Deck 21: An Introduction to Macroeconomics

Question 1

From 2000 to 2001, the U.S. economy's annual growth rate slowed down abruptly.

Answer 1

True

Question 2

Technological breakthroughs, such as the Internet, can be shown with a rightward shift of the aggregate supply curve.

Answer 2

True

Question 3

Two of the most important macroeconomic issues are unemployment and inflation.

Answer 3

True

Question 4

Gross domestic product includes the sale of intermediate goods and services.

Question 5

Economic aggregates are studied by microeconomists.

Question 6

GDP in 2015 would not include the resale of a house built in 2000.

Question 7

Gross domestic product represents the money value of all final goods and services produced in the domestic economy within the year.

Question 8

Aggregation involves adding together different products and services.

Question 9

Real GDP values current output of goods and services at their current prices.

Question 10

An increase in aggregate demand will result in inflation.

Question 11

In macroeconomics, the vertical axis in a supply-demand model measures the price level rather than a particular product's price.

Question 12

When Sarah watches her baby sister each Saturday, gross domestic product increases.

Question 13

Supply and demand provides the basic explanatory framework for constructing both microeconomic and macroeconomic models.

Question 14

During economic fluctuations, individual markets usually move in different directions.

Question 15

Individuals live and work in both individual and aggregate economic entities.

Question 16

The key characteristic of macroeconomics is the process of aggregation.

Question 17

Someone who studies the pricing policies of the Microsoft Corporation would be a microeconomist.

Question 18

Economic terms like "cost of living" and "price level" are important to ordinary individuals.

Question 19

Nominal GDP includes the current value of services produced in the economy.

Question 20

Macroeconomists pay little attention to the composition of aggregate output.

Question 21

Both the Bush and Obama administrations used tax cuts as a remedy to the housing "bubble."

Question 22

Stabilization policy often faces a trade-off between inflation and unemployment.

Question 23

The end of the housing boom of the early 2000s can be illustrated by a decline in aggregate demand.

Question 24

John Maynard Keynes wrote that economies can suffer recession or depression for many years if the government does not intervene.

Question 25

The existence of the "underground economy" causes measured GDP to overestimate actual output.

Question 26

Stagflation is the simultaneous occurrence of inflation and high unemployment.

Question 27

Cars produced by General Motors in Mexico would be included in U.S. Gross domestic product.

Question 28

The devastation of Hurricane Sandy reduced GDP.

Question 29

One of the initial problems facing the newly elected President Clinton was a large budget deficit.

Question 30

If aggregate demand shifts outward, the result will be inflation.

Question 31

Business cycles are a persistent feature of the U.S. economy.

Question 32

In the early 1980s, the economy experienced high unemployment with falling inflation.

Question 33

GDP consistently measures the output of goods and services in all countries.

Question 34

Illegal gambling on the NCAA Final Four would be included in GDP.

Question 35

Part of the good economic performance of the United States in the 1990s can be explained by a rightward-shifting aggregate supply curve.

Question 36

When the Art Institute of Chicago purchases a painting by Mary Cassatt that she produced in Paris in 1885, this would not be included in the U.S. GDP for 2015.

Question 37

Changes in nominal GDP always reflect changes in real output.

Question 38

Stabilization policy has helped ameliorate the impact of recessions since the 1950s.

Question 39

GDP stagnated during the Obama presidency.

Question 40

Gross domestic product accurately measures the environmental costs of producing all goods and services.

Question 41

The Great Depression lead many to question the economy's ability to self-correct.

Question 42

Macroeconomics does not study this aggregate

A) GDP.
B) inflation.
C) happiness.
D) unemployment.

Question 43

For a macroeconomist, the case for aggregation is based on two principles-(1) the composition of demand and supply may not matter for some purposes and (2)

A) during fluctuations markets normally move together.
B) individual markets allocate resources efficiently.
C) inflation, unemployment, and growth never go together.
D) individual markets distribute income efficiently.

Question 44

Macroeconomists are concerned with

A) most questions about individual markets than the overall economy.
B) the causes of unemployment than with the personalities of individual workers.
C) the details of resource allocation and individual market prices than the size of national output.
D) the price of particular products than the overall price level.

Question 45

How does macroeconomics differ from microeconomics?

A) The study of the opportunity cost of nations versus the opportunity cost of individuals
B) The underlying principles
C) The use of abstractions and models
D) The use of aggregate indicators over market resource allocation

Question 46

An economist who studies the sales and profits of a large corporation would be classified as a(n)

A) macroeconomist.
B) equity analyst.
C) stock broker.
D) microeconomist.
E) social economist.

Question 47

In response to the "Great Depression 2.0," the Obama administration responded with more tax cuts, increased federal spending, and aid to state and local governments.

Question 48

A macroeconomist would concentrate on which of the following issues?

A) The price of pizzas
B) The profits of the IBM Corporation
C) The unemployment rate in Germany
D) The market for hotdogs

Question 49

The composition of demand and supply is relatively unimportant to the study of inflation and unemployment rates.

Question 50

If a macroeconomist aggregates many markets into one, then

A) individual market differences are eliminated.
B) one must not confuse ravioli and hotdogs.
C) she is performing a meaningless exercise.
D) differences between products must still be noted.

Question 51

Microeconomics focuses on ____; macroeconomics concentrates on ____.

A) the basic tools of analysis; the use of abstractions and models
B) the economies of various countries; the decisions of individual companies
C) the decisions of individual units; the behavior of entire economies
D) the economic aggregates; the decisions of individual units

Question 52

Economists define an aggregate as

A) a concrete object.
B) a specific principle.
C) a representative good or service.
D) a useful abstraction.
E) something immeasurable.

