question
Fiscal policy involves:
A) changes in interest rates.
B) changes in government spending.
C) changes in the quantity of money.
D) changes in the quantity of money and interest rates.
A) changes in interest rates.
B) changes in government spending.
C) changes in the quantity of money.
D) changes in the quantity of money and interest rates.
answer
B) changes in government spending.
question
Controlling interest rates is an example of:
A) fiscal policy.
B) tax policy.
C) monetary policy.
D) exchange rate policy.
A) fiscal policy.
B) tax policy.
C) monetary policy.
D) exchange rate policy.
answer
C) monetary policy.
question
Suppose an economy has rising total output accompanied by increasing employment. This is generally known as:
A) stagflation.
B) recession.
C) inflation.
D) expansion.
A) stagflation.
B) recession.
C) inflation.
D) expansion.
answer
D) expansion.
question
With regard to the aggregate price level, economists generally believe:
A) price stability is a desirable goal.
B) inflation is worse than deflation.
C) deflation is worse than inflation.
D) inflation actually benefits most retired people.
A) price stability is a desirable goal.
B) inflation is worse than deflation.
C) deflation is worse than inflation.
D) inflation actually benefits most retired people.
answer
A) price stability is a desirable goal.
question
An overall decrease in the price level is called.
A) inflation.
B) deflation.
C) long-run growth.
D) the result of an increase in economic production.
A) inflation.
B) deflation.
C) long-run growth.
D) the result of an increase in economic production.
answer
B) deflation.
question
Recessions are periods when:
A) output rises.
B) the aggregate price level rises.
C) the unemployment rate is falling.
D) output and employment are falling.
A) output rises.
B) the aggregate price level rises.
C) the unemployment rate is falling.
D) output and employment are falling.
answer
D) output and employment are falling.
question
Fiscal policy refers to:
A) the control of interest rates.
B) the control of government spending and taxation.
C) the control of the quantity of money.
D) the control of interest rates and of government spending.
A) the control of interest rates.
B) the control of government spending and taxation.
C) the control of the quantity of money.
D) the control of interest rates and of government spending.
answer
B) the control of government spending and taxation.
question
The annual percentage change in the aggregate price level is negative when there is:
A) deflation.
B) disinflation.
C) inflation.
D) spiraling inflation.
A) deflation.
B) disinflation.
C) inflation.
D) spiraling inflation.
answer
A) deflation.
question
If workers' nominal wages have risen by 50% over a ten-year period and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services that workers can buy has
A) fallen.
B) increased.
C) not changed.
D) It is impossible to determine whether the amount of goods and services that
workers can purchase has changed and in what direction.
A) fallen.
B) increased.
C) not changed.
D) It is impossible to determine whether the amount of goods and services that
workers can purchase has changed and in what direction.
answer
B) increased.
question
Deflation:
A) raises the cost of making purchases and sales for which cash is required.
B) can result in an increase in employment.
C) encourages people to hold cash rather than invest in new factories and productive
assets.
D) is caused by changes in interest rates.
A) raises the cost of making purchases and sales for which cash is required.
B) can result in an increase in employment.
C) encourages people to hold cash rather than invest in new factories and productive
assets.
D) is caused by changes in interest rates.
answer
C) encourages people to hold cash rather than invest in new factories and productive
question
If a country sold more goods and services to the rest of the world than it purchased from the other countries, then the country has a:
A) trade deficit.
B) budget deficit.
C) trade surplus.
D) budget surplus.
A) trade deficit.
B) budget deficit.
C) trade surplus.
D) budget surplus.
answer
C) trade surplus.
question
If an economy is open:
A) anyone can immigrate to the country.
B) trading with other countries makes up a portion of its economy.
C) it does not trade with other countries.
D) Its real GDP will drop.
A) anyone can immigrate to the country.
B) trading with other countries makes up a portion of its economy.
C) it does not trade with other countries.
D) Its real GDP will drop.
answer
B) trading with other countries makes up a portion of its economy.
question
Monetary policy attempts to affect the overall level of spending in the economy by making changes in:
A) taxes.
B) taxes and spending.
C) taxes and interest rates.
D) interest rates and the quantity of money.
A) taxes.
