Question 1

The NBER's Business Cycle Dating Committee defines a recession as at least two consecutive quarters of falling real GDP.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

Accepted Answer

A)  Services have become a smaller fraction of GDP since the 1950s. 
B)  Unemployment insurance and other government transfer programs are more prevalent since the 1950s. 
C)  The government has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s. 
D)  both B and C 
A)  Services have become a smaller fraction of GDP since the 1950s. 
B)  Unemployment insurance and other government transfer programs are more prevalent since the 1950s. 
C)  The government has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s. 
D)  both B and C

Question 3

Long-run economic growth requires all of the following except

Accepted Answer

A)  technological change. 
B)  increases in capital per hour worked. 
C)  government provision of secure property rights. 
D)  political instability. 
A)  technological change. 
B)  increases in capital per hour worked. 
C)  government provision of secure property rights. 
D)  political instability.

Question 4

During a recession, spending on ________ tends to fall more dramatically than spending on ________.

Accepted Answer

A)  necessities; luxuries 
B)  durable goods; nondurable goods 
C)  nondurable goods; durable goods 
D)  food; cars 
A)  necessities; luxuries 
B)  durable goods; nondurable goods 
C)  nondurable goods; durable goods 
D)  food; cars

Question 5

Which of the following will result in an increase in labor productivity?

Accepted Answer

A)  a decrease in the number of people attending institutions of higher education 
B)  a decline in the amount of human capital per worker 
C)  an increase in technology 
D)  a decline in the capital stock per hour worked 
A)  a decrease in the number of people attending institutions of higher education 
B)  a decline in the amount of human capital per worker 
C)  an increase in technology 
D)  a decline in the capital stock per hour worked

Question 6

Figure 21-1  
-Refer to Figure 21-1. Which of the following is consistent with the graph depicted above?

Accepted Answer

A)  An expected recession decreases the profitability of new investment. 
B)  Technological change increases the profitability of new investment. 
C)  The government runs a budget surplus. 
D)  Households become spendthrifts and begin to save less. 
A)  An expected recession decreases the profitability of new investment. 
B)  Technological change increases the profitability of new investment. 
C)  The government runs a budget surplus. 
D)  Households become spendthrifts and begin to save less.

Question 7

Financial securities that represent promises to repay a fixed amount of funds are known as

Accepted Answer

A)  bonds. 
B)  stocks. 
C)  pension funds. 
D)  insurance premiums. 
A)  bonds. 
B)  stocks. 
C)  pension funds. 
D)  insurance premiums.

Question 8

The response of investment spending to an increase in the government budget deficit is called

Accepted Answer

A)  expansionary investment. 
B)  private dissaving. 
C)  crowding out. 
D)  income minus net taxes. 
A)  expansionary investment. 
B)  private dissaving. 
C)  crowding out. 
D)  income minus net taxes.

Question 9

Retained earnings are always sufficient to finance a firm's rapid expansion in a high-growth economy.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would encourage economic growth through increases in the capital stock?

Accepted Answer

A)  an increase in the profitability of new investment due to technological change 
B)  an increase in household saving 
C)  a decrease in the government deficit 
D)  all of the above 
A)  an increase in the profitability of new investment due to technological change 
B)  an increase in household saving 
C)  a decrease in the government deficit 
D)  all of the above

Question 11

An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

Accepted Answer

A)  supply; right; fall 
B)  supply; left; rise 
C)  demand; right; rise 
D)  demand; left; fall 
A)  supply; right; fall 
B)  supply; left; rise 
C)  demand; right; rise 
D)  demand; left; fall

Question 12

At the end of an expansion, wages of workers are usually rising faster than prices.

Accepted Answer

A) True 
 B)False

Question 13

From 1991 until 2001, the United States was in a period of

Accepted Answer

A)  expansion. 
B)  recession. 
C)  business cycle troughs. 
D)  business cycle peaks. 
A)  expansion. 
B)  recession. 
C)  business cycle troughs. 
D)  business cycle peaks.

Question 14

What is labor productivity? How does a country's standard of living relate to labor productivity?

Accepted Answer

Labor productivity refers to the amount

Question 15

Economist Robert Fogel has estimated that by the year 2040, individuals in the United States will be spending

Accepted Answer

A)  more time in the workforce and more time in leisure activities than they do today. 
B)  less time in the workforce and less time in leisure activities than they do today. 
C)  less time in the workforce and more time in leisure activities than they do today. 
D)  more time in the workforce and less time in leisure activities than they do today. 
A)  more time in the workforce and more time in leisure activities than they do today. 
B)  less time in the workforce and less time in leisure activities than they do today. 
C)  less time in the workforce and more time in leisure activities than they do today. 
D)  more time in the workforce and less time in leisure activities than they do today.

Question 16

Figure 21-2  
-Refer to Figure 21-2. Which of the following is consistent with the graph depicted above?

Accepted Answer

A)  An expected expansion increases the profitability of new investment. 
B)  The government runs a budget surplus. 
C)  Investment spending is declining due to crowding out. 
D)  New government regulations decrease the profitability of new investment. 
A)  An expected expansion increases the profitability of new investment. 
B)  The government runs a budget surplus. 
C)  Investment spending is declining due to crowding out. 
D)  New government regulations decrease the profitability of new investment.

Question 17

Recessions typically cause the unemployment rate to ________ and the inflation rate to ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 18

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

Accepted Answer

A) True 
 B)False

Question 19

Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.

Accepted Answer

A)  increase; decrease 
B)  decrease; increase 
C)  decrease; decrease further 
D)  increase; increase further 
A)  increase; decrease 
B)  decrease; increase 
C)  decrease; decrease further 
D)  increase; increase further

Question 20

How are unemployment, inflation, and the business cycle related?

Accepted Answer

A recessionary phase of a business cycle

Exam 21: Economic Growth, the Financial System, and Business Cycles

The NBER's Business Cycle Dating Committee defines a recession as at least two consecutive quarters of falling real GDP.

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

Long-run economic growth requires all of the following except

During a recession, spending on ________ tends to fall more dramatically than spending on ________.

Which of the following will result in an increase in labor productivity?

Figure 21-1 -Refer to Figure 21-1. Which of the following is consistent with the graph depicted above?

Financial securities that represent promises to repay a fixed amount of funds are known as

The response of investment spending to an increase in the government budget deficit is called

Retained earnings are always sufficient to finance a firm's rapid expansion in a high-growth economy.

Which of the following would encourage economic growth through increases in the capital stock?

An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

At the end of an expansion, wages of workers are usually rising faster than prices.

From 1991 until 2001, the United States was in a period of

What is labor productivity? How does a country's standard of living relate to labor productivity?

Economist Robert Fogel has estimated that by the year 2040, individuals in the United States will be spending

Figure 21-2 -Refer to Figure 21-2. Which of the following is consistent with the graph depicted above?

Recessions typically cause the unemployment rate to ________ and the inflation rate to ________.

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.

How are unemployment, inflation, and the business cycle related?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

During a recession, spending on tends to fall more dramatically than spending on .

An increase in the government budget deficit will shift the curve for loanable funds to the and the equilibrium real interest rate will .

Recessions typically cause the unemployment rate to and the inflation rate to .

Inflation tends to during the expansion phase of the business cycle and during the recession phase of the business cycle.