Deck 5: Introduction to Macroeconomics

Question 1

For a given aggregate supply curve,price level and output will both increase when aggregate demand decreases.

Answer 1

False

Question 2

Keynes believed that the best method for tackling recessions was to reduce government spending and raise taxes,thereby reducing the federal budget deficit.

Answer 2

False

Question 3

The aggregate demand curve slopes downward because households feel poorer after a decrease in the price level.

Answer 3

False

Question 4

The federal debt is a stock variable that measures the net accumulation of prior federal deficits.

Question 5

A federal budget deficit can simultaneously reduce inflation and unemployment.

Question 6

An investment bank is a financial institution that finances federal budget deficits at very low interest rates.

Question 7

Macroeconomists test their theories using controlled economy-wide experiments of various kinds.

Question 8

The aggregate supply curve reflects the inverse relationship between the interest rate and the quantity of real GDP supplied.

Question 9

Macroeconomics is a branch of economics that studies:

A)the different costs associated with production.
B)the price and output decisions made by different industries.
C)the overall performance of the economy.
D)the role of a market in determining an efficient outcome.
E)the role of input suppliers in determining the price and quantity of output.

Question 10

Since the Great Depression,business fluctuations have become more severe and longer in duration

Question 11

When business leaders become pessimistic about future sales and profits and increase their spending on plant and equipment,their expectations are usually fulfilled.

Question 12

An economic policy that is based on a flawed theory can,at times,provide a desired outcome.

Question 13

Macroeconomics simply focuses on the annual performance of a particular national economy and ignores its interactions with other national economies around the world.

Question 14

The period between two successive peaks in a business cycle is called a contraction.

Question 15

The failure of the mercantilism policy and the tax policy during the Great Depression proves that economic policies are meaningless and they do more harm than good.

Question 16

An increase in wage rate,other things constant,shifts the aggregate supply curve downward.

Question 17

The gross domestic product measures the value of all final goods and services produced by resources owned by a nation.

Question 18

Stagflation is a situation with high unemployment rates,high inflation rates,and little or no growth in the economy.

Question 19

Stagflation in an economy can be effectively controlled by Keynesian demand management policies.

Question 20

The Reagan administration's policies were aimed at managing aggregate demand.

Question 21

An economic variable that measures something at a particular point in time is called a _____.

A)stock variable
B)periodic variable
C)dummy variable
D)flow variable
E)constant variable

Question 22

Which of the following best describes a flow rather than a stock?

A)You own $5,000 worth of government bonds.
B)You own a $100,000 house.
C)You own a coin collection valued at $10,000.
D)You earn $500 per week.
E)You own a $45,000 automobile.

Question 23

The ultimate objective of macroeconomics is to:

A)reduce the unemployment rate in an economy.
B)stabilize the growth rate in an economy.
C)develop and test theories about how the overall economy works.
D)improve the international competitiveness of U.S.financial markets.
E)maximize the efficiency of government intervention in the marketplace.

Question 24

Which of these signifies the role of money in any economy?

A)It acts as a tool for poverty alleviation in an economy.
B)It serves as a medium of exchange in an economy.
C)It indicates the economic wellbeing of a nation.
D)It helps to differentiate between the nominal and real income of a nation.
E)It is a clear indicator of the growth in national income.

Question 25

Which of the following best describes a stock rather than a flow?

A)Each week,you save $100.
B)Each week,you buy $10 worth of gasoline.
C)Each week,you buy $50 worth of groceries.
D)You earn $500 per week at your job.
E)You own $5,000 worth of government bonds.

Question 26

Which of the following statements regarding the gross domestic product is true?

A)It is useful in comparing the overall performance of different economies at the same time.
B)It measures aggregate income in an economy over a period of ten years.
C)It measures the value of all goods and services produced in the world during a given period.
D)It is a measure of an economy's price level during a particular year.
E)It records the cumulative value of all goods and services produced by domestically owned factors of production.

Question 27

Which of these statements best describes a flow variable?

A)An economic variable that measures something at a particular point in time
B)An economic variable whose value is determined by the market
C)An economic variable that is measured per unit of time
D)An economic variable whose value shows no change over time
E)An economic variable that remains static when other related variables change

Question 28

The economic policy based on the incorrect theory that a nation's economic objective should be to accumulate precious metals in the public treasury is called _____.

A)laissez-faire
B)deficit financing
C)socialism
D)mercantilism
E)capitalism

Question 29

If all firms expect greater demand for their products or services,they will hire _____ resources like labor and capital and the economy will experience _____.

A)fewer; recession
B)fewer; growth
C)more; deflation
D)more; recession
E)more; growth

Question 30

Which of these faulty economic policies was adopted by President Hoover during the Great Depression?

