Question 1

If firms expect greater demand for their products, invest in more capital and hire more labor,

Accepted Answer

A) there will likely be an increase in inflation and a rise in taxation 
B) the business cycle is likely to be moving from peak to trough 
C) their behavior may encourage the very prosperity that they expect 
D) government will probably have to spend more and tax less to offset the economic impacts of these business decisions 
E) consumers will probably spend less in anticipation of a decline in economic activity 
A) there will likely be an increase in inflation and a rise in taxation 
B) the business cycle is likely to be moving from peak to trough 
C) their behavior may encourage the very prosperity that they expect 
D) government will probably have to spend more and tax less to offset the economic impacts of these business decisions 
E) consumers will probably spend less in anticipation of a decline in economic activity

Question 2

Exhibit 5-1    
-In Exhibit 5-1, in period 1 the equilibrium GDP falls from 10,000 to 6,000 when aggregate demand falls from AD to AD'.

Accepted Answer

A) True 
 B)False

Question 3

Between 1947 and 1998, total U.S. employment

Accepted Answer

A) remained about the same while population increased 
B) increased faster than the U.S. population 
C) grew faster than real GDP so that real GDP per worker fell 
D) grew more slowly than real GDP so that real GDP per worker fell 
E) more than quadrupled 
A) remained about the same while population increased 
B) increased faster than the U.S. population 
C) grew faster than real GDP so that real GDP per worker fell 
D) grew more slowly than real GDP so that real GDP per worker fell 
E) more than quadrupled

Question 4

Economic fluctuations

Accepted Answer

A) are linked, but not perfectly synchronized, across countries 
B) are perfectly synchronized across countries 
C) in one country are independent of fluctuations in other countries 
D) in the United States always lag behind fluctuations in other developed economies 
E) in the United States usually occur before fluctuations in other developed economies 
A) are linked, but not perfectly synchronized, across countries 
B) are perfectly synchronized across countries 
C) in one country are independent of fluctuations in other countries 
D) in the United States always lag behind fluctuations in other developed economies 
E) in the United States usually occur before fluctuations in other developed economies

Question 5

If all firms expect greater demand for their products or services, they will hire __________ resources (e.g., labor and capital) and the economy will experience __________.

Accepted Answer

A) fewer; recession 
B) fewer; growth 
C) more; federal budget deficits 
D) more; recession 
E) more; growth 
A) fewer; recession 
B) fewer; growth 
C) more; federal budget deficits 
D) more; recession 
E) more; growth

Question 6

In the 1960s, government policy makers believed that they could

Accepted Answer

A) stabilize the economy by letting the market system solve all problems 
B) reduce unemployment by running federal budget surpluses 
C) eliminate government's role in stabilization policy 
D) use changes in the money supply to virtually eliminate business cycles 
E) use taxation and government spending to fine-tune the economy 
A) stabilize the economy by letting the market system solve all problems 
B) reduce unemployment by running federal budget surpluses 
C) eliminate government's role in stabilization policy 
D) use changes in the money supply to virtually eliminate business cycles 
E) use taxation and government spending to fine-tune the economy

Question 7

Which of the following explains why the aggregate demand curve slopes downward?

Accepted Answer

A) If the price level increases, we feel poorer and therefore buy less. 
B) If the price level increases, we feel richer and therefore buy more. 
C) If domestic prices increase, we substitute domestic goods for imported ones. 
D) If the price of a particular good increases, we substitute away from that good. 
E) A decrease in the price of a particular good is like an increase in income and therefore we buy more. 
A) If the price level increases, we feel poorer and therefore buy less. 
B) If the price level increases, we feel richer and therefore buy more. 
C) If domestic prices increase, we substitute domestic goods for imported ones. 
D) If the price of a particular good increases, we substitute away from that good. 
E) A decrease in the price of a particular good is like an increase in income and therefore we buy more.

Question 8

According to Keynes, if private-sector demand is insufficient to maintain full employment, the government should

Accepted Answer

A) act to make the economy's natural transition to the lower level of employment as easy as possible 
B) shock the economy with an increase in aggregate demand 
C) reduce aggregate supply to reduce inflation 
D) print money to promote consumer spending 
E) act to make the economy's natural transition back to full employment as easy as possible 
A) act to make the economy's natural transition to the lower level of employment as easy as possible 
B) shock the economy with an increase in aggregate demand 
C) reduce aggregate supply to reduce inflation 
D) print money to promote consumer spending 
E) act to make the economy's natural transition back to full employment as easy as possible

Question 9

An increase in wage rates, other things constant, would shift the aggregate supply curve upward.

Accepted Answer

A) True 
 B)False

Question 10

Between 1929 and the depth of the Great Depression in 1933, the United States encountered the following:

Accepted Answer

A) the aggregate supply curve shifted inward with no change in the aggregate demand curve 
B) the aggregate demand curve shifted inward with no change in the aggregate supply curve 
C) the aggregate demand curve shifted outward with no change in the aggregate supply curve 
D) the aggregate supply curve shifted outward with no change in the aggregate demand curve 
E) the aggregate supply and demand curves both shifted outward 
A) the aggregate supply curve shifted inward with no change in the aggregate demand curve 
B) the aggregate demand curve shifted inward with no change in the aggregate supply curve 
C) the aggregate demand curve shifted outward with no change in the aggregate supply curve 
D) the aggregate supply curve shifted outward with no change in the aggregate demand curve 
E) the aggregate supply and demand curves both shifted outward

Question 11

Which of the following is true of the aggregate supply curve?

