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Long-run economic growth is the sustained upward trend in the economy's _____ over time.
Output
 
An attempt to understand the reasons that the football coach's salary is greater than the history professor's
salary at Western University is an example of a question of:
Microeconomics
 
After the trough of the business cycle, the unemployment rate:
Begins to decrease
 
Inflation encourages people to:
spend more cash.
 
An attempt to understand the reasons that the football coach's salary is greater than the history professor's
salary at Western University is an example of a question of:
microeconomics.
 
If output is increasing, the economy is in the _____ phase, also known as the recovery phase, of the business cycle.
expansion
 
If deflation occurs:
people want to hold more cash.
 
The statement "Gas prices have not changed, food prices are up 5%, and housing prices are up 10%"
describes a situation in which:
The economy is experiencing inflation.
 
In the last three quarters of the year, a country's GDP (gross domestic product) level is measured at $15
trillion, $14.5 trillion, and $14 trillion. Based on this data, the economy is in the _____ phase of the business cycle.
recession
 
If a country imports more than it exports, it will have a(n):
trade deficit.
 
Unemployment insurance and welfare programs work as automatic stabilizers.
True
 
For the most part, fiscal policy affects the economy in the short run while monetary policy primarily
matters in the long run.
False
 
_____ is the general term that describes the study of the economy as a whole.
Macroeconomics
 
If an economy's ability to produce goods and services grows faster than its population, then this economy's
standard of living will MOST likely:
increase over time.
 
The paradox of thrift illustrates that:
acting virtuously at the microeconomics level by spending less may result in an adverse macroeconomic
outcome, because this behavior may result in a lower level of aggregate economic production.
 
Economic recessions and economic expansions are:
short run in nature.
 
In the last three quarters of the year, a country's GDP (gross domestic product) level is measured at $12 trillion,
$12.5 trillion, and $13.2 trillion. Based on this data, the economy is in the _____ phase of the business cycle.
Expansion
 
A reduction in personal income taxes increases Aggregate Demand through
an increase in personal consumption.
 
Which of the following statements generates the greatest amount of disagreement among economists?
Government should use fiscal policy to try to stabilize the economy
 
Investment spending in the United States is high relative to its level of savings, but the level of
savings in China is high relative to its investment spending.
This is a valid explanation. A country's levels of saving and investment are macroeconomic
phenomena that determine whether it runs a trade surplus or deficit
 
In the United States, economists assign the task of identifying recessions to:
the National Bureau of Economic Research (NBER)
 
Which of the following statements is correct?
Real gross domestic product, employment, and inflation change during a business cycle.
All three tend to rise during an upturn and fall during a downturn.
 
Based on the graph, what explains why the 1990s came to be known as the Asian financial crisis,
while the events a decade later came to be known as the global financial crisis?
Output growth was less in Japan than the United States in the 1990s, but growth was similar in the 2000s.
 
The effect of the Great Depression on conventional wisdom was to:
shift thoughts and opinions to the Keynesian view.
 
In a recessionary trend:
the unemployment rate is increasing
 
When everyone in the economy saves, everyone's income _____, meaning that everyone must consume less today
falls
 
According to the "animal spirits" described by Keynes, when optimism reigns, ​households and firms
​increase spending which results in inflationary pressures.
 
If the MPC is 3/5 then the multiplier is
2.5, so a $100 increase in government spending increases aggregate demand by $250.
 
Using the liquidity-preference model, when the Federal Reserve decreases the money supply,
the equilibrium interest rate increases.
 
Which of the following is an example of a decrease in government purchases?​
​The government cancels an order for new military equipment.
 
Which of the following is a microeconomic question?
Which government policies should be adopted to make it easier for low-income students to attend college?
 
According to the text, whether a country runs a trade deficit or a trade surplus depends on:
decisions about saving and investment spending in the country.
 
In the short run, inflation _____ during expansions in the business cycle and inflation _____ during
contractions in the business cycle.
increases; decreases
 
The topics studied in macroeconomics include:
inflation
 
Suppose aggregate demand shifts to the left and policymakers want to stabilize output. What can they do?
institute an investment tax credit or increase the money supply
 
In the short run, inflation _____ during expansions in the business cycle and inflation _____ during
contractions in the business cycle.
Increases;  decreases
 
What is Inflation?
An increase in prices and fall in the purchasing value of money.
 
Deflation typically occurs when overall prices fall, it is negative _________
inflation.
 
When one person saves, that person's wealth is _____, meaning that he or she can consume more in the future
increased
 
The Bureau of Labor Statistics releases consumer price index (CPI) data every ________
Month
 
In a recession:
unemployment increases, while aggregate output and aggregate income decrease.
 
The consumer price index (CPI) in the base year will always have the value of ________:
100
 
What is the consumer price index (CPI)?
the measure of the price level based on the consumption patterns of a typical consumer.
 
What are three accuracy problems with the consumer price index (CPI)?
Substitutes, changes in quality, and new goods, services, and locations
 
If inflation occurs in a country, holding nominal wages constant, what will happen to the real wage?
Decrease. Real Wages- is the nominal wage adjusted for changes in the price level.
 
