Question 1

A shock that could trigger an expansion is a

Accepted Answer

A)  large increase in oil prices 
B)  financial crisis 
C)  sudden cutback in military spending 
D)  large decrease in oil prices 
E)  sudden increase in the interest rate 
A)  large increase in oil prices 
B)  financial crisis 
C)  sudden cutback in military spending 
D)  large decrease in oil prices 
E)  sudden increase in the interest rate

Question 2

The recession of 1982 was largely caused

Accepted Answer

A)  on purpose by the Federal Reserve's decision to raise interest rates to combat inflation. 
B)  on purpose by the Federal Reserve's decision to cut interest rates to combat inflation. 
C)  by accident as a result of the Reagan era tax cuts. 
D)  by dramatically rising oil prices. 
E)  on purpose by the Reagan Administration's decision to raise interest rates to combat inflation. 
A)  on purpose by the Federal Reserve's decision to raise interest rates to combat inflation. 
B)  on purpose by the Federal Reserve's decision to cut interest rates to combat inflation. 
C)  by accident as a result of the Reagan era tax cuts. 
D)  by dramatically rising oil prices. 
E)  on purpose by the Reagan Administration's decision to raise interest rates to combat inflation.

Question 3

A weakness of the classical model is

Accepted Answer

A)  the quality of its explanations for long-run movements of the economy 
B)  its confusion between the long and short run 
C)  its assumption that the labor market always clears 
D)  its treatment of crowding out in the long run 
E)  its inadequate attention to the long run 
A)  the quality of its explanations for long-run movements of the economy 
B)  its confusion between the long and short run 
C)  its assumption that the labor market always clears 
D)  its treatment of crowding out in the long run 
E)  its inadequate attention to the long run

Question 4

Assume the economy is at full employment.Which of the following would you expect if oil prices suddenly decreased?

Accepted Answer

A)  A recession 
B)  A decrease in employment below its full-employment level 
C)  An economic contraction 
D)  A technological breakthrough 
E)  An increase in employment above its full-employment level 
A)  A recession 
B)  A decrease in employment below its full-employment level 
C)  An economic contraction 
D)  A technological breakthrough 
E)  An increase in employment above its full-employment level

Question 5

The classical model is one of the best that economists have for capturing the rapidly changing nature of the supply and demand for labor and ultimately for explaining recessions.

Accepted Answer

A) True 
 B)False

Question 6

Say's law will prevent recessions only if a critical assumption of the classical model holds: That the interest rate adjusts until saving is equal to business and government borrowing.

Accepted Answer

A) True 
 B)False

Question 7

Suppose Mike and Renee are the only two people in a very simple economy and that they produce and exchange two goods,soda and pretzels.Which of the following might cause a recession in this simple economy?

Accepted Answer

A)  Mike gets the idea that Renee wants more soda,which Mike produces. 
B)  Renee gets the idea that Mike wants more pretzels,which she produces. 
C)  Mike gets the idea that Renee wants less soda,which he produces. 
D)  Renee gets the idea that Mike wants less soda,which he produces. 
E)  The production of pretzels being equal to the production of soda. 
A)  Mike gets the idea that Renee wants more soda,which Mike produces. 
B)  Renee gets the idea that Mike wants more pretzels,which she produces. 
C)  Mike gets the idea that Renee wants less soda,which he produces. 
D)  Renee gets the idea that Mike wants less soda,which he produces. 
E)  The production of pretzels being equal to the production of soda.

Question 8

Ceteris paribus,when households spend less but do not supply of all their additional saving to the loanable funds market,

Accepted Answer

A)  total spending will exceed below total income,satisfying Say's law. 
B)  total spending will drop below total income,violating Say's law. 
C)  total spending will drop below total income,thereby satisfying Say's law. 
D)  total spending will equal total income,violating Say's law. 
E)  this will contribute to an economic expansion. 
A)  total spending will exceed below total income,satisfying Say's law. 
B)  total spending will drop below total income,violating Say's law. 
C)  total spending will drop below total income,thereby satisfying Say's law. 
D)  total spending will equal total income,violating Say's law. 
E)  this will contribute to an economic expansion.

Question 9

Of the recessions and expansions from 1950 to 1990,the common events were

Accepted Answer

A)  reactions to war and oil prices 
B)  tax increases and tax cuts 
C)  changes in exports 
D)  Decreases in welfare spending 
E)  Increases and decreases in health care spending 
A)  reactions to war and oil prices 
B)  tax increases and tax cuts 
C)  changes in exports 
D)  Decreases in welfare spending 
E)  Increases and decreases in health care spending

Question 10

The classical model does not do a good job of explaining short-run fluctuations in the level of economic activity.

Accepted Answer

A) True 
 B)False

Question 11

What would a leftward shift of the labor demand curve indicate?

Accepted Answer

A)  Firms want to hire more workers than before at any given wage than before. 
B)  Firms want to pay a higher wage than before at any given level of employment. 
C)  Households want to supply fewer hours of work than before at any given wage rate. 
D)  Firms want to hire fewer workers than before at any given wage rate. 
E)  Households want to supply more hours of work than before at any given wage rate. 
A)  Firms want to hire more workers than before at any given wage than before. 
B)  Firms want to pay a higher wage than before at any given level of employment. 
C)  Households want to supply fewer hours of work than before at any given wage rate. 
D)  Firms want to hire fewer workers than before at any given wage rate. 
E)  Households want to supply more hours of work than before at any given wage rate.

Question 12

Which of the following could lead to a decrease in worker productivity?

Accepted Answer

A)  An increase in the physical capital stock 
B)  A decrease in the number of workers 
C)  A war that destroys an enormous amount of plant and equipment 
A)  An increase in the physical capital stock 
B)  A decrease in the number of workers 
C)  A war that destroys an enormous amount of plant and equipment

Question 13

The classical model is a poor predictor of short-run economic fluctuations in part because it assumes that

Accepted Answer

A)  all workers wish to work 
B)  government will prevent these fluctuations 
C)  the labor market always clears 
D)  the long run is just a series of short-run periods 
E)  labor demand curve is stable 
A)  all workers wish to work 
B)  government will prevent these fluctuations 
C)  the labor market always clears 
D)  the long run is just a series of short-run periods 
E)  labor demand curve is stable

Question 14

Over time the full-employment level of output in the United States has risen steadily.

Accepted Answer

A) True 
 B)False

Question 15

You are reading a newspaper article that refers to expansions and contractions in the economy.The references are to changes in

Accepted Answer

A)  wage rates 
B)  inflation rates 
C)  movements in exchange rates 
D)  real GDP 
E)  investment expectations 
A)  wage rates 
B)  inflation rates 
C)  movements in exchange rates 
D)  real GDP 
E)  investment expectations

Question 16

The assumption that labor markets clear makes it very easy for the classical model to explain recessions.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following could lead to an increase in worker productivity?

Accepted Answer

A)  A decrease in the physical capital stock 
B)  An increase in the number of workers 
C)  A war that destroys an enormous amount of plant and equipment 
D)  An increase in the physical capital stock 
E)  A decrease in the human capital stock 
A)  A decrease in the physical capital stock 
B)  An increase in the number of workers 
C)  A war that destroys an enormous amount of plant and equipment 
D)  An increase in the physical capital stock 
E)  A decrease in the human capital stock

Question 18

In order for the classical model to explain expansions and recessions,which of the following would have to be true?

Accepted Answer

A)  Labor supply could not change. 
B)  The labor market equilibrium would have to change suddenly and significantly. 
C)  Labor demand could not change. 
D)  The labor market equilibrium would have to change slowly. 
E)  The labor market equilibrium could not move. 
A)  Labor supply could not change. 
B)  The labor market equilibrium would have to change suddenly and significantly. 
C)  Labor demand could not change. 
D)  The labor market equilibrium would have to change slowly. 
E)  The labor market equilibrium could not move.

