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which of the following explains why production rises in most years?
a. increases in the labor force
b. increases in the capital stock
c. advances in technological knowledge
d. all of the above are correct

d

On average over the past 50 years, the US economy has grown at the rate of about ...
a. 1% per year
b. 3% per year
c. 4% per year
d. 6% per year

b

A short period of falling incomes and rising unemployment is called a ...
a. depression
b. recession
c. expansion
d. business cycle

b

During recessions ...
a. workers are laid off
b. factories are idle
c. firms may find they are unable to sell all they produce
d. all of the above are correct

d

During a recession the economy experiences ...
a. rising employable and income
b. rising employment and falling income
c. rising income and falling employment
d. falling employment and income

d

Which of the following is correct?
a. economic fluctuations are easily predicted by competent economists.
b. recessions have never occurred very close together
c. other measures of spending, income, and production do not fluctuate closely with real GDP
d. none of the above are correct

d

Which of the following is correct?
a. over the business cycle, consumption fluctuates more than investment
b. economic fluctuations are easy to predict
c. during recessions, sales and profits tend to fall
d. because of government policy, the US has suffered no recessions in the last 25 years

c

During recessions ...
a. sales and profits fall
b. sales and profits rise
c. sales rise, profits fall
d. profits fall, sales rise

a

Which of the following typically rises during a recession?
a. garbage collection
b. unemployment
c. corporate profits
d. automobile sales

b

Most economists use the aggregate demand and aggregate supply model primarily to analyze ...
a. short-run fluctuations in the economy
b. the effects of macroeconomic policy on the prices of individual goods
c. the long-run effects of international trade policies
d. productivity and economic growth

a

Real GDP ...
a. is the current dollar value of all goods produced by the citizens of an economy within a given time
b. measures economic activity and income
c. is used primarily to measure long-run trends rather than short-run fluctuations
d. all of the above are correct

b

Real GDP ...
a. moves in the same direction as unemployment
b. is not adjusted for inflation
c. also measures real income
d. all of the above are correct

c

As recessions begins, production ...
a. and unemployment both rise
b. rises and unemployment falls
c. falls and unemployment rises
d. and unemployment both fall

c

During recessions investment ...
a. falls by a larger percentage than GDP
b. falls by about the same percentage as GDP
c. falls by a smaller percentage than GDP
d. falls but the percentage change is sometimes much larger and sometimes much smaller

a

Which of the following is correct concerning recessions?
a. they come at fairly regular and predictable intervals
b. they are associated with comparatively large declines in investment spending
c. hey are any period when real GDP growth is less than average
d. they tend to be associated with falling unemployement

b

Historically, the change in real GDP during recessions has been ...
a. mostly a change in investment spending
b. mostly a change in consumption spending
c. about equally divided between consumption and investment spending
d. sometimes mostly a change in consumption and sometimes mostly a change in investment

a

Which part of real GDP fluctuates most over the course of the business cycle?
a. consumption expenditures
b. government expenditures
c. investment expenditures
d. net exports

c

During recessions, declines in investment account for about ...
a. 1/6 of the decline in real GDP
b. 1/3 of the decline in real GDP
c. 1/2 of the decline in real GDP
d. 2/3 of the decline in real GDP

d

Investment is a ...
a. small part of real GDP, so it accounts for a small share of the fluctuation in real GDP
b. small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP
c. large part of real GDP, so it accounts for a large share of the fluctuation in real GDP
d. large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP

b

The classical dichotomy refers to the separate of ..
a. variables that move with the business cycle and variables that do not
b. changes in money and changes in government expenditures
c. decisions made by the public and decisions made by the government
d. real and nominal variables

d

According to the classical macroeconomic theory, changes in the money supply affect ...
a. nominal and real variables
b. nominal variables but not real variables
c. real variables, but not nominal variables
d. neither normal nor real variables

b

According to classical macroeconomic theory, changes in the money supply affect ...
a. real GDP and the price level
b. real GDP but not the price level
c. the price level but not real GDP
d. neither the price level or real GDP

c

The model of short-run economic fluctuations focuses on the price level and ...
a. real GDP
b. economic growth
c. the neutrality of money
d. none of the above is correct

a

The average price level is measured by ...
a. any real variable
b. the rate of inflation
c. the level of the money supply
d. the CPI or the GDP deflator

d

The model of aggregate demand and aggregate supply explains the relationship between ...
a. the price and quantity of a particular good
b. unemployment and output
c. wages and unemployment
d. real GDP and the price level

d

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are ...
a. the price level, real output
b. real output, employment
c. employment, the inflation rate
d. the value of money, the price level

a

Which of the following adjusts to bring aggregate demand and supply into balance ...
a. the price level and real output
b. the real rate of interest and the money supply
c. government expenditures and taxes
d. the saving rate and net exports

