Question 1

The estimate of potential GDP would decrease if

Accepted Answer

A) the rate of capital depreciation increased. 
B) the labor force decreased. 
C) the price level grew. 
D) All of the above would increase potential GDP. 
A) the rate of capital depreciation increased. 
B) the labor force decreased. 
C) the price level grew. 
D) All of the above would increase potential GDP.

Question 2

Frictional unemployment is a "necessary" cost of a dynamic economy.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

When a lender underestimates the rate of inflation,

Accepted Answer

A) purchasing power is redistributed to the lender. 
B) purchasing power is redistributed to the borrower. 
C) the real rate of interest will be higher than expected. 
D) the nominal interest rate was set too low. 
A) purchasing power is redistributed to the lender. 
B) purchasing power is redistributed to the borrower. 
C) the real rate of interest will be higher than expected. 
D) the nominal interest rate was set too low.

Question 5

The principal benefit of unemployment insurance is that it

Accepted Answer

A) reduces the occurrence of unemployment in the economy. 
B) replaces income lost due to unemployment. 
C) increases labor force participation. 
D) helps reduce the period of unemployment. 
A) reduces the occurrence of unemployment in the economy. 
B) replaces income lost due to unemployment. 
C) increases labor force participation. 
D) helps reduce the period of unemployment.

Question 6

Richard loses his job at the railroad 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 7

If prices rise, then persons living on fixed incomes will

Accepted Answer

A) see their real incomes falling. 
B) see the purchasing power of their savings fall. 
C) need to spend more to maintain their standard of living. 
D) All of the above are true. 
A) see their real incomes falling. 
B) see the purchasing power of their savings fall. 
C) need to spend more to maintain their standard of living. 
D) All of the above are true.

Question 8

Real GDP is the product of the

Accepted Answer

A) total hours of work times the labor force. 
B) labor force times the output per hour. 
C) nation's capital stock times the output per hour. 
D) total hours of work times the output per hour. 
A) total hours of work times the labor force. 
B) labor force times the output per hour. 
C) nation's capital stock times the output per hour. 
D) total hours of work times the output per hour.

Question 9

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 10

During inflationary periods

Accepted Answer

A) all prices rise at the rate of inflation. 
B) real wages must necessarily decline. 
C) some prices may fall. 
D) relative prices do not change. 
A) all prices rise at the rate of inflation. 
B) real wages must necessarily decline. 
C) some prices may fall. 
D) relative prices do not change.

Question 11

If the labor force grows faster than the number employed, the

Accepted Answer

A) unemployment rate will fall. 
B) unemployment rate will rise. 
C) labor force rate will rise. 
D) employment rate will rise. 
A) unemployment rate will fall. 
B) unemployment rate will rise. 
C) labor force rate will rise. 
D) employment rate will rise.

Question 12

Why do environmentalists worry about faster economic growth?
 Economists concede that faster growth is not always better.Why?

Accepted Answer

Environmentalists worry that the sheer i

Question 13

If actual inflation is less than the expected rate of inflation, then probably

Accepted Answer

A) the borrower gains at the expense of the lender. 
B) neither the borrower nor the lender gains. 
C) the lender gains at the expense of the borrower. 
D) the purchasing power of the borrower is increased. 
A) the borrower gains at the expense of the lender. 
B) neither the borrower nor the lender gains. 
C) the lender gains at the expense of the borrower. 
D) the purchasing power of the borrower is increased.

Question 14

Variable inflation rates may be more costly socially than low but predictable rates of inflation.

Accepted Answer

A) True 
 B)False

Question 15

If an investor had a $100,000 long-term capital gain on a $100,000 investment from 1984 to 2010, her real rate of return was most likely

Accepted Answer

A) equal to the expected rate of inflation. 
B) positive. 
C) very near zero.. 
D) negative. 
A) equal to the expected rate of inflation. 
B) positive. 
C) very near zero.. 
D) negative.

Question 16

The incentive to lend increases as the real rate of interest decreases.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Since 1948, the history of real wage rates generally shows that

Accepted Answer

A) prices and wages have risen at the same rate. 
B) prices have risen at a slower rate than wages. 
C) prices have risen faster than wages. 
D) real wages have remained constant over the period. 
A) prices and wages have risen at the same rate. 
B) prices have risen at a slower rate than wages. 
C) prices have risen faster than wages. 
D) real wages have remained constant over the period.

Question 19

Technological change and labor productivity are negatively related.

Accepted Answer

A) True 
 B)False

Question 20

Inflation tends to redistribute real income from lenders to borrowers.

Accepted Answer

A) True 
 B)False

Exam 23: The Goals of Macroeconomic Policy

The estimate of potential GDP would decrease if

Frictional unemployment is a "necessary" cost of a dynamic economy.

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

When a lender underestimates the rate of inflation,

The principal benefit of unemployment insurance is that it

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

If prices rise, then persons living on fixed incomes will

Real GDP is the product of the

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

During inflationary periods

If the labor force grows faster than the number employed, the

Why do environmentalists worry about faster economic growth? Economists concede that faster growth is not always better.Why?

If actual inflation is less than the expected rate of inflation, then probably

Variable inflation rates may be more costly socially than low but predictable rates of inflation.

If an investor had a $100,000 long-term capital gain on a $100,000 investment from 1984 to 2010, her real rate of return was most likely

The incentive to lend increases as the real rate of interest decreases.

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

Since 1948, the history of real wage rates generally shows that

Technological change and labor productivity are negatively related.

Inflation tends to redistribute real income from lenders to borrowers.

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: the Price System

The Shortcomings of Free Markets

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

Is Useconomic Leadership Threatened

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

He 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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