Question 1

The National Bureau of Economic Research:
A) is a government agency that dates business cycles in the United States.
B) is a nonprofit research organization that dates business cycles in the United States.
C) consists of elected officials from the U.S. Senate.
D) is a nonprofit research organization that only determines when recessions begin.

Accepted Answer

The National Bureau of Economic Research is a nonprofit research organization that is primarily focused on conducting economic research and analysis, including determining the start and end dates of business cycles in the United States. It is not a government agency and also conducts research on topics beyond just recession dating.

Question 2

Suppose the National Activity Index of the Federal Reserve Bank of Chicago drops to -0.83 this month after being above +0.36 for the previous three months. This movement in the index indicates that:
A) the economy has probably moved into a recession.
B) the rate of economic growth has slowed, but not enough to suggest that a recession is imminent.
C) the rate of economic growth has dropped below the historical trend rate of growth, and the economy has reached a trough.
D) the economy is at its peak this month but will move into the recession stage in the near future.

Accepted Answer

The answer of Suppose the National Activity Index of the...

Question 3

During a typical economic recovery:
A) inflation declines.
B) people become pessimistic.
C) unemployment decreases.
D) incomes fall.

Accepted Answer

During a typical economic recovery, unemployment decreases. This is because as businesses start to expand and grow, they need to hire more employees to keep up with demand. This increased demand for labor leads to a decrease in unemployment. Inflation may increase during a recovery due to increased demand for goods and services, but it typically does not decline. People may become more optimistic during a recovery as they see their own financial situations improving, so B is not the best choice. Incomes may increase during a recovery as businesses start to thrive again, so D is also not the best choice.

Question 4

The high point of a business cycle is called the:
A) trough.
B) expansion.
C) recession.
D) peak.

Accepted Answer

The high point of a business cycle is called the peak.

Question 5

Alternating periods of macroeconomic expansion and contraction are known as:
A) hyperinflations.
B) business cycles.
C) budget surpluses and deficits.
D) trade surpluses and deficits.

Accepted Answer

Alternating periods of macroeconomic expansion and contraction are known as business cycles. Hyperinflation refers to an extreme and rapid rise in the general price level of goods and services. Budget surpluses and deficits refer to the difference between government revenues and expenditures, while trade surpluses and deficits refer to the difference between a country's exports and imports.

Question 6

A business cycle is:
A) the periodic fluctuation of economic activity.
B) the engine of economic growth.
C) a period lasting about 50 years.
D) identical to the consumption life cycle.

Accepted Answer

A business cycle is a periodic fluctuation of economic activity. It is characterized by four phases: expansion, peak, contraction, and trough. These cycles can be influenced by factors such as interest rates, government policy, and consumer behavior, and can have a significant impact on businesses and individuals alike.

Question 7

Most of the recessions over the past half century have lasted between:
A) 6 and 18 months.
B) two and four years.
C) 1 year and 11 years.
D) two and three months.

Accepted Answer

Most recessions in the past 50 years have typically lasted between 6 and 18 months, as this is the average duration for economic downturns before recovery begins.

Question 8

Suppose the National Bureau of Economic Research announces that the economy has been in a recession for the past year. What effect might this announcement have on the economy?
A) The Federal Reserve will increase interest rates to fight the recession.
B) Employers will trim payrolls in an effort to cut costs in the face of decreased demand for their products.
C) Businesses will invest heavily in plant and equipment.
D) Businesses will add shifts to prepare for the upcoming recovery.

Accepted Answer

If the National Bureau of Economic Research announces that the economy has been in a recession for the past year, this announcement may cause employers to become cautious and trim payrolls. This is because decreased demand for their products in a recession can cause reduced revenue, leading to cutbacks in expenses such as labor costs. The announcement may also lead to a decrease in consumer confidence and spending, further exacerbating the recession. The Federal Reserve may take action to help the economy, but it is unlikely to increase interest rates during a recession as this can cause further contraction. Businesses are also unlikely to invest heavily in plant and equipment during a recession as they may not have the funds available or the demand for their products to justify such an investment. Adding shifts to prepare for a recovery is also unlikely as businesses may not have the demand for their products to warrant additional production.

Question 9

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to -1.5 in November. Which of the following is the best interpretation of this finding?
A) The economy grew at a rate of 0.25% for a few months, but economic growth actually decreased by 1.5% in November.
B) The rate of economic growth slowed in November, but the economy did not move into a recession.
C) The economy was in an expansion in October but moved into a recession in November.
D) Economic activity was above the historical trend rate of growth, but it is likely that the economy moved into a recession in November.

Accepted Answer

The National Activity Index indicates economic activity relative to trend. A drop from +0.25 to -1.5 suggests a significant decline, likely indicating a move into recession.

Question 10

Which phase of the business cycle occurs immediately after a recovery?
A) peak
B) trough
C) boom
D) recession

Accepted Answer

The peak phase occurs immediately after a recovery. It is the highest point of economic growth in the business cycle before the economy begins to slow down again.

