Question 1

Given the aggregate demand curve,an increase in aggregate supply lowers the price level and decreases output.

Accepted Answer

A) True 
 B)False

Question 2

During the Great Depression,

Accepted Answer

A)  unemployment and prices increased while output decreased 
B)  unemployment increased and output while prices decreased 
C)  unemployment and prices decreased while output increased 
D)  unemployment and output decreased while prices increased 
E)  unemployment and output increased while prices decreased 
A)  unemployment and prices increased while output decreased 
B)  unemployment increased and output while prices decreased 
C)  unemployment and prices decreased while output increased 
D)  unemployment and output decreased while prices increased 
E)  unemployment and output increased while prices decreased

Question 3

The aim of supply-side economics is to

Accepted Answer

A)  increase government spending to stimulate aggregate supply 
B)  stimulate exports to increase the balance of payments 
C)  decrease wages to make production cheaper 
D)  lower taxes to increase the supply of resources 
E)  reduce both the inflation and unemployment problems through an increase in taxes 
A)  increase government spending to stimulate aggregate supply 
B)  stimulate exports to increase the balance of payments 
C)  decrease wages to make production cheaper 
D)  lower taxes to increase the supply of resources 
E)  reduce both the inflation and unemployment problems through an increase in taxes

Question 4

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 5

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 6

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 7

Government debt is a flow variable; the budget deficit is a stock variable.

Accepted Answer

A) True 
 B)False

Question 8

According to Adam Smith's The Wealth of Nations,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 9

According to Keynes,the policy of incurring budget deficits will cause the equilibrium price level to __________ and equilibrium output to __________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
E)  remain the same; remain the same 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
E)  remain the same; remain the same

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

The ultimate objective of macroeconomics is to

Accepted Answer

A)  reduce the unemployment rate 
B)  stabilize the economy's growth rate 
C)  develop and test theories about how the overall economy works 
D)  improve the international competitiveness of the U.S.financial markets 
E)  maximize the efficiency of government intervention in the marketplace 
A)  reduce the unemployment rate 
B)  stabilize the economy's growth rate 
C)  develop and test theories about how the overall economy works 
D)  improve the international competitiveness of the U.S.financial markets 
E)  maximize the efficiency of government intervention in the marketplace

Question 13

Stagflation refers to

Accepted Answer

A)  a combination of rising unemployment and rising trade deficits 
B)  a combination of high unemployment and rising prices 
C)  high and rapidly increasing inflation 
D)  extremely high unemployment 
E)  a combination of rising trade deficits and rising federal government budget deficits 
A)  a combination of rising unemployment and rising trade deficits 
B)  a combination of high unemployment and rising prices 
C)  high and rapidly increasing inflation 
D)  extremely high unemployment 
E)  a combination of rising trade deficits and rising federal government budget deficits

Question 14

Exhibit 5-2  
-Refer to Exhibit 5-2.Which line or point represents aggregate supply?

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 15

The Keynesian approach to fiscal policy calls for

Accepted Answer

A)  budget deficits during periods of inflationary pressure 
B)  budget surpluses during periods of high unemployment 
C)  a balanced budget despite the state of the economy 
D)  tax cuts during recession 
E)  spending increases during inflation 
A)  budget deficits during periods of inflationary pressure 
B)  budget surpluses during periods of high unemployment 
C)  a balanced budget despite the state of the economy 
D)  tax cuts during recession 
E)  spending increases during inflation

Question 16

While economic expansions average about three and one half years in duration,economic contractions average about

Accepted Answer

A)  one year in duration 
B)  two years in duration 
C)  three years in duration 
D)  four years in duration 
E)  five years in duration 
A)  one year in duration 
B)  two years in duration 
C)  three years in duration 
D)  four years in duration 
E)  five years in duration

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a flow variable?

Accepted Answer

A)  U.S.plant and equipment 
B)  the U.S.population 
C)  money supply 
D)  investment spending 
E)  household debt 
A)  U.S.plant and equipment 
B)  the U.S.population 
C)  money supply 
D)  investment spending 
E)  household debt

Question 19

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 20

Which of the following best describes a flow (rather than a stock)?

Accepted Answer

A)  you own $5,000 worth of government bonds 
B)  you own a $100,000 house 
C)  you own a coin collection valued at $10,000 
D)  you earn $500 per week 
E)  you own a $45,000 automobile 
A)  you own $5,000 worth of government bonds 
B)  you own a $100,000 house 
C)  you own a coin collection valued at $10,000 
D)  you earn $500 per week 
E)  you own a $45,000 automobile

Exam 5: Introduction to Macroeconomics

Given the aggregate demand curve,an increase in aggregate supply lowers the price level and decreases output.

During the Great Depression,

The aim of supply-side economics is to

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

A recession is a period during which

Which of the following statements is correct?

Government debt is a flow variable; the budget deficit is a stock variable.

According to Adam Smith's The Wealth of Nations,in order to get an economy out of a depression,the government should

According to Keynes,the policy of incurring budget deficits will cause the equilibrium price level to __________ and equilibrium output to __________.

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

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

The ultimate objective of macroeconomics is to

Stagflation refers to

Exhibit 5-2 -Refer to Exhibit 5-2.Which line or point represents aggregate supply?

The Keynesian approach to fiscal policy calls for

While economic expansions average about three and one half years in duration,economic contractions average about

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

Which of the following is a flow variable?

Which of the following is a stock variable?

Which of the following best describes a flow (rather than a stock)?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Productivity and Growth

Tracking the US Economy

Unemployment and Inflation

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

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Developing and Transitional Economies

Understanding Graphs

National Income Accounts

Variable Net Exports

Variable Net Exports Revisited

The Algebra of Income and Expenditure

The Algebra of Demand-Side Equilibrium

Filters

According to Keynes,the policy of incurring budget deficits will cause the equilibrium price level to and equilibrium output to .