A)An increase in tax rate
B)An increase in trade barriers
C)A decrease in tax rate
D)A decrease in government spending
E)An increase in government spending

Question 31

An example of a stock variable in economic theory will be:

A)the amount of money saved by an individual each week.
B)the amount of money spent on buying gasoline each month.
C)the weekly grocery bill of an average household.
D)the total value of the government bond held by an individual.
E)the total fiscal spending during a particular quarter.

Question 32

Which of the following economic measures is most useful in comparing different economies across the world?

A)Aggregate supply
B)Total unemployment
C)Gross domestic product
D)Net national product
E)Aggregate expenditure

Question 33

Which of the following is a flow variable?

A)Price level
B)U.S.population
C)Money supply
D)Investment spending
E)Household debt

Question 34

An economic variable that is measured per unit of time,such as spending per year,is known as a:

A)stock variable.
B)periodic variable.
C)dummy variable
D)flow variable.
E)controlled variable.

Question 35

Identify an example of a flow variable.​

A)The volume of the federal government's debt
B)The population of a country in a particular year
C)The total amount of an individual's wealth
D)The amount of sales tax collected per year
E)The total amount of unemployment in an economy

Question 36

The market value of all final goods and services produced in a nation during a particular period is called the:

A)gross domestic product.
B)net national product.
C)national income.
D)gross national product.
E)gross world product.

Question 37

Identify an example of a stock variable.

A)The growth in investment in an economy
B)The change in the price level in an economy over the years
C)The number of unemployed people in an economy in a particular year
D)The increase in the money supply in an economy
E)The fall in consumer spending during two consecutive years

Question 38

Which of the following variables is measured only at a particular point in time and not over different time periods?

A)The unemployment rate
B)Consumer income
C)The federal government's debt
D)The federal government's budget deficit
E)Total expenditure

Question 39

Which of the following concepts is not included in the study of macroeconomics?

A)The unemployment level
B)The inflation rate
C)The real income
D)The profit-maximizing condition
E)The role of government

Question 40

An example of a flow variable in economics is:

A)the total amount of bank loan taken by Emily.
B)the value of an apartment owned by Jerome.
C)the price of an antique painting used to decorate an office.
D)the earnings of Malaya from piano classes each month.
E)the total value of the U.S.treasury bonds held by China.

Question 41

The demand for _____ is most severely affected by a recession.​

A)medicines
B)automobiles​
C)breakfast cereals​
D)haircuts​
E)gasoline​

Question 42

Which of the following is true of a recession?​

A)It is typically accompanied by inflation and investment growth.
B)It lasts for more than two years on an average.
C)It is typically longer than periods of expansion.
D)It begins after an expansion has peaked.
E)It continues as long as actual output exceeds the potential output.

Question 43

Economic fluctuations:​

A)are linked,but not perfectly synchronized,across countries.
B)are perfectly synchronized across countries.
C)in one country are independent of fluctuations in other countries.
D)in the United States always occur after fluctuations in other developed economies.
E)in the United States usually occur before fluctuations in other developed economies.

Question 44

Which of these partly accounts for the long-term growth in production in the U.S.economy?

A)An increase in government spending
B)An increase in the availability of resources
C)A reduction in federal taxes
D)A gradual but consistent increase in the price level
E)A general optimism about the future and the pioneering spirit of America

Question 45

Identify a valid trend observed in U.S.business cycles since 1933.

A)Contractions lasted for more than two years on an average.
B)There were only two or three complete cycles.
C)There was no recession since 1979.
D)Expansions generally lasted longer than contractions.
E)Each cycle lasted longer than the previous one.

Question 46

A recession is best defined as a period during which:

A)the percentage of the population employed increases.
B)employment,output,and income decrease.
C)the average price level in an economy decreases.
D)the usage of labor and capital resources increases.
E)budget deficit and trade deficit decrease.

Question 47

A key difference between recessions and depressions is that recessions are:

A)longer than depressions.
B)more severe than depressions.
C)accompanied by price increases,while depressions are accompanied by price decreases.
D)shorter and less severe than depressions.
E)accompanied by price decreases,while depressions are accompanied by price increases.

Question 48

Economic fluctuations or business cycles:

A)measure changes in the total number of new businesses started during a year.
B)are fluctuations in the Dow Jones industrial average relative to a long-term growth trend.
C)look at the role played by business on the level of unemployment.
D)are fluctuations in the level of economic activity relative to a long-term growth trend.
E)are changes in government spending that occur over a period of time.

Question 49

A period of sustained decline in output in an economy is known as a(n)_____.​

A)expansion
B)stagnation​
C)peak
D)trough
E)contraction

Question 50

Which of the following is true of a recessionary period?

A)It is usually accompanied by an improvement in the value of an economy's currency.
B)It is usually accompanied by low levels of inflation.
C)It is usually accompanied by a dramatic decline in the stock of inventories.
D)It usually lasts for a few months.
E)It leads to a drastic decline in government spending.

