Economics Chapter 5 Macroeconomics Concerns

Which of the following is NOT a topic studied in Macroeconomics? A) gross domestic product B) the unemployment rate C) the price of IBM computers D) the inflation rate

Which of the following is a topic studied in Macroeconomics? A) gross domestic product B) the wage of auto workers C) the price of IBM computers D) the amount of pizza produced

Which of the following is a topic studied in Macroeconomics? A) the functioning of individual industries B) aggregate behavior of households and industries C) the behavior of individual households D) the decision-making behavior of individual business firms

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are A) administered prices. B) sticky prices. C) regulatory prices. D) market prices.

The demand for corn has increased in May without any change in supply. Eight months later there still has been no change in corn prices. This is an example of a A) price floor. B) price control. C) sticky price. D) macroeconomic price.

The demand for massage therapists declined in the spring of 2007, but the starting wages paid to massage therapists was still the same at the end of 2007. This is an example of a A) sticky price. B) flexible price. C) highly regulated market. D) price control.

An increase in the overall price level is known as A) deflation. B) recession. C) inflation. D) stagflation.

Aggregate behavior is A) the behavior of each household and firm. B) the behavior of each individual. C) the behavior of all households and firms together. D) none of the above.

Inflation is a(n) A) decrease in the overall price level. B) decrease in the overall level of economic activity. C) increase in the overall price level. D) increase in the overall level of economic activity.

Deflation occurs when A) the average price level declines. B) economic activity declines. C) the economic growth rate declines. D) the unemployment rate declines

A period of very rapid increase in the overall price level is known as A) stagnation. B) hyperinflation. C) stagflation. D) depression.

The trend of the economy is A) the long run growth path of the economy. B) the long run inflation rate. C) the long run unemployment rate. D) the short run production capacity of an economy.

The term business cycle refers to the A) short-term ups and downs in the price level. B) long-term trends in the price level. C) short-term ups and downs in the level of economic activity. D) long-term trends in the level of economic activity

A period during which aggregate output rises is known as a(n) A) recession. B) inflation. C) hyperinflation. D) expansion.

A period when the economy shrinks is known as A) a recession. B) a contraction. C) a slump. D) all of the above.

In a business cycle, a peak represents the end of ________ and a trough represents the end of ________. A) an expansion; a recession B) a depression; an expansion C) a trough; a peak D) a recession; an expansion

In a business cycle, a peak represents the end of A) an expansion. B) a depression. C) trough. D) a recession

In a business cycle, a trough represents the end of A) an expansion. B) an inflation. C) a peak D) a recession.

It has become conventional to classify an economic downturn as a recession when aggregate output declines for A) three consecutive quarters. B) two consecutive quarters. C) a year. D) six consecutive quarters.

If the labor force is 500 and employment is 450, then the unemployment rate is A) 100%. B) 90%. C) 10%. D) 0%.

A prolonged and deep recession is called A) a business cycle. B) a depression. C) a stagflation. D) hyperinflation.

Between a trough and a peak, the economy goes through a(n) A) recession. B) bust. C) expansion. D) hyperinflation.

Between a peak and a trough, the economy goes through a(n) A) expansion. B) inflation. C) recession. D) boom

Unemployment means that A) at the going wage rate, there are people who want to work but cannot find work. B) people are not willing to work at the going wage rate. C) there are some people who will not work at the going wage rate. D) there is excess demand in the labor market.

Unemployment implies that in the labor market A) there is an excess supply of labor. B) there is an excess demand for labor. C) there are too few workers for the jobs available. D) quantity demanded of labor exceeds quantity supplied.

The unemployment rate equals A) labor force/population. B) unemployed/employed. C) (employed - unemployed)/labor force. D) (labor force - employed)/labor force.

The unemployment rate equals A) labor force/population. B) unemployed/employed. C) (employed - unemployed)/labor force. D) unemployed/labor force.

If the labor force is 50 million and 48 million are employed then the unemployment rate is: A) 2%. B) 4%. C) 5%. D) 52%.

If 20 million workers are unemployed and 180 million workers are employed, then the unemployment rate is A) 10%. B) 11.1%. C) 18%. D) 80%.

The period in the business cycle from a trough to peak is called a(n) A) recession. B) expansion. C) slump. D) depression.

If output is rising and unemployment is falling, the economy MUST be in a(n) A) contraction. B) expansion. C) depression. D) hyperinflationary period.

The period in the business cycle from a peak to a trough is a(n) A) recession. B) boom. C) expansion. D) inflation.

Unemployment generally ________ during recessions and ________ during expansions. A) falls; rises. B) falls; falls. C) rises; falls. D) rises; rises.

Which of the following statements is FALSE? A) The rate of change in economic activity is used to assess whether an economy is expanding or contracting. B) Short-term ups and downs in the economy are known as business cycles. C) During a recession, output and employment are falling. D) Business cycles are always symmetricthe length of an expansion is the same as the length of a contraction.

1) If the central bank decreases the money supply, it is conducting A) monetary policy. B) supply-side policy. C) fiscal policy. D) incomes policy.