Question 19

During a recession,a rising unemployment rate is

Accepted Answer

A)  rare 
B)  stimulating higher levels of inflation 
C)  predicted by the classical model 
D)  the basis for a new economics expansion 
E)  almost inevitable 
A)  rare 
B)  stimulating higher levels of inflation 
C)  predicted by the classical model 
D)  the basis for a new economics expansion 
E)  almost inevitable

Question 20

What is true of both expansions and recessions?

Accepted Answer

A)  There is a poorer than normal match between workers and their jobs. 
B)  The labor market clears. 
C)  The economy operates at its potential output. 
D)  Cyclical unemployment is zero. 
E)  None of the above. 
A)  There is a poorer than normal match between workers and their jobs. 
B)  The labor market clears. 
C)  The economy operates at its potential output. 
D)  Cyclical unemployment is zero. 
E)  None of the above.

A shock that could trigger an expansion is a

The recession of 1982 was largely caused

A weakness of the classical model is

Assume the economy is at full employment.Which of the following would you expect if oil prices suddenly decreased?

The classical model is one of the best that economists have for capturing the rapidly changing nature of the supply and demand for labor and ultimately for explaining recessions.

Say's law will prevent recessions only if a critical assumption of the classical model holds: That the interest rate adjusts until saving is equal to business and government borrowing.

Suppose Mike and Renee are the only two people in a very simple economy and that they produce and exchange two goods,soda and pretzels.Which of the following might cause a recession in this simple economy?

Ceteris paribus,when households spend less but do not supply of all their additional saving to the loanable funds market,

Of the recessions and expansions from 1950 to 1990,the common events were

The classical model does not do a good job of explaining short-run fluctuations in the level of economic activity.

What would a leftward shift of the labor demand curve indicate?

Which of the following could lead to a decrease in worker productivity?

The classical model is a poor predictor of short-run economic fluctuations in part because it assumes that

Over time the full-employment level of output in the United States has risen steadily.

You are reading a newspaper article that refers to expansions and contractions in the economy.The references are to changes in

The assumption that labor markets clear makes it very easy for the classical model to explain recessions.

Which of the following could lead to an increase in worker productivity?

In order for the classical model to explain expansions and recessions,which of the following would have to be true?

During a recession,a rising unemployment rate is

What is true of both expansions and recessions?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 10: Economic Fluctuations

A shock that could trigger an expansion is a

The recession of 1982 was largely caused

A weakness of the classical model is

Assume the economy is at full employment.Which of the following would you expect if oil prices suddenly decreased?

The classical model is one of the best that economists have for capturing the rapidly changing nature of the supply and demand for labor and ultimately for explaining recessions.

Say's law will prevent recessions only if a critical assumption of the classical model holds: That the interest rate adjusts until saving is equal to business and government borrowing.

Suppose Mike and Renee are the only two people in a very simple economy and that they produce and exchange two goods,soda and pretzels.Which of the following might cause a recession in this simple economy?

Ceteris paribus,when households spend less but do not supply of all their additional saving to the loanable funds market,

Of the recessions and expansions from 1950 to 1990,the common events were

The classical model does not do a good job of explaining short-run fluctuations in the level of economic activity.

What would a leftward shift of the labor demand curve indicate?

Which of the following could lead to a decrease in worker productivity?

The classical model is a poor predictor of short-run economic fluctuations in part because it assumes that

Over time the full-employment level of output in the United States has risen steadily.

You are reading a newspaper article that refers to expansions and contractions in the economy.The references are to changes in

The assumption that labor markets clear makes it very easy for the classical model to explain recessions.

Which of the following could lead to an increase in worker productivity?

In order for the classical model to explain expansions and recessions,which of the following would have to be true?

During a recession,a rising unemployment rate is

What is true of both expansions and recessions?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters