Macroeconomics Unit Test Review

Which statements best describe how governments respond to changes in the business cycle? Check all that apply. a. Governments make currency more available. b. Governments refuse to pass a budget. c. Governments change their policies. d. Governments reduce spending. e. Governments manipulate interest rates.

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What types of investments do banks use to make a profit? Check all that apply. a. opening checking accounts b. starting new businesses c. buying stocks and bonds d. buying several properties e. issuing loans to all customers f. buying the rights to loans

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Inflation causes money to __________ value over time

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What would happen if currency in all countries had fewer denominations? a. People would be more likely to confuse the value of currencies. b. Exchanging money between countries would be much easier. c. People could not charge as many different prices for goods. d. All goods would be more expensive than they currently are.

NOT a. People would be more likely to confuse the value of currencies.

During a recession, what is one way governments try to encourage growth? a. by increasing unemployment benefits b. by stopping government spending c. by requiring firms to maintain production d. by eliminating all tax breaks

NOT c. by requiring firms to maintain production

The graph shows data for the years 2010 through 2012. Which might be a better title for this graph? a. Total Exports for the United States and China b. Trade Between China and the United States c. Unemployment in the United States and China d. The History of International Trade

a. Total Exports for the United States and China

There are five stages in a recession. 1. job loss 2. falling production 3. falling demand (occurs twice) 4. peak production In which order do these stages occur? a. 4, 3, 2, 1, 3 b. 3, 2, 1, 3, 4 c. 4, 3, 2, 3, 1 d. 4, 2, 3, 1, 3

a. 4, 3, 2, 1, 3

What are the signs of low inflation? Check all that apply. a. Demand steadily rises. b. Demand steadily falls. c. Prices continue to increase. d. Prices continue to decrease. e. The economy grows in a healthy way. f. The economy stagnates and struggles.

a. Demand steadily rises. c. Prices continue to increase. e. The economy grows in a healthy way.

Which best describes the nature of cause and effect in the context of the business cycle? a. Each effect has other effects. b. Causes and effects cannot be easily defined. c. A cause has multiple independent effects. d. Each effect has a cause.

a. Each effect has other effects.

Which statement best describes why a government's actions are important in macroeconomics? Check all that apply. a. Government controls industry through policy. b. Government is both a consumer and a producer. c. Government can prevent changes and challenges. d. Government can use policy to influence the economy. e. Government can accurately predict economic trends.

a. Government controls industry through policy. b. Government is both a consumer and a producer. d. Government can use policy to influence the economy.

What is true of representative money? Check all that apply. a. It can be exchanged for a valuable good. b. It was once the most common form of money. c. It was used in systems involving a "gold standard." d. It can be traded for a commodity such as silver. e. It is made with precious metals or stones.

a. It can be exchanged for a valuable good. c. It was used in systems involving a "gold standard." d. It can be traded for a commodity such as silver.

Which statement best describes the effects of low and high interest rates on the economy? a. Low interest rates encourage consumers to borrow and spend, while high interest rates encourage saving. b. High interest rates discourage consumers from investing, while low interest rates encourage investment. c. High interest rates encourage consumers to borrow and spend, while low interest rates encourage saving. d. Low interest rates encourage consumers to invest, while high interest rates discourage investment.

a. Low interest rates encourage consumers to borrow and spend, while high interest rates encourage saving.

Which best describes the purpose served by economic models within an economic system? a. Models identify patterns. b. Models determine the business cycle. c. Models control change. d. Models define global demand.

a. Models identify patterns.

This is a graph showing price and total output in the short and long run. According to this graph, how does supply behave in the long run? a. Output remains constant. b. Output increases. c. Output cannot be predicted. d. Output decreases.

a. Output remains constant.

The inflationary spiral explains the causes and effects of high inflation. The spiral usually begins with an increase in demand. What is the direct effect of this increase? a. Producers raise prices to continue to make a profit. b. The government prints more money, lowering the value of money. c. Workers negotiate with employers to receive more money. d. Consumers need higher wages to keep up with rising prices.

a. Producers raise prices to continue to make a profit.

What are the signs of high inflation? Check all that apply. a. Production begins to fall. b. Production begins to rise. c. Interest rates decrease. d. Interest rates increase. e. Purchasing power falls. f. Fewer fixed rate bank loans.

a. Production begins to fall. d. Interest rates increase. e. Purchasing power falls. f. Fewer fixed rate bank loans.

