cost of economic instability practice quiz
Unlock all answers in this set
Unlock answersquestion
According to John Maynard Keynes's theory of the multiplier-accelerator effect, a decline in investment spending will A ) lead to an upward spiral of the economy. B ) lead to a downward spiral of the economy. C ) be offset by an increase in consumer demand. D ) lead to lower consumer prices.
answer
b
question
Economic instability wastes all of the following EXCEPT A ) human resources. B ) natural resources. C ) tax revenues. D ) capital resources.
answer
c
question
A period of stagnant growth combined with inflation is known as ____________. A ) stagnation B ) stagflation C ) hyperinflation D ) megaflation
answer
stagflation
question
The unofficial statistic that is the sum of monthly inflation and the unemployment rate; same as discomfort index is A ) stagflation B ) misery index C ) monetarism D ) Keynesian economics
answer
b
question
measure the cost of economic instability with _______. A ) the misery index. B ) frustrations of being unemployed C ) constant GDP D ) increased crime
answer
a
question
Unlike demand-side economics, supply-side economics A ) advocates reduced government involvement in business. B ) advocates increased government involvement in business. C ) emphasizes increasing consumer purchasing power. D ) urges higher taxes to increase spending on government programs.
answer
a
question
Monetarism is described as A ) actions to lower unemployment by stimulating aggregate demand. B ) federal government's attempt to stabilize the economy through taxing and government spending. C ) hypothetical relationship between federal tax rates and tax revenues. D ) emphasis on the role of money and its growth as a key to controlling inflation and unemployment.
answer
d
question
Aggregate demand will increase A ) if the dollar declines in value. B ) when productivity is low. C ) if consumers save more and spend less. D ) if consumers save less and spend more.
answer
d
question
John Maynard Keynes A ) argued that foreign-sector spending should not be ignored. B ) argued that government should limit its involvement in business. C ) introduced his theories in the 1970s. D ) introduced his theories in 1936.
answer
d
question
Deregulation is most closely associated with A ) laissez-faire economics. B ) Keynesian economics. C ) demand-side economics. D ) supply-side economics.
answer
d
question
The social costs of economic instability include all of the following EXCEPT A ) stagflation. B ) wasted resources. C ) political instability. D ) crime and damage to family values.
answer
a
question
Which is an example of the uncertainty caused by economic instability? A ) A politician is reelected. B ) A consumer delays a purchase. C ) A manufacturer increases output. D ) An economist measures the GDP gap.
answer
b
question
According to Keynesian economics, only the _________ sector is big enough to step in and offset changes in investment sector spending. A ) consumer B ) consumer C ) investment D ) foreign trade
answer
a b
question
Social costs are A ) price of economic failures that waste the resources of the nation and its people. B ) period of healthy growth and low inflation. C ) period of stagnant growth combined with inflation. D ) price of economic instability in human terms.
answer
d
question
Wage price controls are A ) aggregate supply equals aggregate demand. B ) regulations making it illegal for businesses to give workers raises or to raise prices without the explicit permission of the government. C ) triggers causing benefits to automatically change in the economy when income lowers. D ) income provided for workers who lose their jobs through no fault of their own.
answer
b
question
The ____________ is the sum of the monthly inflation and unemployment rates. A ) misery index B ) composite rate C ) despair rate D ) composite index
answer
a
question
Economists measure the cost of economic instability with A ) the misery index. B ) the GDP gap. C ) constant GDP. D ) both a and b
answer
d
question
Stagflation is ________. A ) sum of the monthly inflation and unemployment rates B ) period of stagnant growth combined with inflation C ) period of healthy growth and low inflation D ) difference between the actual GDP and the potential GDP that could be produced if all resources were fully employed
answer
b
question
Which of the following statements is FALSE? A ) A healthy economy helps the country deal with its social problems. B ) Economic instability is at the root of all social problems. C ) Economic instability can lead to reduced spending on social programs. D ) A healthy economy helps people feel more certain about the future.
answer
b
question
____________ policies are federal policies designed to increase or decrease total demand in the economy by shifting the aggregate demand curve to the right or to the left.
answer
demand side
question
The use of government spending and taxing to influence economic activity is called _ A ) monetary B ) fiscal C ) structural D ) passive
answer
b
question
Those who favor supply-side policies would tend to support the government playing A ) an expanded role in the economy. B ) a reduced role in the economy. C ) no role in the economy. D ) a role in monetary policies only.
answer
b
