MACRO Prepare & Apply - Chapter 10

Recessions cause the inflation rate to​ _________, and the unemployment rate to​ _________. a. increase; decrease b. decrease; increase c. decrease; decrease d. increase; increase

b

The high point of economic activity is called a. a high b. a peak c. a trough d. a zenith

b

Typically, when will the National Bureau of Economic Research (NBER) announce that the economy is in a recession? a. about six months before the recession begins b. a year or more after the recession has begun c. on the date that the recession begins d. typically, more than 10 years after the recession begins

b

Which of the following changes will ensure that an economy experiences sustained economic growth? a. increasing the amount of capital b. technological change c. increasing the amount of raw materials d. increasing the amount of labor

b

Which of the following factors determines the supply of loanable funds? a. changes in the interest rate, which cause firms to undertake more or fewer investment projects b. the willingness of households and governments to save c. the number of financial intermediaries available d. the quantity of stocks and bonds issued by firms

b

Which of the following is not a reason that the economy is considered to have been more stable in the 1950-2007 period than in other periods? a. the use of active government policies to stabilize the economy b. continually falling oil prices c. the increasing importance of services and the declining importance of goods d. the establishment of unemployment insurance programs

b

Firm​ X, a leading manufacturer of rubber tires in country​ A, caters to almost​ one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon​ Reeds, the CEO of firm​ X, feels that these fluctuations in the business environment are​ short-lived and expects the economy to recover very soon. In spite of the​ recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The​ firm's marketing​ head, Sandra​ Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making​ large-scale investments in the present climate. Which of the following questions is most relevant to answer in order to determine the accuracy of the CEO's claim? a. What proportion of total employment does the tire industry account for? b. What is the tire industry's contribution to the country's GDP? c. What are consumer expectations of future growth? d. How quickly did the economy recover the last time there was a recession? e. Does the current recession affect every firm in country A equally?

c

From a trough to a peak, the economy goes through a. the recessionary phase of the business cycle b. falling real GDP c. rising real GDP, but falling real GDP per capita d. the expansionary phase of the business cycle

d

During recessions, the inflation rate a. usually increases near the end of the recession b. is usually higher than during economic expansions c. usually increases d. usually decreases

d

During the last half of the twentieth century, the U.S. economy experienced a. long recessions, interrupted by relatively short expansions b. much more severe swings in real GDP than in the first half of the twentieth century c. an inflation rate that increased during both recessions and expansions d. long expansions, interrupted by relatively short recessions

d

During the last half of the twentieth century, the U.S. economy experienced a. long expectations, interrupted by relatively short recessions b. an inflation rate that increased during both recessions and expansions c. much more severe swings in real GDP than in the first half of the twentieth century d. long recessions, interrupted by relatively short expansions

a

Firm​ X, a leading manufacturer of rubber tires in country​ A, caters to almost​ one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon​ Reeds, the CEO of firm​ X, feels that these fluctuations in the business environment are​ short-lived and expects the economy to recover very soon. In spite of the​ recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The​ firm's marketing​ head, Sandra​ Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making​ large-scale investments in the present climate. Which of the following, if true, would support the CEO's claim? a. The government introduced a floor price in the market for natural rubber last year b. The tire industry reported good growth in profits until the recession began c. Crude oil prices are increasing steadily d. The government recently announced a plan to offer incentives to buyers in the car and household appliances market e. Some of Firm X's competitors have slashed the prices of their products in an attempt to boots sales

a

Firm​ X, a leading manufacturer of rubber tires in country​ A, caters to almost​ one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon​ Reeds, the CEO of firm​ X, feels that these fluctuations in the business environment are​ short-lived and expects the economy to recover very soon. In spite of the​ recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The​ firm's marketing​ head, Sandra​ Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making​ large-scale investments in the present climate. Which of the following, if true, would support the marketing head's claim? a. Import barriers were reduced recently to encourage competition b. Input prices declined substantially due to the recession c. The fact that the economy is in recession was announced a quarter after GDP started to decline d. In the previous recession, a leading player in the hospitality sector had expanded its facilities but was unable to recover its costs later e. Unemployment in the economy was lower than expected during the recession.