Marcus is of the opinion that the theory of liquidity preference explains the determination of the interest
rate very well. Most economists would say that Marcus's opinion is
Keynesian in nature, and that his view is more valid for the short run than for the long run.
 
Which is NOT a question of macroeconomics?
What determines the level of pay received by the average high school biology teacher?
 
Macroeconomics, unlike microeconomics:
tries to explain increases in economic living standards over time.
 
The government finances its spending through tax revenue and _____ in financial markets.
borrowing
 
The total flow of money out of households or the sum of taxes paid, _____ spending, and private
savings equals the total flow of money into households.
consumer
 
If inflation is 4 percent and wages increase by 5 percent, then the purchasing power of workers has:
Increased
 
The percent change in real GDP is always _____ the percent change in real GDP per capita (assuming that
the population is growing)
larger than
 
Which is true regarding inflation and interest rates?
Anticipated inflation can inflict real costs on the economy.
 
According to the text, whether a country runs a trade deficit or a trade surplus depends on:
decisions about saving and investment spending in the country.
 
Which statement is true regarding the business cycle?
In an economic expansion, the unemployment rate decreases while aggregate output increases.
 
During periods of expansion, automatic stabilizers cause government expenditures
to fall and taxes to rise.
 
Which of the following correctly explains the crowding-out effect?
An increase in government expenditures increases the interest rate and so reduces investment spending.
 
Below are four statements about microeconomics and macroeconomics. Which one is true?
Please choose the correct answer from the following choices, and then select the submit answer button.
Fiscal and monetary policy may be helpful in reducing short term economic fluctuations in the economy
caused by adverse economic events.
 
In the last three quarters of the year, a country's GDP (gross domestic product) level is measured at $12 trillion
$12.5 trillion, and $13.2 trillion. Based on this data, the economy is in the _____ phase of the business cycle.
Expansion
 
Changing interest rates is an example of _____ policy.
monetary
 
Recessions tend to be _____, and expansions tend to be _____.
short; long
 
An increase in the money supply decreases the interest rate in the short run.
True
 
Fiscal policy refers to changes in _____ to affect overall spending in the economy:
government spending and taxation
 
If everyone has more cash, then in the long-run:
the overall level of prices will increase.
 
When long-run growth occurs, GDP [gross domestic product] per capita increases if the population:
remains constant.
 
Monetary policy attempts to affect the overall level of spending by making changes in:
interest rates and the quantity of money.
 
Long-run growth is the:
sustained upward trend in aggregate output per person over several decades.
 
A period of rising real GDP is a(n):
expansion.
 
With inflation:
overall prices are increasing, although some may be decreasing.
 
In a typical business cycle, the peak is immediately followed by the:
recession
 
Fiscal policy entails:
setting levels of taxation and/or government spending.
 
The rule that is used most often in many countries to define a recession is:
two consecutive quarters of decreasing output.
 
A country's investment spending during the current year is equal to $120 million, while its level of saving for
the current year is $150 million. Given this information, this country will MOST likely have:
a trade surplus.
 
If an economy's ability to produce goods and services grows faster than its population, then this economy's
standard of living will MOST likely:
increase over time.
 
The paradox of thrift illustrates that:
acting virtuously at the microeconomic level by spending less may result in an adverse macroeconomic
 outcome, because this behavior may result in a lower level of aggregate economic production.
 
An increase in government purchases will
shift aggregate demand from AD1 to AD2
 
Sometimes, changes in monetary policy and/or fiscal policy are intended to offset changes to aggregate
demand over which policymakers have little or no control.
True
 
The government builds a new water-treatment plant. The owner of the company that builds the plant
pays her workers. The workers increase their spending. Firms from which the workers buy goods increase
their output. This type of effect on spending illustrates
the multiplier effect.
 
According to the theory of liquidity preference, which variable adjusts to balance the supply and demand for money?
interest rate
 
If the MPC is 4/5, the multiplier is 5/4.
False
 
Economic recessions and economic expansions are:
short-run in nature.
 
Which statement is true regarding microeconomics and macroeconomics?
Fiscal and monetary policy may be helpful in reducing short-term economic fluctuations in the economy
caused by adverse economic events.
 
Twenty-first-century macroeconomics studies ways to:
smooth out the business cycle.
 
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. According to the text, this country will MOST likely run:
a trade deficit.
 
During recessions, inflation usually:
decreases.
 
Which statement is FALSE regarding long-run economic growth?
The key to higher wages and a rising economic standard of living is avoiding economic troughs.
 
Government intervention in the economy is:
called fiscal policy if it involves changing government spending or taxing in order to offset the economic
effects of short-run fluctuations in the larger economy.
 
Banks create money when they:
make loans
 
Banks reserves are:
the fraction of deposits kept in the form of very liquid assets.
 
Which of the following statements is TRUE?
The level of saving is important for long-run growth.
 
The view that the government should take an active role in the macroeconomy dates to
the Great Depression
 
The reserve ratio is the:
fraction of deposits the banks hold in their vaults plus their deposits at the Federal Reserve.
 