Question 51

The mercantilism policy failed to generate gains from trade for countries which adopted it because of:

A)increases in consumer spending.
B)high levels of federal debt.
C)supply-side shocks from the oil-exporting countries.
D)runaway inflation in the U.S.
E)retaliations from other countries.

Question 52

Which of these is true of the mercantilism policy?

A)It accepts gold as a medium of exchange.
B)It encourages free movement of labor and capital resources between nations.
C)It emphasizes government control over the production of important goods and services.
D)It emphasizes the importance of trade restrictions in achieving economic growth.
E)It believes that a nation's economic vitality depends on its unemployment level.

Question 53

Which of the following factors can partly explain the long-term growth in production in the U.S.economy?

A)Trade surpluses and accumulation of precious metals
B)A gradual but consistent increase in the price level
C)Growth in population
D)Improvements in technology
E)Federal government budget deficits

Question 54

Which of the following would indicate the beginning of a recessionary phase in an economy?​

A)Many new firms starting up
B)Stock prices improving​
C)Businesses slowing down​
D)Demand for real estate picking up
E)Orders for new equipment increasing​

Question 55

Which of the following is true of economic fluctuations?​

A)They can be experienced by the world economy as well as by a single nation.
B)They tend to be equal in length and intensity.
C)They reflect an economy's socio-political condition.
D)They tend to become more severe when the government attempts to stabilize an economy.
E)They have been completely offset by appropriate government policies during the last 40 years.

Question 56

A depression can be defined as:​

A)a mild reduction in total production coupled with a rising unemployment rate that lasts for several years.
B)a mild decline in total production that lasts less than six months.
C)a severe fall in stock prices that causes financial panic and lasts for several years.
D)a severe reduction in total production coupled with high unemployment that lasts for several years.
E)a decline in government spending and taxes that lasts for several months.

Question 57

Long-term growth in production in an economy can be partially explained by:

A)improvements in the rules of the game that facilitate production and exchange.
B)the peaks and troughs of the business cycle or economic fluctuations.
C)trade surpluses that lead to accumulations of precious metals.
D)federal government budget deficits.
E)a gradual but consistent increase in the price level.

Question 58

Which of the following would indicate the beginning of an expansionary phase in an economy?​

A)A minor increase in the number of new firms
B)A decline in stock market prices​
C)An improvement in consumer confidence​
D)A slowdown in housing construction​
E)A decrease in the number of orders for new equipment​

Question 59

A period of sustained growth in output in an economy is referred to as a(n)_____.​

A)expansion
B)contraction​
C)peak​
D)trough​
E)recession​

Question 60

The value of a country's final goods and services after adjusting for changes due to inflation is called its _____.​

A)real GDP
B)nominal GDP​
C)disposable income​
D)net national product​
E)full employment output​

Question 61

One explanation for the slope of the aggregate demand curve is that:​

A)nominal income falls and so does the demand for goods and services as prices rise.
B)falling prices make people feel poorer and reduce spending.
C)the government spends less to drive the price level back to normal as prices rise.
D)businesses increase spending when inflation is high and rising.
E)domestic goods become more expensive relative to foreign goods when prices rise,reducing exports.

Question 62

The aggregate demand curve reflects:​

A)a direct relationship between the price level in an economy and the real GDP demanded.
B)a direct relationship between real GDP demanded and total unemployment.
C)an inverse relationship between the price level in an economy and the nominal GDP demanded.
D)an inverse relationship between the price level in an economy and the real GDP demanded.
E)an inverse relationship between the real GDP demanded and total unemployment.

Question 63

Which of these is a likely impact of an increase in the price level in an economy on the aggregate supply in the economy?​

A)An increase in the quantity of real GDP supplied
B)A decrease in the quantity of real GDP supplied​
C)A leftward shift of the aggregate supply curve​
D)A rightward shift of the aggregate supply curve​
E)An increase in the slope of the aggregate supply curve​

Question 64

A fall in the price level will:​

A)cause an upward movement upward along the aggregate demand curve.
B)cause a downward movement along the aggregate demand curve.
C)cause a leftward shift of the aggregate demand curve.
D)cause a rightward shift of the aggregate demand curve.
E)have no impact on the aggregate demand curve.

Question 65

As the price level increases,the amount of goods and services that consumers,businesses,and governments desire to purchase will change.This is depicted by:​

A)a leftward movement of the aggregate demand curve.
B)a rightward movement of the aggregate demand curve.
C)an upward movement along the aggregate demand curve.
D)a downward movement along the aggregate demand curve.
E)an increase in the slope of the aggregate demand curve.

