Chapter 5 - Assignment Essays

question

Gross Domestic Product (GDP) measures the value of all final goods and services produced within a nation's borders

answer

True

question

Which of the following statements regarding Gross Domestic Product is not true?

answer

It is a stock variable

question

Which of the following is not the proper subject matter for macroeconomics?

answer

the price of corn

question

Capital is a stock variable.

answer

True

question

Which of the following is a stock variable?

answer

the money supply

question

If firms expect greater demand for their products, invest in more capital and hire more labor,

answer

their behavior may encourage the very prosperity that they expect

question

If all firms expect greater demand for their products or services, they will hire __________ resources (e.g., labor and capital) and the economy will experience __________.

answer

more; growth

question

Economic fluctuations (or business cycles)

answer

are fluctuations in the level of economic activity as measured by real GDP, relative to a long-term growth trend

question

In U.S. history, recessions have usually lasted longer than expansion periods.

answer

False

question

The U.S. economy has experienced alternating periods of expansion and contraction in economic activity relative to its long-term growth trend in the economy. These are called economic fluctuations or business cycles.

answer

True

question

A recession is best defined as a period during which

answer

employment, output, and income decline

question

Long-term growth in production can be partially explained by

answer

technological improvements and rise labor force

question

Long-term growth in production can be partially explained by

answer

increases in availability of resources

question

The distinction between recessions and depressions is that recessions are

answer

shorter and less severe than depressions

question

Which of the following is true about U.S. business cycle activity since 1933?

answer

Expansions have generally lasted longer than contractions.

question

Which of the following is not true about recessions?

answer

They last less than six months on average.

question

Economic fluctuations

answer

can be experienced by the world economy as well as by a single nation

question

Economic fluctuations

answer

in one developed nation are often linked to economic fluctuations in other developed economies

question

Which of the following would indicate the beginnings of an expansion of the economy?

answer

consumer confidence improves

question

Certain economic activities signal forthcoming changes in the economy. These are known as the

answer

leading economic indicators

question

The term economy's price level refers to

answer

a general measure or average of prices of all goods and services

question

Which of the following explains why the aggregate demand curve slopes downward?

answer

If the price level increases, real income of households falls and therefore buy less.

question

One explanation of why the aggregate demand curve is downward sloping is that

answer

rising prices reduce people's wealth and thereby reduce spending

question

As the price level increases, the amount of goods and services that consumers, businesses, and governments desire to purchase will change. How will this be illustrated?

answer

a movement upward along the aggregate demand curve

question

A fall in the price level

answer

moves the economy rightward along the aggregate demand curve

question

If the U.S. price level increases, the aggregate quantity of U.S. output demanded

answer

decreases because U.S. products become more expensive relative to foreign products

question

The aggregate demand curve is best defined as depicting the

answer

quantity of goods and services demanded at different price levels during a given time period, other things held constant

question

If the wealth of consumers increases substantially, this would shift

answer

the aggregate demand curve outward

question

Suppliers have an incentive to increase aggregate output whenever the price level rises faster than the cost of production.

answer

True

question

The aggregate supply curve reflects the direct relationship between the price level and the quantity of aggregate output supplied.

answer

True

question

An increase in the price level will cause

answer

an increase in the quantity of aggregate output supplied

question

The aggregate supply curve has

answer

a positive slope

question

When output __________, employment is expected to __________.

answer

rises; rise

question

Equilibrium of aggregate supply and aggregate demand is best described as a situation in which

answer

quantity demanded equals quantity supplied at a unique price level

question

Given the following aggregate demand and aggregate supply schedules, determine the equilibrium level of prices and output.

answer

equilibrium output $600 and equilibrium price level 75

question

Given an aggregate supply curve that slopes upward, an increase in aggregate demand would decrease real GDP.

answer

False

question

If the economy were initially in equilibrium and the aggregate demand curve shifted to the left,

answer

employment would fall

question

In terms of the aggregate demand and supply framework, the Great Depression can be viewed in terms of a

answer

a leftward shift of the aggregate demand curve

question

Adam Smith's "invisible hand" explains

answer

how people, acting out of self-interest, unintentionally promote the general good

question

During the Great Depression

answer

unemployment increased while output and prices decreased

question

According to John Maynard Keynes' General Theory of Employment, Interest and Money, in order to get an economy out of a depression, the government should

answer

allow the economy to correct itself

question

Over any given period, the economy's observed real GDP and price level are those shown by the intersection of the economy's upward rising (short run) AS schedule and the economy's AD schedule.

answer

True

question

Between 1929 and the depth of the Great Depression in 1933, the United States encountered the following:

answer

the aggregate demand curve shifted inward with no change in the aggregate supply curve

question

Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.

