Question 1

The subdiscipline of economics that studies the whole market economy is known as

Accepted Answer

A)  microeconomics. 
B)  market economics. 
C)  macroeconomics. 
D)  global economics. 
A)  microeconomics. 
B)  market economics. 
C)  macroeconomics. 
D)  global economics. C

Question 2

Monetary policy

Accepted Answer

A)  affects growth by keeping interest rates high. 
B)  affects growth by keeping interest rates low. 
C)  affects growth by keeping inflation low and stable. 
D)  has no effect on economic growth. 
E)  affects growth by printing money. 
A)  affects growth by keeping interest rates high. 
B)  affects growth by keeping interest rates low. 
C)  affects growth by keeping inflation low and stable. 
D)  has no effect on economic growth. 
E)  affects growth by printing money. C

Question 3

Discuss the relationship between each of the following variables based on the experience of the U.S. economy over the past 40 years.
(A)GDP and the unemployment rate
(B)The interest rate and the inflation rate
(C)GDP and the inflation rate

Accepted Answer

(A)When the economy is in an expansion, the unemployment rate declines, and when the economy is in a recession, the unemployment rate increases. GDP and the unemployment rate are negatively correlated.
(B)When the inflation rate rises, so does the interest rate. Lenders tend to increase the nominal interest rate when inflation is rising to compensate for the decline in the value of the dollars they will be paid back for the loan. The two are positively correlated.
(C)Inflation has increased prior to every recession and has decreased during and after every recession over the past 40 years.

Question 4

GDP is

Accepted Answer

A)  a term used for economic growth. 
B)  a measure of the economy's potential. 
C)  another term for inflation. 
D)  a measure of the total value of all goods and services produced in a country during a specific period of time. 
E)  the total value of all goods and services produced during a specific period of time adjusted for the general increase in prices. 
A)  a term used for economic growth. 
B)  a measure of the economy's potential. 
C)  another term for inflation. 
D)  a measure of the total value of all goods and services produced in a country during a specific period of time. 
E)  the total value of all goods and services produced during a specific period of time adjusted for the general increase in prices.

Question 5

Answer the questions below:
(A)According to the economic fluctuations theory, what is the major cause of economic fluctuations?
(B)What observation supports the economic fluctuations perspective?

Accepted Answer

(A)The main source of economic fluctuati

Question 6

Suppose there is a permanent decrease in capital in a particular country. How does this change affect that economy's potential GDP? What economic policies can the government use to offset this decline?

Accepted Answer

Potential GDP will fall. The government

Question 7

The increase in U.S. production over the past 40 years

Accepted Answer

A)  equals Japan's increase in production over the same period of time. 
B)  equals Germany's increase in production over the same period of time. 
C)  is less than the increase in production in either Germany or Japan. 
D)  is larger than the sum of Germany's and Japan's current real GDP. 
E)  equals the sum of both Japan's and Germany's increase in production over the same period of time. 
A)  equals Japan's increase in production over the same period of time. 
B)  equals Germany's increase in production over the same period of time. 
C)  is less than the increase in production in either Germany or Japan. 
D)  is larger than the sum of Germany's and Japan's current real GDP. 
E)  equals the sum of both Japan's and Germany's increase in production over the same period of time.

Question 8

How long did the most recent economic expansion last before the beginning of the most recent recession?

Accepted Answer

A)  About a year. 
B)  About two years. 
C)  About three years. 
D)  About 6 years. 
E)  About 20 years. 
A)  About a year. 
B)  About two years. 
C)  About three years. 
D)  About 6 years. 
E)  About 20 years.

Question 9

As the economy went into recession in 2008, the unemployment rate

Accepted Answer

A)  increased by about 3 percentage points. 
B)  increased by 15 percentage points. 
C)  fell by 5 percentage points. 
D)  fell by 1.5 percentage points. 
E)  did not change. 
A)  increased by about 3 percentage points. 
B)  increased by 15 percentage points. 
C)  fell by 5 percentage points. 
D)  fell by 1.5 percentage points. 
E)  did not change.

Question 10

A key assumption of the theory of economic fluctuations is that real GDP fluctuates around potential GDP.

Accepted Answer

A) True 
 B)False

Question 11

Over the past 40 years, real GDP per capita has roughly

Accepted Answer

A)  stayed the same. 
B)  tripled. 
C)  increased by 50 percent. 
D)  doubled. 
E)  declined by 50 percent. 
A)  stayed the same. 
B)  tripled. 
C)  increased by 50 percent. 
D)  doubled. 
E)  declined by 50 percent.

