Test Bank for Macroeconomics
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. - answersA
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 - answersA
The unemployment rate equals
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) (labor force - employed)/labor force. - answersD
The unemployment rate equals
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) unemployed/labor force. - answersD
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. - answersD
The employment rate is the number of people employed divided by number of
people in the labor force. - answersTRUE
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 - answersC
In the goods-and-services market, households
A) only supply.
,B) only demand.
C) both supply and demand.
D) neither supply nor demand. - answersB
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. -
answersD
A promissory note issued by a corporation when it borrows money is a
A) share.
B) corporate bond.
C) corporate dividend.
D) stock - answersB
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. - answersB
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. - answersD
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. - answersC
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. - answersB
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. - answersD
The concept of "market clearing" is adopted and defended by
A) Keynesian economists.
B) Classical economists.
C) fine-tuning economists.
D) demand-side economists. - answersB
Rapid increases in the price level during periods of recession or high
unemployment are known as
A) stagflation.
B) stagnation.
C) depression.
D) inflation. - answersA
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. - answersC
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. - answersD
Keynes believed that expansionary fiscal policy could help get an economy out of
an inflation. - answersFALSE
According to Keynes, aggregate supply determines the level of economic
activities in the economy. - answersFALSE
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 - answersC
In the U.S. economy, the inflation rate in 1975 peaked at ________ percent.
A) 10.1
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. - answersA
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 - answersA
The unemployment rate equals
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) (labor force - employed)/labor force. - answersD
The unemployment rate equals
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) unemployed/labor force. - answersD
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. - answersD
The employment rate is the number of people employed divided by number of
people in the labor force. - answersTRUE
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 - answersC
In the goods-and-services market, households
A) only supply.
,B) only demand.
C) both supply and demand.
D) neither supply nor demand. - answersB
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. -
answersD
A promissory note issued by a corporation when it borrows money is a
A) share.
B) corporate bond.
C) corporate dividend.
D) stock - answersB
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. - answersB
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. - answersD
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. - answersC
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. - answersB
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. - answersD
The concept of "market clearing" is adopted and defended by
A) Keynesian economists.
B) Classical economists.
C) fine-tuning economists.
D) demand-side economists. - answersB
Rapid increases in the price level during periods of recession or high
unemployment are known as
A) stagflation.
B) stagnation.
C) depression.
D) inflation. - answersA
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. - answersC
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. - answersD
Keynes believed that expansionary fiscal policy could help get an economy out of
an inflation. - answersFALSE
According to Keynes, aggregate supply determines the level of economic
activities in the economy. - answersFALSE
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 - answersC
In the U.S. economy, the inflation rate in 1975 peaked at ________ percent.
A) 10.1
