Question 1

Which of the following best describes a typical business cycle?

Accepted Answer

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. 
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.

Question 2

In the 1980s,1990s,and 2000s,the United States has had a

Accepted Answer

A) small trade surplus. 
B) small trade deficit. 
C) large trade deficit. 
D) large trade surplus. 
A) small trade surplus. 
B) small trade deficit. 
C) large trade deficit. 
D) large trade surplus.

Question 3

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

Accepted Answer

A) 1929 to 1935 
B) 1949 to 1973 
C) 1973 to 1995 
D) 1995 to 2008 
A) 1929 to 1935 
B) 1949 to 1973 
C) 1973 to 1995 
D) 1995 to 2008

Question 4

Determine whether each of the following is a positive or normative statement.
(a)The Fed should lower interest rates to increase economic growth,because we're in a recession.
(b)Higher government budget deficits cause higher interest rates.
(c)The trade deficit should decline because of the fall in the value of the dollar.
(d)Because of our high inflation rate,we must reduce the rate of money growth.
(e)A generous unemployment insurance system is a primary cause of high unemployment in Europe.
(f)Increased average labor productivity in a country should lead to faster growth.
(g)Government budget deficits are too high in the United States and should be reduced.

Accepted Answer

(a)Normative
(b)Posi

Question 5

An open economy is a national economy that

Accepted Answer

A) doesn't interact economically with the rest of the world. 
B) has a stock market that is open to traders from anywhere in the world. 
C) has extensive trading and financial relationships with other national economies. 
D) has established diplomatic relations with most other national economies. 
A) doesn't interact economically with the rest of the world. 
B) has a stock market that is open to traders from anywhere in the world. 
C) has extensive trading and financial relationships with other national economies. 
D) has established diplomatic relations with most other national economies.

Question 6

During recessions,the unemployment rate ________ and output ________.

Accepted Answer

A) rises; falls 
B) rises; rises 
C) falls; rises 
D) falls; falls 
A) rises; falls 
B) rises; rises 
C) falls; rises 
D) falls; falls

Question 7

Adam Smith's idea of the "invisible hand" says that given a country's resources and its initial distribution of wealth,the use of markets will

Accepted Answer

A) insulate a nation from the effects of political instability. 
B) eliminate problems of hunger and dissatisfaction. 
C) eliminate inequalities between the rich and the poor. 
D) make people as economically well off as possible. 
A) insulate a nation from the effects of political instability. 
B) eliminate problems of hunger and dissatisfaction. 
C) eliminate inequalities between the rich and the poor. 
D) make people as economically well off as possible.

Question 8

Keynes was motivated to create a macroeconomic theory different from classical theory because

Accepted Answer

A) he believed in government intervention in the economy. 
B) he believed in the idea of the invisible hand. 
C) monetary policy was more important than the classicals acknowledged. 
D) classical theory was inconsistent with the data in the Great Depression. 
A) he believed in government intervention in the economy. 
B) he believed in the idea of the invisible hand. 
C) monetary policy was more important than the classicals acknowledged. 
D) classical theory was inconsistent with the data in the Great Depression.

Question 9

Following World War I and World War II,the United States had a

Accepted Answer

A) small trade surplus. 
B) small trade deficit. 
C) large trade deficit. 
D) large trade surplus. 
A) small trade surplus. 
B) small trade deficit. 
C) large trade deficit. 
D) large trade surplus.

Question 10

If the theory behind an economic model fits the data poorly,you would probably want to

Accepted Answer

A) use the theory to predict what would happen if the economic setting or economic policies change. 
B) start from scratch with a new model. 
C) enrich the model with additional assumptions. 
D) restate the research question. 
A) use the theory to predict what would happen if the economic setting or economic policies change. 
B) start from scratch with a new model. 
C) enrich the model with additional assumptions. 
D) restate the research question.

Question 11

The principal distinction between positive analysis and normative analysis is that

Accepted Answer

A) positive analysis is useful and normative analysis is not useful. 
B) positive analysis is optimistic and normative analysis is neutral. 
C) economists always agree on the conclusions of positive analysis but could disagree on the conclusions of normative analysis. 
D) positive analysis tells us "what is," but normative analysis tells us "what ought to be." 
A) positive analysis is useful and normative analysis is not useful. 
B) positive analysis is optimistic and normative analysis is neutral. 
C) economists always agree on the conclusions of positive analysis but could disagree on the conclusions of normative analysis. 
D) positive analysis tells us "what is," but normative analysis tells us "what ought to be."

