident that the business cycle has been tamed. b) the economy had longer recessions than expansions only during the 1960s and 1990s. c) the economy has constantly had positive real GDP growth rates. d) the economy has not had another severe and prolonged economic downturn comparable to it.

the economy has not had another severe and prolonged economic downturn comparable to it.

An economic recovery encompasses all of the following EXCEPT: a) sustained economic growth. b) a time of increasing employment. c) a short-run increase in aggregate production. d) the end of the business cycle.

the end of the business cycle.

In an open economy: a) trade is beneficial only to the larger economy. b) the exchange rate is determined by the government. c) there is trade in goods, services, and/or assets with other countries. d) specialization in activities with a comparative advantage is not possible.

there is trade in goods, services, and/or assets with other countries.

An open economy: a) trades goods and services with other countries. b) does not regulate its industries. c) allows free practice of speech and religion. d) does not impose taxes on its citizens.

trades goods and services with other countries.

Which would most likely be a MICROECONOMIC question? a) What government policies should be adopted to promote full employment and growth? b) What determines the level of output for the economy as whole? c) Should I go to business school or take a job? d) What determines the overall salary levels paid to workers in a given year?

Should I go to business school or take a job?

Which of the following statements is TRUE? a) The level of saving is important for long-run growth. b) In the past century, the population of the United States has grown faster than output. c) Since World War II, the economy of Argentina has grown faster than the economy of Canada. d) Long-run growth models and business cycle models are the same.

The level of saving is important for long-run growth.

Expansions are periods when real GDP and employment are growing. True or False

True

The additional profit earned by Microsoft Corporation by marketing and using a proprietary method of coding software is a microeconomic issue. (True or False)

True

Which of the following statements is CORRECT? a) Inflation affects only the more advanced countries, whereas less advanced countries face deflation. b) When the economy is in recession and jobs are hard to find, inflation tends to fall. c) Prices of most goods and services remained stable during the Great Depression. d) Supply and demand cannot explain why a particular good or service becomes more expensive relative to other goods and services.

WRONG X Supply and demand cannot explain why a particular good or service becomes more expensive relative to other goods and services. X WRONG

Historical evidence shows that for determining a country's living standards, over: Question options: a) an extended period, long-run growth is much more important than the business cycle. b) long periods, it is difficult to determine whether the business cycle or long-run growth is more important. c) an extended period, long-run growth is just as important as the business cycle. d) short periods, long-run growth is less important than the business cycle.

WRONG X short periods, long-run growth is less important than the business cycle. X WRONG

One normally expects that unemployment increases while aggregate output and aggregate incomes decrease during: a) a recession. b) government intervention. c) the peak of the business cycle. d) an expansion. Save

a recession.

Long-run economic growth is best measured by: a) a sustained rise in the production of goods and services. b) the rate of private saving. c) the growth of the money supply. d) trade surpluses in the long run.

a sustained rise in the production of goods and services.

The relation between a country's level of saving and investment: a) pertains to trade surpluses only. b) does not affect an open economy. c) has often been used to correct a trade deficit but not a trade surplus. d) affects its trade balances.

affects its trade balances.

Long-run growth is the sustained upward trend in: a) the unemployment rate over time. b) aggregate output per person over several decades. c) aggregate output per person over the business cycle. d) interest rates over time.

aggregate output per person over several decades.

Fiscal and monetary policies: a) have no role in macroeconomic policies. b) are used to correct for short-term economic fluctuations. c) have been used by the government for over 250 years. d) are most effective in microeconomic settings.

are used to correct for short-term economic fluctuations.

The purpose of macroeconomic policy is to: a) bring unemployment closer to the natural rate. b) bring unemployment closer to the natural rate, rein in excessively strong expansions, and reduce the severity of recessions. c) rein in excessively strong expansions. d) reduce the severity of recessions.

bring unemployment closer to the natural rate, rein in excessively strong expansions, and reduce the severity of recessions.

