Question 1

We should most likely expect a recession if the Leading Economic Index:

Accepted Answer

A)  falls for three months in a row. 
B)  rises for three months in a row. 
C)  rises for six months in a row. 
D)  falls for six months in a row.

Question 2

The Leading Economic Index is produced by:

Accepted Answer

A)  the National Bureau of Economic Research. 
B)  the Federal Reserve Bank of Chicago. 
C)  the U.S. Treasury. 
D)  the Conference Board.

Question 3

A business cycle is:

Accepted Answer

A)  the periodic fluctuation of economic activity. 
B)  the engine of economic growth. 
C)  a period lasting about 50 years. 
D)  identical to the consumption life cycle.

Question 4

Which of the following components is not used to measure GDP using the income approach?

Accepted Answer

A)  corporate profits 
B)  rental income 
C)  net interest 
D)  net exports

Question 5

We are most likely to see a recession if interest rates on long-term bonds are _____ and interest rates on short-term bonds are _____.

Accepted Answer

A)  8%; 6% 
B)  5%; 5% 
C)  7%; 7% 
D)  2%; 4%

Question 6

GDP measures the final value of goods and services produced to avoid the problem of:

Accepted Answer

A)  disintermediation. 
B)  double counting. 
C)  production by foreign citizens working in the United States. 
D)  undervaluing output.

Question 7

Which phase of the business cycle occurs immediately after a recovery?

Accepted Answer

A)  peak 
B)  trough 
C)  boom 
D)  recession

Question 8

The National Bureau of Economic Research:

Accepted Answer

A)  is a government agency that dates business cycles in the United States. 
B)  is a nonprofit research organization that dates business cycles in the United States. 
C)  consists of elected officials from the U.S. Senate. 
D)  is a nonprofit research organization that only determines when recessions begin.

Question 9

The expenditure category that accounts for the largest share of GDP is:

Accepted Answer

A)  gross private domestic investment. 
B)  government purchases of goods and services. 
C)  personal consumption expenditures. 
D)  net exports.

Question 10

The Leading Economic Index fell in July and August, rose in September, and fell again in October. Based on this, we should expect a recession in the near future.

Accepted Answer

A) True 
 B)False

Question 11

At the peak of the business cycle, the economy is typically operating:

Accepted Answer

A)  at its capacity. 
B)  above capacity. 
C)  below capacity. 
D)  at its highest level ever.

Question 12

A business cycle recovery that doesn't reach its long-term trend can lead to:

Accepted Answer

A)  hyperinflation. 
B)  lower cyclical unemployment. 
C)  its natural unemployment rate. 
D)  a double-dip recession.

Question 13

When the economy hits the bottom of the business cycle, this is called a:

Accepted Answer

A)  downturn. 
B)  trough. 
C)  recession. 
D)  base.

Question 14

Which of the following is NOT a problem in using GDP to measure standards of living?

Accepted Answer

A)  failure to include environmental impacts 
B)  failure to include the value of nonmarket work 
C)  failure to include exports and imports 
D)  failure to include the value of investments in human capital

Question 15

According to the circular flow model, the value of the household sector and the value of the business sector will:

Accepted Answer

A)  never be the same. 
B)  always be equal. 
C)  differ by the amount of the resource market. 
D)  differ by the amount of the product market.

Question 16

Which of the following events has significantly influenced the development of macroeconomic ideas?

Accepted Answer

A)  World War II 
B)  the development of the modern corporation 
C)  the Industrial Revolution 
D)  the Great Depression

Question 17

National income and product accounts came about in the United States during the 1930s as a result of:

Accepted Answer

A)  the theories of John Maynard Keynes. 
B)  a lack of reliable economic data. 
C)  the work of the Council of Economic Advisers. 
D)  the work of the Federal Reserve.

Question 18

The _____ let(s) economists judge our nation's economic performance, compare U.S. income and output to that of other nations, and track the economy's condition over the course of the business cycle.

Accepted Answer

A)  National Bureau of Economic Research 
B)  National Activity Index 
C)  Census Bureau 
D)  national income and product accounts

Question 19

In 1933, Congress directed the _____ to develop estimates of "total national income for each of the calendar years 1929, 1930 and 1931. . . ."

Accepted Answer

A)  Department of Commerce 
B)  Department of Justice 
C)  Census Bureau 
D)  National Bureau of Economic Research

Question 20

The GDP of the country Econia is $100 billion with the following components: C = $50 billion, I = $15 billion, G = $30, and (X - M) = $5 billion. Which of the following would have the largest immediate impact to increase Econia's GDP?

Accepted Answer

A)  Exports rise by $4 billion. 
B)  Inventory investment rises by $5 billion due to decreases in sales. 
C)  The government spends $10 billion more on transfer payments. 
D)  Consumers spend $8 billion more by reducing their savings by $8 billion.

Exam 5: Introduction to Macroeconomics