Question 1

Deflation occurs when
A)the average price level declines.
B)economic activity declines.
C)the economic growth rate declines.
D)the unemployment rate declines.

Accepted Answer

Deflation occurs when there is a sustained decrease in the average price level of goods and services in an economy. This means that the value of money increases, making it more valuable than goods and services. It is often a sign of a weak economy as businesses and consumers reduce spending in anticipation of even lower prices in the future.

Question 2

A period when the economy shrinks is known as
A)a recession.
B)a contraction.
C)a slump.
D)all of the above.

Accepted Answer

A period when the economy shrinks can be referred to as a recession, contraction, or slump. Therefore, all of the above options are suitable answers.

Question 3

A period of very rapid increase in the overall price level is known as
A)stagnation.
B)hyperinflation.
C)stagflation.
D)depression.

Accepted Answer

Hyperinflation refers to a period of very rapid increase in the overall price level, in which the cost of goods and services increases exponentially over a short period of time. This can lead to a loss in the value of currency, economic instability, and a decrease in the standard of living for those affected. Stagnation refers to a period of slow economic growth, while stagflation refers to a combination of high inflation and stagnant economic growth. Depression refers to a prolonged period of economic recession with high unemployment rates and decreased economic activity.

Question 4

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are
A)administered prices.
B)sticky prices.
C)regulatory prices.
D)market prices.

Accepted Answer

Sticky prices refer to prices that do not adjust quickly to changes in supply and demand. This can be due to a variety of factors such as contracts, regulations, or simply perceived market norms. Administered prices are set by a government or other authority, regulatory prices are set by a regulatory body, and market prices fluctuate based on supply and demand.

Question 5

Which of the following is NOT a topic studied in Macroeconomics?
A)gross domestic product
B)the unemployment rate
C)the price of Dell computers
D)the inflation rate

Accepted Answer

Macroeconomics deals with the overall performance and trends in the economy, including measures such as GDP, unemployment rate, and inflation rate. However, the price of a specific company's product, such as Dell computers, is not typically studied in macroeconomics as it is more related to microeconomic analysis.

Question 6

Inflation is a(n)
A)decrease in the overall price level.
B)decrease in the overall level of economic activity.
C)increase in the overall price level.
D)increase in the overall level of economic activity.

Accepted Answer

Inflation refers to an increase in the overall price level of goods and services in an economy. Therefore, choice C is the correct answer. A decrease in the overall price level would be deflation, and a decrease in the level of economic activity would be a recession. An increase in the level of economic activity may result in increased inflation or deflation depending on other factors in the economy.

Question 7

Aggregate behavior is
A)the behavior of each household and firm.
B)the behavior of each individual.
C)the behavior of all households and firms together.
D)none of the above.

Accepted Answer

Aggregate behavior refers to the behavior of all households and firms together, rather than the behavior of each individual unit.

Question 8

The demand for corn has increased in May without any change in supply.Eight months later there still has been no change in corn prices.This is an example of a
A)price floor.
B)price control.
C)sticky price.
D)macroeconomic price.

Accepted Answer

This is an example of a sticky price, which means that prices do not adjust immediately to changes in demand or supply. In this case, the demand for corn increased but the price did not change immediately.

Question 9

An increase in the overall price level is known as
A)deflation.
B)recession.
C)inflation.
D)stagflation.

Accepted Answer

An increase in the overall price level is known as inflation. Deflation is the opposite, which is a decrease in the overall price level. Recession refers to a significant decline in economic activity, while stagflation is a combination of both inflation and stagnation in economic growth.

Question 10

The term business cycle refers to the
A)short-term ups and downs in the price level.
B)long-term trends in the price level.
C)short-term ups and downs in the level of economic activity.
D)long-term trends in the level of economic activity.

Accepted Answer

The term business cycle refers to the short-term ups and downs in the level of economic activity, including fluctuations in GDP, employment, and production. It is characterized by periods of expansion and contraction, with cyclical peaks and troughs.

Question 11

It has become conventional to classify an economic downturn as a recession when aggregate output declines for
A)three consecutive quarters.
B)two consecutive quarters.
C)a year.
D)six consecutive quarters.

Accepted Answer

A recession is traditionally defined as two consecutive quarters of negative GDP growth.

Question 12

Which of the following is a topic studied in Macroeconomics?
A)the functioning of individual industries
B)aggregate behavior of households and industries
C)the behavior of individual households
D)the decision-making behavior of individual business firms

Accepted Answer

Macroeconomics studies the overall behavior of the economy, including the aggregate behavior of households and industries. The other choices are topics that are studied in Microeconomics, which focuses on the individual behavior of households and firms within specific industries.

