Chapter 6 Review Questions Answers – Flashcards

Macroeconomics, unlike microeconomics, a. considers the behavior of individual firms and markets. b. focuses on the production and consumption of particular goods. c. tries to explain increases in living standards over time. d. finds that the behavior of individuals is more important in determining economic activity than is the aggregate summation of this behavior

Which of the following statements is true? a. In macroeconomics, there is now a role for government intervention in the economy. b. In microeconomics, the prices determined in economic models are aggregate price levels for the economy. c. Microeconomics studies the business cycle fluctuations in the economy. d. Fiscal and monetary policy may be helpful in reducing short-term economic fluctuations in the economy due to adverse economic events.

Which of the following is NOT an aggregate macroeconomic variable? a. Savings: the sum of household, government, and business savings during a given year. b. investment: the addition of the economy's supply of productive physical capital. c. Bicycle production: the total number of bicycles manufactured in an economy during a given year. d. Capital account: the total net amount of assets sold to foreigners.

In an recession, a. unemployment increases, aggregate output decreases and people enjoy higher living standards. b. unemployment increases while aggregate output and aggregate income decrease. c. aggregate output and aggregate income decrease, eventually leading, in all cases, to an economic depression. d. aggregate output must fall for at least three consecutive quarters.

Government intervention in the economy is a. called fiscal policy if it involves a policy change that alters the interest rate or the level of money in circulation in the economy. b. called fiscal policy if it involves changing government spending or taxing in order to offset the economic effects fo short-run fluctuations in the macroeconomy. c. particularly useful in helping economies in the long run. d. only helpful during economic recessions

Economic growth a. refers to increases in real GDP per capita over the long run b. refers to short-term fluctuations in real GDP per capital. c. is best measured using the eployment rate. d. is of little importance to economists.

Macroeconomics a. focuses on how the behavior of individuals and firms in the aggregate economy interact to produce a market price for each good and service offerest in the economy. b. focuses on how the actions of individuals and firms in the economy interest to produce a particular economy-wide level of economic performance. c. considers how specific markets for goods and services determine their equilibrium prices and quantities. d. Answers A, B, and C are correct.

Which of the following statements is true? a. An economy in a recession will have a lower unemployment rate than will the same economy operating in an expansion. b. In an economic expansion, the unemployment rate decreases while aggregate output increases. c. An economy's output level and employment rate move in opposite directions. d. Answers B and C are correct

The paradox of thrift illustrates that a. In macroeconomics the combined effect of individual decisions can have effects that are very different from what any one individual intended. b. acting virtuously at the microeconomic level by spending less may result in an adverse macroeconomic outcome, since this behavior may result in a lower level of aggregate production. c. acting in a profligate manner at the microeconomic level by spending more may result in an expansion of the economy. d. A, B, and C are correct

`According to Keynesian economics, a depressed economy is the result of a. inadequate spending b. irrational behavior on the part of individuals and firms operating in the economy. c. scarce resources d. monetary ad fiscal policy

Inflation occurs when a. the aggregate level of output increases b. the unemployment rate decreases c. the aggregate price level rises over time d. consumers' purchasing power increases over time.

A country that trades goods and services with another country is known as a a. open economy b. real economy c. weak economy d. closed economy

Monetary policy refers to the changes in a. taxes and government spending designed to change the overall level of spending in an economy. b. interest rates and the money supply designed to change the overall level of spending in an economy

The changes in taxes and government spending designed to change the overall level of spending in an economy is called a. monetary policy b. fiscal policy c. either monetary policy of fiscal policy depending upon what is happening to the interest rate.

Economic recessions and economic expansions are a. long-run in nature b. short-run in nature

An economic contraction is a. another term for an economic recession b. indicates that the economy is experiencing a decresase in the level of employment. c. part of the business cycle d. a, b, and c are all correct

And economic expansion is a. another term for an economic recovery b. indicates that the economy is experiencing a decrease in the level of unemployment c. is that part of the business cycle between the business-cycle through and the business cycle peak d. answers A, B, and C are all correct e. answers A and C are correct

Which of the following statements is true? I. the 2007-2009 recession in the US hit the economy much harder than the 2001 recession did II. The Great Depression is the US was a 43 month long economic downturn. III. The US recession of 2001 lasted only eight months, while the recession of 2007-2009 lasted more than twice as long. a. Statements I, II, and III are all true b. Statements II and III are true c. Statements I and III are true d. Statement II is true

A sustained rise in the quantity of goods and services a country produces is referred to as a. a economic expansion or recovery b. a period of employment c. long-run economic growth d. sound fiscal policy

Long-run growth per capita is a. the key to higher wages and a rising standard of living b. a situation that occurs when the economy's overall production grows at a faster rate than the economoy's population c. a sustained upward trend in output per person d. A, B, and C are correct

Deflation occurs when a. economic production increases in the aggregate economy b. the overall price level decreases in an economy c. the overall level of employment decreases in the aggregate economy d. both the overall price level and the overall level of employment in an economy decrease.

When the economy is in a recession, jobs are a. hard to find and the overall level of prices in the economy tends to rise b. easy to find and the overall level of prices in the economy tends to rise c. hard to find and the overall level of prices in teh economy tends to fall d. easy to find and the overall level of prices in teh econmy tends to fall

A country runs a trade deficit when a. its level of employment decreases b. its overall price level is falling c. the value of the goods and services it imports exceeds the value fo the goods and services it exports. d. the value of the goods and services it exports exceeds the value of the goods and services it imports

The value of a country's imports is equal to $1.2 billion this year while the value of the country's exports is equal to $1.3 billion this year. This country is running a a. trade surplus this year b. trade deficit this year

Whether a country runes a trade surplus of a trade deficit depends on a. what part of the business cycle the country is currently in. b. whether or not the coutnry is experienceing deflation or inflation c. whenter the country is employing fiscal or monetary policy d. decisions about saving and investment spending in the country

A country's investment spending during the current year is equal to $400 million, while its level of saving for the current year is $350 million. Given this information, this country will ilkely run a trade a. surplus b. deficit