Question 1

What happened during the Great Depression?

Accepted Answer

The answer of What happened during the Great Depression?...

Question 2

The figure below shows the relationship between an economy's output and employment.
 
-Refer to the figure above.If the economy is currently on F₂ and produces Y₃ level of output,a leftward shift of the labor demand curve with no change in productivity will cause output to ________.

Accepted Answer

A)  decline from Y₃ to Y₁ 
B)  decline from Y₃ to Y₂ 
C)  increase from Y₃ to Y₅ 
D)  increase from Y₃ to Y₄

Question 3

During a recession,real GDP falls.Which of the following also tends to fall?

Accepted Answer

A)  Real consumption 
B)  Real investment 
C)  Employment 
D)  All of the above

Question 4

Irving Fisher,the preeminent economic forecaster of the late 1920s,stated just before the start of the Great Depression that stock prices ________.

Accepted Answer

A)  "were due for a substantial correction" 
B)  "had reached a permanently high plateau" 
C)  "would never again fall below current levels 
D)  "were substantially lower than they should be"

Question 5

Keynes used the term "animal spirits" to describe the ________.

Accepted Answer

A)  altruistic nature of consumers and firms 
B)  changes in human capital that cause economic fluctuations 
C)  psychological factors that affect the mood of consumers and businesses 
D)  role of technology in causing economic fluctuations

Question 6

Which of the following happens when an economy's labor demand curve shifts to the left without any change in its labor supply curve,assuming all else equal?

Accepted Answer

A)  The equilibrium wage rate rises. 
B)  The unemployment rate rises. 
C)  The output of the economy rises. 
D)  The aggregate price level falls.

Question 7

Which of the following is likely to happen if a contractionary monetary policy is adopted?

Accepted Answer

A)  The aggregate price level will increase. 
B)  The real interest rate will increase. 
C)  Real wages will fall. 
D)  Unemployment will fall.

Question 8

Which of the following statements is true according to Okun's Law?

Accepted Answer

A)  The unemployment rate tends to decrease when the growth rate of real GDP is high. 
B)  The unemployment rate tends to increase when the rate of inflation is high. 
C)  The unemployment rate tends to increase when the growth rate of real GDP is high. 
D)  The unemployment rate is unaffected by changes in the growth rate of real GDP if there is stagflation.

Question 9

In the mid-2000s,U.S.housing prices experienced a bubble.What does a bubble in housing prices refer to?

Accepted Answer

A)  High asset prices that do not reflect the true long-run value of the asset 
B)  Low asset prices that do not reflect the true long-run value of the asset 
C)  Rising asset prices trending toward the true long-run value of the asset 
D)  Falling asset prices trending toward the true long-run value of the asset

Question 10

Assuming all else equal,if the demand for a firm's product falls,________.

Accepted Answer

A)  the firm's labor demand curve shifts to the right 
B)  the firm's labor demand curve shifts to the left 
C)  the firm moves to a lower point along its labor demand curve 
D)  the firm moves to a higher point along its labor demand curve

Question 11

Which of the following is a likely consequence of a fall in private investment?

Accepted Answer

A)  A fall in consumption 
B)  A fall in labor supply 
C)  A rise in asset prices 
D)  A fall in mortgage defaults

Question 12

Assuming all else equal,if the price of each unit of capital rises,________.

Accepted Answer

A)  a firm's labor demand curve will shift to the left 
B)  a firm's labor demand curve will shift to the right 
C)  a firm will move to a lower point along its labor demand curve 
D)  a firm will move to a higher point along its labor demand curve

Question 13

The decrease in home construction in the late 2000s resulted in decreased demand at home supply stores like Home Depot,and decreased demand for home appliances like washing machines and refrigerators.This is referred to as a ________ effect of the decrease in home construction.

Accepted Answer

A)  Phillips 
B)  multiplier 
C)  bubble 
D)  recession

Question 14

Which of the following statements is likely to be true according to Okun's Law?

Accepted Answer

A)  The unemployment rate remains constant when the growth rate of real GDP is 0 percent. 
B)  The unemployment rate remains constant when the growth rate of real GDP is 2 percent. 
C)  The unemployment rate declines when the growth rate of real GDP is below 2 percent. 
D)  The unemployment rate is zero when the growth rate of real GDP is exactly 1 percent.

Question 15

Which of the following would be a "multiplier effect" resulting from the decrease in home construction in the late 2000s?

Accepted Answer

A)  A decrease in employment in the home construction industry 
B)  A decrease in the demand for home mortgages 
C)  A decrease in the demand for home appliances 
D)  A decrease in real interest rates

Question 16

Which feature of economic fluctuations was not present during the Great Depression?

Accepted Answer

A)  Co-movement of economic aggregates like real GDP and real investment 
B)  Limited predictability of turning points 
C)  Persistence in the rate of economic growth 
D)  All of the above were present during the Great Depression

Question 17

What is the primary difference between modeling expansions and recessions using the labor market model?

Accepted Answer

A)  Rigid wages are relevant for modeling recessions but not for modeling expansions. 
B)  Rigid wages are relevant for modeling expansions but not for modeling recessions. 
C)  Real GDP is relevant for modeling recessions but not for modeling expansions. 
D)  Real GDP is relevant for modeling expansions but not for modeling recessions.

Question 18

A short-run change in ________ is referred to as a business cycle.

Accepted Answer

A)  the growth rate of real GDP 
B)  the aggregate price level 
C)  the currency exchange rate 
D)  the expenditure incurred by the government

Question 19

How did housing prices in the United States change during 2000−2010?

Accepted Answer

A)  Housing prices rose steadily over this period. 
B)  Housing prices rose sharply until around 2006, when they began to fall sharply. 
C)  Housing prices fell sharply until around 2006, when they began to rise sharply. 
D)  Housing prices fell steadily over this period.

Question 20

Peak unemployment during the Great Depression was about ________.

Accepted Answer

A)  10 percent 
B)  15 percent 
C)  20 percent 
D)  25 percent

Exam 12: Short-Run Fluctuations