If Congress increases government spending, it is using A) monetary policy. B) supply-side policy. C) fiscal policy. D) incomes policy.

Government policies regarding taxes and expenditures are called A) fiscal policy. B) income policies. C) supply-side policy. D) monetary policy.

The government implements fiscal policy when it changes A) spending and/or interest rate. B) money supply and/or taxes. C) taxes and/or spending. D) taxes and/or interest rate.

The government wants to encourage consumer spending through cutting income taxes. This is an example of A) an incomes policy. B) a fiscal policy. C) a supply-side policy. D) a monetary policy.

The ________ can change the quantity of money in the economy. A) Treasury Department B) Federal Reserve C) Congress D) Office of the Comptroller of the Currency

The Federal Reserve affecting the supply of money is known as A) fiscal policy. B) monetary policy. C) growth policy. D) supply side policy.

Policies designed to affect the quantity of money are A) fiscal policies. B) supply side or growth policies. C) government spending policies. D) monetary policies.

The diagram that shows the income received and payments made by each sector of the economy is the A) aggregate demand-aggregate supply diagram. B) circular flow diagram. C) income flow diagram. D) income-production diagram.

In the circular flow diagram, the different payments made by firms to households include A) wages and profits. B) interest and taxes. C) transfer payments and dividends. D) taxes and transfer payments.

An example of a transfer payment is A) an interest payment on a General Motors' bond. B) the added value of stock from the time it was bought to the time it was sold. C) a Social Security retirement benefit. D) the salary paid to a member of the armed forces.

A transfer payment is A) a bonus to get a worker to accept a transfer. B) a cash payment made by the government to people who do not supply goods, services or labor in exchange for the payment. C) a cash payment for transferring a good from one person to another. D) an in kind payment for working "off the books."

A household that spends less than it receives in income during a given period is A) saving. B) dissaving. C) running a deficit. D) receiving transfer payments.

The major lesson of the circular flow diagram is that A) saving must always be less than investment. B) taxes must always be greater than government expenditures. C) total income in the economy must always equal total spending. D) tax receipts must be equal to transfer payments

In which of the following markets are funds demanded and supplied? A) the labor market B) the goods and services market C) the money market D) the factor market

In the goods-and-services market, households A) only supply. B) only demand. C) both supply and demand. D) neither supply nor demand.

The demanders in the goods-and-services market are A) households and business firms. B) households, the government, and the rest of the world. C) the government and business firms. D) households, the government, business firms, and the rest of the world.

In which basic market would DVDs be traded? A) the goods and services market B) the money market C) the labor market D) the factor market

In the circular flow diagram, firms ________ labor and households ________ goods and services. A) demand; supply. B) demand; demand. C) supply; demand. D) supply; supply.

In the circular flow diagram, households demand ________ and supply ________. A) labor; labor. B) goods; services. C) goods and services; labor. D) labor; goods and services.

Promissory notes issued by the federal government when it borrows money are known as A) Treasury shares. B) Treasury stocks. C) Treasury bonds. D) none of the above

A promissory note issued by a corporation when it borrows money is a A) share. B) corporate bond. C) corporate dividend. D) stock.

Dividends are A) government profits distributed among bondholders. B) corporate profits distributed among shareholders. C) capital gains realized by stockholders. D) promissory notes issued by corporations.

Which of the following is a CORRECT statement? A) Companies issue shares but don't issue bonds. B) The government issues both bonds and shares. C) Bondholders earn dividends but shareholders don't. D) Shareholders earn dividends but bondholders don't.

A capital gain is A) a financial instrument that gives the holder a share in the ownership of a firm and therefore the right to share in the profits of the firm. B) the portion of a corporation's profits that the firm pays out each period to its shareholders. C) an increase in the value of an asset over the price initially paid for it. D) the difference between an individual's economic income and money income.

An increase in the value of an asset over the price initially paid for it is a A) dividend. B) share of stock. C) promissory note. D) capital gain.

If Tomas purchases a share of stock for $150 and one year later sells it for $225, he will realize a A) dividend of $75. B) capital gain of $75. C) dividend of $225. D) a capital gain of $225

If Juanita purchases a share of stock for $20 and three years later sells it for $120, she will realize a A) dividend of $100. B) capital gain of $100. C) dividend of $120. D) capital gain of $140.

Wayne purchased 10 autographed Eli Manning football cards when he was 15 years old for a total cost of $50 and then sold those football cards 4 years later for $800. Due to these transactions A) Wayne earned a capital gain of $800. B) Wayne earned a capital gain of $750. C) Wayne earned a dividend of $800. D) Wayne earned a dividend of $750.

Mike purchased a 1968 Chevy Corvette in 2006 for $30,000 and a year later he sold it for $36,000. Due to these transactions A) Mike earned a capital loss of $6,000. B) Mike earned a dividend of $36,000. C) Mike earned a dividend of $600. D) Mike earned a capital gain of $6,000.