Question 53

Macroeconomists differ from microeconomists because macroeconomists focus on the study of

A) inflation, unemployment, and GDP than in individual markets.
B) market prices than the cost of living.
C) inflation in the United States rather than inflation in Puerto Rico.
D) tariffs than global trade.

Question 54

Macroeconomics is best described as a study of ____ and microeconomics as a study of ____.

A) financial markets, specific markets
B) nations, individuals
C) the stars, solar system
D) abstract, concrete

Question 55

Macroeconomics stresses

A) resource allocation and income distribution.
B) inflation and unemployment.
C) resource allocation and inflation.
D) unemployment and income distribution.

Question 56

During a recession, markets will

A) decline.
B) increase.
C) increase then decrease.
D) move in many different directions.

Question 57

Economist John Maynard Keynes wrote that recessions can be prolonged and interminable; therefore, government action is needed to jump-start the economy.

Question 58

Combining various goods and services into a convenient grouping is called

A) conglomeration.
B) blending.
C) congregation.
D) agglomeration.
E) aggregation.

Question 59

During the first year of the Obama administration in 2009, the American economy experienced

A) low unemployment.
B) stagnation.
C) slow rate of growth.
D) deflation.

Question 60

China is the world's largest wheat producer. If China's real gross domestic product grew by 11 percent in the previous year, it implies that

A) production of wheat grew by more than 11 percent.
B) products other than wheat grew by less than 11 percent.
C) China's overall output grew by 11 percent.
D) production of wheat is declining in China.

Question 61

The aggregate demand curve shows the quantity of domestic product

A) produced at each possible price level.
B) demanded and produced at each possible price level.
C) that is exported at each possible price level.
D) demanded at each possible price level.

Question 62

A good produced in 2009 and held in inventory until it is sold in 2010 would be included in which measure of GDP?

A) Half the value in 2009 and half the value in 2010
B) In 2010 GDP
C) In both 2009 and 2010 GDP
D) In 2009 GDP

Question 63

While their respective subject matters differ greatly, both microeconomists and macroeconomists rely on the same basic tools; that is, both rely on

A) government contracts to promote research and publications.
B) demand and supply analysis.
C) the economic theory of John Maynard Keynes.
D) consumer protection laws and antitrust legislation.

Question 64

The clearest sign of inflation would be a(n)

A) increase in the price level.
B) increase in the quantity of total final output.
C) decrease in the quantity of total final output.
D) simultaneous increase in both output and prices.

Question 65

If the prices of all goods and services rise during the year,

A) real GDP may fall.
B) nominal GDP must rise.
C) nominal GDP may increase.
D) real GDP must rise.

Question 66

The horizontal axis on the aggregate demand-aggregate supply model measures

A) the price of the specific product produced.
B) the level of total output.
C) the price level.
D) the level of employment.

Question 67

Gross domestic product is calculated by adding together

A) the number of goods and services produced in the economy.
B) money value of final goods and services.
C) number of workers employed in national production.
D) all commodities but not services produced in the economy.

Question 68

A recession is a period during which

A) aggregate demand, production, and unemployment rise.
B) aggregate demand, production, and unemployment fall.
C) aggregate demand, production, and unemployment remain the same.
D) aggregate demand and production rise while unemployment remains the same.
E) aggregate demand and production fall while unemployment rises.

Question 69

If aggregate demand shifts inward over a long period of time, with aggregate supply held constant, the economy should experience

A) unemployment.
B) budget surpluses.
C) stagflation.
D) inflation.

Question 70

Nominal GDP is

A) also called real GDP.
B) a more accurate measure than real GDP.
C) real GDP adjusted for changes in the price level.
D) GDP measured in current prices.

Question 71

If aggregate demand shifts outward over a long period of time, with aggregate supply held constant, the economy should experience

A) unemployment.
B) recession.
C) budget surpluses.
D) inflation.

Question 72

Real GDP

A) is GDP adjusted for changes in the price level.
B) is also called nominal GDP.
C) measures GDP minus depreciation of capital.
D) will always change when prices change.

Question 73

Gross domestic product is the

A) most comprehensive measure of production of a nation's resources.
B) total of goods and services purchased by consumers.
C) most comprehensive measure of total output in the United States.
D) most defined measure of net exports.

Question 74

The clearest sign of economic growth is a(n)

A) increase in nominal GDP.
B) increase in real GDP.
C) decrease in nominal GDP.

Question 75

Which of the following is a true measure of national output?

A) GNP at market price
B) Nominal GNP
C) GDP in future dollars
D) GDP using base-year prices

Question 76

The vertical axis of the aggregate demand-aggregate supply model measures the amount of

A) total employment.
B) total final output.
C) the price level.
D) net exports.

Question 77

The basic organizing framework for both microeconomic and macroeconomic models is

A) purely competitive markets.
B) government planning of the economy.
C) demand and supply.
D) democratic socialism.
E) All of these responses are correct.

Question 78

In the aggregate demand-aggregate supply model, a decrease in income taxes can be illustrated by an

A) outward shift of the aggregate demand curve.
B) inward shift of the aggregate demand curve.
C) inward shift of the aggregate supply curve.
D) outward shift of the aggregate supply curve.

Question 79

Gross domestic product is best described as the

A) measure of a nation's total economic welfare.
B) national income, including nonmarket income.
C) sum of money values of all final output produced in the domestic economy within the year.
D) national output minus environmental damage.

Question 80

Which of the following is not an abstraction of macroeconomics?

A) Inflation rate
B) Total costs
C) Unemployment
D) Aggregate supply