Question 1

The average price of aggregate output is called the economy's _____.

Accepted Answer

A)  aggregate demand 
B)  real GDP 
C)  aggregate supply 
D)  price level 
E)  equilibrium 
A)  aggregate demand 
B)  real GDP 
C)  aggregate supply 
D)  price level 
E)  equilibrium

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Confidence in Keynesian economics _____

Accepted Answer

A)  diminished in the 1960s as the unemployment rate fell. 
B)  flourished in the 1960s despite two major recessions. 
C)  diminished in the 1960s as unemployment increased. 
D)  diminished in the 1970s as inflation occurred simultaneously with two recessions. 
E)  flourished through the 1980s despite Reagan's supply-side policies. 
A)  diminished in the 1960s as the unemployment rate fell. 
B)  flourished in the 1960s despite two major recessions. 
C)  diminished in the 1960s as unemployment increased. 
D)  diminished in the 1970s as inflation occurred simultaneously with two recessions. 
E)  flourished through the 1980s despite Reagan's supply-side policies.

Question 4

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

Accepted Answer

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. 
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 5

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

Accepted Answer

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 
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 6

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

Accepted Answer

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. 
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 7

Identify an example of a stock variable.

Accepted Answer

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 
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 8

The Reagan administration's 1981 personal income tax changes were designed to _____

Accepted Answer

A)  stimulate aggregate demand and reduce unemployment. 
B)  stimulate aggregate demand and increase economic growth. 
C)  stimulate aggregate supply and increase economic growth. 
D)  decrease aggregate demand in order to reduce inflation. 
E)  increase tax revenues to reduce the federal budget deficit. 
A)  stimulate aggregate demand and reduce unemployment. 
B)  stimulate aggregate demand and increase economic growth. 
C)  stimulate aggregate supply and increase economic growth. 
D)  decrease aggregate demand in order to reduce inflation. 
E)  increase tax revenues to reduce the federal budget deficit.

Question 9

Which of the following is the most likely to occur when a decrease in the price level in an economy affects the wealth of consumers?

Accepted Answer

A)  a rightward shift of the aggregate supply curve 
B)  a leftward shift of the aggregate demand curve 
C)  a movement along the aggregate demand curve 
D)  a leftward shift of the aggregate supply curve 
E)  a leftward shift of both the aggregate demand and aggregate supply curves 
A)  a rightward shift of the aggregate supply curve 
B)  a leftward shift of the aggregate demand curve 
C)  a movement along the aggregate demand curve 
D)  a leftward shift of the aggregate supply curve 
E)  a leftward shift of both the aggregate demand and aggregate supply curves

Question 10

One explanation for the slope of the aggregate demand curve is that _____

Accepted Answer

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. 
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 11

Keynes believed that the best method for boosting an economy during a recession was to _____

Accepted Answer

A)  increase money supply so that individuals would have more incentive to spend. 
B)  cut government spending and increase taxes to reduce or even eliminate fiscal deficit. 
C)  increase government spending and cut taxes so that consumers could spend more. 
D)  cut both government spending and taxes to reduce government expenditure in the economy. 
E)  increase both government spending and taxes to increase the role of government in the economy. 
A)  increase money supply so that individuals would have more incentive to spend. 
B)  cut government spending and increase taxes to reduce or even eliminate fiscal deficit. 
C)  increase government spending and cut taxes so that consumers could spend more. 
D)  cut both government spending and taxes to reduce government expenditure in the economy. 
E)  increase both government spending and taxes to increase the role of government in the economy.

Question 12

For a given aggregate supply curve, an increase in aggregate demand will _____

Accepted Answer

A)  decrease the real interest rate. 
B)  increase real GDP. 
C)  decrease the price level. 
D)  increase the real exchange rate. 
E)  decrease real GDP. 
A)  decrease the real interest rate. 
B)  increase real GDP. 
C)  decrease the price level. 
D)  increase the real exchange rate. 
E)  decrease real GDP.

Question 13

Which of the following decades is known as the "Golden Age of Keynesian Economics"?

