Question 1

If taxes are less than transfers plus government spending, then

Accepted Answer

A)  there is positive saving. 
B)  there is a balanced budget. 
C)  there is a budget surplus. 
D)  there is public dissaving. 
A)  there is positive saving. 
B)  there is a balanced budget. 
C)  there is a budget surplus. 
D)  there is public dissaving.

Question 2

A(n) ________ comes to an end with a business cycle ________.

Accepted Answer

A)  recession; peak 
B)  recession; trough 
C)  expansion; trough 
D)  expansion; bubble 
A)  recession; peak 
B)  recession; trough 
C)  expansion; trough 
D)  expansion; bubble

Question 3

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?

Accepted Answer

A)  growth in capital per hour accompanied by technological change 
B)  increases in labor force participation rates as workers who are out of the labor force pursue rising wages 
C)  a shift of workers in the economy from the agricultural sector to the nonagricultural sector 
D)  an influx of immigrant labor into an economy without any accompanying technological change 
A)  growth in capital per hour accompanied by technological change 
B)  increases in labor force participation rates as workers who are out of the labor force pursue rising wages 
C)  a shift of workers in the economy from the agricultural sector to the nonagricultural sector 
D)  an influx of immigrant labor into an economy without any accompanying technological change

Question 4

Which of the following increases labor productivity?

Accepted Answer

A)  an increase in the aggregate hours of work 
B)  decreases in the availability of computers and factory buildings 
C)  inventions of new machinery, equipment, or software 
D)  a decline in the health of the population 
A)  an increase in the aggregate hours of work 
B)  decreases in the availability of computers and factory buildings 
C)  inventions of new machinery, equipment, or software 
D)  a decline in the health of the population

Question 5

During a recession, spending on ________ tends to fall more dramatically than spending on ________.

Accepted Answer

A)  necessities; luxuries 
B)  durable goods; nondurable goods 
C)  nondurable goods; durable goods 
D)  food; cars 
A)  necessities; luxuries 
B)  durable goods; nondurable goods 
C)  nondurable goods; durable goods 
D)  food; cars

Question 6

When the economy reaches a trough in a business cycle, which of the following will occur?

Accepted Answer

A)  Income, production, and employment will continue to fall. 
B)  Income, production, and employment will begin to rise. 
C)  Income and production will rise, but employment will continue to fall. 
D)  Employment rises, but income and production will continue to fall. 
A)  Income, production, and employment will continue to fall. 
B)  Income, production, and employment will begin to rise. 
C)  Income and production will rise, but employment will continue to fall. 
D)  Employment rises, but income and production will continue to fall.

Question 7

As the economy nears the end of an expansion, interest rates usually ________ and wages raise more ________ than prices.

Accepted Answer

A)  rise; rapidly 
B)  rise; slowly 
C)  fall; rapidly 
D)  fall; slowly 
A)  rise; rapidly 
B)  rise; slowly 
C)  fall; rapidly 
D)  fall; slowly

Question 8

Figure 21-2  
-Refer to Figure 21-2. Which of the following is consistent with the graph depicted above?

Accepted Answer

A)  An expected expansion increases the profitability of new investment. 
B)  The government runs a budget surplus. 
C)  There is a shift from an income tax to a consumption tax. 
D)  New government regulations decrease the profitability of new investment. 
A)  An expected expansion increases the profitability of new investment. 
B)  The government runs a budget surplus. 
C)  There is a shift from an income tax to a consumption tax. 
D)  New government regulations decrease the profitability of new investment.

Question 9

In an open economy, there is interaction with other economies in terms of both trading of goods and services and borrowing and lending.

Accepted Answer

A) True 
 B)False

Question 10

During the recession phase of the business cycle,

Accepted Answer

A)  production is usually rising. 
B)  interest rates are usually falling. 
C)  unemployment is usually falling. 
D)  income is usually rising. 
A)  production is usually rising. 
B)  interest rates are usually falling. 
C)  unemployment is usually falling. 
D)  income is usually rising.