In microeconomics, price helps determine both quantity supplied and quantity demanded. Which other factors can impact each by causing a shift to occur? a. Quantity supplied is determined by production costs, and quantity demanded is determined by desire for the product. b. Quantity supplied is determined by production costs, and quantity demanded is determined by producer behavior. c. Quantity supplied is determined by consumer behavior, and quantity demanded is determined by aggregate demand. d. Quantity supplied is determined by producer behavior, and quantity demanded is determined by desire for the product.

a. Quantity supplied is determined by production costs, and quantity demanded is determined by desire for the product.

Which are the roles of a bank? Check all that apply. a. Storing and holding money b. Making purchases to create profits c. Lending money d. Investing in the economy e. Creating money for the economy

a. Storing and holding money c. Lending money d. Investing in the economy

What is one consequence of stagflation? a. The economy drastically slows down as money loses its buying power. b. Producers cannot keep up with consumer interest and raise their prices. c. There are not enough workers to meet the rising level of production. d. Demand is too high and people spend more money than they should.

a. The economy drastically slows down as money loses its buying power.

Which of the following best describes the circular flow model? a. The model represents the movement of money throughout the economy. b. The model represents the interactions within sectors. c. The model represents the flow of goods and services between sectors. d. The model represents the changing relationships between actors.

a. The model represents the movement of money throughout the economy.

This graph shows changes in GDP and the unemployment rate in the United States in recent years. Which statement most accurately describes the trends shown on this graph? a. When GDP falls, unemployment rises. b. GDP and unemployment have little to do with each other. c. When GDP rises, unemployment rises as well. d. GDP and unemployment rise at times of world crises.

a. When GDP falls, unemployment rises.

Typically, low inflation is a sign of a. a healthy economy because it results from a steady rise in demand. b. a healthy economy because it results from a steady rise in supply. c. a struggling economy because it results from a steady fall in demand. d. a struggling economy because it results from a steady fall in supply.

a. a healthy economy because it results from a steady rise in demand.

When production is very high but demand is very low, it can lead to a. a recession. b. a recovery. c. prosperity. d. the peak.

a. a recession.

Read the graph about mortgage interest rates and housing starts between 1978 and 1983. A conclusion that can be drawn from both graphs by looking at 1983 is that interest rates a. dropped, which led to more home starts. b. peaked, while home starts bottomed out. c. climbed, which led to fewer home starts. d. bottomed out, while home starts peaked.

a. dropped, which led to more home starts.

Read the paragraph. Government officials in Country M have determined that they need to take action to encourage the growth of their economy. To do this, they have introduced an incentive policy that offers citizens free education. This is extended to all individuals who sign a contract agreeing to work within their specific industry for the next ten years. Country M hopes to encourage economic growth by investing in a. education to reduce unemployment and increase production. b. new technologies to produce goods that are in great demand. c. resources that can be traded with other nations. d. research to develop goods that can be sold on a global scale.

a. education to reduce unemployment and increase production.

Which body or group is most able to use money to influence the economy? a. government b. suppliers c. firms d. producers

a. government

Stagflation occurs when high inflation combines with a. high unemployment and a low level of production. b. low unemployment and a high level of production. c. a drop in buying power and a rise in workers' wages. d. a rise in buying power and a drop in workers' wages.

a. high unemployment and a low level of production.

In the circular flow model, factors of production flow to firms. Which of the following are the primary factors of production? Check all that apply. a. labor b. capital c. goods d. land e. services

a. labor b. capital d. land

The graph shows changes in the US economy between 1971 and 2001. According to the graph, 1971 to 1976 was a period of stagflation due to a. rising unemployment and inflation. b. falling unemployment and inflation. c. rising unemployment and falling inflation. d. falling unemployment and rising inflation.

a. rising unemployment and inflation.

People might choose to use a debit card rather than cash for purchases because a. they do not want to carry around large amounts of cash. b. their banking institutions charge high fees for cash withdrawals. c. most items cost less when purchased with a debit card. d. debit cards have a higher value than cash and can buy more.

a. they do not want to carry around large amounts of cash.

Which unemployment rate do most economists consider to be acceptable in the United States? a. 0 percent b. 5 percent c. 10 percent d. 20 percent

b. 5 percent

What advantages does money have over bartered goods? Check all that apply. a. Money is easy to earn, and bartering takes a lot of work. b. Money has a set value, and bartered goods do not. c. Money is more portable than bartered goods. d. Money is always worth more than bartered goods. e. Money allows people to easily store value they earn.

b. Money has a set value, and bartered goods do not. c. Money is more portable than bartered goods. e. Money allows people to easily store value they earn.

The circle graph shows information about Germany's labor force in 2011. Which statement most accurately describes Germany's labor force? a. Most Germans are farmers. b. Most Germans work in services. c. Most Germans work in factories. d. Most Germans fish for a living.

b. Most Germans work in services.

