Question 1

A depression can be defined as _____

Accepted Answer

A)  a mild reduction in total production coupled with a rising unemployment rate that lasts for several years. 
B)  a mild decline in total production that lasts less than six months. 
C)  a severe fall in stock prices that causes financial panic and lasts less than six months. 
D)  a severe reduction in total production coupled with high unemployment that lasts for several years. 
E)  a decline in government spending and taxes that lasts less than six months.

Question 2

If the price level in the U.S. decreases, aggregate 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 in the U.S. decrease.

Question 3

Which of the following was true of the U.S. job market between 1929 and 2011?

Accepted Answer

A)  The number of jobs created in the organized sector was less than that in the unorganized sector. 
B)  The number of employed people increased by less than five percent. 
C)  The average education of workers increased over the years. 
D)  The productivity of workers declined over the years. 
E)  The growth in employment opportunities was slower compared to the growth in population.

Question 4

What occurred during the 1890s?

Accepted Answer

A)  A U.S. economic expansion that became the longest on record. 
B)  The economy contracted about half the time, and the unemployment rate topped 18 percent. 
C)  The outbreak of war boosted employment to fight for the country and to make tanks, ships, aircraft, and the like. 
D)  Federal spending increased on both the war in Vietnam and social programs at home. 
E)  Home prices declined and foreclosures rose, as more borrowers failed to make their mortgage payments.

Question 5

When did the Great Recession end?

Accepted Answer

A)  1929 
B)  1954 
C)  2009 
D)  2007 
E)  2011

Question 6

Exhibit 5.3
 
-Refer to Exhibit 5.3, which shows the aggregate demand and supply curves for the United States. In this Exhibit, which of the following might cause a shift in the aggregate demand curve from AD to AD'?

Accepted Answer

A)  an increase in household wealth 
B)  a fall in domestic interest rates 
C)  an increase in government spending 
D)  an appreciation of the dollar relative to other currencies 
E)  a decrease in the nation's money supply

Question 7

The economic policy based on the incorrect theory that a nation's economic objective should be to accumulate precious metals in the public treasury is called _____.

Accepted Answer

A)  laissez-faire 
B)  deficit financing 
C)  socialism 
D)  mercantilism 
E)  capitalism

Question 8

Identify the correct statement.

Accepted Answer

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

Question 9

_____ reflects the relationship between the economy's price level and aggregate output demanded.

Accepted Answer

A)  Aggregate demand 
B)  The aggregate demand curve 
C)  Aggregate supply 
D)  The aggregate supply curve 
E)  Aggregate output

Question 10

The recession that set in after December 2007 can be attributed to _____

Accepted Answer

A)  an increase in the expenditure on war. 
B)  a decline in home prices and an increase in foreclosures. 
C)  an increase in terrorist activities. 
D)  crop failures around the world. 
E)  an increase in oil prices in the international market.

Question 11

Which of these is a coincident economic indicator?

Accepted Answer

A)  the demand for plant and machinery 
B)  personal income 
C)  real estate growth 
D)  the interest rate 
E)  the unemployment rate

Question 12

Macroeconomics studies _____

Accepted Answer

A)  the different costs associated with production. 
B)  the price and output decisions made by different industries. 
C)  the overall performance of the economy. 
D)  the role of a market in determining an efficient outcome. 
E)  the role of input suppliers in determining the price and quantity of output.

Question 13

What was most likely the cause of the Great Depression?

Accepted Answer

A)  a fall in the domestic price level, leading to an increase in the demand for imports 
B)  a fall in resource prices, leading to an increase in aggregate supply 
C)  an increase in unemployment, leading to a decrease in aggregate demand 
D)  an increase in the domestic price level, leading to an increase in the demand for exports 
E)  Economists still debate the exact causes.

Question 14

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 occur after fluctuations in other developed economies. 
E)  in the United States usually occur before fluctuations in other developed economies.

Question 15

Which of the following is a central argument of Keynes's General Theory?

Accepted Answer

A)  Competition does not allocate resources efficiently in a modern industrial economy. 
B)  Full employment can be maintained even during a major recession if wage rates are lowered far enough. 
C)  Modern industrial economies do not tend automatically toward full employment rates of output. 
D)  Money does not play an important role in either causing or curing recession. 
E)  Government can best stabilize the economy by letting the market system automatically adjust toward full employment.

Question 16

Exhibit 5.4
 
-Refer to Exhibit 5.4, which shows the aggregate demand and supply curves for the United States. A rightward shift of the aggregate supply curve from AS to AS' is likely to be caused by _____

Accepted Answer

A)  an increase in resource prices, improved technology, or an extension of patent protection. 
B)  a decrease in resource prices, improved technology, or an extension of patent protection. 
C)  a decrease in resource prices, improved technology, or a shortening of patent protection. 
D)  an appreciation of the dollar, higher inflation in Europe, or a decrease in resource prices. 
E)  a depreciation of the dollar, higher inflation in Asia, or improved technology.

Question 17

Which of the following can be concluded about the long-run performance of the U.S. economy?

Accepted Answer

A)  It has been able to create employment opportunities but only at the cost of high inflation. 
B)  It has failed to generate sufficient aggregate demand in the economy. 
C)  It has been one of the most productive economies in the world in terms of growth in real GDP. 
D)  It has focused fiscal policies mostly at improving aggregate supply. 
E)  It has suffered from huge fiscal deficits that dampened economic growth.

Question 18

Which of the following occurred from 2007 to 2009?

Accepted Answer

A)  the Great Depression 
B)  the Great Recession 
C)  a stable economy 
D)  strong economic growth 
E)  high unemployment and high inflation

Question 19

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 the 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 20

Which of the following is not assumed to be constant along an aggregate supply curve?

Accepted Answer

A)  the price level in an economy 
B)  the exchange rate between the domestic and a foreign currency 
C)  the state of technology used in production 
D)  the unemployment rate 
E)  resource prices

Exam 5: Introduction to Macroeconomics.