answer

True

question

Keynes believed that the best method for ending the Great Depression was to reduce government spending and raise taxes, thereby reducing the federal budget deficit.

answer

False

question

Which is true of John Maynard Keynes?

answer

He argued that increased government demand should offset reduced private sector demand to prevent depression.

question

According to Keynes, the policy of incurring budget deficits will cause the equilibrium price level to __________ and equilibrium output to __________.

answer

rise; rise

question

According to Keynes, if private-sector demand is insufficient to maintain full employment, the government should

answer

shock the economy with an increase in aggregate demand

question

Inflation is

answer

a sustained increase in the price level

question

Who wrote The General Theory of Employment, Interest, and Money?

answer

John Maynard Keynes

question

If spending by the federal government exceeds revenue,

answer

there is a federal budget deficit

question

Suppose the economy is initially in equilibrium and then an energy shock occurs, such as when OPEC raised oil prices. Which of the following is likely to result?

answer

Stagflation.

question

Stagflation refers to

answer

an increase in the price level accompanied by decreases in real output and employment

question

On an aggregate demand and aggregate supply graph, the stagflation of the 1970s can be represented as a

answer

leftward shift of the aggregate supply curve

question

Government debt is a flow variable; the budget deficit is a stock variable.

answer

False

question

Which of the following statements is correct?

answer

A budget deficit is a flow variable; debt is a stock variable.

question

The tax cuts passed during the Reagan administration were designed primarily

answer

to increase the supply of productive resources

question

The aim of supply-side economics is to

answer

lower taxes to increase the supply of resources

question

Supply-side economists argue that a cut in personal income tax rates would

answer

increase government revenues

question

The Reagan administration's 1981 investment tax changes were designed to

answer

stimulate aggregate supply and thereby increase economic growth

question

The global financial panic in September 2008 which led to a sharp fall in business investment spending and consumer spending can be viewed as

answer

a sharp decrease in aggregate demand

question

In the history of the U.S. economy, which economic era saw both high unemployment and high inflation at the same time?

answer

from the early 1970s to the early 1980s

question

Keynesian solution for moving an economy out of recession is active fiscal policy measures that shift

answer

AS to left

question

Expansionary Keynesian fiscal policy with expand spending but also expands government's budget deficit

answer

True

question

An expansionary fiscal policy amounts to a shift of AD to right. This shift increases the economy's GDP and reduces unemployment but also increases the price index

answer

True

question

A right-ward shift of both AD and AS can increase the economy's GDP without changing the price index.

answer

True

1 of 66

question

Gross Domestic Product (GDP) measures the value of all final goods and services produced within a nation's borders

answer

True

question

Which of the following statements regarding Gross Domestic Product is not true?

answer

It is a stock variable

question

Which of the following is not the proper subject matter for macroeconomics?

answer

the price of corn

question

Capital is a stock variable.

answer

True

question

Which of the following is a stock variable?

answer

the money supply

question

If firms expect greater demand for their products, invest in more capital and hire more labor,

answer

their behavior may encourage the very prosperity that they expect

question

If all firms expect greater demand for their products or services, they will hire __________ resources (e.g., labor and capital) and the economy will experience __________.

answer

more; growth

question

Economic fluctuations (or business cycles)

answer

are fluctuations in the level of economic activity as measured by real GDP, relative to a long-term growth trend

question

In U.S. history, recessions have usually lasted longer than expansion periods.

answer

False

question

answer

True

question

A recession is best defined as a period during which

answer

employment, output, and income decline

question

Long-term growth in production can be partially explained by

answer

technological improvements and rise labor force

question

Long-term growth in production can be partially explained by

answer

increases in availability of resources

question

The distinction between recessions and depressions is that recessions are

answer

shorter and less severe than depressions

question

Which of the following is true about U.S. business cycle activity since 1933?

answer

Expansions have generally lasted longer than contractions.

question

Which of the following is not true about recessions?

answer

They last less than six months on average.

question

Economic fluctuations

answer

can be experienced by the world economy as well as by a single nation

question

Economic fluctuations

answer

in one developed nation are often linked to economic fluctuations in other developed economies

question

Which of the following would indicate the beginnings of an expansion of the economy?

answer

consumer confidence improves

question

Certain economic activities signal forthcoming changes in the economy. These are known as the

answer

leading economic indicators

question

The term economy's price level refers to

answer

a general measure or average of prices of all goods and services

question

Which of the following explains why the aggregate demand curve slopes downward?

answer

If the price level increases, real income of households falls and therefore buy less.

question

One explanation of why the aggregate demand curve is downward sloping is that

answer

rising prices reduce people's wealth and thereby reduce spending

question

As the price level increases, the amount of goods and services that consumers, businesses, and governments desire to purchase will change. How will this be illustrated?

