Question 1

If tax revenues increase more than government spending does, the price level will rise.

Accepted Answer

A) True 
 B)False

Question 2

A recession is a period during which

Accepted Answer

A) employment, production, and income decrease 
B) the price level is increasing 
C) inventories are falling dramatically 
D) the unemployment rate is falling while the price level is rising 
E) the government attempts to reduce a budget deficit by reducing taxes and increasing government spending 
A) employment, production, and income decrease 
B) the price level is increasing 
C) inventories are falling dramatically 
D) the unemployment rate is falling while the price level is rising 
E) the government attempts to reduce a budget deficit by reducing taxes and increasing government spending

Question 3

According to John Maynard Keynes' General Theory of Employment, Interest and Money, in order to get an economy out of a depression, the government should

Accepted Answer

A) increase spending 
B) decrease spending 
C) reduce taxes 
D) increase taxes 
E) allow the economy to correct itself 
A) increase spending 
B) decrease spending 
C) reduce taxes 
D) increase taxes 
E) allow the economy to correct itself

Question 4

Economic fluctuations

Accepted Answer

A) can be experienced by the world economy as well as by a single nation 
B) tend to be equal in length and intensity 
C) refer to a declining economy 
D) have become more severe since the government has attempted to stabilize the economy 
E) have been completely offset by appropriate government policy during the last 40 years 
A) can be experienced by the world economy as well as by a single nation 
B) tend to be equal in length and intensity 
C) refer to a declining economy 
D) have become more severe since the government has attempted to stabilize the economy 
E) have been completely offset by appropriate government policy during the last 40 years

Question 5

Which of the following is a stock variable?

Accepted Answer

A) Gross Domestic Product 
B) consumption spending 
C) the federal government's spending on Social Security 
D) the money supply 
E) Federal income tax revenue 
A) Gross Domestic Product 
B) consumption spending 
C) the federal government's spending on Social Security 
D) the money supply 
E) Federal income tax revenue

Question 6

Keynesian demand management policies are not effective in fighting stagflation.

Accepted Answer

A) True 
 B)False

Question 7

One explanation of why the aggregate demand curve is downward sloping is that

Accepted Answer

A) as prices fall, nominal income rises and so does the demand for real goods and services 
B) rising prices reduce people's wealth and thereby reduce spending 
C) with falling prices, government decides to spend less to increase the price level 
D) businesses increase investment spending in response to higher interest rates caused by inflation 
E) as prices fall, domestically produced goods become more expensive relative to foreign-produced products, which increases production 
A) as prices fall, nominal income rises and so does the demand for real goods and services 
B) rising prices reduce people's wealth and thereby reduce spending 
C) with falling prices, government decides to spend less to increase the price level 
D) businesses increase investment spending in response to higher interest rates caused by inflation 
E) as prices fall, domestically produced goods become more expensive relative to foreign-produced products, which increases production

Question 8

If the economy experiences stagflation,

Accepted Answer

A) government can quickly restore full employment by doing nothing to interfere with the economy's natural self-correcting forces 
B) only Keynesian policies can remedy the situation 
C) only anti-unemployment policies can remedy the situation 
D) Keynesian anti-inflation policies will raise the inflation rate 
E) increasing a federal budget surplus will worsen inflation 
A) government can quickly restore full employment by doing nothing to interfere with the economy's natural self-correcting forces 
B) only Keynesian policies can remedy the situation 
C) only anti-unemployment policies can remedy the situation 
D) Keynesian anti-inflation policies will raise the inflation rate 
E) increasing a federal budget surplus will worsen inflation

Question 9

If business leaders become pessimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.

Accepted Answer

A) reduce; reduces; fulfilled 
B) reduce; increases; fulfilled 
C) reduce; increases; not met 
D) increase; increases; not met 
E) increase; reduces; fulfilled 
A) reduce; reduces; fulfilled 
B) reduce; increases; fulfilled 
C) reduce; increases; not met 
D) increase; increases; not met 
E) increase; reduces; fulfilled

Question 10

The aggregate demand curve slopes downward because households feel poorer after a decrease in the price level.

Accepted Answer

A) True 
 B)False

Question 11

The word stagflation describes a situation in which a higher price level occurs simultaneously with

Accepted Answer

A) lower employment 
B) lower unemployment 
C) higher aggregate output 
D) federal budget deficits 
E) federal budget surpluses 
A) lower employment 
B) lower unemployment 
C) higher aggregate output 
D) federal budget deficits 
E) federal budget surpluses

Question 12

For a fixed aggregate supply curve, decreases in aggregate demand increase real GDP.

