Question 1

Which of the following is true of a recessionary period?

Accepted Answer

A)   It is usually accompanied by an improvement in the value of an economy's currency.
B)   It is usually accompanied by low levels of inflation.
C)   It is usually accompanied by a dramatic decline in the stock of inventories.
D)   It usually lasts for a few months.
E)   It leads to a drastic decline in government spending.

Question 2

The value of a country's final goods and services after adjusting for changes due to inflation is called its _____.

Accepted Answer

A)   real GDP
B)   nominal GDP
C)   disposable income
D)   net national product
E)   full employment output

Question 3

A key difference between recessions and depressions is that recessions are:

Accepted Answer

A)   longer than depressions.
B)   more severe than depressions.
C)   accompanied by price increases, while depressions are accompanied by price decreases.
D)   shorter and less severe than depressions.
E)   accompanied by price decreases, while depressions are accompanied by price increases.

Question 4

Keynes believed that the best method for boosting an economy during a recession was to:

Accepted Answer

A)   increase money supply so that individuals would have more incentive to spend.
B)   cut government spending and increase taxes to reduce or even eliminate fiscal deficit.
C)   increase government spending and cut taxes so that consumers could spend more.
D)   cut both government spending and taxes to reduce government expenditure in the economy.
E)   increase both government spending and taxes to increase the role of government in the economy.

Question 5

An increase in government spending, other things constant, will cause a:

Accepted Answer

A)   leftward shift of the aggregate supply curve.
B)   rightward shift of the aggregate supply curve.
C)   leftward shift of the aggregate demand curve.
D)   rightward shift of the aggregate demand curve.
E)   downward movement along the aggregate supply curve.

Question 6

In combating stagflation, a government-induced:

Accepted Answer

A)   increase in aggregate demand would help reduce inflation but aggravate unemployment.
B)   decrease in aggregate demand would help reduce unemployment but aggravate inflation.
C)   increase in aggregate demand would help reduce unemployment but aggravate inflation.
D)   decrease in aggregate demand would help reduce both unemployment and inflation.
E)   increase in aggregate demand would help reduce both unemployment and inflation.

Question 7

Which of these is true of the mercantilism policy?

Accepted Answer

A)   It accepts gold as a medium of exchange.
B)   It encourages free movement of labor and capital resources between nations.
C)   It emphasizes government control over the production of important goods and services.
D)   It emphasizes the importance of trade restrictions in achieving economic growth.
E)   It believes that a nation's economic vitality depends on its unemployment level.

Question 8

Which of these economic changes was observed during the Great Depression?

Accepted Answer

A)   A fall in the domestic price level leading to an increase in import demand
B)   A fall in resource prices leading to an increase in aggregate supply
C)   An increase in unemployment leading to a decrease in the aggregate demand
D)   An increase in the domestic price level leading to an increase in export demand
E)   An increase in real GDP leading to an increase in the real interest rate

Question 9

Which of these factors can explain the short recession experienced by the U.S. in 2001?

Accepted Answer

A)   Terrorist attacks
B)   The stock market crash
C)   Bursting of the real estate bubble
D)   A rise in international oil prices
E)   Expenditure on war

Question 10

When economists refer to an economy's price level, they indicate:

Accepted Answer

A)   the rate of inflation in that economy.
B)   the prices of goods and services relative to consumers' incomes.
C)   a composite measure of prices of all goods and services.
D)   a period of level, or steady, prices in that economy.
E)   the price of a specific consumer good.

Question 11

Identify a valid trend observed in U.S. business cycles since 1933.

Accepted Answer

A)   Contractions lasted for more than two years on an average.
B)   There were only two or three complete cycles.
C)   There was no recession since 1979.
D)   Expansions generally lasted longer than contractions.
E)   Each cycle lasted longer than the previous one.

Question 12

As the price level increases, the amount of goods and services that consumers, businesses, and governments desire to purchase will change. This is depicted by:

Accepted Answer

A)   a leftward movement of the aggregate demand curve.
B)   a rightward movement of the aggregate demand curve.
C)   an upward movement along the aggregate demand curve.
D)   a downward movement along the aggregate demand curve.
E)   an increase in the slope of the aggregate demand curve.

