Question 1

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 2

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 3

Which of the following groups would have the highest unemployment rates?

Accepted Answer

A)  Married men 
B)  White workers 
C)  College graduates 
D)  Teenagers 
A)  Married men 
B)  White workers 
C)  College graduates 
D)  Teenagers

Question 4

Compared to the unemployed during the Great Depression, persons unemployed in today's economy are

Accepted Answer

A)  worse off due to higher price levels. 
B)  worse off due to higher rates of unemployment in the 1990s. 
C)  better off due to unemployment insurance. 
D)  better off due to lower price levels. 
A)  worse off due to higher price levels. 
B)  worse off due to higher rates of unemployment in the 1990s. 
C)  better off due to unemployment insurance. 
D)  better off due to lower price levels.

Question 5

In the analysis of potential GDP, labor and capital are considered

Accepted Answer

A)  inputs. 
B)  final goods and services. 
C)  byproducts of economic growth. 
D)  outputs. 
A)  inputs. 
B)  final goods and services. 
C)  byproducts of economic growth. 
D)  outputs.

Question 6

In 2009, the average unemployment rate in the United States averaged

Accepted Answer

A)  4.6 percent. 
B)  5.4 percent. 
C)  7.2 percent. 
D)  9.3 percent. 
A)  4.6 percent. 
B)  5.4 percent. 
C)  7.2 percent. 
D)  9.3 percent.

Question 7

Policy makers should manage aggregate demand so that it grows in line with the economy's capacity to produce. This task is the realm of

Accepted Answer

A)  growth policy. 
B)  stabilization policy. 
C)  labor policy. 
D)  inflation policy. 
A)  growth policy. 
B)  stabilization policy. 
C)  labor policy. 
D)  inflation policy.

Question 8

Richard loses his job at the microbrewery due to a downturn in general business conditions. He is experiencing

Accepted Answer

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

Question 9

How do the labor force, the nation's capital stock, and the rate of technical progress contribute to potential GDP growth and labor productivity?

Accepted Answer

Potential GDP growth depends on the grow

Question 10

Potential GDP is an estimate of the economy's ability to produce goods and services if the

Accepted Answer

A)  labor force is fully employed. 
B)  price level is stable. 
C)  trade balance is zero. 
D)  federal budget is balanced. 
A)  labor force is fully employed. 
B)  price level is stable. 
C)  trade balance is zero. 
D)  federal budget is balanced.

Question 11

Potential GDP would decrease if

Accepted Answer

A)  technical progress improves. 
B)  capital stock increases. 
C)  the number of hours worked increases. 
D)  Congress passes a 32-hour work week. 
A)  technical progress improves. 
B)  capital stock increases. 
C)  the number of hours worked increases. 
D)  Congress passes a 32-hour work week.

Question 12

If inflation is expected by both borrowers and lenders, then we would expect

Accepted Answer

A)  real rates to be higher than nominal rates of interest. 
B)  real rates to be equal to nominal rates of interest. 
C)  real rates to be lower than nominal rates of interest. 
D)  nominal rates of interest to be less than the expected inflation rate. 
A)  real rates to be higher than nominal rates of interest. 
B)  real rates to be equal to nominal rates of interest. 
C)  real rates to be lower than nominal rates of interest. 
D)  nominal rates of interest to be less than the expected inflation rate.

Question 13

The real interest rate is equal to

Accepted Answer

A)  the real GDP rate + savings rate. 
B)  growth rate in prices. 
C)  nominal interest rate + expected inflation rate. 
D)  nominal interest rate - expected inflation rate. 
A)  the real GDP rate + savings rate. 
B)  growth rate in prices. 
C)  nominal interest rate + expected inflation rate. 
D)  nominal interest rate - expected inflation rate.

Question 14

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 15

The first president who commit the government to a target unemployment rate is

Accepted Answer

A)  FDR. 
B)  John F Kennedy. 
C)  Bill Clinton. 
D)  Lyndon Johnson. 
A)  FDR. 
B)  John F Kennedy. 
C)  Bill Clinton. 
D)  Lyndon Johnson.

Question 16

A new technological innovation would increase

Accepted Answer

A)  the labor force. 
B)  labor hours worked. 
C)  labor productivity. 
D)  population growth. 
A)  the labor force. 
B)  labor hours worked. 
C)  labor productivity. 
D)  population growth.

Question 17

When the expected inflation rate equals the actual inflation rate, the real interest rate was accurately estimated.

Accepted Answer

A) True 
 B)False

Question 18

Negative inflation rates benefit lenders because

Accepted Answer

A)  the real interest rate is negative. 
B)  the nominal interest rate is negative. 
C)  the nominal interest rate is positive. 
D)  the real interest rate is positive. 
A)  the real interest rate is negative. 
B)  the nominal interest rate is negative. 
C)  the nominal interest rate is positive. 
D)  the real interest rate is positive.

Question 19

People who failed to look for a job are classified as

Accepted Answer

A)  unemployed. 
B)  underemployed. 
C)  out of the labor force. 
D)  part time employed. 
A)  unemployed. 
B)  underemployed. 
C)  out of the labor force. 
D)  part time employed.

Question 20

Suppose the small country of Trantor has a steady growth rate of 2.5 percent. Its GDP is expected to double in

Accepted Answer

A)  70 years. 
B)  5 years. 
C)  2.5 years. 
D)  28 years. 
A)  70 years. 
B)  5 years. 
C)  2.5 years. 
D)  28 years.

Exam 22: The Goals of Macroeconomic Policy

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

Which of the following groups would have the highest unemployment rates?

Compared to the unemployed during the Great Depression, persons unemployed in today's economy are

In the analysis of potential GDP, labor and capital are considered

In 2009, the average unemployment rate in the United States averaged

Policy makers should manage aggregate demand so that it grows in line with the economy's capacity to produce. This task is the realm of

Richard loses his job at the microbrewery due to a downturn in general business conditions. He is experiencing

How do the labor force, the nation's capital stock, and the rate of technical progress contribute to potential GDP growth and labor productivity?

Potential GDP is an estimate of the economy's ability to produce goods and services if the

Potential GDP would decrease if

If inflation is expected by both borrowers and lenders, then we would expect

The real interest rate is equal to

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

The first president who commit the government to a target unemployment rate is

A new technological innovation would increase

When the expected inflation rate equals the actual inflation rate, the real interest rate was accurately estimated.

Negative inflation rates benefit lenders because

People who failed to look for a job are classified as

Suppose the small country of Trantor has a steady growth rate of 2.5 percent. Its GDP is expected to double in

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

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