Keynesians argue that low levels of spending: a) are evident only during expansions. b) are not helped by monetary or fiscal policy efforts. c) can lead to prolonged recessions. d) are irrelevant.

can lead to prolonged recessions.

In the United States, recessions are typically associated with a(n): a) decrease in the number of people living in poverty. b) falling unemployment rate. c) decrease in the percentage of Americans with health insurance. d) increase in corporate profits.

decrease in the percentage of Americans with health insurance.

If during several months the economy is simultaneously increasing its levels of output and employment, then the economy is in a(n): a) recession. b) turning point between a recovery and a downturn. c) expansion. d) depression.

expansion.

When an economy is expanding, unemployment tends to _____ and overall prices tend to _____. a) fall; fall b) fall; rise c) rise; rise d) rise; fall

fall; rise

Setting government spending and taxes in an effort to change overall spending in an economy is use of: a) monetary policy. b) fiscal policy. c) investment. d) the stock market.

fiscal policy.

In the paradox of thrift: a) when families and business are feeling pessimistic about the future, they spend more. b) risky behavior during economic tough times has large negative consequences for society. c) increased saving by individuals increases their chances of becoming unemployed. d) firms that are pessimistic about the future lay off the most saving-conscientious workers.

increased saving by individuals increases their chances of becoming unemployed.

If workers' nominal wages have risen by 50% over a 10 years and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services workers can buy has: a) fallen. b) increased. c) decreased in quality. d) not changed.

increased.

A rubbernecking traffic jam is an example of: a) the paradox of thrift. b) individual behavior that has a large aggregate impact. c) an outcome smaller than the sum of its parts. d) microeconomics in action.

individual behavior that has a large aggregate impact.

The topics studied in macroeconomics include: a) mergers. b) spillovers, such as pollution. c) inflation. d) monopolies.

inflation.

Inflation affects people adversely because: a) the budget deficit increases. b) purchasing power tends to increase. c) nominal income falls. d) it causes money to lose its value over time.

it causes money to lose its value over time.

When an economy's overall production grows faster than its population, it is undergoing: a) long-run growth per capita. b) an increase in nominal GDP. c) the paradox of thrift. d) deflation.

long-run growth per capita.

Promotion of employment and growth in the economy as a whole is the focus of: a) monetary policy. b) fiscal policy. c) macroeconomics. d) microeconomics.

macroeconomics

Changing interest rates is an example of _____ policy. a) monetary b) fiscal c) tax d) exchange rate

monetary

An increase in the nation's _____ is generally accepted as a long-run indicator of a rising standard of living. a) unemployment rate b) inflation rate c) output per person d) trade deficit

output per person

With inflation: a) the economy must be producing at full employment. b) overall prices are increasing, although some may be decreasing. c) the economy must be contracting. d) all prices must be increasing.

overall prices are increasing, although some may be decreasing.

For the past several months, per capita output has increased at a slower and slower rate. Over the same period, the unemployment rate has been falling, but it appears to have leveled off and may soon rise. Where in the business cycle is the economy? a) trough b) expansion c) peak d) recession

peak

During a recession, one will often observe: a) rising unemployment rates and falling aggregate output. b) rising aggregate output. c) zero unemployment rates. d) rising employment rates.

rising unemployment rates and falling aggregate output.

Recessions tend to be _____, and expansions tend to be _____. a) long; short b) long; long c) short; long d) short; short

short; long

Figure: The Business Cycle Reference: Ref 6-1 (Figure: The Business Cycle) Look at the figure The Business Cycle. Point B on this graph shows a(n): Question 20 options: a) recession. b) peak. c) expansion. d) trough.

trough

In many countries, economists adopt the rule that a recession is a period of at least _____ during which aggregate output falls. a) two consecutive quarters b) a full year c) one quarter d) three consecutive quarters

two consecutive quarters

One of the issues of importance to macroeconomists is: a) the behavior of individuals and their allocation of income. b) how firms determine the profit-maximizing level of output. c) understanding how living standards change over time. d) the behavior of individual markets.

understanding how living standards change over time.