Question 1

Since 1950, expansions in the United States have become ________, while recessions have become ________.

Accepted Answer

A)  longer; longer 
B)  shorter; shorter 
C)  shorter; longer 
D)  longer; shorter 
A)  longer; longer 
B)  shorter; shorter 
C)  shorter; longer 
D)  longer; shorter

Question 2

Economists have not found a way to predict when recessions will begin and end.

Accepted Answer

A) True 
 B)False

Question 3

In comparison to a government that runs a balanced budget, when the government runs a budget deficit,

Accepted Answer

A)  the equilibrium interest rate will fall. 
B)  business investment will fall. 
C)  household savings will fall. 
D)  none of the above 
A)  the equilibrium interest rate will fall. 
B)  business investment will fall. 
C)  household savings will fall. 
D)  none of the above

Question 4

If Ebenezer Scrooge spends rather than saves his vast wealth, he will

Accepted Answer

A)  slow economic growth because he is reducing the amount of funds available for investment. 
B)  slow economic growth because he is increasing the amount of funds available for investment. 
C)  promote economic growth because he is increasing the amount of funds available for investment. 
D)  promote economic growth because he is decreasing the amount of funds available for investment. 
A)  slow economic growth because he is reducing the amount of funds available for investment. 
B)  slow economic growth because he is increasing the amount of funds available for investment. 
C)  promote economic growth because he is increasing the amount of funds available for investment. 
D)  promote economic growth because he is decreasing the amount of funds available for investment.

Question 5

Suppose that real GDP for 2012 was $10,000 billion and real GDP for 2013 was $11,000 billion. What is the rate of growth of real GDP between 2012 and 2013?

Accepted Answer

A)  1% 
B)  2% 
C)  5% 
D)  10% 
A)  1% 
B)  2% 
C)  5% 
D)  10%

Question 6

Potential GDP is always greater than real GDP in an economy.

Accepted Answer

A) True 
 B)False

Question 7

Private saving is defined as

Accepted Answer

A)  Y + TR - C - T. 
B)  T + G + TR. 
C)  T - G + TR. 
D)  Y + TR + C - T. 
A)  Y + TR - C - T. 
B)  T + G + TR. 
C)  T - G + TR. 
D)  Y + TR + C - T.

Question 8

If real GDP grows by 3% in 2011, 3.2% in 2012, and 2.5% in 2013, what is the average annual growth rate of real GDP?

Accepted Answer

A)  2.6% 
B)  2.9% 
C)  3.1% 
D)  4.2% 
A)  2.6% 
B)  2.9% 
C)  3.1% 
D)  4.2%

Question 9

Inflation usually increases during a recession and decreases during an expansion.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following financial securities is most liquid?

Accepted Answer

A)  a savings account 
B)  a share of stock 
C)  a cashier's check 
D)  a $20 bill 
A)  a savings account 
B)  a share of stock 
C)  a cashier's check 
D)  a $20 bill

Question 11

Explain and show graphically how a decrease in government spending affects the equilibrium interest rate and equilibrium quantity of loanable funds in the market for loanable funds.

Accepted Answer

When government spending decreases, gove

Question 12

Since 1950,

Accepted Answer

A)  economic expansions in the United States have been so short that expansions barely exist. 
B)  the average length of expansions in the United States have become shorter as compared to before 1950. 
C)  the average length of expansions in the United States have become longer as compared to before 1950. 
D)  the average length of expansions in the United States are about the same length as compared to before 1950. 
A)  economic expansions in the United States have been so short that expansions barely exist. 
B)  the average length of expansions in the United States have become shorter as compared to before 1950. 
C)  the average length of expansions in the United States have become longer as compared to before 1950. 
D)  the average length of expansions in the United States are about the same length as compared to before 1950.

Question 13

What type of consumer goods are most affected by the business cycle: durable goods or nondurable goods? Why?

Accepted Answer

Some workers lose income during a recess

Question 14

If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?

Accepted Answer

A)  $10 billion 
B)  $30 billion 
C)  $40 billion 
D)  $70 billion 
A)  $10 billion 
B)  $30 billion 
C)  $40 billion 
D)  $70 billion

Question 15

At the end of World War II in 1945, many economists and business managers expected that the U.S. economy would enter a severe recession. At that time, Sears and Montgomery Ward were the two largest department store chains in the country. Sears CEO Robert Wood expected continuing prosperity and opened new stores. Montgomery Ward CEO Sewell Avery expected falling incomes and rising unemployment and closed a number of existing stores. The results of their actions were seen during the late 1940s, when

Accepted Answer

A)  Sears declared bankruptcy and was purchased by Montgomery Ward. 
B)  Montgomery Ward weathered the economic downturn in better financial shape than Sears. 
C)  Sears rapidly gained market share at Montgomery Ward's expense. 
D)  Sears had to close many of the new stores it had opened following the end of the war. 
A)  Sears declared bankruptcy and was purchased by Montgomery Ward. 
B)  Montgomery Ward weathered the economic downturn in better financial shape than Sears. 
C)  Sears rapidly gained market share at Montgomery Ward's expense. 
D)  Sears had to close many of the new stores it had opened following the end of the war.

