Question 1

Which of the following is a true statement about the length of recessions and expansions in the United States economy?

Accepted Answer

A)  After 1950, the length of expansions equaled the length of recessions. 
B)  After 1950, the length of expansions were much less than the length of recessions. 
C)  After 1950, the length of expansions were much longer than the length of recessions. 
D)  After 1950, the length of expansions were brief and almost nonexistent. 
A)  After 1950, the length of expansions equaled the length of recessions. 
B)  After 1950, the length of expansions were much less than the length of recessions. 
C)  After 1950, the length of expansions were much longer than the length of recessions. 
D)  After 1950, the length of expansions were brief and almost nonexistent.

Question 2

Since 1950, recessions in the United States

Accepted Answer

A)  have not occurred. 
B)  have become more severe than before 1950. 
C)  have become less severe than before 1950. 
D)  are about as severe as they were before 1950. 
A)  have not occurred. 
B)  have become more severe than before 1950. 
C)  have become less severe than before 1950. 
D)  are about as severe as they were before 1950.

Question 3

Under which of the following circumstances would private saving be positive in a closed economy?

Accepted Answer

A)  Y = $10 trillion C = $5 trillion
TR = $2 trillion
G = $2 trillion
Public saving = $1 trillion 
B)  Y = $9 trillion C = $5 trillion
TR = $1 trillion
G = $1 trillion
Public saving = $3 trillion 
C)  Y = $8 trillion C = $2 trillion
TR = $4 trillion
G = $2 trillion
Public saving = $4 trillion 
D)  Y = $6 trillion C = $2 trillion
TR = $8 trillion
G = $3 trillion
Public saving = $1 trillion 
A)  Y = $10 trillion C = $5 trillion
TR = $2 trillion
G = $2 trillion
Public saving = $1 trillion 
B)  Y = $9 trillion C = $5 trillion
TR = $1 trillion
G = $1 trillion
Public saving = $3 trillion 
C)  Y = $8 trillion C = $2 trillion
TR = $4 trillion
G = $2 trillion
Public saving = $4 trillion 
D)  Y = $6 trillion C = $2 trillion
TR = $8 trillion
G = $3 trillion
Public saving = $1 trillion

Question 4

For the recessions in the United States since the 1950s,

Accepted Answer

A)  cyclical unemployment has been non-existent. 
B)  unemployment rises on average by about 1.2 percentage points 12 months after a recession begins. 
C)  unemployment falls on average by 2 percentage points 12 months after a recession begins. 
D)  unemployment rises on average about 5 percentage points 12 months after a recession begins. 
A)  cyclical unemployment has been non-existent. 
B)  unemployment rises on average by about 1.2 percentage points 12 months after a recession begins. 
C)  unemployment falls on average by 2 percentage points 12 months after a recession begins. 
D)  unemployment rises on average about 5 percentage points 12 months after a recession begins.

Question 5

If labor productivity growth slows down in a country, this will

Accepted Answer

A)  accelerate the increase in real GDP per capita. 
B)  accelerate the increase in nominal GDP. 
C)  slow down the increase in real GDP per capita. 
D)  slow down the increase in nominal GDP. 
A)  accelerate the increase in real GDP per capita. 
B)  accelerate the increase in nominal GDP. 
C)  slow down the increase in real GDP per capita. 
D)  slow down the increase in nominal GDP.

Question 6

Liquidity refers to

Accepted Answer

A)  the ease with a stock can be traded for a bond. 
B)  the ease with which a financial security can be traded for cash. 
C)  the number of times a dollar changes hands in the creation of GDP in an economy. 
D)  the number of shares of stock a corporation issues. 
A)  the ease with a stock can be traded for a bond. 
B)  the ease with which a financial security can be traded for cash. 
C)  the number of times a dollar changes hands in the creation of GDP in an economy. 
D)  the number of shares of stock a corporation issues.

Question 7

Technological advances generally result in

Accepted Answer

A)  decreased incomes. 
B)  increased life expectancy. 
C)  increased infant mortality rates. 
D)  increased average number of hours worked per day. 
A)  decreased incomes. 
B)  increased life expectancy. 
C)  increased infant mortality rates. 
D)  increased average number of hours worked per day.

Question 8

Which of the following goods would see the largest decline in demand during a recession?