a

The aggregate demand curve ...
a. has a slope that is explained in the same way as the slope of the demand curve for a particular product
b. is vertical in the long run
c. shows an inverse relationship between the price level and the quantity of all goods and services demanded
d. all of the above are correct

c

Other things the same, a fall in the economy's overall level of prices tends to ...
a. raise both the quantity demanded and supplied of goods and services
b. raise the quantity demanded of goods and services, but lower the quantity supplied
c. lower the quantity demanded and the quantity supplies of goods and services
d. lower both the quantity demanded and the quantity supplied of goods and services

b

As the price level rises ...
a. people will want to buy more bonds, so the interest rate rises
b. people will want to buy fewer bonds, so the interest rate falls
c. people will want to buy more bonds, so the interest rate falls
d. people will want to buyer fewer bonds, so the interest rate rises

d

Which of the following is included in the aggregate demand for goods and services?
a. consumption demand
b. investment demand
c. net exports
d. all of the above are correct

d

Which of the following are NOT included in aggregate demand?
a. purchases of stock and bonds
b. purchases of services such as visits to the doctor
c. purchases of capital goods such as equipment in a factory
d. purchases by foreigners of consumer goods produced in the United States

a

The effect of an increase in the price level on aggregate demand is represented by a ...
a. shift to the right of the aggregate demand curve
b. shift to the left of the aggregate demand curve
c. movement to the left along a given aggregate demand curve
d. movement to the right along a given aggregate demand curve

c

The wealth effect, interest rate effect and exchange rate effect are all explanations for ...
a. the slope of short-run aggregate supply
b. the slope of long-run aggregate supply
c. the slope of the aggregate demand curve
d. everything that makes the aggregate demand curve shift

c

Other things the same, as the price level falls ...
a. the money supply falls
b. interest rates rise
c. a dollar buys more domestic goods
d. the aggregate demand curve shifts right

c

Other things the same, as the price level rises, the real value of a dollar ...
a. rises, and interest rates rise
b. rises, and the interest rates fall
c. falls, and interest rates rise
d. falls, and interest rates fall

c

Other things the same, as the price level falls, a country's exchange rate ...
a. and interest rates rise
b. and interest rates fall
c. falls and interest rates rise
d. rises and interest rates fall

b

Other things the same, as the price level rises, the real value of money ...
a. and the exchange rate rise
b. and the exchange rate fall
c. rises and the exchange rate falls
d. falls and the exchange rate rises

d

Other things the same, a decrease in the price level makes the dollars people hold worth ...
a. more, so they are willing to spend more
b. more, so they are willing to spend less
c. less, so they are willing to spend more
d. less, so they are willing to spend less

a

Other things the same, if the price level falls, households ...
a. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases
b. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases
c. decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases
d. decrease foreign bond purchases, so the supply of dollars in the market for foreign- currency exchange decreases

a

Other things the same, the aggregate quantity of goods demanded in the US increases if ...
a. real wealth falls
b. the interest rate rises
c. the dollar depreciates
d. none of the above is correct

c

A decrease in the price level induces people to hold ...
a. less money, so they lend less and the interest rate rises
b. less money, so they lend more and the interest rate falls
c. more money, so they lend more and the interest rate rises
d. more money, so they lend less and the interest rate falls

b

When the price level rises ...
a. interest rates rise, so firms increase investment
b. interest rates rise, so firms decrease investment
c. interest rates fall, so firms increase investment
d. interest rates fall, so firms decrease investment

b

As the price level falls, which of the following increases?
a. lending and investment spending
b. lending, but not investment spending
c. investment spending but not lending
d. neither investment spending nor lending

a

A decrease in the price level causes real wealth to ...
a. fall, interest rates to fall, and the dollar to appreciate
b. fall, interest rates to rise, and the dollar to depreciate
c. rise, interest rates to rise, and the dollar to appreciate
d. rise, interest rates to fall, and the dollar to depreciate

d

An increase in the price level causes the interest rate to ...
a. increase, the dollar to depreciate, and net exports to increase
b. increase, the dollar to appreciate, and net exports to decrease
c. decrease, the dollar to depreciate, and net exports to increase
d. decrease, the dollar to appreciate, and net exports to decrease

b

When the dollar depreciates, US ...
a. exports and imports increase
b. exports increase, while imports decrease
c. exports decrease, while imports increase
d. exports and imports decrease

b

A decrease in the US interest rates leads to ...
a. a depreciation of the dollar that leads to greater net exports
b. a depreciation of the dollar that leads to smaller net exports
c. an appreciation of the dollar that leads to greater net exports
d. an appreciation of the dollar that leads to smaller net exports

a

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