Question 1

When the growth rates of actual and potential GDP diverge, they usually diverge because

Accepted Answer

A) actual GDP growth equals potential GDP growth. 
B) actual GDP growth falls below potential GDP growth. 
C) potential GDP growth rates fall below actual GDP growth rates. 
D) potential GDP growth rates fluctuate while actual GDP growth rates remain stable. 
A) actual GDP growth equals potential GDP growth. 
B) actual GDP growth falls below potential GDP growth. 
C) potential GDP growth rates fall below actual GDP growth rates. 
D) potential GDP growth rates fluctuate while actual GDP growth rates remain stable.

Question 2

The distinction between real and nominal rates of interest is understood by

Accepted Answer

A) most public policy makers. 
B) the majority of the American population. 
C) a majority of legislators. 
D) relatively few Americans. 
A) most public policy makers. 
B) the majority of the American population. 
C) a majority of legislators. 
D) relatively few Americans.

Question 3

In the United States, labor productivity is approximately

Accepted Answer

A) $73 per hour. 
B) $94 per hour. 
C) $102 per hour. 
D) $110 per hour. 
A) $73 per hour. 
B) $94 per hour. 
C) $102 per hour. 
D) $110 per hour.

Question 4

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 5

The German inflation rate after World War I was measured in the thousands of percent.This condition is referred to as

Accepted Answer

A) fundamental inflation. 
B) environmental inflation. 
C) hyperinflation. 
D) episodic inflation. 
A) fundamental inflation. 
B) environmental inflation. 
C) hyperinflation. 
D) episodic inflation.

Question 6

The difference between the purchase price of a financial asset and the sale price of the asset is called a(n)

Accepted Answer

A) capital gain. 
B) dividend. 
C) profit. 
D) investment. 
A) capital gain. 
B) dividend. 
C) profit. 
D) investment.

Question 7

Full employment is defined by most economists as the minimization of

Accepted Answer

A) cyclical unemployment. 
B) frictional unemployment. 
C) seasonal unemployment. 
D) structural unemployment. 
A) cyclical unemployment. 
B) frictional unemployment. 
C) seasonal unemployment. 
D) structural unemployment.

Question 8

The production function has ____ on the horizontal axis.

Accepted Answer

A) real GDP 
B) capital stock 
C) technology 
D) labor input 
A) real GDP 
B) capital stock 
C) technology 
D) labor input

Question 9

An increase in capital stock will shift the production function

Accepted Answer

A) downward. 
B) rightward. 
C) upward. 
D) outward. 
A) downward. 
B) rightward. 
C) upward. 
D) outward.

Question 10

Countries like Germany, Russia, and Zimbabwe have experienced hyperinflation within the last century.It occurred mainly due to the

Accepted Answer

A) the lack of inflationary controls. 
B) government mistakenly believed it could "inflate" way its debt. 
C) government-run dictatorships. 
D) government believed its policies would attract foreign investment. 
A) the lack of inflationary controls. 
B) government mistakenly believed it could "inflate" way its debt. 
C) government-run dictatorships. 
D) government believed its policies would attract foreign investment.

Question 11

Changes in relative prices usually lead to increases in real income because prices have changed.

Accepted Answer

A) True 
 B)False

Question 12

GDP equals hours of work multiplied by output per hour.This can be rewritten as

Accepted Answer

A) growth rate of potential GDP = growth rate of labor input + growth rate of labor productivity. 
B) potential GDP = wages + cost of production. 
C) growth rate of real GDP = growth rate of labor input + growth rate of marginal output. 
D) growth rate of GDP = growth rate of wages + growth rate of labor productivity. 
A) growth rate of potential GDP = growth rate of labor input + growth rate of labor productivity. 
B) potential GDP = wages + cost of production. 
C) growth rate of real GDP = growth rate of labor input + growth rate of marginal output. 
D) growth rate of GDP = growth rate of wages + growth rate of labor productivity.

Question 13

Throughout the period from 1996 to 2010, U.S.Real GDP growth has been

Accepted Answer

A) constant. 
B) declining. 
C) steadily increasing. 
D) fluctuating. 
A) constant. 
B) declining. 
C) steadily increasing. 
D) fluctuating.