Accepted Answer

A)  automobiles 
B)  food 
C)  clothing 
D)  haircuts 
A)  automobiles 
B)  food 
C)  clothing 
D)  haircuts

Question 9

Retained earnings are sufficient to finance a firm's rapid expansion in a high-growth economy.

Accepted Answer

A) True 
 B)False

Question 10

The key to sustained economic growth is increasing labor productivity.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following will increase investment spending in the economy, holding everything else constant?

Accepted Answer

A)  an increase in the federal government surplus 
B)  an increase in the budget deficit 
C)  an increase in consumer dissavings 
D)  an increase in transfer payments 
A)  an increase in the federal government surplus 
B)  an increase in the budget deficit 
C)  an increase in consumer dissavings 
D)  an increase in transfer payments

Question 12

Potential GDP is the maximum output a firm is capable of producing.

Accepted Answer

A) True 
 B)False

Question 13

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

Accepted Answer

A)  technology. 
B)  labor productivity. 
C)  real GDP. 
D)  human capital. 
A)  technology. 
B)  labor productivity. 
C)  real GDP. 
D)  human capital.

Question 14

Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.

Accepted Answer

A)  increase; decrease 
B)  decrease; increase 
C)  decrease; decrease further 
D)  increase; increase further 
A)  increase; decrease 
B)  decrease; increase 
C)  decrease; decrease further 
D)  increase; increase further

Question 15

A country with no trade and no borrowing and lending relationships with other countries is known as a(n)

Accepted Answer

A)  planned economy. 
B)  market economy. 
C)  open economy. 
D)  closed economy. 
A)  planned economy. 
B)  market economy. 
C)  open economy. 
D)  closed economy.

Question 16

The total amount of physical capital available in a country is know as the country's

Accepted Answer

A)  labor productivity. 
B)  savings. 
C)  investment. 
D)  capital stock. 
A)  labor productivity. 
B)  savings. 
C)  investment. 
D)  capital stock.

Question 17

Which of the following would you expect to increase the equilibrium interest rate?

Accepted Answer

A)  an increase in the percentage of income after net taxes that households save 
B)  an increase in the budget deficit 
C)  a decrease in the profitability of investment projects firms are considering 
D)  a change from an income tax to a consumption tax 
A)  an increase in the percentage of income after net taxes that households save 
B)  an increase in the budget deficit 
C)  a decrease in the profitability of investment projects firms are considering 
D)  a change from an income tax to a consumption tax

Question 18

When a recession ends,

Accepted Answer

A)  interest rates decrease. 
B)  households decrease spending on durable goods. 
C)  the household sector decreases spending substantially. 
D)  firms increase the amount of borrowing. 
A)  interest rates decrease. 
B)  households decrease spending on durable goods. 
C)  the household sector decreases spending substantially. 
D)  firms increase the amount of borrowing.

Question 19

A decrease in the real interest rate will

Accepted Answer

A)  increase consumption and reduce investment. 
B)  increase saving and investment. 
C)  decrease investment and government spending. 
D)  increase consumption and investment. 
A)  increase consumption and reduce investment. 
B)  increase saving and investment. 
C)  decrease investment and government spending. 
D)  increase consumption and investment.

Question 20

During the expansion phase of the business cycle,

Accepted Answer

A)  production increases. 
B)  employment decreases. 
C)  income decreases. 
D)  unemployment increases. 
A)  production increases. 
B)  employment decreases. 
C)  income decreases. 
D)  unemployment increases.

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

Which of the following is a true statement about the length of recessions and expansions in the United States economy?

Since 1950, recessions in the United States

Under which of the following circumstances would private saving be positive in a closed economy?

For the recessions in the United States since the 1950s,

If labor productivity growth slows down in a country, this will

Liquidity refers to

Technological advances generally result in

Which of the following goods would see the largest decline in demand during a recession?

Retained earnings are sufficient to finance a firm's rapid expansion in a high-growth economy.

The key to sustained economic growth is increasing labor productivity.

Which of the following will increase investment spending in the economy, holding everything else constant?

Potential GDP is the maximum output a firm is capable of producing.

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.

A country with no trade and no borrowing and lending relationships with other countries is known as a(n)

The total amount of physical capital available in a country is know as the country's

Which of the following would you expect to increase the equilibrium interest rate?

When a recession ends,

A decrease in the real interest rate will

During the expansion phase of the business cycle,

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

Inflation tends to during the expansion phase of the business cycle and during the recession phase of the business cycle.