Deck 5: Introduction to Macroeconomics

Question 1

Deflation occurs when

A)the average price level declines.
B)economic activity declines.
C)the economic growth rate declines.
D)the unemployment rate declines.

Answer 1

A

Question 2

A period when the economy shrinks is known as

A)a recession.
B)a contraction.
C)a slump.
D)all of the above.

Answer 2

D

Question 3

A period of very rapid increase in the overall price level is known as

A)stagnation.
B)hyperinflation.
C)stagflation.
D)depression.

Answer 3

B

Question 4

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are

A)administered prices.
B)sticky prices.
C)regulatory prices.
D)market prices.

Question 5

Which of the following is NOT a topic studied in Macroeconomics?

A)gross domestic product
B)the unemployment rate
C)the price of Dell computers
D)the inflation rate

Question 6

Inflation is a(n)

A)decrease in the overall price level.
B)decrease in the overall level of economic activity.
C)increase in the overall price level.
D)increase in the overall level of economic activity.

Question 7

Aggregate behavior is

A)the behavior of each household and firm.
B)the behavior of each individual.
C)the behavior of all households and firms together.
D)none of the above.

Question 8

The demand for corn has increased in May without any change in supply.Eight months later there still has been no change in corn prices.This is an example of a

A)price floor.
B)price control.
C)sticky price.
D)macroeconomic price.

Question 9

An increase in the overall price level is known as

A)deflation.
B)recession.
C)inflation.
D)stagflation.

Question 10

The term business cycle refers to the

A)short-term ups and downs in the price level.
B)long-term trends in the price level.
C)short-term ups and downs in the level of economic activity.
D)long-term trends in the level of economic activity.

Question 11

It has become conventional to classify an economic downturn as a recession when aggregate output declines for

A)three consecutive quarters.
B)two consecutive quarters.
C)a year.
D)six consecutive quarters.

Question 12

Which of the following is a topic studied in Macroeconomics?

A)the functioning of individual industries
B)aggregate behavior of households and industries
C)the behavior of individual households
D)the decision-making behavior of individual business firms

Question 13

In a business cycle,a peak represents the end of ________ and a trough represents the end of ________.

A)an expansion; a recession
B)a depression; an expansion
C)a trough; a peak
D)a recession; an expansion

Question 14

In a business cycle,a trough represents the end of

A)an expansion.
B)an inflation.
C)a peak.
D)a recession.

Question 15

The demand for massage therapists declined in the spring of 2012,but the starting wages paid to massage therapists was still the same at the end of 2012.This is an example of a

A)sticky price.
B)flexible price.
C)highly regulated market.
D)price control.

Question 16

A period during which aggregate output rises is known as a(n)

A)recession.
B)inflation.
C)hyperinflation.
D)expansion.

Question 17

In a business cycle,a peak represents the end of

A)an expansion.
B)a depression.
C)trough.
D)a recession.

Question 18

If the labor force is 500 and employment is 450,then the unemployment rate is

A)100%.
B)90%.
C)10%.
D)0%.

Question 19

Which of the following is a topic studied in Macroeconomics?

A)gross domestic product
B)the wage of auto workers
C)the price of Dell computers
D)the amount of pizza produced

Question 20

The trend of the economy is

A)the long run growth path of the economy.
B)the long run inflation rate.
C)the long run unemployment rate.
D)the short run production capacity of an economy.

Question 21

Hyperinflation and stagflation are two different names which refer to identical economic conditions.

Question 22

The period in the business cycle from a trough to peak is called a(n)

A)recession.
B)expansion.
C)slump.
D)depression.

Question 23

Macroeconomics is concerned with the market price and equilibrium quantity of each good or service.

Question 24

If output is rising and unemployment is falling,the economy MUST be in a(n)

A)contraction.
B)expansion.
C)depression.
D)hyperinflationary period.

Question 25

Between a trough and a peak,the economy goes through a(n)

A)recession.
B)bust.
C)expansion.
D)hyperinflation.

Question 26

All business cycles are symmetric-the length of an expansion is the same as the length of a recession.

Question 27

If the labor force is 50 million and 48 million are employed then the unemployment rate is

A)2%.
B)4%.
C)5%.
D)52%.

Question 28

The employment rate is the number of people employed divided by number of people in the labor force.

Question 29

A prolonged and deep recession is called

A)a business cycle.
B)a depression.
C)a stagflation.
D)hyperinflation.

Question 30

Macroeconomics is concerned with inflation or deflation,output growth and unemployment.

