Question 1

The inflation-adjusted value of all goods and services produced is

Accepted Answer

A) The GDP deflator. 
B) Nominal GDP. 
C) GDP per capita. 
D) Real GDP. 
A) The GDP deflator. 
B) Nominal GDP. 
C) GDP per capita. 
D) Real GDP.

Question 2

Which of the following is true if equilibrium exceeds full employment?

Accepted Answer

A) The economy is inside the production possibilities curve. 
B) The economy is experiencing low inflation. 
C) Growth rates are unacceptably low. 
D) The economy is working beyond normal capacity. 
A) The economy is inside the production possibilities curve. 
B) The economy is experiencing low inflation. 
C) Growth rates are unacceptably low. 
D) The economy is working beyond normal capacity.

Question 3

From the supply-side perspective,the economy may fail to reach full employment because of

Accepted Answer

A) Production incentives. 
B) Declining costs. 
C) Lack of government regulation. 
D) Taxes that are too high. 
A) Production incentives. 
B) Declining costs. 
C) Lack of government regulation. 
D) Taxes that are too high.

Question 4

International trade and money flows can increase aggregate supply and aggregate demand if

Accepted Answer

A) Trade barriers are increased. 
B) Trade barriers are reduced. 
C) Tariffs are increased. 
D) Quotas are increased. 
A) Trade barriers are increased. 
B) Trade barriers are reduced. 
C) Tariffs are increased. 
D) Quotas are increased.

Question 5

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

Accepted Answer

A) Lower unemployment rates. 
B) Lower real output. 
C) Increased aggregate demand. 
D) None of the choices are correct. 
A) Lower unemployment rates. 
B) Lower real output. 
C) Increased aggregate demand. 
D) None of the choices are correct.

Question 6

Ceteris paribus,the price level will decrease if the aggregate

Accepted Answer

A) Supply curve shifts to the left. 
B) Demand curve shifts to the left. 
C) Demand curve shifts to the right. 
D) Supply and demand curves both shift to the right. 
A) Supply curve shifts to the left. 
B) Demand curve shifts to the left. 
C) Demand curve shifts to the right. 
D) Supply and demand curves both shift to the right.

Question 7

The study of aggregate economic activity for the economy as a whole is

Accepted Answer

A) Opportunity cost. 
B) Scarcity. 
C) Macroeconomics. 
D) Microeconomics. 
A) Opportunity cost. 
B) Scarcity. 
C) Macroeconomics. 
D) Microeconomics.

Question 8

A positively sloped aggregate supply curve reflects

Accepted Answer

A) The idea that greater production lowers profit margins,which raises quantity demanded. 
B) The decrease in the real value of money as the price level rises. 
C) The rising costs associated with increased capacity utilization. 
D) None or the other choices. 
A) The idea that greater production lowers profit margins,which raises quantity demanded. 
B) The decrease in the real value of money as the price level rises. 
C) The rising costs associated with increased capacity utilization. 
D) None or the other choices.

Question 9

Choose the letter below that best represents the type of shift that would occur in the following situation in the United States: A technological breakthrough significantly reduces the cost of computerizing production lines.(See Figure 8.6. )

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 10

During a recession,real output actually falls.

Accepted Answer

A) True 
 B)False

Question 11

Internal market forces include all of the following except

Accepted Answer

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

Question 12

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 period

Question 13

According to classical economists,market-driven economies

Accepted Answer

A) Are typically self-adjusting. 
B) Are inherently unstable. 
C) Require government intervention. 
D) Are always in long-run equilibrium. 
A) Are typically self-adjusting. 
B) Are inherently unstable. 
C) Require government intervention. 
D) Are always in long-run equilibrium.

Question 14

What is the foreign trade effect,and how does it explain the shape of the aggregate demand curve?

Accepted Answer

The foreign trade effect helps explain t

Question 15

Ceteris paribus,if average prices in the U.S.economy fall,then the

Accepted Answer

A) Real balances effect will lead to a lower quantity of U.S.output demanded. 
B) Foreign trade effect will lead to a lower quantity of U.S.output demanded. 
C) Interest rate effect will lead to a higher quantity of U.S.output demanded. 
D) Cost effect will lead to a higher quantity of U.S.output demanded. 
A) Real balances effect will lead to a lower quantity of U.S.output demanded. 
B) Foreign trade effect will lead to a lower quantity of U.S.output demanded. 
C) Interest rate effect will lead to a higher quantity of U.S.output demanded. 
D) Cost effect will lead to a higher quantity of U.S.output demanded.

Question 16

A growth recession is said to occur when the economy grows at a

Accepted Answer

A) Rate less than that of population. 
B) Rate less than the long-term average. 
C) Slower rate in the current year than the preceding year. 
D) Negative rate. 
A) Rate less than that of population. 
B) Rate less than the long-term average. 
C) Slower rate in the current year than the preceding year. 
D) Negative rate.

Question 17

Assume you have $5,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 125 at the end of the year,the real value of your savings is closest to

Accepted Answer

A) $4,000. 
B) $4,875. 
C) $5,125. 
D) $6,250. 
A) $4,000. 
B) $4,875. 
C) $5,125. 
D) $6,250.

Question 18

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 95 at the end of the year,the real value of your savings is closest to

Accepted Answer

A) $1,900. 
B) $1,905. 
C) $2,095. 
D) $2,105. 
A) $1,900. 
B) $1,905. 
C) $2,095. 
D) $2,105.

Question 19

Choose the letter below that best represents the type of shift that would occur in the following situation in the United States: During World War II,the U.S.government spent huge amounts of money to fund the war effort.(See Figure 8.6. )

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 20

Given AD1 and AS1 in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to

Accepted Answer

A) Increase taxes and increase government spending to shift AD1 to AD2. 
B) Increase the growth of the money supply to shift AD1 to AD2. 
C) Do nothing and wait for "natural" market forces to achieve full employment. 
D) Use all available supply-side options. 
A) Increase taxes and increase government spending to shift AD1 to AD2. 
B) Increase the growth of the money supply to shift AD1 to AD2. 
C) Do nothing and wait for "natural" market forces to achieve full employment. 
D) Use all available supply-side options.

Exam 8: The Business Cycle

The inflation-adjusted value of all goods and services produced is

Which of the following is true if equilibrium exceeds full employment?

From the supply-side perspective,the economy may fail to reach full employment because of

International trade and money flows can increase aggregate supply and aggregate demand if

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

Ceteris paribus,the price level will decrease if the aggregate

The study of aggregate economic activity for the economy as a whole is

A positively sloped aggregate supply curve reflects

Choose the letter below that best represents the type of shift that would occur in the following situation in the United States: A technological breakthrough significantly reduces the cost of computerizing production lines.(See Figure 8.6. )

During a recession,real output actually falls.

Internal market forces include all of the following except

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

According to classical economists,market-driven economies

What is the foreign trade effect,and how does it explain the shape of the aggregate demand curve?

Ceteris paribus,if average prices in the U.S.economy fall,then the

A growth recession is said to occur when the economy grows at a

Assume you have $5,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 125 at the end of the year,the real value of your savings is closest to

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 95 at the end of the year,the real value of your savings is closest to

Choose the letter below that best represents the type of shift that would occur in the following situation in the United States: During World War II,the U.S.government spent huge amounts of money to fund the war effort.(See Figure 8.6. )

Given AD1 and AS1 in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

Given AD₁ and AS₁ in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to