Question 66

By a leading economic indicator,economists mean:​

A)an indicator of future economic activity.
B)an indicator that reflects economic fluctuations as they occur.
C)a highly accurate indicator that is easily measured.
D)an indicator that predicts the level of inflation in an economy.
E)any variable that follows changes in economic activity.

Question 67

Which of these is a lagging economic indicator?​

A)The unemployment rate
B)Personal income​
C)Industrial production​
D)Total employment​
E)Fluctuations in stock prices​

Question 68

Which of these is the most likely impact of an increase in the wealth of consumers?​

A)The aggregate supply curve shifts outward.
B)The aggregate demand curve shifts outward.
C)The aggregate demand curve shifts inward.
D)The aggregate supply curve shifts inward.
E)Both the aggregate demand and aggregate supply curves shift inward.

Question 69

Which of these is a likely consequence of an increase in the price level in the economy,other things constant?​

A)Firms demanding less imported raw materials
B)Government demanding less military hardware​
C)Foreigners demanding greater amount of U.S.goods​
D)Households demanding more housing and furniture​
E)Firms demanding more capital resources​

Question 70

A rise in the price level will:​

A)cause an upward movement along the aggregate demand curve.
B)cause a downward movement along the aggregate demand curve.
C)cause a leftward shift of the aggregate demand curve.
D)cause a rightward shift of the aggregate demand curve.
E)have no impact on the aggregate demand curve.

Question 71

Which of these is a coincident economic indicator?​

A)The demand for plant and machinery
B)Personal income​
C)Real estate growth​
D)The interest rate​
E)The unemployment rate​

Question 72

Which of these statements correctly explains the shape of the aggregate demand curve?​

A)As prices fall,nominal income rises and so does the demand for real goods and services.
B)Rising prices reduce people's wealth and thereby decrease spending.
C)With falling prices,government decides to spend less to increase the price level.
D)Businesses increase investment spending in response to higher interest rates caused by inflation.
E)As prices fall,domestically produced goods become more expensive relative to foreign goods,resulting in an increase in production.

Question 73

The aggregate demand curve for an economy depicts the:​

A)quantity of goods and services demanded during a given time period at different interest rates,other things held constant.
B)quantity of goods and services demanded at different price levels during different time periods,other things held constant.
C)quantity of goods and services demanded at different price levels during a given time period,other things held constant.
D)quantity of goods and services that the economy is capable of producing during a given time period,other things held constant.
E)final quantity of goods and services actually produced by the economy during a given time period,other things held constant.

Question 74

If the price level in the U.S.decreases,aggregate output demanded:​

A)decreases because U.S.products become cheaper relative to foreign products.
B)decreases because U.S.products become more expensive relative to foreign products.
C)increases because U.S.products become cheaper relative to foreign products.
D)increases because U.S.products become more expensive relative to foreign products.
E)decreases because household wealth and spending in the U.S.decrease.

Question 75

The aggregate supply curve represents:​

A)the quantity of aggregate output that producers are willing and able to supply at each possible price level.
B)the total quantity of a particular good that all producers are willing to supply at each possible price level.
C)the total quantity of a particular good that all producers are willing to supply at the equilibrium price level.
D)the quantity of aggregate output that producers are willing and able to supply at the equilibrium price level.
E)the quantity of aggregate output that producers are willing and able to supply at the equilibrium level of GDP.

Question 76

If the price level in the U.S.increases,aggregate output demanded:​

A)decreases because U.S.products become cheaper relative to foreign products.
B)decreases because U.S.products become more expensive relative to foreign products.
C)increases because U.S.products become cheaper relative to foreign products.
D)increases because U.S.products become more expensive relative to foreign products.
E)decreases because household wealth and spending increase.

Question 77

When economists refer to an economy's price level,they indicate:​

A)the rate of inflation in that economy.
B)the prices of goods and services relative to consumers' incomes.
C)a composite measure of prices of all goods and services.
D)a period of level,or steady,prices in that economy.
E)the price of a specific consumer good.

Question 78

Identify the correct statement.​

A)If the price level increases,we feel poorer and buy less.
B)If the price level increases,we feel richer and buy more.
C)If domestic prices increase,we substitute domestic goods for imported ones.
D)An increase in the price of a particular good leads to a substitution​
E)A decrease in the price of a particular good is like an increase in income and therefore we buy more.

Question 79

Economic activities that signal forthcoming changes in the economy are referred to as:​

A)coincidental economic indicators.
B)GDP implicit price deflators.
C)lagging economic indicators.
D)perfect economic indicators.
E)leading economic indicators.

Question 80

Which of the following statements about leading economic indicators is true?​

A)Most people refer to them before making any important spending decision.
B)They are the only economic indicators available to economists.
C)They indicate when an economy is in a recession or an expansion.
D)They foreshadow turning points in the business cycle.
E)They can predict precisely when turning points in an economy will occur.