Question 16

Following the September 11, 2001, terrorist attacks, the managers of many hotels expected a prolonged period of reduced travel and responded by laying off workers and postponing or canceling new construction. Isadore Sharp, the chairman and CEO of Four Seasons Hotels, decided to

Accepted Answer

A)  continue expanding and was able to maintain or enhance the company's market share. 
B)  continue expanding and the company ended up losing significant market share. 
C)  curtail expansion plans, and by significantly cutting back on expansion was able to maintain the company's market share. 
D)  curtail expansion plans and the company ended up losing significant market share. 
A)  continue expanding and was able to maintain or enhance the company's market share. 
B)  continue expanding and the company ended up losing significant market share. 
C)  curtail expansion plans, and by significantly cutting back on expansion was able to maintain the company's market share. 
D)  curtail expansion plans and the company ended up losing significant market share.

Question 17

Which of the following would encourage economic growth through increases in the capital stock?

Accepted Answer

A)  a change from an income tax to a consumption tax 
B)  an increase in household saving 
C)  a decrease in the government deficit 
D)  all of the above 
A)  a change from an income tax to a consumption tax 
B)  an increase in household saving 
C)  a decrease in the government deficit 
D)  all of the above

Question 18

________ is the ease with which a financial security can be exchanged for money.

Accepted Answer

A)  Risk 
B)  The face value 
C)  Liquidity 
D)  The rate of return 
A)  Risk 
B)  The face value 
C)  Liquidity 
D)  The rate of return

Question 19

Figure 21-5  
-Refer to Figure 21-5. "Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above.

Accepted Answer

A)  A to B 
B)  B to A 
C)  B to C 
D)  C to A 
A)  A to B 
B)  B to A 
C)  B to C 
D)  C to A

Question 20

Which of the following statements describes the experiences of the Whirlpool Corporation since it was established in 1911?

Accepted Answer

A)  strong uninterrupted growth in demand 
B)  long-run growth interrupted by periods of business cycle recession 
C)  little or no growth in the long run, and unaffected by the business cycle 
D)  little or no growth in the long run, but very vulnerable to the business cycle 
A)  strong uninterrupted growth in demand 
B)  long-run growth interrupted by periods of business cycle recession 
C)  little or no growth in the long run, and unaffected by the business cycle 
D)  little or no growth in the long run, but very vulnerable to the business cycle

Exam 21: Economic Growth, the Financial System, and Business Cycles

Since 1950, expansions in the United States have become ________, while recessions have become ________.

Economists have not found a way to predict when recessions will begin and end.

In comparison to a government that runs a balanced budget, when the government runs a budget deficit,

If Ebenezer Scrooge spends rather than saves his vast wealth, he will

Suppose that real GDP for 2012 was $10,000 billion and real GDP for 2013 was $11,000 billion. What is the rate of growth of real GDP between 2012 and 2013?

Potential GDP is always greater than real GDP in an economy.

Private saving is defined as

If real GDP grows by 3% in 2011, 3.2% in 2012, and 2.5% in 2013, what is the average annual growth rate of real GDP?

Inflation usually increases during a recession and decreases during an expansion.

Which of the following financial securities is most liquid?

Explain and show graphically how a decrease in government spending affects the equilibrium interest rate and equilibrium quantity of loanable funds in the market for loanable funds.

Since 1950,

What type of consumer goods are most affected by the business cycle: durable goods or nondurable goods? Why?

If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?

Following the September 11, 2001, terrorist attacks, the managers of many hotels expected a prolonged period of reduced travel and responded by laying off workers and postponing or canceling new construction. Isadore Sharp, the chairman and CEO of Four Seasons Hotels, decided to

Which of the following would encourage economic growth through increases in the capital stock?

________ is the ease with which a financial security can be exchanged for money.

Figure 21-5 -Refer to Figure 21-5. "Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above.

Which of the following statements describes the experiences of the Whirlpool Corporation since it was established in 1911?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Since 1950, expansions in the United States have become , while recessions have become .