Question 1

The inflation rate is the
A)percent increase in the average level of prices over a year.
B)percent increase in output over a year.
C)percent increase in the unemployment rate over a year.
D)price level divided by the level of output.

Accepted Answer

The inflation rate is the percentage increase in the average level of prices over a year.

Question 2

The main reason that the United States has such a high standard of living is
A)low unemployment.
B)high average labor productivity.
C)low inflation.
D)high government budget deficits.

Accepted Answer

High average labor productivity is the main reason for the high standard of living in the United States. This means that American workers produce more goods and services per hour worked than other countries, leading to a higher overall GDP and standard of living. Low unemployment and low inflation can also contribute to a high standard of living, but they are not the main reasons. High government budget deficits, on the other hand, can actually harm the economy and lower the standard of living over time.

Question 3

During recessions,the unemployment rate ________ and output ________.
A)rises; falls
B)rises; rises
C)falls; rises
D)falls; falls

Accepted Answer

During recessions, businesses typically reduce production and layoff workers, causing the unemployment rate to rise. As a result, output (or GDP) also typically falls because there are fewer people employed and producing goods and services.

Question 4

The two major reasons for the tremendous growth in output in the U.S.economy over the last 125 years are
A)population growth and low inflation.
B)population growth and increased productivity.
C)low unemployment and low inflation.
D)low inflation and low trade deficits.

Accepted Answer

The growth in output over the last 125 years in the U.S. economy is attributed to two major factors: population growth and increased productivity. With an increase in population, there is more demand for goods and services, leading to increased production. Similarly, an increase in productivity means that goods can be produced more efficiently, leading to a higher output.

Question 5

The most direct effect of an increase in the growth rate of average labor productivity would be an increase in
A)the inflation rate.
B)the unemployment rate.
C)the long-run economic growth rate.
D)imported goods.

Accepted Answer

An increase in the growth rate of average labor productivity would lead to an increase in the long-run economic growth rate because it means that more output can be produced for a given amount of input, leading to increased efficiency, higher profits, and ultimately, increased economic growth. It would not directly impact inflation, unemployment, or imported goods.

Question 6

Short-run contractions and expansions in economic activity are called
A)recessions.
B)expansions.
C)deficits.
D)the business cycle.

Accepted Answer

Short-run contractions and expansions in economic activity are known as the business cycle. Recessions and expansions are two phases in the business cycle. Deficits, on the other hand, refer to a situation where a government's spending is greater than its income.

Question 7

The number of unemployed divided by the labor force equals
A)the inflation rate.
B)the labor force participation rate.
C)the unemployment rate.
D)the misery index.

Accepted Answer

The number of unemployed divided by the labor force is known as the unemployment rate. It is calculated as a percentage and is a key measure of the health of the labor market. A high unemployment rate indicates that a significant portion of the labor force is unable to find work, which can lead to negative economic consequences. Therefore, C is the correct choice as it defines the unemployment rate.

Question 8

Average labor productivity is the
A)amount of workers per machine.
B)amount of machines per worker.
C)ratio of employed to unemployed workers.
D)amount of output per worker.

Accepted Answer

Average labor productivity is the amount of output produced per worker, so the correct choice is D. The other choices are not relevant to the definition of labor productivity.

Question 9

If the price level was 100 in 2009 and 102 in 2010,the inflation rate was
A)102%.
B)20%.
C)2%.
D)0)2%.

Accepted Answer

The inflation rate can be calculated using the formula:
Inflation rate = ((Price level in current year - Price level in previous year)/ Price level in previous year) x 100%
Using this formula, we get:
Inflation rate = ((102-100)/100) x 100%
Inflation rate = (2/100) x 100%
Inflation rate = 2%
Therefore, the correct answer is C) 2%.

Question 10

In analyzing macroeconomic data during the past year,you have discovered that average labor productivity fell,but total output increased.What was most likely to have caused this?
A)There is nothing unusual in this outcome because this is what normally occurs.
B)The capital/output ratio probably rose.
C)There was an increase in labor input.
D)Unemployment probably increased.

Accepted Answer

The fact that total output increased despite a decline in average labor productivity suggests that there was an increase in labor input, either through an increase in the number of workers or an increase in the hours worked by existing workers. This increased labor input compensated for the decline in labor productivity, resulting in overall output growth.

Question 11

A country is said to be experiencing deflation when
A)prices of most goods and services are rising over time.
B)prices of most goods and services are falling over time.
C)total output is rising over time.
D)total output is falling over time.

Accepted Answer

Deflation occurs when there is a persistent decrease in the general price level of goods and services in the economy. This means that over time, prices are falling rather than rising, making goods and services cheaper. Choice A is incorrect, as it describes inflation, which is when prices are rising over time. Choices C and D are incorrect because they refer to changes in total output, which is not necessarily related to changes in the general price level.

Question 12

A country is said to be experiencing inflation when
A)prices of most goods and services are rising over time.
B)prices of most goods and services are falling over time.
C)total output is rising over time.
D)total output is falling over time.

Accepted Answer

Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time. This means that prices of most goods and services are rising over time. The other options, B, C, and D, do not accurately describe inflation. Falling prices are known as deflation, and rising output is known as economic growth. Falling output is known as a recession or economic contraction.

Question 13

The highest and most prolonged period of unemployment in the United States over the last 125 years occurred during
A)World War II.
B)the 1890s Depression.
C)the 1990-1991 recession.
D)the Great Depression of the 1930s.

Accepted Answer

The Great Depression of the 1930s was the highest and most prolonged period of unemployment in the United States over the last 125 years, with unemployment rates peaking at over 25% and lasting for several years. While other periods of economic downturn, such as the 1990-1991 recession, have resulted in high unemployment rates, they were not as severe or as long-lasting as the Great Depression.

Question 14

Before World War II,the average level of prices in the United States usually
A)fell during wartime and rose during peacetime.
B)fell during wartime and fell during peacetime.
C)rose during wartime and fell during peacetime.
D)rose during wartime and rose during peacetime.

Accepted Answer

During World War II, the government implemented price controls to prevent inflation, which led to a decrease in prices during wartime. However, during peacetime, prices tended to rise as demand increased and the economy grew. Therefore, the average level of prices in the United States generally rose during wartime and fell during peacetime before World War II.

Question 15

When national output rises,the economy is said to be in
A)an expansion.
B)a deflation.
C)an inflation.
D)a recession.

Accepted Answer

When national output or Gross Domestic Product (GDP) increases, it indicates that the economy is producing more goods and services. This leads to an increase in employment, income, and consumption, which results in economic growth. The term used to describe this phase of the business cycle is known as an expansion or an economic boom. In contrast, a recession occurs when the economy experiences a decline in output over a sustained period. Therefore, option A is the best choice as it accurately reflects the situation when national output rises.

Question 16

From 1800 to 1940,the price level in the United States
A)trended neither upward nor downward.
B)fluctuated wildly.
C)declined slowly.
D)increased slowly.

Accepted Answer

The answer of From 1800 to 1940,the price level in...

Question 17

The unemployment rate is the
A)number of unemployed divided by the number of employed.
B)number of employed divided by the number of unemployed.
C)number of unemployed divided by the labor force.
D)labor force divided by the number of unemployed.

Accepted Answer

The unemployment rate is calculated by dividing the number of unemployed individuals by the labor force, which includes both the employed and unemployed but actively seeking work. Therefore, option C is the correct answer.

Question 18

During the Great Depression,the unemployment rate for the United States peaked at approximately
A)10%.
B)70%.
C)45%.
D)25%.

Accepted Answer

The highest unemployment rate recorded during the Great Depression was approximately 25%.

Question 19

Which of the following best describes a typical business cycle?
A)Economic expansions are followed by economic contractions.
B)Inflation is followed by unemployment.
C)Trade surpluses are followed by trade deficits.
D)Stagflation is followed by inflationary economic growth.

Accepted Answer

A typical business cycle involves alternating periods of economic expansion and economic contraction. This is characterized by fluctuations in economic activity, including changes in employment rates, GDP, and inflation. Economic expansions are commonly followed by contractions, and vice versa.

Question 20

In which of the following periods did average labor productivity in the United States grow the fastest?
A)1929 to 1935
B)1949 to 1973
C)1973 to 1995
D)1995 to 2008

Accepted Answer

The period from 1949 to 1973 saw the fastest growth in average labor productivity in the United States, with an annual growth rate of 2.8%. This period is often referred to as the "Golden Age of Capitalism" and was characterized by strong economic growth, low unemployment, and rising living standards for many Americans.

Quiz 1: Introduction to Macroeconomics

The inflation rate is the

The main reason that the United States has such a high standard of living is

During recessions,the unemployment rate and output .

The two major reasons for the tremendous growth in output in the U.S.economy over the last 125 years are

The most direct effect of an increase in the growth rate of average labor productivity would be an increase in

Short-run contractions and expansions in economic activity are called

The number of unemployed divided by the labor force equals

Average labor productivity is the

If the price level was 100 in 2009 and 102 in 2010,the inflation rate was

In analyzing macroeconomic data during the past year,you have discovered that average labor productivity fell,but total output increased.What was most likely to have caused this?

A country is said to be experiencing deflation when

A country is said to be experiencing inflation when

The highest and most prolonged period of unemployment in the United States over the last 125 years occurred during

Before World War II,the average level of prices in the United States usually

When national output rises,the economy is said to be in

From 1800 to 1940,the price level in the United States

The unemployment rate is the

During the Great Depression,the unemployment rate for the United States peaked at approximately

Which of the following best describes a typical business cycle?

In which of the following periods did average labor productivity in the United States grow the fastest?