B) taxes and spending.
C) taxes and interest rates.
D) interest rates and the quantity of money.
answer
D) interest rates and the quantity of money.
question
A country's total product, better known as real gross domestic product (GDP) undergoes periodic fluctuations called:
A) a recession.
B) a business cycle.
C) an expansion.
D) a trough.
A) a recession.
B) a business cycle.
C) an expansion.
D) a trough.
answer
B) a business cycle.
question
Which of the following is most likely a macroeconomics question rather than a microeconomics question?
A) Is the national unemployment rate rising or falling?
B) Are consumers buying more bottled water and less fruit juice?
C) Are salaries for nurses rising or falling?
D) Should a tax be levied on each ton of carbon a factory emits?
A) Is the national unemployment rate rising or falling?
B) Are consumers buying more bottled water and less fruit juice?
C) Are salaries for nurses rising or falling?
D) Should a tax be levied on each ton of carbon a factory emits?
answer
A) Is the national unemployment rate rising or falling?
question
The indirect ownership of physical capital refers to households owning:
A) cash.
B) stock.
C) savings accounts.
D) their house.
A) cash.
B) stock.
C) savings accounts.
D) their house.
answer
B) stock.
question
(Figure: Circular-Flow Model) How does the government finance its purchases of goods and services?
A) by printing money
B) by taxes
C) by borrowing
D) by taxes and borrowing
A) by printing money
B) by taxes
C) by borrowing
D) by taxes and borrowing
answer
B) by taxes
question
Disposable income in a particular period is:
A) total income earned.
B) income earned plus government transfer payments.
C) income earned plus government transfer payments less taxes.
D) income earned plus government transfer payments less taxes and savings.
A) total income earned.
B) income earned plus government transfer payments.
C) income earned plus government transfer payments less taxes.
D) income earned plus government transfer payments less taxes and savings.
answer
C) income earned plus government transfer payments less taxes.
question
In the United States, government spending accounts for approximately what percentage of GDP?
A) 7%
B) 9%
C) 20%
D) 29%
A) 7%
B) 9%
C) 20%
D) 29%
answer
C) 20%
question
If during 2010, the country of Sildavia recorded investment spending of $3 billion, government purchases of $3 billion, consumer spending of $7 billion, imports of $5 billion, government transfers of $1 billion, and exports of $3 billion. Sildavia's GDP in 2010 was:
A) $11 billion.
B) $12 billion.
C) $13 billion.
D) $14 billion.
A) $11 billion.
B) $12 billion.
C) $13 billion.
D) $14 billion.
answer
A) $11 billion.
question
Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks cost $80 each and gasoline costs $3 per gallon. The USPI for 2011 is:
A) 100.
B) 150.
C) 200.
D) 250.
A) 100.
B) 150.
C) 200.
D) 250.
answer
C) 200.
question
Inflation is:
A) a rising aggregate price level.
B) an expansion of output.
C) a rise in wages.
D) a rise in the unemployment rate.
A) a rising aggregate price level.
B) an expansion of output.
C) a rise in wages.
D) a rise in the unemployment rate.
answer
A) a rising aggregate price level.
question
If the CPI is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:
A) 10%.
B) 20%.
C) 25%.
D) 50%.
A) 10%.
B) 20%.
C) 25%.
D) 50%.
answer
C) 25%.
question
The value, at current market prices, of the final goods and services produced during a particular period is:
A) disposable personal product.
B) gross foreign factor output.
C) gross personal product.
D) gross domestic product.
A) disposable personal product.
B) gross foreign factor output.
C) gross personal product.
D) gross domestic product.
answer
D) gross domestic product.
question
A price index:
A) always includes a base year.
B) measures the cost of purchasing a market basket of output across different years.
C) is normalized to 100 for the base year.
D) always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.
A) always includes a base year.
B) measures the cost of purchasing a market basket of output across different years.
C) is normalized to 100 for the base year.
D) always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.
answer
D) always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.
question
Which of the following is NOT included in the calculation of GDP?
