Deck 5: What Macroeconomics Tries to Explain

Question 1

For the average living standard of a nation to rise,the only thing that needs to happen is for nominal GDP to increase faster than the price level.

Answer 1

False

Question 2

Inflation and unemployment are examples of macroeconomic topics.

Answer 2

True

Question 3

Output per person rises when

A) the population increases faster than real GDP
B) real GDP rises faster than the number of employed workers
C) real GDP increases at the same rate as the population
D) real GDP rises slower than the population
E) real GDP rises faster than the population

Answer 3

real GDP rises faster than the population

Question 4

Economists monitor economic growth by keeping track of

A) the stock market
B) population growth
C) the total quantity of goods and services produced in the United States each year
D) the inflation rate
E) the distribution of income among U.S.states

Question 5

Macroeconomics studies the behavior of aggregates while microeconomics studies the behavior of individual decision-making units.

Question 6

The equilibrium price of automobiles is a primarily macroeconomic issue.

Question 7

If the rate of economic growth is positive,then everyone becomes better off.

Question 8

Which of the following is a major macroeconomic goal?

A) Low prices
B) Declining prices
C) Pure competition
D) Stable prices
E) High prices

Question 9

What are the three important macroeconomic goals about which most economists,and society at large,agree?

A) economic growth,full employment,and low interest rates
B) economic growth,full employment,and stable prices
C) economic growth,zero unemployment,and falling prices
D) economic growth,low unemployment,and a balanced budget
E) economic growth,a balanced budget,and balanced international trade

Question 10

Over the past 80 years,real GDP has

A) decreased in more years than it has increased
B) increased dramatically
C) increased slowly
D) increased moderately
E) been stable

Question 11

Which of the following is a major macroeconomic goal?

A) Low prices
B) Fair prices
C) Pure competition
D) Low unemployment
E) High prices

Question 12

An understanding of macroeconomics is valuable because it can help

A) in making purchase decisions
B) us to understand the forces that determine how fast the economy grows
C) us to understand why some firms earn more economic profit than others
D) to minimize the amount of tax an individual owes
E) minimize the opportunity cost of making poor decisions

Question 13

Since the late 1970s,economic growth has

A) occurred at a rapid pace compared to the period 1950-1973
B) improved living standards across the entire population
C) maintained approximately constant living standards across the entire population
D) improved the living standards of less-skilled workers while highly skilled workers have become worse off
E) improved the living standards of highly skilled workers while less-skilled workers have become worse off

Question 14

In only one of the following situations is a nation's standard of living certain to increase.Which one?

A) Real GDP rises faster than population.
B) Real GDP rises faster than the price level.
C) Real GDP rises.
D) Real GDP rises faster than the number of people employed.
E) Real GDP rises faster than the number of people unemployed.

Question 15

Macroeconomics studies the behavior of individual decision makers while microeconomics studies the overall economy.

Question 16

Macroeconomics is best suited to answering questions such as

A) what determines the unemployment rate among students on this campus
B) why rent is higher in big cities than in smaller ones
C) how fast the overall price level will rise next year
D) what determines the demand for public transportation in rural areas
E) why sales taxes in this area are increasing

Question 17

From 1929 to 1933,U.S.output dropped by about

A) 10 percent
B) 20 percent
C) 25 percent
D) 50 percent
E) 75 percent

Question 18

Which of the following indicates that the average standard of living is rising?

A) Real GDP decreases faster than the price level.
B) Real GDP increases faster than the price level.
C) The population increases.
D) Real GDP increases faster than the population.
E) Population increases faster than real GDP.

Question 19

Increases in the general price level are primarily a macroeconomic issue.

Question 20

Rapid economic growth has increased the economic well-being of U.S.citizens because

A) people are now earning higher incomes while goods and services are cheaper
B) the dollar is worth now more than in the past
C) the output of goods and services has risen faster than the population
D) the population is now living and working longer
E) the population has increased while production has decreased

Question 21

Most recessions last approximately three years.

Question 22

How many times in the last 80 years has the official unemployment rate in the United States reached 0 percent?

A) 0
B) 1
C) 2
D) 3
E) 4

Question 23

If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7 percent,the economy is

A) not achieving full economic potential
B) experiencing an increase of 2 percent in real annual per capita GDP
C) experiencing a slump
D) experiencing high prices and low inflation
E) producing along its production possibilities frontier

Question 24

The Employment Act of 1946 directed the federal government to pursue the three objectives of maximizing employment,production,and purchasing power.

Question 25

Because it lowers the amount of output per person,unemployment results in

A) a shift in the economy's production possibilities frontier
B) increased workers' incomes
C) optimism about economic growth
D) a lower standard of living
E) rapid inflation

Question 26

If a factory hires 1,000 new workers,the nation's output level is probably

A) increasing and unemployment is likely to increase
B) increasing and unemployment is likely to decrease by 1000 individuals
C) fluctuating
D) stable
E) increasing and unemployment is likely to decrease by less than 1,000 individuals

Question 27

The U.S.economy experienced fluctuations in employment and output over the last half of the twentieth century.However,the length of the average recession has been about the same as the length of the average expansion.