Question 13

The Keynesian approach to fiscal policy calls for:

Accepted Answer

A)   budget deficits during periods of inflationary pressure.
B)   budget surpluses during periods of high unemployment.
C)   a balanced budget despite the state of the economy.
D)   tax cuts during recession.
E)   spending increases during inflation.

Question 14

If the price level in the U.S. decreases, aggregate output demanded:

Accepted Answer

A)   decreases because U.S. products become cheaper relative to foreign products.
B)   decreases because U.S. products become more expensive relative to foreign products.
C)   increases because U.S. products become cheaper relative to foreign products.
D)   increases because U.S. products become more expensive relative to foreign products.
E)   decreases because household wealth and spending in the U.S. decrease.

Question 15

The aggregate demand curve slopes downward because households feel poorer after a decrease in the price level.

Accepted Answer

A) True 
 B)False

Question 16

Due to the implementation of the Troubled Asset Relief Program and the American Recovery and Reinvestment Act, the Federal budget deficit _____.

Accepted Answer

A)   doubled
B)   tripled
C)   stayed the same
D)   decreased significantly
E)   quadrupled

Question 17

One explanation for the slope of the aggregate demand curve is that:

Accepted Answer

A)   nominal income falls and so does the demand for goods and services as prices rise.
B)   falling prices make people feel poorer and reduce spending.
C)   the government spends less to drive the price level back to normal as prices rise.
D)   businesses increase spending when inflation is high and rising.
E)   domestic goods become more expensive relative to foreign goods when prices rise, reducing exports.

Question 18

The aggregate demand curve for an economy depicts the:

Accepted Answer

A)   quantity of goods and services demanded during a given time period at different interest rates, other things held constant.
B)   quantity of goods and services demanded at different price levels during different time periods, other things held constant.
C)   quantity of goods and services demanded at different price levels during a given time period, other things held constant.
D)   quantity of goods and services that the economy is capable of producing during a given time period, other things held constant.
E)   final quantity of goods and services actually produced by the economy during a given time period, other things held constant.

Question 19

Which of these is a central argument of Keynes's General Theory?

Accepted Answer

A)   Competition does not allocate resources efficiently in a modern industrial economy.
B)   Full employment can be maintained even during a major recession if wage rates are lowered far enough.
C)   Modern industrial economies do not tend automatically toward full employment rates of output.
D)   Money does not play an important role in either causing or curing recession.
E)   Government can best stabilize the economy by letting the market system automatically adjust toward full employment.

Question 20

Economic fluctuations:

Accepted Answer

A)   are linked, but not perfectly synchronized, across countries.
B)   are perfectly synchronized across countries.
C)   in one country are independent of fluctuations in other countries.
D)   in the United States always occur after fluctuations in other developed economies.
E)   in the United States usually occur before fluctuations in other developed economies.

Exam 5: Introduction to Macroeconomics

In combating stagflation, a government-induced:

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The value of a country's final goods and services after adjusting for changes due to inflation is called its _____.

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The aggregate demand curve slopes downward because households feel poorer after a decrease in the price level.

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Keynes believed that the best method for boosting an economy during a recession was to:

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Which of these is true of the mercantilism policy?

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As the price level increases, the amount of goods and services that consumers, businesses, and governments desire to purchase will change. This is depicted by:

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Which of these economic changes was observed during the Great Depression?

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Which of the following is true of a recessionary period?

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The aggregate demand curve for an economy depicts the:

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A key difference between recessions and depressions is that recessions are:

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Identify a valid trend observed in U.S. business cycles since 1933.

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One explanation for the slope of the aggregate demand curve is that:

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The Keynesian approach to fiscal policy calls for:

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When economists refer to an economy's price level, they indicate:

Correct AnswerverifiedShow Answer

Due to the implementation of the Troubled Asset Relief Program and the American Recovery and Reinvestment Act, the Federal budget deficit _____.

Correct AnswerverifiedShow Answer

Which of these is a central argument of Keynes's General Theory?

Correct AnswerverifiedShow Answer

Which of these factors can explain the short recession experienced by the U.S. in 2001?

Correct AnswerverifiedShow Answer

Economic fluctuations:

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An increase in government spending, other things constant, will cause a:

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If the price level in the U.S. decreases, aggregate output demanded:

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