A) the Social Security check your relative receives each month
B) the new textbook you purchase for a college course
C) a coffee you purchase from the coffee shop down the street
D) the wages you pay to the employee who cleans your house
A) the Social Security check your relative receives each month
B) the new textbook you purchase for a college course
C) a coffee you purchase from the coffee shop down the street
D) the wages you pay to the employee who cleans your house
answer
A) the Social Security check your relative receives each month
question
Households derive income from all of the following except:
A) wages or labor income.
B) interest from lending.
C) rent from allowing firms to use their land.
D) imports.
A) wages or labor income.
B) interest from lending.
C) rent from allowing firms to use their land.
D) imports.
answer
D) imports.
question
The major difference between the CPI and the producer price index is that:
A) the producer price index is based on retail prices and CPI is based on wholesale
prices.
B) the producer price index measures the cost of living of self-employed workers and
the CPI measures the cost of living of salaried workers.
C) the producer price index generally registers a higher rate of inflation than the CPI.
D) the producer price index is based on the cost of a basket typically purchased by
producers, while the CPI is based on the cost of a basket typically purchased by consumers.
A) the producer price index is based on retail prices and CPI is based on wholesale
prices.
B) the producer price index measures the cost of living of self-employed workers and
the CPI measures the cost of living of salaried workers.
C) the producer price index generally registers a higher rate of inflation than the CPI.
D) the producer price index is based on the cost of a basket typically purchased by
producers, while the CPI is based on the cost of a basket typically purchased by consumers.
answer
D) the producer price index is based on the cost of a basket typically purchased by
producers, while the CPI is based on the cost of a basket typically purchased by consumers.
producers, while the CPI is based on the cost of a basket typically purchased by consumers.
question
Assume that the CPI for 2009 was 103.9 and for 2010 was 107.6. What was the inflation rate between the two years?
A) 0.97%
B) 1.04%
C) 3.56%
D) -3.70%
A) 0.97%
B) 1.04%
C) 3.56%
D) -3.70%
answer
C) 3.56%
question
Scenario: Good A and Good B) With 2009 as the base year, real GDP is greatest in:
A) 2009.
B) 2010.
C) 2011.
D) Its base year always.
A) 2009.
B) 2010.
C) 2011.
D) Its base year always.
answer
C) 2011.
question
Consider an economy that produces only two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is:
A) $100.
B) $700.
C) $1,100.
D) $900.
A) $100.
B) $700.
C) $1,100.
D) $900.
answer
B) $700.
question
An example of a factor that causes the natural rate of unemployment to fall is:
A) a binding minimum wage.
B) the recent proliferation of temporary employment agencies.
C) a slowdown in productivity growth.
D) the unintended by-product of government policies referred to as Eurosclerosis.
A) a binding minimum wage.
B) the recent proliferation of temporary employment agencies.
C) a slowdown in productivity growth.
D) the unintended by-product of government policies referred to as Eurosclerosis.
answer
B) the recent proliferation of temporary employment agencies.
question
During a recession:
A) unemployment and the growth rate of real GDP both decrease.
B) unemployment decreases and the growth rate of real GDP increases.
C) unemployment increases and the growth rate of real GDP decreases.
D) there is no relation between unemployment and the growth rate of real GDP.
A) unemployment and the growth rate of real GDP both decrease.
B) unemployment decreases and the growth rate of real GDP increases.
C) unemployment increases and the growth rate of real GDP decreases.
D) there is no relation between unemployment and the growth rate of real GDP.
answer
C) unemployment increases and the growth rate of real GDP decreases.
question
Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available is called:
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) natural unemployment.
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) natural unemployment.
answer
B) structural unemployment.
question
(Scenario: Employment in Xenia) What is the unemployment rate in Xenia?
A) 7.14%
B) 4.25%
C) 11.11%
D) 2%
A) 7.14%
B) 4.25%
C) 11.11%
D) 2%
answer
A) 7.14%
question
Last month Brent lost his job at the auto parts factory because his factory, like many others, relocated to Asia. Brent and his former co-workers have been looking for similar factory jobs in the town, but they have found no openings. Which of the following best describes what has happened to the labor market in Brent's town?
A) The supply of labor has fallen.
B) The supply of labor has risen.
C) The demand for labor has risen.
D) The demand for labor has fallen.
A) The supply of labor has fallen.
B) The supply of labor has risen.