Accepted Answer

A)  the 1930s 
B)  the 1950s 
C)  the 1960s 
D)  the 1970s 
E)  the 1980s 
A)  the 1930s 
B)  the 1950s 
C)  the 1960s 
D)  the 1970s 
E)  the 1980s

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Economists use the price index to eliminate year-to-year changes in GDP caused solely by changes in _____

Accepted Answer

A)  the exchange rate. 
B)  the unemployment rate. 
C)  fiscal spending. 
D)  consumer demand. 
E)  the price level. 
A)  the exchange rate. 
B)  the unemployment rate. 
C)  fiscal spending. 
D)  consumer demand. 
E)  the price level.

Question 16

What did "The General Theory of Employment, Interest, and Money" attempt to explain?

Accepted Answer

A)  why people act in their own best interests 
B)  why aggregate demand was unstable 
C)  how people, acting out of self-interest, unintentionally promote the general good 
D)  how comparative advantage and specialization promote international trade 
E)  how the creation of goods and services generates its own demand by creating employment and income 
A)  why people act in their own best interests 
B)  why aggregate demand was unstable 
C)  how people, acting out of self-interest, unintentionally promote the general good 
D)  how comparative advantage and specialization promote international trade 
E)  how the creation of goods and services generates its own demand by creating employment and income

Question 17

Exhibit 5.3
  
-Refer to Exhibit 5.3 which shows the aggregate demand and supply curves for the United States. The price level changes from _____ when the aggregate supply curve shifts from AS' to AS".

Accepted Answer

A)  4 to 2 
B)  2 to 3 
C)  2 to 2 
D)  3 to 1 
E)  2 to 4 
A)  4 to 2 
B)  2 to 3 
C)  2 to 2 
D)  3 to 1 
E)  2 to 4

Question 18

Which of these is the best measure of the average standard of living in an economy?

Accepted Answer

A)  The unemployment rate 
B)  Nominal income 
C)  Real GDP 
D)  National debt 
E)  Real GDP per capita 
A)  The unemployment rate 
B)  Nominal income 
C)  Real GDP 
D)  National debt 
E)  Real GDP per capita

Question 19

_____ is the economy's aggregate output measured in dollars of constant purchasing power.

Accepted Answer

A)  GDP 
B)  The price level 
C)  Nominal GDP 
D)  Real GDP 
E)  Aggregate output 
A)  GDP 
B)  The price level 
C)  Nominal GDP 
D)  Real GDP 
E)  Aggregate output

Question 20

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

Accepted Answer

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

The average price of aggregate output is called the economy's _____.

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

Confidence in Keynesian economics _____

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

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

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

Identify an example of a stock variable.

The Reagan administration's 1981 personal income tax changes were designed to _____

Which of the following is the most likely to occur when a decrease in the price level in an economy affects the wealth of consumers?

One explanation for the slope of the aggregate demand curve is that _____

Keynes believed that the best method for boosting an economy during a recession was to _____

For a given aggregate supply curve, an increase in aggregate demand will _____

Which of the following decades is known as the "Golden Age of Keynesian Economics"?

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

Economists use the price index to eliminate year-to-year changes in GDP caused solely by changes in _____

What did "The General Theory of Employment, Interest, and Money" attempt to explain?

Exhibit 5.3 -Refer to Exhibit 5.3 which shows the aggregate demand and supply curves for the United States. The price level changes from _____ when the aggregate supply curve shifts from AS' to AS".

Which of these is the best measure of the average standard of living in an economy?

_____ is the economy's aggregate output measured in dollars of constant purchasing power.

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

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 5: Introduction to Macroeconomics.

The average price of aggregate output is called the economy's _____.

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

Confidence in Keynesian economics _____

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

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

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

Identify an example of a stock variable.

The Reagan administration's 1981 personal income tax changes were designed to _____

Which of the following is the most likely to occur when a decrease in the price level in an economy affects the wealth of consumers?

One explanation for the slope of the aggregate demand curve is that _____

Keynes believed that the best method for boosting an economy during a recession was to _____

For a given aggregate supply curve, an increase in aggregate demand will _____

Which of the following decades is known as the "Golden Age of Keynesian Economics"?

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

Economists use the price index to eliminate year-to-year changes in GDP caused solely by changes in _____

What did "The General Theory of Employment, Interest, and Money" attempt to explain?

Exhibit 5.3 -Refer to Exhibit 5.3 which shows the aggregate demand and supply curves for the United States. The price level changes from _____ when the aggregate supply curve shifts from AS' to AS".

Which of these is the best measure of the average standard of living in an economy?

_____ is the economy's aggregate output measured in dollars of constant purchasing power.

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

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

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