Ami purchased 100 shares of stock for $10,000. A year later the stock is valued at $18,000. Instead of selling the stock, Ami held onto it for another year. Which of the following is TRUE? A) The $8,000 increase in the value of the stock represents an unrealized capital gain. B) The $8,000 increase in the value of the stock represents a dividend. C) To determine the capital gain, it is first necessary to know the normal rate of return on capital. D) none of the above

A dividend is A) a promissory note issued by corporations when they borrow money. B) an increase in the value of an asset over the purchase price initially paid for it. C) the difference between the interest rate a bank pays on deposits and the interest rate it charges for loans. D) the portion of a corporation's profits that the firm pays out each period to its shareholders.

The portion of a corporation's profits that a firm pays out each period to its shareholders is a A) dividend. B) promissory note. C) capital gain. D) corporate bond.

To get the economy out of a slump, Keynes believed that the government should A) cut both taxes and government spending. B) increase both taxes and government spending. C) increase taxes and/or decrease government spending. D) decrease taxes and/or increase government spending.

To bring the economy out of an inflationary period, Keynes argued that the government should A) cut both taxes and government spending. B) increase both taxes and government spending. C) increase taxes and/or decrease government spending. D) decrease taxes and/or increase government spending.

Which of the following is an assumption used by Classical economists? A) Wages adjust downward but not upward. B) Wages adjust upward but not downward. C) Wages are inflexible. D) Wages adjust both upward and downward.

According to the Classical model, unemployment A) could not persist because wages would rise to eliminate the excess supply of labor. B) could not persist because wages would fall to eliminate the excess supply of labor. C) could be eliminated through fiscal and monetary policies. D) could be eliminated only through government intervention.

According to Classical economists, if the quantity of labor demanded exceeds the quantity supplied, there is a A) surplus of labor and wages will rise. B) shortage of labor and wages will fall. C) shortage of labor and wages will rise. D) surplus of labor and wages will fall.

According to the Classical economists, the economy A) requires fine-tuning to reach full employment. B) has sticky prices in many industries. C) is self-correcting. D) will never be at full employment

Macroeconomic policies became more influenced by Keynes' theories starting with, A) the period of high unemployment and high inflation in the 1970s. B) the Great Depression. C) the period of high inflation in the early 1980s. D) the OPEC recession.

According to Classical models, the level of employment is determined primarily by A) the level of aggregate demand for goods and services. B) prices and wages. C) government taxation. D) government spending.

According to Keynes, the level of employment is determined by A) flexible wages and prices. B) interest rates. C) price and wages. D) the level of aggregate demand for goods and services.

The concept of "market clearing" is adopted and defended by A) Keynesian economists. B) Classical economists. C) fine-tuning economists. D) demand-side economists.

Suppose the economy suffers a high rate of unemployment. According to Keynesian economists, the government should increase employment by A) decreasing money supply. B) balancing the budget. C) not doing anything. D) increasing government spending.

Which of the following would be an example of fine tuning? A) Firms increase wages to attract high-quality workers. B) Firms increase employment benefits to increase workers' productivity. C) The federal government enacts legislation to increase spending to try to stimulate the economy. D) The federal government passes legislation that would require that the government's budget always be balanced.

Rapid increases in the price level during periods of recession or high unemployment are known as A) stagflation. B) stagnation. C) depression. D) inflation.

Stagflation occurs when the economy's inflation rate is high and A) employment is high. B) the unemployment rate is high. C) the unemployment rate is low. D) the rate of change in economic activities is positive.

Related to the Economics in Practice on p. 97 [409]: F. Scott Fitzgerald's The Great Gatsby is set in the "Roaring '20s". This decade in U.S. history was characterized by A) economic expansion and high unemployment. B) recession and high unemployment. C) economic expansion and low unemployment. D) the Great Depression and stagflation.

Related to the Economics in Practice on p. 97 [409]: John Steinbeck's The Grapes of Wrath is set in the early 1930s. During this time, the U.S. economy was primarily in the ________ phase of the business cycle, culminating in the Great Depression. A) peak B) recession C) trough D) expansion

Related to the Economics in Practice on p. 99 [411]: John Maynard Keynes' most notable published work is entitled A) Capitalism Doomed. B) The General Theory of Employment, Interest, and Money. C) The Communist Manifesto. D) Freakonomics.

Related to the Economics in Practice on p. 99 [411]: John Maynard Keynes sought to solve the economic paradox of the Great Depression, which was the coexistence of A) low production and low unemployment. B) high production and low inflation. C) high production and high inflation. D) low production and high unemployment.

Since 1970, the U.S. economy has experienced four A) periods of high inflation. B) recessions. C) deflations. D) periods of stagflation.

Since 1970, the U.S. economy has experienced two A) periods of high inflation. B) recessions. C) deflations. D) all of the above

During the U.S. recession of 1980-1982, the unemployment rate reached a high of ________ percent. A) 7.6 B) 8.8 C) 10.7 D) 22.4

In the U.S. economy, the inflation rate in 1975 peaked at ________ percent. A) 10.1 B) 11.0 C) 14.2 D) 22.4