Question 14

The shortfall between actual real GDP and potential GDP

Accepted Answer

A) decreases as the unemployment rate rises. 
B) increases as the unemployment rate rises. 
C) increases as the employment rate rises. 
D) decreases as the labor force increases. 
A) decreases as the unemployment rate rises. 
B) increases as the unemployment rate rises. 
C) increases as the employment rate rises. 
D) decreases as the labor force increases.

Question 15

Growth in potential GDP depends on

Accepted Answer

A) the labor force growth rate, capital stock growth rate, and rate of technical progress. 
B) government spending, growth in prices, and labor productivity. 
C) cyclical fluctuations and growth in the capital stock. 
D) growth in real GDP, nominal GDP, and the population. 
A) the labor force growth rate, capital stock growth rate, and rate of technical progress. 
B) government spending, growth in prices, and labor productivity. 
C) cyclical fluctuations and growth in the capital stock. 
D) growth in real GDP, nominal GDP, and the population.

Question 16

If an economy is experiencing deflation, a decrease in the price level, then the most advantageous actions would be

Accepted Answer

A) borrowing money at a fixed interest rate and buying a house. 
B) borrowing money at a fixed interest rate and buying land. 
C) keeping money in a checking account. 
D) keeping your wealth in gold and other precious metals. 
A) borrowing money at a fixed interest rate and buying a house. 
B) borrowing money at a fixed interest rate and buying land. 
C) keeping money in a checking account. 
D) keeping your wealth in gold and other precious metals.

Question 17

The most likely group of the following that would be eligible for unemployment insurance benefits is

Accepted Answer

A) new college graduates looking for their first job. 
B) mothers returning to the labor force after caring for young children. 
C) workers who quit their jobs. 
D) experienced workers recently laid off. 
A) new college graduates looking for their first job. 
B) mothers returning to the labor force after caring for young children. 
C) workers who quit their jobs. 
D) experienced workers recently laid off.

Question 18

Frictional unemployment is a sign of a healthy economy because

Accepted Answer

A) workers become more productive after taking vacations. 
B) economic growth remains steady. 
C) workers seek labor where they can provide the most value to their respective employer. 
D) wages fall, which forces workers to compete. 
A) workers become more productive after taking vacations. 
B) economic growth remains steady. 
C) workers seek labor where they can provide the most value to their respective employer. 
D) wages fall, which forces workers to compete.

Question 19

The use of automated teller machines (ATMs) has caused some bank tellers to lose their jobs.This is an example of

Accepted Answer

A) cyclical unemployment. 
B) seasonal unemployment. 
C) frictional unemployment. 
D) structural unemployment. 
A) cyclical unemployment. 
B) seasonal unemployment. 
C) frictional unemployment. 
D) structural unemployment.

Question 20

During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time.How has this development affected potential GDP and labor productivity?

Accepted Answer

Decreasing the length of the workweek, o

Exam 22: The Goals of Macroeconomic Policy

When the growth rates of actual and potential GDP diverge, they usually diverge because

The distinction between real and nominal rates of interest is understood by

In the United States, labor productivity is approximately

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

The German inflation rate after World War I was measured in the thousands of percent.This condition is referred to as

The difference between the purchase price of a financial asset and the sale price of the asset is called a(n)

Full employment is defined by most economists as the minimization of

The production function has ____ on the horizontal axis.

An increase in capital stock will shift the production function

Countries like Germany, Russia, and Zimbabwe have experienced hyperinflation within the last century.It occurred mainly due to the

Changes in relative prices usually lead to increases in real income because prices have changed.

GDP equals hours of work multiplied by output per hour.This can be rewritten as

Throughout the period from 1996 to 2010, U.S.Real GDP growth has been

The shortfall between actual real GDP and potential GDP

Growth in potential GDP depends on

If an economy is experiencing deflation, a decrease in the price level, then the most advantageous actions would be

The most likely group of the following that would be eligible for unemployment insurance benefits is

Frictional unemployment is a sign of a healthy economy because

The use of automated teller machines (ATMs) has caused some bank tellers to lose their jobs.This is an example of

During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time.How has this development affected potential GDP and labor productivity?

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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