Accepted Answer

A) It portrays an inverse relationship between the price level and quantity of aggregate output. 
B) Resource utilization is constant along the curve. 
C) A decrease in the price level encourages firms to expand production because the cost of production decreases. 
D) The curve is upward-sloping. 
E) As average prices in the United States rise relative to average prices in other countries, U.S. producers find export markets more attractive than domestic markets. 
A) It portrays an inverse relationship between the price level and quantity of aggregate output. 
B) Resource utilization is constant along the curve. 
C) A decrease in the price level encourages firms to expand production because the cost of production decreases. 
D) The curve is upward-sloping. 
E) As average prices in the United States rise relative to average prices in other countries, U.S. producers find export markets more attractive than domestic markets.

Question 12

If the economy were initially in equilibrium and the aggregate demand curve shifted to the left,

Accepted Answer

A) employment would fall 
B) the price level would rise 
C) the aggregate supply curve would shift rightward 
D) the aggregate supply curve would shift leftward 
E) the economy would experience an expansion period 
A) employment would fall 
B) the price level would rise 
C) the aggregate supply curve would shift rightward 
D) the aggregate supply curve would shift leftward 
E) the economy would experience an expansion period

Question 13

Which of the following events did not occur in the 1970s?

Accepted Answer

A) the U.S. inflation rate soared above 5 percent annually 
B) crop failures in major grain-producing countries 
C) substantial oil price increases 
D) growing confidence that Keynesian policies could stabilize the economy 
E) stagflation 
A) the U.S. inflation rate soared above 5 percent annually 
B) crop failures in major grain-producing countries 
C) substantial oil price increases 
D) growing confidence that Keynesian policies could stabilize the economy 
E) stagflation

Question 14

Stagflation is best described as

Accepted Answer

A) increasing output and decreasing prices 
B) increasing output and increasing prices 
C) no change in output or prices 
D) decreasing output and decreasing prices 
E) decreasing output and increasing prices 
A) increasing output and decreasing prices 
B) increasing output and increasing prices 
C) no change in output or prices 
D) decreasing output and decreasing prices 
E) decreasing output and increasing prices

Question 15

Properly applied, a federal budget deficit can simultaneously reduce inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is correct?

Accepted Answer

A) A budget deficit is a flow variable; debt is a stock variable. 
B) A budget deficit is a stock variable; debt is a flow variable. 
C) A budget deficit and the debt are both stock variables. 
D) The budget deficit decreases when debt increases. 
E) Debt increases when the budget deficit decreases. 
A) A budget deficit is a flow variable; debt is a stock variable. 
B) A budget deficit is a stock variable; debt is a flow variable. 
C) A budget deficit and the debt are both stock variables. 
D) The budget deficit decreases when debt increases. 
E) Debt increases when the budget deficit decreases.

Question 17

Which of the following is a stock variable?

Accepted Answer

A) business spending on capital equipment 
B) consumer income 
C) the federal government's debt 
D) the federal government's budget deficit 
E) total expenditure 
A) business spending on capital equipment 
B) consumer income 
C) the federal government's debt 
D) the federal government's budget deficit 
E) total expenditure

Question 18

Exhibit 5-2  
-Refer to Exhibit 5-2. Which line or point represents the price level?

Accepted Answer

A) line a 
B) line b 
C) line c 
D) line d 
E) point e 
A) line a 
B) line b 
C) line c 
D) line d 
E) point e

Question 19

Suppliers have an incentive to increase aggregate output whenever the price level rises faster than the cost of production.

Accepted Answer

A) True 
 B)False

Question 20

Fine-tuning the economy means

Accepted Answer

A) making government economic policy more "people oriented" 
B) using government policies to adjust the economy and promote economic stability 
C) tinkering with microeconomic problems such as externalities and losing sight of the big picture 
D) placing fewer regulations on the private sector, thereby eliminating the need for government intervention 
E) designing policies based exclusively on the leading economic indicators 
A) making government economic policy more "people oriented" 
B) using government policies to adjust the economy and promote economic stability 
C) tinkering with microeconomic problems such as externalities and losing sight of the big picture 
D) placing fewer regulations on the private sector, thereby eliminating the need for government intervention 
E) designing policies based exclusively on the leading economic indicators

Exam 5: Introduction to Macroeconomics

If firms expect greater demand for their products, invest in more capital and hire more labor,

Exhibit 5-1 -In Exhibit 5-1, in period 1 the equilibrium GDP falls from 10,000 to 6,000 when aggregate demand falls from AD to AD'.

Between 1947 and 1998, total U.S. employment

Economic fluctuations

If all firms expect greater demand for their products or services, they will hire __________ resources (e.g., labor and capital) and the economy will experience __________.

In the 1960s, government policy makers believed that they could

Which of the following explains why the aggregate demand curve slopes downward?

According to Keynes, if private-sector demand is insufficient to maintain full employment, the government should

An increase in wage rates, other things constant, would shift the aggregate supply curve upward.

Between 1929 and the depth of the Great Depression in 1933, the United States encountered the following:

Which of the following is true of the aggregate supply curve?

If the economy were initially in equilibrium and the aggregate demand curve shifted to the left,

Which of the following events did not occur in the 1970s?

Stagflation is best described as

Properly applied, a federal budget deficit can simultaneously reduce inflation and unemployment.

Which of the following statements is correct?

Which of the following is a stock variable?

Exhibit 5-2 -Refer to Exhibit 5-2. Which line or point represents the price level?

Suppliers have an incentive to increase aggregate output whenever the price level rises faster than the cost of production.

Fine-tuning the economy means

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Algebra of Income and Expenditure

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

Filters

If all firms expect greater demand for their products or services, they will hire resources (e.g., labor and capital) and the economy will experience .