Question 28

Periodic fluctuations in real GDP are called

A) business cycles
B) recessions
C) peaks
D) expansions
E) troughs

Question 29

During the Great Depression of the 1930s,the unemployment rate in the United States peaked at around

A) 5 percent
B) 10 percent
C) 12 percent
D) 25 percent
E) 50 percent

Question 30

During a recession,both output and unemployment fall.

Question 31

One macroeconomic goal is to achieve an unemployment rate of zero.

Question 32

The unemployment rate is usually zero except during recessions.

Question 33

The phase of the business cycle characterized by rising output is called a(n)

A) peak
B) recession
C) depression
D) trough
E) expansion

Question 34

If the unemployment rate is 6 percent,that means that 6 percent of

A) the population is not working
B) potential workers do not have jobs
C) the workforce is searching for work but has not found a job at that time
D) the individuals who are looking for work cannot find jobs
E) the population is not looking for a job

Question 35

Periodic fluctuations in GDP are called business cycles.

Question 36

The Full Employment and Balanced Growth Act of 1978 set the target unemployment rate for the United States economy at 4 percent.

Question 37

Recessions are identified by

A) severe and long-lasting phases of decreased output
B) high employment
C) constant output
D) decreasing output
E) low unemployment

Question 38

The United States economy has achieved the target rate of unemployment,as set by the Full Employment and Balanced Growth Act (1978),for most years over the last few decades.

Question 39

If the unemployment rate has reached an all-time low,the production of output is probably

A) high
B) low
C) fluctuating
D) stable
E) inefficient

Question 40

In the Full Employment and Balanced Growth Act of 1978,Congress set a target rate of unemployment.The nation achieves this target rate

A) in most years
B) at least once a year
C) only rarely
D) in election years
E) at least once every five years

Question 41

A measure that economists use in order to keep track of employment is

A) the price level
B) real GDP per person
C) real GDP
D) the growth rate of output
E) the unemployment rate

Question 42

During the 1990s and the first decade of the 2000s

A) polls have shown that U.S.citizens are more concerned about inflation than any other national problem
B) the U.S.inflation rate reached double digits (10 percent or higher)
C) the U.S.economy consistently experienced deflation (a falling price level)
D) the U.S.inflation rate averaged about 8 percent per year
E) the U.S.inflation rate averaged less than 3 percent per year

Question 43

Refer to Figure 5-1 above.If the economy moves from point B to C on the graph,it is going through a(n)

A) peak
B) trough
C) expansion
D) slump
E) recession

Question 44

Since 1959,the U.S.has experienced severe recessions in which three periods?

A) 1964-65,1981-82,and 1990-91
B) 1974-75,1981-82,and 2008-09
C) 1960-61,1974-75,and 2008-09
D) 1960-61,1981-82,and 2008-09
E) 1969-70,1981-82,and 2008-09

Question 45

Inflation has never been a major problem in the U.S.

Question 46

Microeconomics involves the analysis of smaller,less developed economies while macroeconomics is concerned with the analysis of larger developed economies.

Question 47

Over the past 90 years or so,the inflation rate has

A) generally increased
B) been positive in most years
C) stayed low
D) been negative in most years
E) dramatically increased

Question 48

The inflation rate

A) explains how prices are reacting to economic policies
B) indicates the level of prices charged by all firms in the economy
C) measures the annual percent increase in the average level of prices
D) measures how fast wages and incomes are rising
E) determines the prices that firms will offer to customers

Question 49

Aggregation is important in macroeconomics because

A) it is a basic tool of reasoning
B) we need a model with as much information as possible
C) it allows us to comprehend the entire economy in all its detail
D) it allows us to keep different markets separate in our minds
E) we need to consider the entire economy at once with a model as simple as possible

Question 50

Refer to Figure 5-1 above.If the economy moves from point A to B on the graph,it is going through a(n)

A) peak
B) trough
C) expansion
D) boom
E) recession

Question 51

We could try to use a powerful computer to construct a macroeconomic model including tens of thousands of demand and supply curves,for every market in the economy.This would not be a useful undertaking because

A) it would not be worth the increased level of complication and effort needed to collect all information
B) the model would be simplistic
C) the model would inevitably leave out important information
D) the suggested prices would inevitably be wrong in each market
E) the model would not be realistic

Question 52

Aggregation is important because it allows macroeconomists to divide a whole into its individual components.

Question 53

In macroeconomics,

A) we study one market at a time
B) we try to understand how the entire economy behaves
C) we focus on large,important products and ignore the rest
D) we study one nation's economy only
E) we aggregate all national economies into a world economy

Question 54

When we study macroeconomics,

A) we model tens of thousands of individual supply and demand curves
B) we determine thousands of prices and quantities
C) we employ aggregation to reduce the number of markets we need to understand
D) we add up all the demand and supply curves that are obtained in microeconomics
E) we add up the prices of all goods and services produced in the economy

Question 55

Refer to Figure 5-1 above.If the economy reaches point B on the graph,it is going through a(n)

A) peak
B) trough
C) expansion
D) boom
E) recession

Question 56

Why is inflation considered a problem?

