Chapter 17

Chapter 17

Macroeconomics: The Big Picture

Copyright © Houghton Mifflin Company. All rights reserved. 17 | 2

Question

Which of the following is not a macroeconomic topic?

a) The current unemployment rates in Europeb) The rising costs in the US health-care

industry c) Unemployment during the Great Depressiond) US inflation rates during a recessione) Economic growth of countries in Latin

America


Answer

Which of the following is not a macroeconomic topic?

a) The current unemployment rates in Europeb) The rising costs in the US health-care

industry (Correct)c) Unemployment during the Great Depressiond) US inflation rates during a recessione) Economic growth of countries in Latin

America


Question

Which of the following is the best measure of how individuals benefit from economic growth?

a) The rate of increase in GDP per capitab) The rate of increase in GDPc) The rate of increase in real GDP

per capitad) The rate of inflatione) The rate of increase in real GDP


Answer

Which of the following is the best measure of how individuals benefit from economic growth?

a) The rate of increase in GDP per capitab) The rate of increase in GDPc) The rate of increase in real GDP

per capita (Correct)d) The rate of inflatione) The rate of increase in real GDP


Question

A recession isa) a fall in real GDP lasting at least one month.b) a fall in real GDP lasting at least six

months.c) said to occur whenever real GDP falls

below the long-term trend.d) said to occur whenever real GDP falls below

the long-term trend for at least one month.e) a fall in real GDP lasting at least one year.


Answer

A recession isa) a fall in real GDP lasting at least one month.b) a fall in real GDP lasting at least six

months. (Correct)c) said to occur whenever real GDP falls

below the long-term trend.d) said to occur whenever real GDP falls below

the long-term trend for at least one month.e) a fall in real GDP lasting at least one year.


When a recession ends , the economy usually experiences

a) immediate growth and prosperity.b) a depression.c) a period of recovery back to its

pre-recession state.d) rising inflation and unemployment rates.e) no ill effects from the recession.

Question


When a recession ends , the economy usually experiences

a) immediate growth and prosperity.b) a depression.c) a period of recovery back to its

pre-recession state. (Correct)d) rising inflation and unemployment rates.e) no ill effects from the recession.

Answer


Question

The unemployment ratea) has increased steadily over the last 30 years.b) is never equal to zero.c) is zero if the economy is in an expansion.d) increases as real GDP increases.e) is zero unless the economy is in a recession.


Answer

The unemployment ratea) has increased steadily over the last 30 years.b) is never equal to zero. (Correct)c) is zero if the economy is in an expansion.d) increases as real GDP increases.e) is zero unless the economy is in a recession.


Question

The two branches of macroeconomic theory area) inflation and growth theory.b) inflation and economic fluctuations theory.c) economic fluctuations and unemployment

theory.d) inflation and unemployment theory.e) economic fluctuations and economic

growth theory.


Answer

The two branches of macroeconomic theory area) inflation and growth theory.b) inflation and economic fluctuations theory.c) economic fluctuations and unemployment

theory.d) inflation and unemployment theory.e) economic fluctuations and economic

growth theory. (Correct)


Question

The three determinants of the supply of real GDP are

a) labor, capital, and money. b) labor, capital, and households.c) labor, capital, and technology. d) labor, capital, and markets.e) labor, capital, and government.


Answer

The three determinants of the supply of real GDP are

a) labor, capital, and money. b) labor, capital, and households.c) labor, capital, and technology. (Correct)d) labor, capital, and markets.e) labor, capital, and government.


Question

Which of the following best explains how fiscal policy affects economic growth?

a) By controlling strategic industriesb) By developing new government agenciesc) By funding higher educationd) By providing unemployment compensatione) By affecting incentives to invest, work, hire

workers, and develop new technologies


Answer

Which of the following best explains how fiscal policy affects economic growth?

a) By controlling strategic industriesb) By developing new government agenciesc) By funding higher educationd) By providing unemployment compensatione) By affecting incentives to invest, work, hire

workers, and develop new technologies (Correct)


Question

Monetary policya) affects long-term economic growth by

keeping interest rates high.b) affects long-term economic growth by

keeping interest rates low.c) affects long-term economic growth by

keeping inflation rates low and stable. d) has no effect on long-term economic growth.e) affects long-term economic growth by

keeping the US national debt low.


Answer

Monetary policya) affects long-term economic growth by

keeping interest rates high.b) affects long-term economic growth by

keeping interest rates low.c) affects long-term economic growth by

keeping inflation rates low and stable. (Correct)d) has no effect on long-term economic growth.e) affects long-term economic growth by

keeping the US national debt low.


Question

According to the theory of economic fluctuations, which of the following explains the relationship between aggregate demand and employment during a recession?

a) A fall in output causes potential GDP to increase, causing employment to decline.

b) A fall in real GDP causes aggregate demand to fall. As a result, firms lay off workers.

c) A fall in aggregate demand causes real GDP to fall as firms adjust their production. Workers are laid off as a result.

d) A fall in aggregate demand causes potential GDP to fall. The resulting decline in output causes employment to fall.

e) Workers decide they would rather have more leisure time and decide not to work as much. As a result there is less labor employed and less is produced.


Answer

According to the theory of economic fluctuations, which of the following explains the relationship between aggregate demand and employment during a recession?

a) A fall in output causes potential GDP to increase, causing employment to decline.

b) A fall in real GDP causes aggregate demand to fall. As a result, firms lay off workers.

c) A fall in aggregate demand causes real GDP to fall as firms adjust their production. Workers are laid off as a result. (Correct)

d) A fall in aggregate demand causes potential GDP to fall. The resulting decline in output causes employment to fall.

e) Workers decide they would rather have more leisure time and decide not to work as much. As a result there is less labor employed and less is produced.


Question

If the economy is heading towards a recession, the Federal Reserve is likely to

a) raise interest rates in order to increaseaggregate demand.

b) raise interest rates in order to reduceaggregate demand.

c) lower interest rates in order to increase aggregate demand.

d) lower interest rates in order to reduceaggregate demand.

e) do nothing because it is not clear what effect interest rates have on aggregate demand.


Answer

If the economy is heading towards a recession, the Federal Reserve is likely to

a) raise interest rates in order to increaseaggregate demand.

b) raise interest rates in order to reduceaggregate demand.

c) lower interest rates in order to increase aggregate demand. (Correct)

d) lower interest rates in order to reduceaggregate demand.

e) do nothing because it is not clear what effect interest rates have on aggregate demand.

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Chapter 17