Question 11

The Business Cycle Dating Committee defines a recession as

Accepted Answer

A)  two consecutive quarters of declining real GDP. 
B)  two consecutive quarters of declining nominal GDP. 
C)  a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months. 
D)  a significant decline in inflation and unemployment lasting more than a few months. 
A)  two consecutive quarters of declining real GDP. 
B)  two consecutive quarters of declining nominal GDP. 
C)  a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months. 
D)  a significant decline in inflation and unemployment lasting more than a few months.

Question 12

Which of the following is not one of the key services provided by the financial system?

Accepted Answer

A)  decreasing taxes 
B)  risk sharing 
C)  liquidity 
D)  generating information 
A)  decreasing taxes 
B)  risk sharing 
C)  liquidity 
D)  generating information

Question 13

Recessions cause the unemployment rate to ________ and the inflation rate to ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 14

Use the equations for public and private saving to demonstrate how total saving in the economy equals investment.

Accepted Answer

Private saving is equal to Y + TR - C -

Question 15

Table 21-1
  
-Refer to Table 21-1. Using the table above, what is the approximate growth rate of real GDP from 2012 to 2013?

Accepted Answer

A)  1% 
B)  2% 
C)  3% 
D)  4% 
A)  1% 
B)  2% 
C)  3% 
D)  4%

Question 16

Which one of the following is not considered a financial intermediary?

Accepted Answer

A)  a bank 
B)  a pension fund 
C)  an insurance company 
D)  a credit counselor 
A)  a bank 
B)  a pension fund 
C)  an insurance company 
D)  a credit counselor

Question 17

Long-run economic growth requires all of the following except

Accepted Answer

A)  technological change. 
B)  increases in capital per hour worked. 
C)  government provision of secure property rights. 
D)  political instability. 
A)  technological change. 
B)  increases in capital per hour worked. 
C)  government provision of secure property rights. 
D)  political instability.

Question 18

Which of the following is most likely to be able to sustain economic growth in an economy?

Accepted Answer

A)  sustained increases in the labor force participation rate 
B)  technological change 
C)  increases in capital per hour worked 
D)  accumulations of economic resources 
A)  sustained increases in the labor force participation rate 
B)  technological change 
C)  increases in capital per hour worked 
D)  accumulations of economic resources

Question 19

Which of the following is most liquid?

Accepted Answer

A)  a mutual fund share 
B)  a government bond 
C)  a corporate bond 
D)  a dollar bill 
A)  a mutual fund share 
B)  a government bond 
C)  a corporate bond 
D)  a dollar bill

Question 20

The budget deficit is defined as

Accepted Answer

A)  T - (G + TR), and this is negative. 
B)  T - (G + TR), and this is positive. 
C)  T + (G - TR), and this is negative. 
D)  T + (G + TR), and this is negative. 
A)  T - (G + TR), and this is negative. 
B)  T - (G + TR), and this is positive. 
C)  T + (G - TR), and this is negative. 
D)  T + (G + TR), and this is negative.

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

If taxes are less than transfers plus government spending, then

A(n) ________ comes to an end with a business cycle ________.

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?

Which of the following increases labor productivity?

During a recession, spending on ________ tends to fall more dramatically than spending on ________.

When the economy reaches a trough in a business cycle, which of the following will occur?

As the economy nears the end of an expansion, interest rates usually ________ and wages raise more ________ than prices.

Figure 21-2 -Refer to Figure 21-2. Which of the following is consistent with the graph depicted above?

In an open economy, there is interaction with other economies in terms of both trading of goods and services and borrowing and lending.

During the recession phase of the business cycle,

The Business Cycle Dating Committee defines a recession as

Which of the following is not one of the key services provided by the financial system?

Recessions cause the unemployment rate to ________ and the inflation rate to ________.

Use the equations for public and private saving to demonstrate how total saving in the economy equals investment.

Table 21-1 -Refer to Table 21-1. Using the table above, what is the approximate growth rate of real GDP from 2012 to 2013?

Which one of the following is not considered a financial intermediary?

Long-run economic growth requires all of the following except

Which of the following is most likely to be able to sustain economic growth in an economy?

Which of the following is most liquid?

The budget deficit is defined as

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

A(n) comes to an end with a business cycle .

During a recession, spending on tends to fall more dramatically than spending on .

As the economy nears the end of an expansion, interest rates usually and wages raise more than prices.

Recessions cause the unemployment rate to and the inflation rate to .