Deck 5: An Introduction to Macroeconomics

Question 1

The key characteristic of macroeconomics is the process of aggregation.

Answer 1

True

Question 2

Abstract terms like "cost of living" and "price level" are meaningless to ordinary individuals.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

Aggregation involves adding together different products and services.

Question 7

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

Question 8

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

Question 9

If aggregate demand keeps shifting rightward month after month and aggregate supply remains constant,the economy will experience a recession.

Question 10

GDP in 2011 would not include the resale of a house built in 2000.

Question 11

If a woman marries her housekeeper,GDP would remain constant.

Question 12

An increase in aggregate demand will result in inflation.

Question 13

Macroeconomists pay little attention to the composition of aggregate output.

Question 14

Economic aggregates are not observable in the "real world."

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

Gross Domestic Product includes the sale of intermediate goods and services.

Question 21

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

Question 22

Economic fluctuations in the United States have been less extreme since the 1950s.

Question 23

In terms of macroeconomic conditions,the 1930s were the "good old days."

Question 24

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

Question 25

In 2001,the first year of the Bush administration,Americans learned that recessions were a thing of the past.

Question 26

Stagflation is the simultaneous occurrence of inflation and high unemployment.

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

Gross Domestic Product accurately measures the environmental costs of producing all goods and services.

Question 35

Cars produced by General Motors in Mexico would be included in U.S.Gross Domestic Product.

Question 36

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

Question 37

Production for war and environmental clean-up services are not included in GDP.

Question 38

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 2011.

Question 39

Changes in nominal GDP always reflect changes in real output.

Question 40

In the United States,GDP has grown slower than the population since 1870.

Question 41

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 42

During the first year of the Bush administration in 2001,the American economy

A) increased its already rapid growth rate.
B) experienced high levels of inflation.
C) slowed in its rate of economic growth.
D) experienced a decrease in the rate of unemployment.

Question 43

Macroeconomics stresses

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

Question 44

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 45

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

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

Question 46

Macroeconomists think that

A) most questions about individual markets are more important than the overall economy.
B) questions of overall unemployment are less important than the jobs of particular workers.
C) the details of resource allocation and individual market prices are less important than the amount of national output.
D) the causes of unemployment usually lie with the personalities of individual workers.
E) the price of particular products is more important than the overall price level.

Question 47

An example of an abstraction used in macroeconomics is

A) the price level.
B) total costs.
C) the tax rate.
D) the treasury bill rate.
E) proprietor's income.

Question 48

During economic fluctuations,markets tend to move

A) together.
B) in random directions.
C) in opposite directions.
D) in many different directions.

Question 49

It might be useful to think of macroeconomics as a study of ____ and microeconomics as a study of ____.

A) big corporations, small businesses
B) oceans, fish
C) the long run, the short run
D) abstract, concrete
E) theory, reality

Question 50

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 51

Combining various goods and services into a convenient grouping is called

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

Question 52

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 53

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 54

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 55

Macroeconomists are distinguished from microeconomists because macroeconomists are more interested in

A) inflation and unemployment than in individual markets.
B) large corporations rather than small businesses.
C) inflation in the United States rather than inflation in Costa Rica.
D) the demand for oil rather than the demand for corn.

Question 56

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

Question 57

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 hot dogs

Question 58

In economics,aggregation refers to

A) collecting sample specimens for reclassification.
B) using small stones to pave an artistic walkway.
C) combining many markets into one overall economy.
D) using large computers to solve economic problems.

Question 59

How do macroeconomists differ from microeconomists?

A) the basic tools of analysis
B) the underlying principles
C) the use of abstractions and models
D) the problems studied
E) All of the above are correct.

Question 60

If a macroeconomist aggregates many markets into one,then

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

Question 61

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 62

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

A) GDP at market price
B) Nominal GDP
C) GDP in current dollars
D) GDP in constant dollars

Question 63

In 2011,you buy a beautiful vintage 1965 Thunderbird convertible.This purchase would

A) be included in the GDP for 2011.
B) not be included in the GDP for 2011.
C) be included in both the GDP for 1965 and 2011.
D) be in the GDP for 2011 at a depreciated value.

Question 64

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 65

In the aggregate demand-aggregate supply model,economic growth 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) All of the above.

Question 66

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 67

A real estate salesperson sells a house in 2011 that was built in 2005.How does this transaction get counted in the GDP statistics?

A) The price of the house and the real estate salesperson's commission are both included in 2011's GDP.
B) Neither the price of the house or the commission is included in 2011's GDP.
C) The real estate salesperson's commission but not the price of the house is included in 2011's GDP.
D) The price of the house would be included in both 2005's GDP and the GDP for 2011.

Question 68

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 69

Macroeconomic models use abstract concepts such as "price level" and "national income" that are calculated by combining many markets into one.This process is known as

A) analysis and synthesis.
B) integration and derivation.
C) conceptualization.
D) aggregation.

Question 70

Gross Domestic Product is the

A) least inclusive aggregate used to measure the economy.
B) total of goods and services desired by consumers.
C) most comprehensive measure of total output in the United States.
D) most accurate measure of the trade balance of the United States.

Question 71

Real GDP

A) is nominal 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 72

A recession is a period during which

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

Question 73

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

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

Question 74

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 75

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 76

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 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 the above.

Question 78

The clearest sign of economic growth is a(n)

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

Question 79

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 80

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.