A reserve requirement ratio is the:
fraction of deposits that the bank is required to hold.
 
Suppose the reserve ratio is 20%. If Holly deposits $1,000 of cash into her checking account and her
bank lends $600 to Freda, the money supply:
increases by $600.
 
The _____________ multiplier is equal to ______________.
money; 1 divided by the required reserve ratio
 
One normally expects that unemployment increases while aggregate output and aggregate incomes decrease during
a recession
 
Suppose that the Federal reserve is concerned about the effects of falling stock prices on the economy.
What could it do?
buy bonds to lower the interest rate
 
Macroeconomics was first recognized as a well-developed branch of economics during the:
Great Depression during the 1930s.
 
Economic recessions and economic expansions are:
short run in nature.
 
The existence of banks:
results in the money supply being larger than the amount of currency in circulation.
 
If the banks were required to keep 100% of deposits in reserves they could:
make no loans
 
Excess reserves are important because:
banks cannot make loans unless they have excess reserves.
 
If a bank has deposits of $100,000, cash on hand of $10,000 and $15,000 on deposit at the Federal
Reserve, and the required reserve ratio is 0.2, then the bank
has excess reserves of $5,000
 
Suppose the reserve ratio is 25%, then they money multiplier is
4
 
The relation between a country's level of saving and investment:
affects its trade balances
 
Long-run growth is the sustained upward trend in:
aggregate output per person over several decades.
 
Setting government spending and taxes in an effort to change overall spending in an economy is use of:
fiscal policy
 
The money multiplier and the required reserve ratio are:
are inversely ratio
 
One of the issues of importance to macroeconomists is:
understanding how living standards change over time.
 
If during several months the economy is simultaneously increasing its levels of output and employment,
then the economy is in a(n):
expansion.
 
Which would NOT be classified as a MACROECONOMIC question?
What determines a university's cost of offering a new course?
 
Keynesian economics stressed:
the importance of total spending.
 
A recession is a period when output is _____ and employment is _____.
falling; falling
 
Which statement is FALSE regarding long-run economic growth?
The key to higher wages and a rising economic standard of living is avoiding economic troughs.
 
If the economy grows at 3.5% and prices increase by 2.5%, most people will be economically:
better off.
 
A corporation meets to decide where to locate its next coffee shop. This is a question of:
microeconomics.
 
Price stability occurs when:
the overall cost of living is changing very slowly.
 
A nation whose value of imports exceeds its value of exports is said to have:
a trade deficit.
 
Long-run economic growth is best measured by:
a sustained rise in the production of goods and services.
 
The longest U.S. recession since 1900 is the recession that began in:
1929.
 
If prices decrease by 3% during the year, corporations are MOST likely to _____ investment in factories
and other productive assets.
Decrease
 
If an economy is open:
trading with other countries makes up a portion of its economy.
 
An economic expansion in the United States is typically associated with a(n):
falling unemployment rate
 
If workers' nominal wages have risen by 50% over a 10 years and prices have increased by 40% in
that same period, then we can safely conclude that the amount of goods and services workers can buy has:
increased.
 
Which question is the most appropriate to the study of MACROECONOMICS?
How does the aggregate price level affect overall consumer spending?
 
The central mission of modern macroeconomics is to prevent:
a deep recession like the Great Depression.
 
How will wages at a manufacturing plant change when its workforce is unionized?
the study of microeconomics
 
The work by Milton Friedman altered the consensus that had developed in the aftermath of the Great
Depression on how the economy should be managed. As a result, the current goal of economic policymakers is to:
reduce the magnitude of both downturns and upturns.
 
The response of policy makers during the 2007-09 recession was _____ the actions of policy makers
during the Great Depression.
different from
 
Malthus was saying that the growth of the population is limited by the amount of food available to eat;
people will live at the subsistence level forever. Malthus's description did not apply to the world after 1800 because:
He didn't account for advances in technology that would increase productivity.
 
Is the following statement true or false?: A business-cycle expansion is different from economic growth.
true
 
When the interest rate decreases, the opportunity cost of holding money
decreases, so the quantity of money demanded increases.
 
If everyone has more cash, a long-run effect is that:
the overall level of prices will increase
 
If car prices are up 20%, housing prices are up 1%, and food prices are up 8%, the economy is experiencing:
inflation.
 
Below are four statements about microeconomics and macroeconomics. Which one is true?
Fiscal and monetary policy may be helpful in reducing short-term economic fluctuations in the
economy caused by adverse economic events.
 
_____ policy involves changing government spending to affect overall spending.
Fiscal
 
During most expansions, it is _____ for workers to find jobs compared to during recessions.
easier
 
If an economy's ability to produce goods and services grows _____ the population, then this
economy's standard of living will increase over time
Faster than
 
A country's investment spending during the current year is equal to $120 million, while its level of saving for the
current year is $150 million. Given this information, this country will MOST likely have:
a trade surplus.
 
Goods and services that are bought from foreigners are:
imports.
 
A rising overall level of prices is called:
Inflation