a

Potential GDP is a. sometimes greater, sometimes less, and sometimes equal to actual real GDP b. always greater than actual real GDP c. the level of GDP that would be produced when firms are operating below capacity d. always less than actual real GDP

a

Purchases of which type of goods are business cycles more likely to affect? a. durable goods b. goods the government purchases c. services d. nondurable goods

a

Purchases of which types of goods are business cycles most likely to affect? a. durable goods b. services c. nondurable goods d. goods the government purchases

a

The low point of economic activity is called a. a trough b. a low c. a peak d. a bottom

a

Which of the following are financial securities that represent promises to repay a fixed amount of funds? a. bonds b. neither stocks nor bonds c. stocks d. both stocks and bonds

a

Firm​ X, a leading manufacturer of rubber tires in country​ A, caters to almost​ one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon​ Reeds, the CEO of firm​ X, feels that these fluctuations in the business environment are​ short-lived and expects the economy to recover very soon. In spite of the​ recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The​ firm's marketing​ head, Sandra​ Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making​ large-scale investments in the present climate. Which of the following questions is most relevant to answer in order to determine the accuracy of the CEO's claim? a. what proportions of total employment does the tire industry account for? b. how quickly did the economy recover the last time there was a recession? c. what are consumer expectations of future growth? d. does the current recession affect every firm in country A equally? e. what is the tire industry's contribution to the country's GDP?

c

From a trough to a peak, the economy goes through a. the recessionary phase of the business cycle b. rising real GDP, but falling real GDP per capita c. the expansionary phase of the business cycle d. falling real GDP

c

In determining whether to borrow funds, firms compare the rate of return they expect to make on an investment with a. The initial cost of the investment b. The total amount of profit they expect to make from the investment c. The interest rate they must pay to borrow the necessary funds d. The revenue expected from the investment

c

The computation of the average annual growth rate of real GDP a. is the same for shorter periods of time as for longer periods of time b. involves computing the percentage change in real GDP between the first year and the last year for the period being examined c. is more complex when examining data for a long period of time than when examining data for only a few years d. involves simply averaging the growth rate for each year, but only if data for many years are available

c

The period between the high point of economic activity and the following low point is called a. inflation b. an expansion c. a recession d. stagflation

c

The period between the low point of economic activity and the following high point is called a. an acceleration b. inflation c. an expansion d. stagflation

c

Which of the following is not a reason that the economy is considered to have been more stable in the 1950-2007 period than in other periods? a. the increasing importance of services and the declining importance of goods b. the establishment of unemployment insurance programs c. continually falling oil prices d. the use of active government policies to stabilize the economy

c

Which of the following is not a service that the financial system provides for savers and borrowers? a. matching savers with borrowers b. increased liquidity for savers c. guaranteeing savers high rates of return d. risk sharing among savers

c

As the economy nears the end of an expansion, which of the following typically occurs? a. Wages are usually rising faster than prices b. The profits of firms will be failing c. Interest rates are usually rising d. All of the above occur

d

As the economy nears the end of an expansion, which of the following typically occurs? a. interest rats are usually rising b. wages are usually rising faster than prices c. the profits of firms will be falling d. all of the above occur

d

Holding all else constant, a federal government budget deficit will a. increase the supply of loanable funds and decrease the equilibrium real interest rate b. decrease the supply of loanable funds and decrease the equilibrium real interest rate c. increase the demand for loanable funds and increase the equilibrium real interest rate d. decrease the supply of loanable funds and increase the equilibrium real interest rate

d

Recessions cause the inflation rate to​ _________, and the unemployment rate to​ _________. a. decrease; decrease b. increase; increase c. increase; decrease d. decrease; increase

d

The unemployment rate a. typically rises during a recession and falls immediately after the recession has ended b. typically falls during a recession and after the recession has ended c. typically falls during a recession and rises after the recession has ended d. typically rises during a recession and after the recession has ended

d

What is the best use of rule of 70 among those listed below? a. to calculate the difference between the growth rate in real GDP and the growth rate in real GDP per capita b. to forecast the duration of recessions c. to find the average annual growth rate of real GDP d. to judge how rapidly real GDP per capita is growing over long time periods

d

Which of the following changes does not cause an increase in the quantity of goods and services that can be produced by one worker, or in one hour of work? a. technological change b. an increase in the literacy rate c. an increase in the quantity of capital per hour worked d. an increase in the number of workers

d

What happens to durable goods production, such as automobiles, during a recession?

it decreases

What happens to the inflation rate during a recession?

it decreases

What happens to unemployment during a recession?

it increases