Which event most likely explains renewed demand in a recovery period? a. Increased employment means increased availability of funds. b. Need, and therefore demand, increases as goods wear out. c. Producers decrease prices to prompt demand and recovery. d. Economic policy renews consumer confidence and, hence, demand.

b. Need, and therefore demand, increases as goods wear out.

What explains the difference between retail and commercial banking? a. Commercial banks loan money to small businesses, while retail banks loan money to large corporations. b. Retail banks loan money to small businesses, while commercial banks loan money to large corporations. c. Commercial banks help small businesses make capital purchases, while retail banks help big businesses invest. d. Retail banks help big businesses make capital purchases, while commercial banks help consumers invest.

b. Retail banks loan money to small businesses, while commercial banks loan money to large corporations.

Which is an effect of stagflation? a. Trade with other economies increases. b. The value of a country's currency drops. c. Prices for goods fall sharply and suddenly. d. The GDP rises along with production levels.

b. The value of a country's currency drops.

What is one problem that might commonly occur when one is bartering? a. Someone wants to trade a valuable item for a less valuable one. b. Two people have different ideas about the value of an item. c. Someone wants to barter a good in exchange for a service. d. Two people want to trade items of equal or nearly equal value.

b. Two people have different ideas about the value of an item.

What might cause a change in the value of fiat money? a. a change in the value of commodities b. a change in government regulations c. a change in materials used to make money d. a change in individuals' spending habits

b. a change in government regulations

An entrepreneur who needs money to create and distribute a new invention would most likely visit a. a community banker. b. an investment banker. c. a commercial banker. d. an executive banker.

b. an investment banker.

The Federal Reserve Bank of the United States is also known as the a. people's bank. b. central bank. c. world bank. d. retail bank.

b. central bank.

Bank deposits help the nation's economy by a. providing protection for consumers from theft. b. giving banks the money to loan and invest. c. providing protection for banks on investments. d. giving consumers the ability to save money.

b. giving banks the money to loan and invest.

The circular flow model examines interactions between which sectors of the economy? Check all that apply. a. private b. government c. business d. tech e. households

b. government c. business e. households

One fact about all currency is that it a. loses value over time. b. has a changing value. c. maintains a stable value. d. grows increasingly valuable.

b. has a changing value.

To help encourage economic growth, a country can a. stop selling goods to other countries. b. invest in research and development. c. lay off unneeded workers. d. lower requirements for education.

b. invest in research and development.

Cost-push inflation occurs when a. consumers begin purchasing more goods. b. producers need more money to make and distribute goods. c. the government prints more money and pushes prices up. d. consumers have more money to spend on goods and services.

b. producers need more money to make and distribute goods.

The aggregate is a. a type of economic system. b. the total number of goods demanded or supplied. c. a form of revenue. d. the total profit made on sales.

b. the total number of goods demanded or supplied.

What decisions does the business cycle help businesses make? Check all that apply. a. whether to stay at old facilities or move to new facilities b. whether to grow or shrink the business c. whether to keep or change products d. whether to increase or decrease production e. whether to hire or lay off workers f. whether to invest or save money

b. whether to grow or shrink the business d. whether to increase or decrease production e. whether to hire or lay off workers f. whether to invest or save money

Which of these scenarios involves commodity money? a. A girl writes a check to her friend for a stack of valuable comic books. b. A boy starts a lemonade stand and sells each drink for twenty-five cents. c. A woman offers her neighbor a US silver dollar in exchange for a bicycle. d. A man buys some T-shirts and pays with a US fifty-dollar bill.

c. A woman offers her neighbor a US silver dollar in exchange for a bicycle.

Which scenario best reflects the relationship between production and demand in a recession? a. Car dealerships have minimal overstock. b. Car dealerships are not restocking. c. Car dealerships cannot sell their stock. d. Car dealerships cannot obtain stock.

c. Car dealerships cannot sell their stock.

This graph shows merchandise export data for the years 2010 through 2012. Which statement most accurately describes the information presented on the graph? a. The United States exported more merchandise than any other nation. b. The United States exported more than $2 trillion worth of goods in 2012. c. China exported more goods than the United States from 2010 to 2012. d. China exported more than $2 trillion in goods for each year on the graph.

c. China exported more goods than the United States from 2010 to 2012.

The graph shows changes in GDP in the United States from 2009 to 2011. How did the contribution of the services sector to GDP change between 2009 and 2011? a. It rose by less than 1 percent. b. It fell significantly. c. It rose significantly. d. It stayed exactly the same.

c. It rose significantly.

In microeconomics, what occurs when equilibrium is reached? a. Prices decline. b. Prices increase. c. Prices are set. d. Prices fluctuate.

c. Prices are set.