Question 31

The period in the business cycle from a peak to a trough is a(n)

A)recession.
B)boom.
C)expansion.
D)inflation.

Question 32

Macroeconomic behavior is the sum of all the microeconomic decisions made by individual households and firms.

Question 33

The unemployment rate equals

A)labor force/population.
B)unemployed/employed.
C)(employed - unemployed)/labor force.
D)(labor force - employed)/labor force.

Question 34

Unemployment implies that in the labor market

A)there is an excess supply of labor.
B)there is an excess demand for labor.
C)there are too few workers for the jobs available.
D)quantity demanded of labor exceeds quantity supplied.

Question 35

Unemployment generally ________ during recessions and ________ during expansions.

A)falls; rises.
B)falls; falls.
C)rises; falls.
D)rises; rises.

Question 36

The unemployment rate equals

A)labor force/population.
B)unemployed/employed.
C)(employed - unemployed)/labor force.
D)unemployed/labor force.

Question 37

Unemployment means that

A)at the going wage rate,there are people who want to work but cannot find work.
B)people are not willing to work at the going wage rate.
C)there are some people who will not work at the going wage rate.
D)there is excess demand in the labor market.

Question 38

Which of the following statements is FALSE?

A)The rate of change in economic activity is used to assess whether an economy is expanding or contracting.
B)Short-term ups and downs in the economy are known as business cycles.
C)During a recession,output and employment are falling.
D)Business cycles are always symmetric-the length of an expansion is the same as the length of a contraction.

Question 39

Between a peak and a trough,the economy goes through a(n)

A)expansion.
B)inflation.
C)recession.
D)boom.

Question 40

If 20 million workers are unemployed and 180 million workers are employed,then the unemployment rate is

A)10%.
B)11.1%.
C)18%.
D)80%.

Question 41

In the goods-and-services market,households

A)only supply.
B)only demand.
C)both supply and demand.
D)neither supply nor demand.

Question 42

The government wants to encourage consumer spending through cutting income taxes.This is an example of

A)an incomes policy.
B)a fiscal policy.
C)a supply-side policy.
D)a monetary policy.

Question 43

The Federal Reserve affecting the supply of money is known as

A)fiscal policy.
B)monetary policy.
C)growth policy.
D)supply side policy.

Question 44

The major lesson of the circular flow diagram is that

A)saving must always be less than investment.
B)taxes must always be greater than government expenditures.
C)total income in the economy must always equal total spending.
D)tax receipts must be equal to transfer payments.

Question 45

The government implements fiscal policy when it changes

A)spending and/or interest rate.
B)money supply and/or taxes.
C)taxes and/or spending.
D)taxes and/or interest rate.

Question 46

Government policies regarding taxes and expenditures are called

A)fiscal policy.
B)income policies.
C)supply-side policy.
D)monetary policy.

Question 47

If Congress increases government spending,it is using

A)monetary policy.
B)supply-side policy.
C)fiscal policy.
D)incomes policy.

Question 48

In which of the following markets are funds demanded and supplied?

A)the labor market
B)the goods and services market
C)the money market
D)the factor market

Question 49

The ________ can change the quantity of money in the economy.

A)Treasury Department
B)Federal Reserve
C)Congress
D)Office of the Comptroller of the Currency

Question 50

The following is a correct order in a business cycle: recession,trough,peak,expansion.

Question 51

A transfer payment is

A)a bonus to get a worker to accept a transfer.
B)a cash payment made by the government to people who do not supply goods,services or labor in exchange for the payment.
C)a cash payment for transferring a good from one person to another.
D)an in kind payment for working "off the books."

Question 52

A household that spends less than it receives in income during a given period is

A)saving.
B)dissaving.
C)running a deficit.
D)receiving transfer payments.

Question 53

In the circular flow diagram,the different payments made by firms to households include

A)wages and profits.
B)interest and taxes.
C)transfer payments and dividends.
D)taxes and transfer payments.

Question 54

An expansion is usually associated with rising price levels.

Question 55

An example of a transfer payment is

A)an interest payment on a General Motors' bond.
B)the added value of stock from the time it was bought to the time it was sold.
C)a Social Security retirement benefit.
D)the salary paid to a member of the armed forces.

Question 56

If the central bank decreases the money supply,it is conducting

A)monetary policy.
B)supply-side policy.
C)fiscal policy.
D)incomes policy.