Accepted Answer

A) True 
 B)False

Question 13

The distinction between recessions and depressions is that recessions are

Accepted Answer

A) longer than depressions 
B) more severe than depressions 
C) accompanied by price increases, depressions by price decreases 
D) shorter and less severe than depressions 
E) accompanied by price decreases, depressions by price increases 
A) longer than depressions 
B) more severe than depressions 
C) accompanied by price increases, depressions by price decreases 
D) shorter and less severe than depressions 
E) accompanied by price decreases, depressions by price increases

Question 14

Keynes believed that the best method for ending the Great Depression was to reduce government spending and raise taxes, thereby reducing the federal budget deficit.

Accepted Answer

A) True 
 B)False

Question 15

If business leaders become optimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.

Accepted Answer

A) increase; increases; fulfilled 
B) increase; increases; not met 
C) increase; decreases; fulfilled 
D) decrease; decreases; fulfilled 
E) decrease; increases; not met 
A) increase; increases; fulfilled 
B) increase; increases; not met 
C) increase; decreases; fulfilled 
D) decrease; decreases; fulfilled 
E) decrease; increases; not met

Question 16

Which of the following is not true about the link between the economies of the United States and the United Kingdom?

Accepted Answer

A) Both economies went into recession in the early 1980s 
B) Neither economy experienced significant growth in the middle and late 1980s 
C) Both economies experienced recessions in 1991 
D) Both economies enjoyed recoveries during the 1990s and slowed down in 2001 
E) Growth in both economies has leveled off since 2004 
A) Both economies went into recession in the early 1980s 
B) Neither economy experienced significant growth in the middle and late 1980s 
C) Both economies experienced recessions in 1991 
D) Both economies enjoyed recoveries during the 1990s and slowed down in 2001 
E) Growth in both economies has leveled off since 2004

Question 17

On an aggregate demand and aggregate supply graph, the Great Depression can be pictured as

Accepted Answer

A) a leftward shift of the aggregate supply curve 
B) a rightward shift of the aggregate supply curve 
C) a leftward shift of the aggregate demand curve 
D) an increase in the price level caused by a movement along the aggregate demand curve 
E) a decrease in the price level caused by a movement along the aggregate supply curve 
A) a leftward shift of the aggregate supply curve 
B) a rightward shift of the aggregate supply curve 
C) a leftward shift of the aggregate demand curve 
D) an increase in the price level caused by a movement along the aggregate demand curve 
E) a decrease in the price level caused by a movement along the aggregate supply curve

Question 18

If the U.S. price level increases, the aggregate quantity of U.S. 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 
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

Question 19

If the U.S. price level decreases, the aggregate quantity of U.S. 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 decrease 
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 decrease

Question 20

The Keynesian approach to government economic policy

Accepted Answer

A) has emphasized the role of individual self-interest as a powerful stabilizing force 
B) has consistently failed to reduce fluctuations in economic activity 
C) was ineffective during the 1960s 
D) highlighted the role of aggregate demand 
E) was rechristened supply-side economics around 1980 
A) has emphasized the role of individual self-interest as a powerful stabilizing force 
B) has consistently failed to reduce fluctuations in economic activity 
C) was ineffective during the 1960s 
D) highlighted the role of aggregate demand 
E) was rechristened supply-side economics around 1980

Exam 5: Introduction to Macroeconomics

If tax revenues increase more than government spending does, the price level will rise.

A recession is a period during which

According to John Maynard Keynes' General Theory of Employment, Interest and Money, in order to get an economy out of a depression, the government should

Economic fluctuations

Which of the following is a stock variable?

Keynesian demand management policies are not effective in fighting stagflation.

One explanation of why the aggregate demand curve is downward sloping is that

If the economy experiences stagflation,

If business leaders become pessimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.

The aggregate demand curve slopes downward because households feel poorer after a decrease in the price level.

The word stagflation describes a situation in which a higher price level occurs simultaneously with

For a fixed aggregate supply curve, decreases in aggregate demand increase real GDP.

The distinction between recessions and depressions is that recessions are

Keynes believed that the best method for ending the Great Depression was to reduce government spending and raise taxes, thereby reducing the federal budget deficit.

If business leaders become optimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.

Which of the following is not true about the link between the economies of the United States and the United Kingdom?

On an aggregate demand and aggregate supply graph, the Great Depression can be pictured as

If the U.S. price level increases, the aggregate quantity of U.S. output demanded

If the U.S. price level decreases, the aggregate quantity of U.S. output demanded

The Keynesian approach to government economic policy

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 business leaders become pessimistic about future sales and profits, they will spending on plant and equipment, which employment and income and, therefore, their expectations are __.

If business leaders become optimistic about future sales and profits, they will spending on plant and equipment, which employment and income and, therefore, their expectations are __.