answer

a movement upward along the aggregate demand curve

question

A fall in the price level

answer

moves the economy rightward along the aggregate demand curve

question

If the U.S. price level increases, the aggregate quantity of U.S. output demanded

answer

decreases because U.S. products become more expensive relative to foreign products

question

The aggregate demand curve is best defined as depicting the

answer

quantity of goods and services demanded at different price levels during a given time period, other things held constant

question

If the wealth of consumers increases substantially, this would shift

answer

the aggregate demand curve outward

question

Suppliers have an incentive to increase aggregate output whenever the price level rises faster than the cost of production.

answer

True

question

The aggregate supply curve reflects the direct relationship between the price level and the quantity of aggregate output supplied.

answer

True

question

An increase in the price level will cause

answer

an increase in the quantity of aggregate output supplied

question

The aggregate supply curve has

answer

a positive slope

question

When output __________, employment is expected to __________.

answer

rises; rise

question

Equilibrium of aggregate supply and aggregate demand is best described as a situation in which

answer

quantity demanded equals quantity supplied at a unique price level

question

Given the following aggregate demand and aggregate supply schedules, determine the equilibrium level of prices and output.

answer

equilibrium output $600 and equilibrium price level 75

question

Given an aggregate supply curve that slopes upward, an increase in aggregate demand would decrease real GDP.

answer

False

question

If the economy were initially in equilibrium and the aggregate demand curve shifted to the left,

answer

employment would fall

question

In terms of the aggregate demand and supply framework, the Great Depression can be viewed in terms of a

answer

a leftward shift of the aggregate demand curve

question

Adam Smith's "invisible hand" explains

answer

how people, acting out of self-interest, unintentionally promote the general good

question

During the Great Depression

answer

unemployment increased while output and prices decreased

question

According to John Maynard Keynes' General Theory of Employment, Interest and Money, in order to get an economy out of a depression, the government should

answer

allow the economy to correct itself

question

Over any given period, the economy's observed real GDP and price level are those shown by the intersection of the economy's upward rising (short run) AS schedule and the economy's AD schedule.

answer

True

question

Between 1929 and the depth of the Great Depression in 1933, the United States encountered the following:

answer

the aggregate demand curve shifted inward with no change in the aggregate supply curve

question

Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.

answer

True

question

Keynes believed that the best method for ending the Great Depression was to reduce government spending and raise taxes, thereby reducing the federal budget deficit.

answer

False

question

Which is true of John Maynard Keynes?

answer

He argued that increased government demand should offset reduced private sector demand to prevent depression.

question

According to Keynes, the policy of incurring budget deficits will cause the equilibrium price level to __________ and equilibrium output to __________.

answer

rise; rise

question

According to Keynes, if private-sector demand is insufficient to maintain full employment, the government should

answer

shock the economy with an increase in aggregate demand

question

Inflation is

answer

a sustained increase in the price level

question

Who wrote The General Theory of Employment, Interest, and Money?

answer

John Maynard Keynes

question

If spending by the federal government exceeds revenue,

answer

there is a federal budget deficit

question

Suppose the economy is initially in equilibrium and then an energy shock occurs, such as when OPEC raised oil prices. Which of the following is likely to result?

answer

Stagflation.

question

Stagflation refers to

answer

an increase in the price level accompanied by decreases in real output and employment

question

On an aggregate demand and aggregate supply graph, the stagflation of the 1970s can be represented as a

answer

leftward shift of the aggregate supply curve

question

Government debt is a flow variable; the budget deficit is a stock variable.

answer

False

question

Which of the following statements is correct?

answer

A budget deficit is a flow variable; debt is a stock variable.

question

The tax cuts passed during the Reagan administration were designed primarily

answer

to increase the supply of productive resources

question

The aim of supply-side economics is to

answer

lower taxes to increase the supply of resources

question

Supply-side economists argue that a cut in personal income tax rates would

answer

increase government revenues

question

The Reagan administration's 1981 investment tax changes were designed to

answer

stimulate aggregate supply and thereby increase economic growth

question

The global financial panic in September 2008 which led to a sharp fall in business investment spending and consumer spending can be viewed as

answer

a sharp decrease in aggregate demand

question

In the history of the U.S. economy, which economic era saw both high unemployment and high inflation at the same time?

answer

from the early 1970s to the early 1980s

question

Keynesian solution for moving an economy out of recession is active fiscal policy measures that shift

answer

AS to left

question

Expansionary Keynesian fiscal policy with expand spending but also expands government's budget deficit

answer

True

question

An expansionary fiscal policy amounts to a shift of AD to right. This shift increases the economy's GDP and reduces unemployment but also increases the price index

answer

True

question

A right-ward shift of both AD and AS can increase the economy's GDP without changing the price index.

answer

True

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