Question 1

The growth rate of potential GDP is the sum of two other growth rates.These other growth rates are

Accepted Answer

A)  population and resource base. 
B)  goods output and services output. 
C)  labor input and labor hours worked. 
D)  labor input and labor productivity. 
A)  population and resource base. 
B)  goods output and services output. 
C)  labor input and labor hours worked. 
D)  labor input and labor productivity.

Question 2

What is a GDP deflator? Why do some economists consider the GDP deflator to be a better measure of overall inflation than the Consumer Price Index?

Accepted Answer

The price index used to deflate nominal

Question 3

Increasing economic growth may be beneficial because

Accepted Answer

A)  mass poverty is a serious problem in the United States. 
B)  most Americans do not have the basic goods and services necessary for a decent life. 
C)  the price level falls only if the economy is growing. 
D)  most of the world is still below the poverty level of income. 
A)  mass poverty is a serious problem in the United States. 
B)  most Americans do not have the basic goods and services necessary for a decent life. 
C)  the price level falls only if the economy is growing. 
D)  most of the world is still below the poverty level of income.

Question 4

An economy can increase its total output of goods and services if it

Accepted Answer

A)  increases the hours of work or output per hour. 
B)  increases the hours of work or decreases output per hour. 
C)  decreases hours of work or decreases output per hour. 
D)  decreases hours of work and decreases output per hour. 
A)  increases the hours of work or output per hour. 
B)  increases the hours of work or decreases output per hour. 
C)  decreases hours of work or decreases output per hour. 
D)  decreases hours of work and decreases output per hour.

Question 5

The rate of interest written on a contract between a borrower and a lender is the

Accepted Answer

A)  nominal interest rate. 
B)  real interest rate. 
C)  implied interest rate. 
D)  expected interest rate. 
A)  nominal interest rate. 
B)  real interest rate. 
C)  implied interest rate. 
D)  expected interest rate.

Question 6

A nation's standard of living depends on its population and labor productivity.

Accepted Answer

A) True 
 B)False

Question 7

Unemployment insurance has an important macroeconomic effect because it

Accepted Answer

A)  props up aggregate supply. 
B)  props up aggregate demand. 
C)  props up aggregate exports. 
D)  helps balance the federal budget. 
A)  props up aggregate supply. 
B)  props up aggregate demand. 
C)  props up aggregate exports. 
D)  helps balance the federal budget.

Question 8

The real wage rate is defined as the wage rate divided by

Accepted Answer

A)  the interest rate. 
B)  the money supply. 
C)  nominal GDP. 
D)  the price level. 
A)  the interest rate. 
B)  the money supply. 
C)  nominal GDP. 
D)  the price level.

Question 9

Cyclical unemployment occurs when real GDP falls below potential GDP.

Accepted Answer

A) True 
 B)False

Question 10

Economists generally assume that faster economic growth is negative for society.

Accepted Answer

A) True 
 B)False

Question 11

The fastest growing economy between 1870 and 1979 was

Accepted Answer

A)  the United Kingdom. 
B)  the United States. 
C)  Japan. 
D)  Brazil. 
A)  the United Kingdom. 
B)  the United States. 
C)  Japan. 
D)  Brazil.

Question 12

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return, then we should expect

Accepted Answer

A)  increased investment by the utility. 
B)  expansion of electric power generating capacity. 
C)  future power shortages. 
D)  excess investment by the electric utility. 
A)  increased investment by the utility. 
B)  expansion of electric power generating capacity. 
C)  future power shortages. 
D)  excess investment by the electric utility.

Question 13

If economic output is increased by increasing the number of people working in the economy, then

Accepted Answer

A)  both GDP per capita and labor productivity will increase. 
B)  both GDP per capita and labor productivity will decrease. 
C)  GDP per capita will increase. 
D)  Labor productivity will increase. 
A)  both GDP per capita and labor productivity will increase. 
B)  both GDP per capita and labor productivity will decrease. 
C)  GDP per capita will increase. 
D)  Labor productivity will increase.

Question 14

If part of the labor force is unemployed, the foregone goods and services are

Accepted Answer

A)  lost until the unemployed find jobs. 
B)  are replaced by unemployment insurance. 
C)  are lost forever. 
D)  are replaced by an equal amount of imports. 
A)  lost until the unemployed find jobs. 
B)  are replaced by unemployment insurance. 
C)  are lost forever. 
D)  are replaced by an equal amount of imports.

Question 15

Due to the distortionary effects of inflation, capital investment may be reduced due to higher price levels.

Accepted Answer

A) True 
 B)False

Question 16

The growth rate of potential GDP depends, among other factors, on the

Accepted Answer

A)  rate of technological progress. 
B)  unemployment rate. 
C)  size of the labor force. 
D)  rate of capital stock depreciation. 
A)  rate of technological progress. 
B)  unemployment rate. 
C)  size of the labor force. 
D)  rate of capital stock depreciation.

Question 17

The nominal rate of interest is the difference between the real rate and the expected rate of inflation.

Accepted Answer

A) True 
 B)False

Question 18

The main cost that low inflation imposes on an economy is that low inflation

Accepted Answer

A)  inevitably leads to high inflation. 
B)  distorts some economic decisions. 
C)  reduces real wages. 
D)  benefits lenders at the expense of borrowers. 
A)  inevitably leads to high inflation. 
B)  distorts some economic decisions. 
C)  reduces real wages. 
D)  benefits lenders at the expense of borrowers.

Question 19

Unemployment insurance cannot eliminate the national costs of lost output due to unemployed labor.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following countries has not experienced hyperinflation in the twentieth century?

Accepted Answer

A)  Germany 
B)  Russia 
C)  Argentina 
D)  United States 
A)  Germany 
B)  Russia 
C)  Argentina 
D)  United States

Exam 23: The Goals of Macroeconomic Policy

The growth rate of potential GDP is the sum of two other growth rates.These other growth rates are

What is a GDP deflator? Why do some economists consider the GDP deflator to be a better measure of overall inflation than the Consumer Price Index?

Increasing economic growth may be beneficial because

An economy can increase its total output of goods and services if it

The rate of interest written on a contract between a borrower and a lender is the

A nation's standard of living depends on its population and labor productivity.

Unemployment insurance has an important macroeconomic effect because it

The real wage rate is defined as the wage rate divided by

Cyclical unemployment occurs when real GDP falls below potential GDP.

Economists generally assume that faster economic growth is negative for society.

The fastest growing economy between 1870 and 1979 was

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return, then we should expect

If economic output is increased by increasing the number of people working in the economy, then

If part of the labor force is unemployed, the foregone goods and services are

Due to the distortionary effects of inflation, capital investment may be reduced due to higher price levels.

The growth rate of potential GDP depends, among other factors, on the

The nominal rate of interest is the difference between the real rate and the expected rate of inflation.

The main cost that low inflation imposes on an economy is that low inflation

Unemployment insurance cannot eliminate the national costs of lost output due to unemployed labor.

Which of the following countries has not experienced hyperinflation in the twentieth century?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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