Question 12

Many people perceive erroneously that most macroeconomists spend a lot of time engaged in

Accepted Answer

A) forecasting. 
B) macroeconomic research. 
C) macroeconomic analysis. 
D) data development. 
A) forecasting. 
B) macroeconomic research. 
C) macroeconomic analysis. 
D) data development.

Question 13

In 1993,the debate heated up in the United States about the North American Free Trade Agreement (NAFTA),which proposed to reduce barriers to trade (such as taxes on or limits to imports)among Canada,the United States,and Mexico.Some people opposed strongly the agreement,arguing that an influx of foreign goods under NAFTA would disrupt the U.S.economy,harm domestic industries,and throw American workers out of work.How might a classical economist respond to these concerns? Would you expect a Keynesian economist to be more or less sympathetic to these concerns than the classical economist? Why?

Accepted Answer

A classical economist might argue that t

Question 14

Why were the U.S.government budget deficits of the 1980s and early 1990s so unusual from a historical point of view?

Accepted Answer

A) It was the first time the U.S. government had ever run deficits. 
B) In the past, deficits were usually that large only in wartime. 
C) It was the first time that deficits were accompanied by very high rates of inflation. 
D) It was the first time that deficits diverted funds from other productive uses, such as investment in modern equipment. 
A) It was the first time the U.S. government had ever run deficits. 
B) In the past, deficits were usually that large only in wartime. 
C) It was the first time that deficits were accompanied by very high rates of inflation. 
D) It was the first time that deficits diverted funds from other productive uses, such as investment in modern equipment.

Question 15

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

Accepted Answer

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. 
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.

Question 16

A country has a trade deficit when

Accepted Answer

A) imports exceed exports. 
B) imports equal exports. 
C) exports exceed imports. 
D) exports are zero. 
A) imports exceed exports. 
B) imports equal exports. 
C) exports exceed imports. 
D) exports are zero.

Question 17

The unemployment rate is the

Accepted Answer

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. 
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.

Question 18

What is meant by aggregation? Why is aggregation important for macroeconomic analysis?

Accepted Answer

Aggregation refers to the process of add

Question 19

Equilibrium in the economy means

Accepted Answer

A) unemployment is zero. 
B) quantities demanded and supplied are equal in all markets. 
C) prices are not changing over time. 
D) tax revenues equal government spending, so the government has no budget deficit. 
A) unemployment is zero. 
B) quantities demanded and supplied are equal in all markets. 
C) prices are not changing over time. 
D) tax revenues equal government spending, so the government has no budget deficit.

Question 20

What are the major factors affecting the long-term growth of the economy's output?

Accepted Answer

The major factors ar

Which of the following best describes a typical business cycle?

In the 1980s,1990s,and 2000s,the United States has had a

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

An open economy is a national economy that

During recessions,the unemployment rate and output .

Adam Smith's idea of the "invisible hand" says that given a country's resources and its initial distribution of wealth,the use of markets will

Keynes was motivated to create a macroeconomic theory different from classical theory because

Following World War I and World War II,the United States had a

If the theory behind an economic model fits the data poorly,you would probably want to

The principal distinction between positive analysis and normative analysis is that

Many people perceive erroneously that most macroeconomists spend a lot of time engaged in

Why were the U.S.government budget deficits of the 1980s and early 1990s so unusual from a historical point of view?

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

A country has a trade deficit when

The unemployment rate is the

What is meant by aggregation? Why is aggregation important for macroeconomic analysis?

Equilibrium in the economy means

What are the major factors affecting the long-term growth of the economy's output?

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 1: Introduction to Macroeconomics

Which of the following best describes a typical business cycle?

In the 1980s,1990s,and 2000s,the United States has had a

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

An open economy is a national economy that

During recessions,the unemployment rate ________ and output ________.

Adam Smith's idea of the "invisible hand" says that given a country's resources and its initial distribution of wealth,the use of markets will

Keynes was motivated to create a macroeconomic theory different from classical theory because

Following World War I and World War II,the United States had a

If the theory behind an economic model fits the data poorly,you would probably want to

The principal distinction between positive analysis and normative analysis is that

Many people perceive erroneously that most macroeconomists spend a lot of time engaged in

Why were the U.S.government budget deficits of the 1980s and early 1990s so unusual from a historical point of view?

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

A country has a trade deficit when

The unemployment rate is the

What is meant by aggregation? Why is aggregation important for macroeconomic analysis?

Equilibrium in the economy means

What are the major factors affecting the long-term growth of the economy's output?

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

During recessions,the unemployment rate and output .