Question 13

In a business cycle,a peak represents the end of ________ and a trough represents the end of ________.
A)an expansion; a recession
B)a depression; an expansion
C)a trough; a peak
D)a recession; an expansion

Accepted Answer

A peak in a business cycle represents the end of an expansion, where economic activity reaches its highest point before entering a downturn or recession. Conversely, a trough represents the end of a recession, where economic activity reaches its lowest point before entering an expansion. Therefore, the best choice is A) an expansion and a recession.

Question 14

In a business cycle,a trough represents the end of
A)an expansion.
B)an inflation.
C)a peak.
D)a recession.

Accepted Answer

The trough represents the end of a recession, which is the phase of the business cycle where economic activity is at its lowest point, characterized by high unemployment, low consumer spending, and low economic growth.

Question 15

The demand for massage therapists declined in the spring of 2012,but the starting wages paid to massage therapists was still the same at the end of 2012.This is an example of a
A)sticky price.
B)flexible price.
C)highly regulated market.
D)price control.

Accepted Answer

A sticky price is a situation where prices do not adjust quickly to changes in demand or supply in the market. In this case, even though demand for massage therapists decreased, the starting wages paid to them remained the same, indicating sticky prices.

Question 16

A period during which aggregate output rises is known as a(n)
A)recession.
B)inflation.
C)hyperinflation.
D)expansion.

Accepted Answer

A period during which aggregate output rises is known as an expansion.

Question 17

In a business cycle,a peak represents the end of
A)an expansion.
B)a depression.
C)trough.
D)a recession.

Accepted Answer

A peak in the business cycle represents the end of an expansion when economic activity and growth have reached their highest point before the economy begins to slow down and enter a recession. Peaks are characterized by a high level of employment, high consumer and business confidence, and strong levels of economic growth.

Question 18

If the labor force is 500 and employment is 450,then the unemployment rate is
A)100%.
B)90%.
C)10%.
D)0%.

Accepted Answer

To calculate the unemployment rate, we need to subtract employment from the labor force and then divide by the labor force. 
Unemployment rate = (Labor force - Employment) / Labor force 
= (500 - 450) / 500 
= 50 / 500 
= 0.1 or 10% 
Therefore, the unemployment rate is 10%.

Question 19

Which of the following is a topic studied in Macroeconomics?
A)gross domestic product
B)the wage of auto workers
C)the price of Dell computers
D)the amount of pizza produced

Accepted Answer

Gross Domestic Product (GDP) is a key measure of macroeconomic performance, which reflects the total value of goods and services produced in a country in a given period of time. Macroeconomics is concerned with the overall performance of the economy, such as economic growth, inflation, unemployment, and government policies that affect these measures. Wage of auto workers (B), Price of Dell computers (C), and the amount of pizza produced (D) are examples of microeconomic topics that focus on specific markets or industries rather than the overall economy.

Question 20

The trend of the economy is
A)the long run growth path of the economy.
B)the long run inflation rate.
C)the long run unemployment rate.
D)the short run production capacity of an economy.

Accepted Answer

The trend of the economy refers to the long run growth path of the economy, which is characterized by the growth of potential output, productivity, and population. It is a measure of the economy's sustainable growth potential over time, typically measured over several years or decades. It is different from the short run fluctuations of the business cycle, which are influenced by temporary shocks and fluctuations in aggregate demand and supply. The trend of the economy reflects the underlying structural factors that determine the economy's productive capacity, such as technological progress, labor force participation, and capital accumulation.

Quiz 5: Introduction to Macroeconomics

Deflation occurs when

A period when the economy shrinks is known as

A period of very rapid increase in the overall price level is known as

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are

Which of the following is NOT a topic studied in Macroeconomics?

Inflation is a(n)

Aggregate behavior is

The demand for corn has increased in May without any change in supply.Eight months later there still has been no change in corn prices.This is an example of a

An increase in the overall price level is known as

The term business cycle refers to the

It has become conventional to classify an economic downturn as a recession when aggregate output declines for

Which of the following is a topic studied in Macroeconomics?

In a business cycle,a peak represents the end of and a trough represents the end of .

In a business cycle,a trough represents the end of

The demand for massage therapists declined in the spring of 2012,but the starting wages paid to massage therapists was still the same at the end of 2012.This is an example of a

A period during which aggregate output rises is known as a(n)

In a business cycle,a peak represents the end of

If the labor force is 500 and employment is 450,then the unemployment rate is

Which of the following is a topic studied in Macroeconomics?

The trend of the economy is