C) The demand for labor has risen.
D) The demand for labor has fallen.
answer
D) The demand for labor has fallen.
question
(Table: Labor Force Data) Using the data from the accompanying table, suppose the labor force participation rate is 70%. The labor force is equal to:
A) 1,200 million.
B) 50 million.
C) 105 million.
D) 400 million.
A) 1,200 million.
B) 50 million.
C) 105 million.
D) 400 million.
answer
C) 105 million.
question
Discouraged workers are those individuals:
A) who are getting paid too little.
B) who do not like their job.
C) who are working part time but are looking for a full-time job.
D) who have given up looking for a job.
A) who are getting paid too little.
B) who do not like their job.
C) who are working part time but are looking for a full-time job.
D) who have given up looking for a job.
answer
D) who have given up looking for a job.
question
Two primary goals for macroeconomists are:
A) 0% unemployment and price stability.
B) 0% frictional unemployment and price stability.
C) price stability and low unemployment.
D) 0% structural unemployment and price stability.
A) 0% unemployment and price stability.
B) 0% frictional unemployment and price stability.
C) price stability and low unemployment.
D) 0% structural unemployment and price stability.
answer
C) price stability and low unemployment.
question
Recent declines in union membership are likely to cause the natural rate of unemployment to:
A) increase.
B) decrease.
C) be unaffected.
D) be unpredictable.
A) increase.
B) decrease.
C) be unaffected.
D) be unpredictable.
answer
B) decrease.
question
If there are 100 million people in the total population, a labor force of 50 million, and 47 million employed workers, the unemployment rate is:
A) 3%.
B) 6%.
C) 8%.
D) 10%.
A) 3%.
B) 6%.
C) 8%.
D) 10%.
answer
B) 6%.
question
A person without a job who is actively seeking and available for work is considered:
A) employed.
B) unemployed.
C) underemployed.
D) marginally attached.
A) employed.
B) unemployed.
C) underemployed.
D) marginally attached.
answer
B) unemployed.
question
The country of Livonia has an adult population of 100 million; 60% of Livonia's population is employed, but 10% of the people are unemployed. The labor force participation rate in Livonia is:
A) 70%.
B) 60%.
C) 7%.
D) 10%.
A) 70%.
B) 60%.
C) 7%.
D) 10%.
answer
A) 70%.
question
Which of the following situations is likely to increase the natural rate of unemployment?
A) the entrance of many new people into the work force
B) a decrease in unemployment compensation benefits
C) a decrease in job search time due to information advances like the Internet
D) the elimination of the minimum wage
A) the entrance of many new people into the work force
B) a decrease in unemployment compensation benefits
C) a decrease in job search time due to information advances like the Internet
D) the elimination of the minimum wage
answer
A) the entrance of many new people into the work force
question
Structural unemployment can be caused by all of the following EXCEPT:
A) minimum wages.
B) labor unions.
C) efficiency wages.
D) fluctuations in the business cycle.
A) minimum wages.
B) labor unions.
C) efficiency wages.
D) fluctuations in the business cycle.
answer
D) fluctuations in the business cycle.
question
Increases in the average level of prices are called:
A) depreciation.
B) deflation.
C) inflation.
D) expectations.
A) depreciation.
B) deflation.
C) inflation.
D) expectations.
answer
C) inflation.
question
During rapid price inflation, firms must frequently change prices. The cost of changing listed prices is known as the:
A) menu cost.
B) real interest rate cost.
C) shoe-leather cost.
D) unit-of-account cost.
A) menu cost.
B) real interest rate cost.
C) shoe-leather cost.
D) unit-of-account cost.
answer
A) menu cost.
question
Which of the following statements is FALSE?
A) Unemployment always rises during recessions.
B) Unemployment always falls during expansions.
C) There is a strong negative relation between growth in real GDP and changes in
unemployment.
D) In general, there is a trade-off between inflation and unemployment in the short
run.
A) Unemployment always rises during recessions.
B) Unemployment always falls during expansions.
C) There is a strong negative relation between growth in real GDP and changes in
unemployment.
D) In general, there is a trade-off between inflation and unemployment in the short
run.
answer
B) Unemployment always falls during expansions.
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