Question 11

Which of the following is NOT a criticism of the dating of business cycles by the National Bureau of Economic Research (NBER)?
A) Economists use different methodologies to measure business cycles.
B) NBER dates peaks and troughs only after they occur.
C) The NBER deliberations are not public.
D) The NBER is sometimes manipulated by the federal government.

Accepted Answer

The NBER is an independent organization and is not manipulated by the federal government. The other options are common criticisms of the NBER's methodology and process.

Question 12

Business cycles:
A) are always the same duration.
B) are always the same magnitude.
C) are always the same duration and magnitude.
D) vary in duration and magnitude.

Accepted Answer

Business cycles vary in both duration and magnitude. They are not predictable and can be influenced by a variety of factors such as technological advancements, changes in consumer demand, and government policies.

Question 13

Over the past 150 years, the U.S. economy has endured a recession on average about every:
A) one to two years.
B) four to five years.
C) 10 to 50 years
D) 50 years

Accepted Answer

Historically, the U.S. economy has experienced a recession approximately every four to five years on average over the past 150 years.

Question 14

At the peak of the business cycle, the economy is typically operating:
A) at its capacity.
B) above capacity.
C) below capacity.
D) at its highest level ever.

Accepted Answer

At the peak of the business cycle, the economy is typically operating at its capacity, which means that resources are being fully utilized and there is little room for further expansion without risking inflation or other negative consequences.

Question 15

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.
A) expansion
B) recovery
C) contraction
D) trough

Accepted Answer

The answer of Suppose an economy has historically grown at...

Question 16

Suppose an economy has historically grown at a rate of 2.25%. The economy is growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.
A) expansion
B) recovery
C) contraction
D) trough

Accepted Answer

The economy is likely in the expansion stage of the business cycle, as it is growing at a rate higher than its historical average, and the unemployment rate is low, indicating strong economic activity.

Question 17

Which of the following events has significantly influenced the development of macroeconomic ideas?
A) World War II
B) the development of the modern corporation
C) the Industrial Revolution
D) the Great Depression

Accepted Answer

The Great Depression significantly influenced macroeconomic ideas, leading to the development of Keynesian economics, which emphasized the role of government intervention in stabilizing the economy.

Question 18

U.S. business cycles since 1950 have shown:
A) expansions to be just as lengthy as recessions.
B) expansions to be longer than recessions.
C) expansions to be shorter than recessions.
D) stable unemployment rates.

Accepted Answer

Data shows that since 1950, U.S. business expansions have lasted longer than recessions, with the most recent expansion period (2009-2019) lasting a record 10 years. However, this does not necessarily mean unemployment rates are stable during this time as they can fluctuate within an expansion.

Question 19

Suppose the National Activity Index of the Federal Reserve Bank of Chicago increased from -0.29 in May to -0.13 in June. Which of the following is the best interpretation of this finding?
A) Economic activity improved slightly from May to June, but the economy is in a recession.
B) Economic activity improved slightly from May to June, but the rate of economic growth is below its historical trend.
C) The rate of economic growth declined in May and June.
D) Economic activity declined from May to June, and the rate of economic growth is below its historical trend.

Accepted Answer

The increase from -0.29 to -0.13 indicates an improvement in economic activity, but since the index is still negative, it suggests that the rate of economic growth is below its historical trend.

Question 20

Which phase of the business cycle occurs immediately before a trough?
A) peak
B) recession
C) boom
D) recovery

Accepted Answer

A recession is the phase that occurs immediately before a trough in the business cycle, characterized by a decline in economic activity across the economy lasting more than a few months.

Quiz 5: Introduction to Macroeconomics

The National Bureau of Economic Research:

Suppose the National Activity Index of the Federal Reserve Bank of Chicago drops to -0.83 this month after being above +0.36 for the previous three months. This movement in the index indicates that:

During a typical economic recovery:

The high point of a business cycle is called the:

Alternating periods of macroeconomic expansion and contraction are known as:

A business cycle is:

Most of the recessions over the past half century have lasted between:

Suppose the National Bureau of Economic Research announces that the economy has been in a recession for the past year. What effect might this announcement have on the economy?

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to -1.5 in November. Which of the following is the best interpretation of this finding?

Which phase of the business cycle occurs immediately after a recovery?

Which of the following is NOT a criticism of the dating of business cycles by the National Bureau of Economic Research (NBER) ?

Business cycles:

Over the past 150 years, the U.S. economy has endured a recession on average about every:

At the peak of the business cycle, the economy is typically operating:

Which of the following events has significantly influenced the development of macroeconomic ideas?

U.S. business cycles since 1950 have shown:

Suppose the National Activity Index of the Federal Reserve Bank of Chicago increased from -0.29 in May to -0.13 in June. Which of the following is the best interpretation of this finding?

Which phase of the business cycle occurs immediately before a trough?