Typically, high inflation is a sign of a. a healthy economy because it results from a fall in production costs. b. a healthy economy because it results from a rise in consumer interest. c. a struggling economy because wages cannot keep up with the increase in prices. d. a struggling economy because it results from a fall in consumer interest.

c. a struggling economy because wages cannot keep up with the increase in prices.

What term is used in macroeconomics to describe the total supply and the total demand? a. capital b. inflation c. aggregate d. equilibrium

c. aggregate

Rabia does not currently have a job, but declined a job offer because she feels her skills merit better pay and a better position. Which terms can be used to describe Rabia? Check all that apply. a. cyclically unemployed b. domestically unemployed c. frictionally unemployed d. structurally unemployed e. still employed f. unemployed

c. frictionally unemployed f. unemployed

The circle graph shows the GDP in Germany for 2012. Which sector of Germany's economy had the highest GDP? a. agriculture b. industry c. services d. technology

c. services

The most common measure of inflation is a statistic called the __________.

consumer price index

Read the graph that displays interest and total payments on a loan. Banks make the most money and take the most risk with an interest rate of a. 5 percent. b. 10 percent. c. 15 percent d. 18 percent.

d. 18 percent.

There are four stages in an economic recovery. 1. increased production 2. rising demand (occurs twice) 3. increased hiring In which order do these stages occur? a. 2, 1, 2, 3 b. 3, 2, 1, 2 c. 2, 3, 1, 2 d. 2, 1, 3, 2

d. 2, 1, 3, 2

These are the four stages of the business cycle: 1. Depression 2. Prosperity 3. Recession 4. Recovery In which order do these stages occur? a. 1, 3, 4, 2 b. 3, 1, 2, 4 c. 1, 2, 3, 4 d. 2, 3, 1, 4

d. 2, 3, 1, 4

What is the difference between inflation and deflation? a. Inflation can result from falling demand and boosts the value of money. Deflation can result from rising demand and reduces the value of money. b. Inflation can result from rising demand and boosts the value of money. Deflation can result from falling demand and reduces the value of money. c. Inflation can result from falling demand and reduces the value of money. Deflation can result from rising demand and boosts the value of money. d. Inflation can result from rising demand and reduces the value of money. Deflation can result from falling demand and boosts the value of money.

d. Inflation can result from rising demand and reduces the value of money. Deflation can result from falling demand and boosts the value of money.

Which statement best describes the main cause of the 2008 housing market crash in the United States? a. Many people could not buy new homes during a weak economy. b. Many homes could not sell because housing prices rose too fast. c. Many homes could not sell because banks charged high interest. d. Many people could not make home payments during a weak economy.

d. Many people could not make home payments during a weak economy.

Which of the following conditions is most indicative of recovery? a. The economy has stopped shrinking. b. The economy begins to peak. c. The economy has passed the trough. d. The economy is growing again.

d. The economy is growing again.

Why are imports, which bring goods into a country, considered a leakage factor? a. Imports do not generate domestic income. b. Domestic industry loses ground as imports increase. c. Imports are taxed heavily, which is a secondary leakage factor. d. The money paid to producers of imports leaves the country.

d. The money paid to producers of imports leaves the country.

Which is an example of a demand account? a. savings account b. investment account c. credit account d. checking account

d. checking account

In the United States, dollar bills, nickels, and dimes are a. representative money. b. commodity money. c. various currencies. d. different denominations.

d. different denominations.

A currency's exchange rate is a. how many denominations the currency has. b. its stable rate as established by the government. c. how easily it can be divided into other currencies. d. its changing value relative to other currencies.

d. its changing value relative to other currencies.

Which best describes what injector factors bring to an economic system? a. factors of production b. imports c. consumers d. money

d. money

Economic growth takes place when a country a. produces a steady number of automobiles. b. has a high unemployment rate. c. measures its gross domestic product (GDP). d. produces more goods and services.

d. produces more goods and services.

Jim lost his job in a car assembly factory to a robot and his skills will no longer be needed. Which terms can be used to describe Jim? Check all that apply. a. cyclically unemployed b. domestically unemployed c. frictionally unemployed d. structurally unemployed e. still employed f. unemployed

d. structurally unemployed f. unemployed

Hyperinflation can occur when a. consumers begin purchasing more goods. b. producers need more money to make and distribute goods. c. companies raise prices to pass on costs to consumers. d. the government prints a ton of money in order to pay off its debt.

d. the government prints a ton of money in order to pay off its debt.

The condition of a country's ____________ depends on its people's ability to exchange money for goods and services.

economy

The exchange of factors of production for income occurs in the _____________ market.

factor

A fee banks charge in exchange for borrowing money is called ___________.

interest

When individuals are looking for jobs but are unable to find work, they are said to be ___________.

unemployed