Question 1

What are the different phases of the business cycle,and how are production and employment affected in each phase?

Accepted Answer

The business cycle is alternating periods of economic growth and contraction.During a period of growth the economy expands,production increases,and unemployment declines.The growth phase reaches a peak,and the economy then begins to contract; production decreases,and unemployment increases.The contraction ends in a trough,and the economy starts to expand again.The cycle looks like a roller coaster track.

Question 2

Internal market forces include all of the following except

Accepted Answer

A)  Population growth.
B)  Spending behavior.
C)  Innovation.
D)  Trade disruptions. D

Question 3

Who believed that small disturbances in output,prices,or unemployment were likely to be magnified by the invisible hand of the marketplace?

Accepted Answer

A)  President Herbert Hoover.
B)  Adam Smith.
C)  John Maynard Keynes.
D)  Jean-Baptiste Say. C

Question 4

At which of the following price levels would a shortage occur in Figure 8.4?

Accepted Answer

A)  P1.
B)  P2.
C)  P3.
D)  P4.

Question 5

Supply-side theories of the business cycle focus on how improper incentives lead to the unwillingness of producers to supply more goods and services at existing prices.
Supply-side theory focuses on lowering taxes and improving infrastructure to boost supply.

Accepted Answer

A) True 
 B)False

Question 6

Based on the classical view,

Accepted Answer

A)  Unemployment never occurs.
B)  Cyclical unemployment might occur temporarily.
C)  All goods produced are always purchased at an unchanging price.
D)  Persistent unemployment might be a problem.

Question 7

Which of the following is not considered a macro outcome?

Accepted Answer

A)  The level of unemployment.
B)  External shocks such as weather.
C)  The average price of goods and services.
D)  The year-to-year expansion in overall productive capacity.

Question 8

Which of the following economic perspectives focuses on the need for government to shift aggregate supply to correct problems of unemployment and inflation?

Accepted Answer

A)  Supply-side.
B)  Keynesian.
C)  Classical.
D)  Monetary.

Question 9

An economic expansion refers to an increase in the volume of goods and services produced.
During an economic expansion,GDP rises and unemployment falls.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following was not characteristic of the U.S.economy during the Great Depression?

Accepted Answer

A)  Families lost their farms.
B)  Automobile production fell.
C)  The stock market crashed.
D)  Unemployment reached 50 percent.

Question 11

Using Figure 8.5,if the equilibrium real output is Q2 then

Accepted Answer

A)  Aggregate demand must be AD1.
B)  Aggregate demand could be either AD1 or AD2 depending on the level of aggregate supply.
C)  The equilibrium price level is P2.
D)  Aggregate supply must be AS1 and the equilibrium price level must be P1.

Question 12

A tax cut can best be characterized as

Accepted Answer

A)  Monetary policy only.
B)  Fiscal policy only.
C)  Supply-side policy only.
D)  Either fiscal or supply-side policy.

Question 13

If full employment is associated with an output that is greater than the current macro equilibrium,which of the following best describes the impact of a rightward shift of the aggregate supply curve,ceteris paribus?

Accepted Answer

A)  A higher price level and a higher level of output.
B)  A higher price level and a lower level of output.
C)  A recession or depression.
D)  A lower price level and a higher level of output.

Question 14

Which of the following is characteristic of a downturn in the business cycle?

Accepted Answer

A)  Lower unemployment rates.
B)  Lower real output.
C)  Higher interest rates.
D)  None of the choices are correct.

Question 15

Which of the following is illustrated by the aggregate demand curve?

Accepted Answer

A)  How real personal income varies with the inflation rate.
B)  How total quantity of output demanded varies with the average price level.
C)  How real output varies with the inflation rate.
D)  How real personal income varies with the price level.

Question 16

In Figure 8.5,according to Keynesians,if equilibrium real output is Q1 and full-employment real output is Q2,an appropriate fiscal policy lever would be to

Accepted Answer

A)  Increase AD by increasing income taxes.
B)  Increase AD by increasing government spending.
C)  Increase AS by reducing government regulations.
D)  Reduce AS by tightening air pollution standards to improve air quality.

Question 17

The quantity of real output supplied rises as the price level rises,ceteris paribus.
There is a direct and positive relationship between the price level and the economy's output.

Accepted Answer

A) True 
 B)False

Question 18

In the absence of external shocks or government policy,an economy would

Accepted Answer

A)  Still experience business cycle fluctuations because of internal market forces.
B)  Not experience business cycle fluctuations.
C)  Not be able to expand production and output.
D)  None of the choices are correct.

Question 19

Fiscal policy is the use of

Accepted Answer

A)  Government spending and taxes to alter macroeconomic outcomes.
B)  Money and credit controls to alter macroeconomic outcomes.
C)  Tax incentives,deregulation,and other mechanisms to increase the ability and willingness to produce goods and services.
D)  Trade policy to alter macroeconomic outcomes.

Question 20

Keynes believed that a market-driven economy was inherently unstable.
Keynes urged government to intervene to maintain full employment during periods of economic downturn.

Accepted Answer

A) True 
 B)False

Exam 8: The Business Cycle

What are the different phases of the business cycle,and how are production and employment affected in each phase?

Internal market forces include all of the following except

Who believed that small disturbances in output,prices,or unemployment were likely to be magnified by the invisible hand of the marketplace?

At which of the following price levels would a shortage occur in Figure 8.4?

Supply-side theories of the business cycle focus on how improper incentives lead to the unwillingness of producers to supply more goods and services at existing prices. Supply-side theory focuses on lowering taxes and improving infrastructure to boost supply.

Based on the classical view,

Which of the following is not considered a macro outcome?

Which of the following economic perspectives focuses on the need for government to shift aggregate supply to correct problems of unemployment and inflation?

An economic expansion refers to an increase in the volume of goods and services produced. During an economic expansion,GDP rises and unemployment falls.

Which of the following was not characteristic of the U.S.economy during the Great Depression?

Using Figure 8.5,if the equilibrium real output is Q₂ then

A tax cut can best be characterized as

If full employment is associated with an output that is greater than the current macro equilibrium,which of the following best describes the impact of a rightward shift of the aggregate supply curve,ceteris paribus?

Which of the following is characteristic of a downturn in the business cycle?

Which of the following is illustrated by the aggregate demand curve?

In Figure 8.5,according to Keynesians,if equilibrium real output is Q₁ and full-employment real output is Q₂,an appropriate fiscal policy lever would be to

The quantity of real output supplied rises as the price level rises,ceteris paribus. There is a direct and positive relationship between the price level and the economy's output.

In the absence of external shocks or government policy,an economy would

Fiscal policy is the use of

Keynes believed that a market-driven economy was inherently unstable. Keynes urged government to intervene to maintain full employment during periods of economic downturn.