Intermediate MacroEconomics: Chapter 10, HW/TEST

Which of the following questions is appropriate to the study of microeconomics?

A. How does the aggregate price level affect overall consumer spending?

B. How much will Sony charge for the new game system to be introduced later this year?

C. How does the GDP affect overall government spending?

D. How does the level of interest rates affect investment spending?

B. How much will Sony charge for the new game system to be introduced later this year?

If an economy is open:

A. Its real gross domestic product will drop.

B. it does not trade with other countries.

C. anyone can immigrate to the country.

D. trading with other countries makes up a portion of its economy.

D. trading with other countries makes up a portion of its economy.

A period of rising real gross domestic product is a(n):

A. expansion.

B. trough.

C. peak.

D. recession.

A. expansion.

The most painful effect of a recession is:

A. inflation.

B. liquidity trap.

C. money neutrality.

D. unemployment.

D. unemployment.

During a recession, one will often observe:

A. rising aggregate output.

B. zero unemployment rates.

C. rising unemployment rates and falling aggregate output.

D. rising employment rates.

C. rising unemployment rates and falling aggregate output.

An open economy is an economy that:

A. does not regulate its industries.

B. offers freedom of speech and religion.

C. does not impose taxes on its citizens.

D. trades goods and services with other countries.

D. trades goods and services with other countries.

Fiscal policy attempts to affect the overall level of spending in the economy through:

A. discretionary regulation of profits and wages.

B. changes in tax policy or government spending.

C. changes in the quantity of money or the interest rate.

D. changes in the inflation rate.

B. changes in tax policy or government spending.

The peak of the business cycle provides evidence that the recession is over.
True
False
False

Which of the following would not be classified as a macroeconomic question?

A. What determines the overall trade in goods, services, and financial assets between the United States and the rest of the world?

B. What determines the overall level of prices in the economy as a whole?

C. What determines the cost to a university or college of offering a new course?

D. How many people are employed in the economy as a whole?

C. What determines the cost to a university or college of offering a new course?

Long-run growth is the sustained upward trend in:

A. aggregate output per person over the business cycle.

B. nominal gross domestic product over time.

C. Output of the economy over time.

D. interest rates over time.

C. Output of the economy over time.

If a country has a trade deficit, does it indicate that the country has a serious problem?

A. Yes. Trade deficits occur when a country has low worker productivity.

B. Yes. Trade deficits occur when a country does not have a comparative advantage in production.

C. No. Trade deficits occur when a country’s investment spending is higher than its level of saving.

D. Yes. Trade deficits occur when a country has high budget surplus.

C. No. Trade deficits occur when a country’s investment spending is higher than its level of saving.

An open economy:

A. trades only with its neighbors.

B. does not trade goods, services, or assets with other countries.

C. trades goods and services with other countries.

D. trades goods but not services or assets with other countries.

C. trades goods and services with other countries.

The point in the business cycle at which a recession ends and the expansion begins is called the:

A. lag.

B. trough.

C. downturn.

D. peak.

B. trough.

A rubbernecking traffic jam is an example of:

A. microeconomics in action.

B. individual behavior that has a large aggregate impact.

C. the paradox of thrift.

D. an outcome smaller than the sum of its parts.

B. individual behavior that has a large aggregate impact.

The widely held view that the government should take an active role in the macroeconomy dates to:

A. the Vietnam War.

B. the Civil War.

C. the Great Depression.

D. World War I.

C. the Great Depression.

The economic policy that uses changes in government spending and taxes to affect the overall spending in the economy is known as:

A. free-trade policy.

B. fiscal policy.

C. monetary policy.

D. tax-and-spend policy.

B. fiscal policy.

The modern tools of macroeconomic policy are:

A. fiscal policy and monetary policy.

B. monetary policy and exchange rate policy.

C. capital policy and labor policy.

D. tax policy and antitrust policy.

A. fiscal policy and monetary policy.

Controlling interest rates is an example of:

A. tax policy.

B. exchange rate policy.

C. monetary policy.

D. fiscal policy.

C. monetary policy.

Which of the following are considered to be the two types of macroeconomic policies?

A. monetary and regulation policy

B. fiscal and regulation policy

C. fiscal policy and price controls

D. monetary and fiscal policy

D. monetary and fiscal policy

Expansions are periods of economic growth when real gross domestic product and employment are growing.
True
False
True

An increase in the nation’s overall price level is:

A. inflation.

B. long-term economic growth.

C. unemployment.

D. deflation.

A. inflation.

If macroeconomic policy has been successful over time, it is likely that the economy has not seen:

A. any unemployment.

B. any inflation.

C. a business cycle.

D. any severe recessions.

D. any severe recessions.

Increasing the total amount of available productive resources is the focus of:

A. monetary policy.

B. fiscal policy.

C. microeconomics.

D. macroeconomics.

D. macroeconomics.

Recessions are periods in which output and employment are falling.
True
False
True

The additional profit earned by Microsoft Corporation by marketing and using a different method of coding software is a microeconomic issue.
True
False
True

If over several months the economy is increasing its levels of both output and employment, then the economy is in a(n):

A. expansion.

B. recession.

C. depression.

D. turning point between a recovery and a downturn.

A. expansion.

The trough of the business cycle:

A. comes before the recession phase.

B. is a temporary minimum level of real GDP.

C. is a temporary maximum level of real gross domestic product (GDP).

D. comes right after the expansion phase.

B. is a temporary minimum level of real GDP.

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