A) Firms gain too much economic power.
B) It is always very high when it exists.
C) People prefer falling prices.
D) It is costly for society.
E) Government gains too much economic power..

Question 57

Which of the following is a period of decreasing output that is severe and long lasting?

A) business cycle
B) expansion
C) peak
D) recession
E) depression

Question 58

During the expansion phase of a business cycle

A) employment and output are both at a peak
B) employment and output are both rising
C) employment is falling and output is rising
D) unemployment is rising and output is falling
E) employment is rising and output is falling

Question 59

Refer to Figure 5-1 above.If the economy goes from point A to point C on the graph,it is going through a(n)

A) peak
B) trough
C) expansion
D) business cycle
E) recession

Question 60

Aggregation is the process of combining different things into a single category.

Question 61

The phase of the business cycle characterized by rising employment is called

A) a recession
B) a low-tax phase
C) a high-inflation phase
D) an expansion
E) a depression

Question 62

Rapid economic growth,stable prices and __________ are the three important macroeconomic goals about which most economists agree.

A) an unemployment rate of zero
B) zero inflation
C) full employment
D) a high exchange rate
E) low interest rates

Question 63

The two phases of the business cycle are

A) high economic growth and low economic growth
B) expansion and contraction
C) expansion and depression
D) high inflation and low inflation
E) potential economic growth and actual economic growth

Question 64

John Maynard Keynes,author of The General Theory of Employment,Interest,and Money,argued that

A) classical economic theory was correct
B) the government should follow a policy of laissez faire
C) the critiques of classical economics were flawed
D) the economy does not always perform well in the absence of government guidance
E) instead of focusing on money,the government should control interest rates

Question 65

For the average living standard of a nation to __________,__________ must increase faster than the price level

A) increase;nominal GDP
B) increase;real GDP
C) decrease;nominal GDP
D) remain constant;nominal GDP
E) decrease;real GDP

Question 66

The occurrence of the Great Depression offered evidence that supported

A) the classical theory of economics
B) the need for the government to practice the policy of laissez faire
C) the need for the government to control prices
D) Congress to take action to stop rising prices
E) the Keynesian idea that the government needed to guide the economy

Question 67

Which of the following is a normative macroeconomic statement?

A) An increase in government spending will reduce unemployment.
B) An active government policy should be employed to maintain a healthy economy.
C) The unemployment rate is 10 percent.
D) There is a positive relationship between inflation and the rate of growth of money
E) Gross domestic product grew 3 percent this year.

Question 68

The term laissez faire can be translated

A) "leave it alone"
B) "make it equitable (fair)"
C) "take an active role"
D) "markets work"
E) "free of problems"

Question 69

Refer to Figure 5-2 above.When moving from point B to C on the graph,the economy is going through a(n)

A) peak
B) trough
C) expansion
D) downturn
E) recession

Question 70

If two economists disagree on an issue and their disagreement is based on personal value judgments,then this controversy is a normative one.

Question 71

Since the late 1970s which of the following groups has become worse off?

A) Highly-skilled workers
B) Technical workers
C) Less-skilled workers
D) Scientists and other workers who require a lot of education
E) All types of workers

Question 72

Rapid economic growth is important because it

A) makes some people richer
B) eliminates scarcity
C) makes the unemployment rate zero
D) allows the average person to consume more goods and services
E) reduces interest rates

Question 73

In mid-2009,the unemployment rate stood at

A) 25 percent
B) 5 percent
C) 6 percent
D) 9.5 percent
E) 20 percent

Question 74

Classical economists believed that

A) the government should play an active role in controlling the economy
B) the government can best help the economy by leaving it alone
C) the economy is controlled by the government
D) laissez faire will hurt the economy
E) economists should offer guidance to governmental leaders

Question 75

"Output fell 2 percent last quarter" is an example of a positive economic statement.

Question 76

Who was the economist that began modern macroeconomics?

A) Adam Smith
B) Paul Samuelson
C) Milton Friedman
D) John Maynard Keynes
E) Ben Bernanke

Question 77

During the contraction phase of the business cycle

A) employment and output are both rising
B) employment and output are both at a peak
C) employment and output are both at their lowest
D) employment and output are both falling
E) employment is falling and output is rising

Question 78

Which of the following is not an important macroeconomic goal?

A) Stable prices
B) Full employment
C) Rapid economic growth
D) Low interest rates
E) None of the above is an important macroeconomic goal

Question 79

A laissez faire policy is one in which

A) the government plays a major role in guiding economic activity
B) the government prefers to control taxes rather than spending
C) the government leaves things alone
D) individuals rely on the government for guidance but not for active intervention in the economy
E) businesses rely on the government for guidance but not for active intervention in the economy

Question 80

The group of economists who believed that the macroeconomy worked very well on its own were

A) microeconomists
B) macroeconomists
C) classical economists
D) Keynesian economists
E) Marxist economists