Question 57

The diagram that shows the income received and payments made by each sector of the economy is the

A)aggregate demand-aggregate supply diagram.
B)circular flow diagram.
C)income flow diagram.
D)income-production diagram.

Question 58

Policies designed to affect the quantity of money are

A)fiscal policies.
B)supply side or growth policies.
C)government spending policies.
D)monetary policies.

Question 59

A recession is usually associated with increasing unemployment.

Question 60

A recession is associated with a negative rate of growth of the economy.

Question 61

Fiscal policy generally takes the form of regulations specifying the maximum amount by which the money supply can be changed.

Question 62

Which of the following is a CORRECT statement?

A)Companies issue shares but don't issue bonds.
B)The government issues both bonds and shares.
C)Bondholders earn dividends but shareholders don't.
D)Shareholders earn dividends but bondholders don't.

Question 63

In which basic market would DVDs be traded?

A)the goods and services market
B)the money market
C)the labor market
D)the factor market

Question 64

In the circular flow diagram,firms ________ labor and households ________ goods and services.

A)demand; supply
B)demand; demand
C)supply; demand
D)supply; supply

Question 65

The portion of a corporation's profits that a firm pays out each period to its shareholders is a

A)dividend.
B)promissory note.
C)capital gain.
D)corporate bond.

Question 66

Contractionary fiscal policy includes raising taxes.

Question 67

If Tomas purchases a share of stock for $150 and one year later sells it for $225,he will realize a

A)dividend of $75.
B)capital gain of $75.
C)dividend of $225.
D)a capital gain of $225.

Question 68

If Juanita purchases a share of stock for $20 and three years later sells it for $120,she will realize a

A)dividend of $100.
B)capital gain of $100.
C)dividend of $120.
D)capital gain of $140.

Question 69

A promissory note issued by a corporation when it borrows money is a

A)share.
B)corporate bond.
C)corporate dividend.
D)stock.

Question 70

Mike purchased a 1968 Chevy Corvette in 2009 for $30,000 and a year later he sold it for $36,000.Due to these transactions

A)Mike earned a capital loss of $6,000.
B)Mike earned a dividend of $36,000.
C)Mike earned a dividend of $600.
D)Mike earned a capital gain of $6,000.

Question 71

Wayne purchased 10 autographed Eli Manning football cards when he was 15 years old for a total cost of $50 and then sold those football cards 4 years later for $800.Due to these transactions

A)Wayne earned a capital gain of $800.
B)Wayne earned a capital gain of $750.
C)Wayne earned a dividend of $800.
D)Wayne earned a dividend of $750.

Question 72

Monetary policy includes changing the level of household taxes.

Question 73

In the circular flow diagram,households demand ________ and supply ________.

A)labor; labor
B)goods; services
C)goods and services; labor
D)labor; goods and services

Question 74

An increase in the value of an asset over the price initially paid for it is a

A)dividend.
B)share of stock.
C)promissory note.
D)capital gain.

Question 75

Ami purchased 100 shares of stock for $10,000.A year later the stock is valued at $18,000.Instead of selling the stock,Ami held onto it for another year.Which of the following is TRUE?

A)The $8,000 increase in the value of the stock represents an unrealized capital gain.
B)The $8,000 increase in the value of the stock represents a dividend.
C)To determine the capital gain,it is first necessary to know the normal rate of return on capital.
D)none of the above

Question 76

The demanders in the goods-and-services market are

A)households and business firms.
B)households,the government,and the rest of the world.
C)the government and business firms.
D)households,the government,business firms,and the rest of the world.

Question 77

A capital gain is

A)a financial instrument that gives the holder a share in the ownership of a firm and therefore the right to share in the profits of the firm.
B)the portion of a corporation's profits that the firm pays out each period to its shareholders.
C)an increase in the value of an asset over the price initially paid for it.
D)the difference between an individual's economic income and money income.

Question 78

Promissory notes issued by the federal government when it borrows money are known as

A)Treasury shares.
B)Treasury stocks.
C)Treasury bonds.
D)none of the above

Question 79

A dividend is

A)a promissory note issued by corporations when they borrow money.
B)an increase in the value of an asset over the purchase price initially paid for it.
C)the difference between the interest rate a bank pays on deposits and the interest rate it charges for loans.
D)the portion of a corporation's profits that the firm pays out each period to its shareholders.

Question 80

Dividends are

A)government profits distributed among bondholders.
B)corporate profits distributed among shareholders.
C)capital gains realized by stockholders.
D)promissory notes issued by corporations.