Question 12

The average annual growth rate of the U.S. economy over the past 40 years has been about

Accepted Answer

A)  0 percent. 
B)  10 percent. 
C)  15 percent. 
D)  3 percent. 
E)  -3 percent. 
A)  0 percent. 
B)  10 percent. 
C)  15 percent. 
D)  3 percent. 
E)  -3 percent.

Question 13

According to data collected by the International Monetary Fund, production per person in China in 2005 was 15 times as large as it had been in 1980.

Accepted Answer

A) True 
 B)False

Question 14

The real interest rate is

Accepted Answer

A)  the difference between the stated, or nominal, interest rate and the expected rate of inflation. 
B)  the difference between the stated, or nominal, interest rate and the rate of growth of real GDP. 
C)  the sum of the stated, or nominal, interest rate plus the expected inflation rate. 
D)  the rate of interest on Treasury bills. 
E)  the same as the prime rate. 
A)  the difference between the stated, or nominal, interest rate and the expected rate of inflation. 
B)  the difference between the stated, or nominal, interest rate and the rate of growth of real GDP. 
C)  the sum of the stated, or nominal, interest rate plus the expected inflation rate. 
D)  the rate of interest on Treasury bills. 
E)  the same as the prime rate.

Question 15

The highest unemployment rate recorded in the United States since World War II is

Accepted Answer

A)  42 percent. 
B)  3 percent. 
C)  10.4 percent. 
D)  5 percent. 
E)  19.1 percent. 
A)  42 percent. 
B)  3 percent. 
C)  10.4 percent. 
D)  5 percent. 
E)  19.1 percent.

Question 16

GDP is the total value of all goods and services newly produced in the economy during a specified period of time, adjusted for inflation.

Accepted Answer

A) True 
 B)False

Question 17

Over the last 40 years in the United States, the unemployment rate has

Accepted Answer

A)  remained a constant 5 percent. 
B)  averaged zero. 
C)  fluctuated but shown no clear upward or downward trend. 
D)  shown a steady upward trend. 
E)  shown a steady downward trend. 
A)  remained a constant 5 percent. 
B)  averaged zero. 
C)  fluctuated but shown no clear upward or downward trend. 
D)  shown a steady upward trend. 
E)  shown a steady downward trend.

Question 18

The negative correlation that occurs between inflation and economic growth can best be explained by

Accepted Answer

A)  inflation increasing uncertainty. 
B)  inflation decreasing uncertainty. 
C)  inflation making everything cheaper. 
D)  inflation making everything too expensive. 
E)  None of these 
A)  inflation increasing uncertainty. 
B)  inflation decreasing uncertainty. 
C)  inflation making everything cheaper. 
D)  inflation making everything too expensive. 
E)  None of these

Question 19

Potential real GDP is the GDP that economists would expect to observe when the unemployment rate is zero.

Accepted Answer

A) True 
 B)False

Question 20

According to the textbook, which of the following is one of the most important developments of the 1980-2006 period?

Accepted Answer

A)  The rapid economic growth of China 
B)  The end of the World Trade Organization 
C)  The dissolution of the European Union 
D)  The beginning of the Great Depression 
A)  The rapid economic growth of China 
B)  The end of the World Trade Organization 
C)  The dissolution of the European Union 
D)  The beginning of the Great Depression

Exam 5: Macroeconomics: the Big Picture

The subdiscipline of economics that studies the whole market economy is known as

Monetary policy

Discuss the relationship between each of the following variables based on the experience of the U.S. economy over the past 40 years. (A)GDP and the unemployment rate (B)The interest rate and the inflation rate (C)GDP and the inflation rate

GDP is

Answer the questions below: (A)According to the economic fluctuations theory, what is the major cause of economic fluctuations? (B)What observation supports the economic fluctuations perspective?

Suppose there is a permanent decrease in capital in a particular country. How does this change affect that economy's potential GDP? What economic policies can the government use to offset this decline?

The increase in U.S. production over the past 40 years

How long did the most recent economic expansion last before the beginning of the most recent recession?

As the economy went into recession in 2008, the unemployment rate

A key assumption of the theory of economic fluctuations is that real GDP fluctuates around potential GDP.

Over the past 40 years, real GDP per capita has roughly

The average annual growth rate of the U.S. economy over the past 40 years has been about

According to data collected by the International Monetary Fund, production per person in China in 2005 was 15 times as large as it had been in 1980.

The real interest rate is

The highest unemployment rate recorded in the United States since World War II is

GDP is the total value of all goods and services newly produced in the economy during a specified period of time, adjusted for inflation.

Over the last 40 years in the United States, the unemployment rate has

The negative correlation that occurs between inflation and economic growth can best be explained by

Potential real GDP is the GDP that economists would expect to observe when the unemployment rate is zero.

According to the textbook, which of the following is one of the most important developments of the 1980-2006 period?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters