Economics A Contemporary Introduction 10th Edition by William A. McEachern - Test Bank
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Economics A Contemporary Introduction 10th Edition by William A. McEachern - Test Bank

Economics A Contemporary Introduction 10th Edition by William A. McEachern - Test Bank   Instant Download - Complete Test Bank With Answers     Sample Questions Are Posted Below   Chapter 5—Introduction to Macroeconomics MULTIPLE CHOICE 1.Gross Domestic Product measures the value of all final goods and services produced within a nation's borders. a. True …

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Economics A Contemporary Introduction 10th Edition by William A. McEachern – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Chapter 5—Introduction to Macroeconomics
MULTIPLE CHOICE
1.Gross Domestic Product measures the value of all final goods and services produced within a nation’s borders.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:The National EconomyKEY:Bloom’s: Knowledge
2.The ultimate objective of macroeconomics is to
a. reduce the unemployment rate
b. stabilize the economy’s growth rate
c. develop and test theories about how the overall economy works
d. improve the international competitiveness of the U.S. financial markets
e. maximize the efficiency of government intervention in the marketplace
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:The National EconomyKEY:Bloom’s: Analysis
3.Which of the following statements regarding Gross Domestic Product is not true?
a. It is a stock variable.
b. It is measured for a particular time period, usually one year.
c. It is perhaps the most effective means of viewing the same economy over time.
d. It is a measure of the economy’s performance.
e. It is a flow variable, not a stock variable.
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: The National Economy KEY: Bloom’s: Comprehension
4.Which of the following is not the proper subject matter for macroeconomics?
a. unemployment levels
b. inflation rates
c. levels of national output
d. the price of corn
e. the role of government
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: What’s Special About the National Economy? KEY: Bloom’s: Comprehension
5.Capital is a stock variable.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Knowledge
6.Which of the following is a stock variable?
a. business spending on capital equipment
b. consumer income
c. the federal government’s debt
d. the federal government’s budget deficit
e. total expenditure
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
7.Which of the following is a stock variable?
a. Gross Domestic Product
b. consumption spending
c. the federal government’s spending on Social Security
d. the money supply
e. Federal income tax revenue
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
8.Which of the following is a stock variable?
a. U.S. exports
b. sales by corporations
c. borrowing by the federal government
d. household wealth
e. net exports
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
9.Which of the following is a flow variable?
a. U.S. plant and equipment
b. the U.S. population
c. money supply
d. investment spending
e. household debt
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
10.Which of the following is not a flow variable?
a. the amount of spending by consumers this holiday season
b. the number of times a dollar bill is spent in a day
c. the amount of sales taxes collected in a state per year
d. the number of shares of stock traded on Wall Street per week
e. the $100 Susan keeps in her purse, in case an emergency arises
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
11.An economic variable that is measured per unit of time, such as spending per year, is known as a(n)
a. stock variable
b. periodic variable
c. expectations variable
d. flow variable
e. constant variable
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Knowledge
12.If firms expect greater demand for their products, invest in more capital and hire more labor,
a. there will likely be an increase in inflation and a rise in taxation
b. the business cycle is likely to be moving from peak to trough
c. their behavior may encourage the very prosperity that they expect
d. government will probably have to spend more and tax less to offset the economic impacts of these business decisions
e. consumers will probably spend less in anticipation of a decline in economic activity
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
13.If business leaders become optimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.
a. increase; increases; fulfilled
b. increase; increases; not met
c. increase; decreases; fulfilled
d. decrease; decreases; fulfilled
e. decrease; increases; not met
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
14.If business leaders become pessimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.
a. reduce; reduces; fulfilled
b. reduce; increases; fulfilled
c. reduce; increases; not met
d. increase; increases; not met
e. increase; reduces; fulfilled
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
15.If all firms expect greater demand for their products or services, they will hire __________ resources (e.g., labor and capital) and the economy will experience __________.
a. fewer; recession
b. fewer; growth
c. more; federal budget deficits
d. more; recession
e. more; growth
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Comprehension
16.Which of the following best describes a stock (rather than a flow)?
a. each week you save $100
b. each week you buy $10 worth of gasoline
c. each week you buy $50 worth of groceries
d. you earn $500 per week at your job
e. you own $5,000 worth of government bonds
ANS: E PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Analysis
17.Which of the following best describes a flow (rather than a stock)?
a. you own $5,000 worth of government bonds
b. you own a $100,000 house
c. you own a coin collection valued at $10,000
d. you earn $500 per week
e. you own a $45,000 automobile
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: The Human Body and the U.S. Economy KEY: Bloom’s: Analysis
18.During the Great Depression, President Hoover
a. correctly called for an increase in taxes
b. incorrectly called for an increase in taxes
c. incorrectly called for a decrease in taxes
d. correctly called for a decrease in government spending
e. incorrectly called for an increase in government spending
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:Knowledge and PerformanceKEY:Bloom’s: Knowledge
19.Since the Great Depression, business fluctuations have become more severe and longer in duration.
a. True
b. False
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Economic Fluctuations and Growth KEY: Bloom’s: Analysis
20.Economic fluctuations (or business cycles)
a. are changes in the number of businesses started
b. are fluctuations in the Dow Jones industrial average relative to a long-term growth trend
c. look at the role of business in the hiring resources
d. are fluctuations in the level of economic activity, relative to a long-term growth trend
e. are changes in government spending that occur over a period of years
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Economic Fluctuations and Growth KEY: Bloom’s: Knowledge
21.While economic expansions average about three and one half years in duration, economic contractions average about
a. one year in duration
b. two years in duration
c. three years in duration
d. four years in duration
e. five years in duration
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Economic Fluctuations and Growth KEY: Bloom’s: Knowledge
22.In U.S. history, recessions have usually lasted longer than expansion periods.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
23.The U.S. economy has experienced alternating periods of expansion and contraction in economic activity relative to its long-term growth trend in the economy. These are called economic fluctuations or business cycles.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
24.A recession is best defined as a period during which
a. the percentage of the population employed is declining
b. employment, output, and income decline
c. the price level is declining
d. more resources are used
e. the budget deficit and trade deficit are both growing
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
25.A recession is a period during which
a. employment, production, and income decrease
b. the price level is increasing
c. inventories are falling dramatically
d. the unemployment rate is falling while the price level is rising
e. the government attempts to reduce a budget deficit by reducing taxes and increasing government spending
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
26.Long-term growth in production can be partially explained by
a. improvements in the “rules of the game” that facilitate production and exchange
b. the peaks and troughs of the business cycle (or economic fluctuations)
c. trade surpluses that lead to accumulations of precious metals
d. federal government budget deficits
e. a gradual but consistent increase in the price level
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: U.S. Economic Fluctuations KEY: Bloom’s: Comprehension
27.Long-term growth in production can be partially explained by
a. trade surpluses that lead to accumulations of precious metals
b. a gradual but consistent increase in the price level
c. general optimism about the future and the pioneering spirit of America
d. improvements in technology
e. federal government budget deficits
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: U.S. Economic Fluctuations KEY: Bloom’s: Comprehension
28.Long-term growth in production can be partially explained by
a. increases in government spending
b. increases in availability of resources
c. reductions in federal taxes
d. a gradual but consistent increase in the price level
e. general optimism about the future and the pioneering spirit of America
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: U.S. Economic Fluctuations KEY: Bloom’s: Comprehension
29.The distinction between recessions and depressions is that recessions are
a. longer than depressions
b. more severe than depressions
c. accompanied by price increases, depressions by price decreases
d. shorter and less severe than depressions
e. accompanied by price decreases, depressions by price increases
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
30.Which of the following is true about U.S. business cycle activity since 1933?
a. There has been only one business cycle in the last 30 years.
b. There have been only two or three complete cycles.
c. There have been no recessions since 1979.
d. Expansions have generally lasted longer than contractions.
e. Each cycle has lasted longer than the previous one.
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
31.A depression can be defined as
a. a mild reduction in total production coupled with a rising unemployment rate that lasts for several years
b. a decline in total production that lasts less than six months
c. a severe fall in stock prices that causes financial panic and lasts several years
d. a severe reduction in total production coupled with high unemployment that lasts several years
e. a decline in government spending and taxes that lasts for several months
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: U.S. Economic Fluctuations KEY: Bloom’s: Comprehension
32.Which of the following is not true about recessions?
a. They are milder than depressions.
b. They last less than six months on average.
c. They typically are shorter than periods of expansion.
d. They begin after an expansion has peaked.
e. They continue until the economy reaches a trough.
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: U.S. Economic Fluctuations KEY: Bloom’s: Comprehension
33.A period of sustained growth of output in the economy is referred to as a(n)
a. expansion
b. contraction
c. peak
d. trough
e. recession
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
34.A period of sustained decline of output in the economy is known as a(n)
a. expansion
b. growth phase
c. peak
d. trough
e. contraction
ANS:EPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
35.Which of the following would indicate the beginnings of an expansion of the economy?
a. fewer new firms are started
b. stock market prices decline
c. consumer confidence improves
d. housing construction slows
e. orders for new equipment decrease
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Leading Economic Indicators KEY: Bloom’s: Comprehension
36.Which of the following statements about leading economic indicators is true?
a. Most people refer to them before making any important spending decision.
b. They are the only economic indicators available to economists.
c. They indicate when the economy is in a recession or an expansion.
d. They foreshadow turning points in the business cycle.
e. They can predict precisely when turning points in the economy will occur.
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Leading Economic Indicators KEY: Bloom’s: Comprehension
37.By a leading economic indicator, economists mean
a. an indicator of future economic activity
b. an indicator that measures current economic activity
c. a highly accurate indicator that is easily measured
d. an indicator that is accurate most of the time
e. any variable that can measure either past or present economic activity
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:Leading Economic IndicatorsKEY:Bloom’s: Knowledge
38.Certain economic activities signal forthcoming changes in the economy. These are known as the
a. coincidental economic indicators
b. GDP implicit price deflator
c. lagging economic indicators
d. composite of economic activities
e. leading economic indicators
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:Leading Economic IndicatorsKEY:Bloom’s: Knowledge
39.When economists refer to the economy’s price level, they mean
a. the rate of inflation
b. the price of goods and services relative to consumers’ incomes
c. a general measure of prices of all goods and services
d. a period of level, or steady, prices
e. the prices of a specific consumer good
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Output and the Price Level KEY: Bloom’s: Comprehension
40.The aggregate demand curve slopes downward because households feel poorer after a decrease in the price level.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
41.As the price level rises, individuals feel richer. Therefore, they will spend more.
a. True
b. False
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
42.The aggregate demand curve reflects the direct relationship between the price level and the quantity of aggregate output demanded.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
43.Which of the following explains why the aggregate demand curve slopes downward?
a. If the price level increases, we feel poorer and therefore buy less.
b. If the price level increases, we feel richer and therefore buy more.
c. If domestic prices increase, we substitute domestic goods for imported ones.
d. If the price of a particular good increases, we substitute away from that good.
e. A decrease in the price of a particular good is like an increase in income and therefore we buy more.
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
44.Which of the following is a reason why the aggregate demand curve slopes downward?
a. At a higher price level, fewer goods and services are available.
b. Periods when the price level is rising are usually times of swift declines in economic activity.
c. Households feel poorer with an increase in average prices.
d. If the U.S. price level rises, foreigners will buy more U.S. goods, leaving fewer U.S. goods for domestic consumers.
e. As the price level rises, business leaders become pessimistic about the future and reduce production.
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
45.One explanation for the negative slope of the aggregate demand curve is that
a. as prices rise, nominal income falls and so does the demand for real goods and services
b. falling prices make people feel poorer and reduce spending
c. as prices rise, government spends less to drive the price level back down
d. businesses increase spending when inflation is high and rising
e. as prices rise, domestic goods become more expensive relative to foreign goods, which reduces exports
ANS: E PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
46.One explanation of why the aggregate demand curve is downward sloping is that
a. as prices fall, nominal income rises and so does the demand for real goods and services
b. rising prices reduce people’s wealth and thereby reduce spending
c. with falling prices, government decides to spend less to increase the price level
d. businesses increase investment spending in response to higher interest rates caused by inflation
e. as prices fall, domestically produced goods become more expensive relative to foreign-produced products, which increases production
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
47.As the price level increases, the amount of goods and services that consumers, businesses, and governments desire to purchase will change. How will this be illustrated?
a. a leftward movement of the aggregate demand curve
b. a rightward movement of the aggregate demand curve
c. a movement upward along the aggregate demand curve
d. a movement downward along the aggregate demand curve
e. the price level change causes the aggregate supply curve to shift, bringing the economy back into equilibrium
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
48.A fall in the price level
a. moves the economy rightward along the aggregate demand curve
b. moves the economy leftward along the aggregate demand curve
c. shifts the aggregate demand curve to the left
d. shifts the aggregate demand curve to the right
e. is inconsistent with the other-things-constant assumption on which the aggregate demand curve is based
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
49.A rise in the price level
a. moves the economy rightward along the aggregate demand curve
b. moves the economy leftward along the aggregate demand curve
c. shifts the aggregate demand curve to the left
d. shifts the aggregate demand curve to the right
e. is inconsistent with the other-things-constant assumption on which the aggregate demand curve is based
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
50.If the U.S. price level decreases, the aggregate quantity of U.S. output demanded
a. decreases because U.S. products become cheaper relative to foreign products
b. decreases because U.S. products become more expensive relative to foreign products
c. increases because U.S. products become cheaper relative to foreign products
d. increases because U.S. products become more expensive relative to foreign products
e. decreases because household wealth and spending decrease
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
51.If the U.S. price level increases, the aggregate quantity of U.S. output demanded
a. decreases because U.S. products become cheaper relative to foreign products
b. decreases because U.S. products become more expensive relative to foreign products
c. increases because U.S. products become cheaper relative to foreign products
d. increases because U.S. products become more expensive relative to foreign products
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
52.The aggregate demand curve slopes downward because
a. a decrease in the price level decreases the real value of household wealth
b. a decrease in the domestic price level increases imports
c. an increase in the price level leads to a decrease in demand for money, which decreases interest rates
d. a decrease in the domestic price level increases exports
e. none of the above
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
53.The aggregate demand curve is best defined as depicting the
a. quantity of goods and services demanded during a given time period at different interest rates
b. quantity of goods and services demanded at different price levels during different time periods
c. quantity of goods and services demanded at different price levels during a given time period, other things held constant
d. quantity of goods and services that the economy is capable of producing during a given time period
e. final quantity of goods and services actually produced by the economy during a given time period
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
54.If the wealth of consumers increases substantially, this would shift
a. the aggregate supply curve outward
b. the aggregate demand curve outward
c. the aggregate demand curve inward
d. the aggregate supply curve inward
e. both the aggregate demand and supply curves inward
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand Curve KEY: Bloom’s: Comprehension
55.Suppliers have an incentive to increase aggregate output whenever the price level rises faster than the cost of production.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Supply Curve KEY: Bloom’s: Comprehension
56.An increase in wage rates, other things constant, would shift the aggregate supply curve upward.
a. True
b. False
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Supply CurveKEY:Bloom’s: Analysis
57.The aggregate supply curve reflects the direct relationship between the price level and the quantity of aggregate output supplied.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Supply Curve KEY: Bloom’s: Comprehension
58.Which of the following is true of the aggregate supply curve?
a. It portrays an inverse relationship between the price level and quantity of aggregate output.
b. Resource utilization is constant along the curve.
c. A decrease in the price level encourages firms to expand production because the cost of production decreases.
d. The curve is upward-sloping.
e. As average prices in the United States rise relative to average prices in other countries, U.S. producers find export markets more attractive than domestic markets.
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Supply Curve KEY: Bloom’s: Comprehension
59.The aggregate supply curve indicates
a. the quantity of aggregate output that producers are willing and able to supply at each possible price level
b. the total quantity of a particular good that all producers are willing to supply at each possible price level
c. the total quantity of a particular good that all producers are willing to supply at the equilibrium price level
d. the quantity of aggregate output that producers are willing and able to supply at the equilibrium price level
e. the quantity of aggregate output that producers are willing and able to supply at the equilibrium level of GDP
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Supply Curve KEY: Bloom’s: Comprehension
60.An increase in the price level will cause
a. an increase in the quantity of aggregate output supplied
b. a decrease in the quantity of aggregate output supplied
c. a leftward shift of the aggregate supply curve
d. a rightward shift of the aggregate supply curve
e. a leftward or rightward shift of the aggregate supply curve, depending on the reason for the price change
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Supply Curve KEY: Bloom’s: Comprehension
61.A decrease in the price level will cause
a. an increase in the quantity of aggregate output supplied
b. a decrease in the quantity of aggregate output supplied
c. a leftward shift of the aggregate supply curve
d. a rightward shift of the aggregate supply curve
e. a leftward or rightward shift of the aggregate supply curve, depending on the reason for the price change
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Supply Curve KEY: Bloom’s: Comprehension
62.The aggregate supply curve has
a. a negative slope
b. a positive slope
c. a zero slope (a horizontal line)
d. an infinite slope (a vertical line)
e. a negative slope like the aggregate demand curve, only steeper
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Supply CurveKEY:Bloom’s: Knowledge
63.When output __________, employment is expected to __________.
a. rises; rise
b. rises; fall
c. falls; rise
d. falls; remain constant
e. remains constant; fall
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Equilibrium KEY: Bloom’s: Comprehension
64.Equilibrium of aggregate supply and aggregate demand is best described as a situation in which
a. the slope of aggregate demand equals the slope of aggregate supply
b. quantity demanded exceeds quantity supplied
c. quantity demanded equals quantity supplied at a unique price level
d. quantity supplied exceeds quantity demanded at a unique price level
e. quantity supplied equals quantity demanded at all price levels
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: Equilibrium KEY: Bloom’s: Comprehension
65.If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?
a. the aggregate supply curve would shift outward and the aggregate demand curve would remain unchanged
b. the aggregate supply curve would shift inward and the aggregate demand curve would remain unchanged
c. the aggregate demand curve would shift outward and the aggregate supply curve would remain unchanged
d. the aggregate demand curve would shift inward and the aggregate supply curve would remain unchanged
e. the domestic aggregate demand and supply curves would remain unchanged
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
66.Given the following aggregate demand and aggregate supply schedules, determine the equilibrium level of prices and output.
Aggregate Demand Aggregate Supply
(quantity demanded (quantity supplied
in billions of dollars) Price Level in billions of dollars)
$   100 150 $1,200
     200 125   1,000
     400 100      800
     600   75      600
     800   50      400
  1,000   25      200
a. equilibrium output $1,000 and equilibrium price level 25
b. equilibrium output $800 and equilibrium price level 50
c. equilibrium output $200 and equilibrium price level 125
d. equilibrium output $400 and equilibrium price level 25
e. equilibrium output $600 and equilibrium price level 75
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
67.Given an aggregate supply curve that slopes upward, an increase in aggregate demand would decrease real GDP.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
68.For a fixed aggregate supply curve, decreases in aggregate demand increase real GDP.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
69.For a given aggregate supply curve, the price level and output both rise when aggregate demand decreases.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
70.If the economy were initially in equilibrium and the aggregate demand curve shifted to the left,
a. employment would fall
b. the price level would rise
c. the aggregate supply curve would shift rightward
d. the aggregate supply curve would shift leftward
e. the economy would experience an expansion period
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
71.In terms of the aggregate demand and supply framework, the Great Depression can be viewed in terms of a
a. rightward shift of the aggregate demand curve
b. rightward shift of the aggregate supply curve
c. movement downward along the aggregate demand curve
d. a leftward shift of the aggregate demand curve
e. a leftward shift of the aggregate supply curve
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
72.The laissez-faire approach popular before the Great Depression influenced the U.S. government to see business downturns as
a. natural phases in an otherwise healthy system, and therefore to take short-term deficit spending measures to help recovery
b. natural phases in an otherwise healthy system, and therefore to wait for recovery to occur naturally
c. serious maladies in an otherwise healthy system, and therefore to work to redesign the system to avoid such failure in the future
d. failures of the type of system Adam Smith envisaged, and therefore to work to move toward a modern, more managed economy
e. failures of the system to achieve the form that Adam Smith envisaged, and therefore to work to decrease government interference at the micro level
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
73.During the Great Depression,
a. unemployment and prices increased while output decreased
b. unemployment increased while output and prices decreased
c. unemployment and prices decreased while output increased
d. unemployment and output decreased while prices increased
e. unemployment and output increased while prices decreased
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
74.According to John Maynard Keynes’ General Theory of Employment, Interest and Money, in order to get an economy out of a depression, the government should
a. increase spending
b. decrease spending
c. reduce taxes
d. increase taxes
e. allow the economy to correct itself
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
75.On an aggregate demand and aggregate supply graph, the Great Depression can be pictured as
a. a leftward shift of the aggregate supply curve
b. a rightward shift of the aggregate supply curve
c. a leftward shift of the aggregate demand curve
d. an increase in the price level caused by a movement along the aggregate demand curve
e. a decrease in the price level caused by a movement along the aggregate supply curve
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
76.Adam Smith’s “invisible hand” explains
a. why people act in their own best interests
b. why the government intervenes to overcome failures in private markets.
c. how people, acting out of self-interest, unintentionally promote the general good
d. how comparative advantage and specialization promote international trade
e. how the creation of goods and services (supply) generates its own demand by creating employment and income
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
Exhibit 5-1
77.Exhibit 5-1 shows that from the beginning of period 1 to the end of period 2,
a. real GDP decreased and then increased
b. real GDP increased and then decreased
c. real GDP fell from $10,000 to $6,000
d. real GDP rose from $6,000 to $10,000
e. the inflation rate fell from 4 to 1
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
78.In Exhibit 5-1, from the beginning of period 1 to the end of period 2, nominal GDP went from
a. $40,000 to $18,000 and back again
b. $40,000 to $18,000 and stayed there
c. $40,000 to $18,000 in period 1 and to $10,000 in period 2
d. $40,000 to $18,000 to $10,000 in period 1 and stayed there in period 2
e. $40,000 to $18,000 to $10,000 in period 1 and then back to $18,000 in period 2
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
79.In Exhibit 5-1, what happens to the equilibrium price level in period 1 as the aggregate demand curve shifts from AD to AD’
a. nothing
b. falls from 4 to 3
c. falls from 4 to 1
d. rises from 1 to 4
e. falls from 4 to 2
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
80.In Exhibit 5-1, in period 1 the equilibrium GDP falls from 10,000 to 6,000 when aggregate demand falls from AD to AD’.
a. True
b. False
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
81.In Exhibit 5-1, which of the following might cause a shift in the aggregate demand curve from AD to AD’?
a. an increase in household wealth
b. a fall in domestic interest rates
c. an increase in government spending
d. an appreciation of the dollar relative to other currencies
e. a decrease in the nation’s money supply
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
82.In Exhibit 5-1 in period 4, the price level starts at ______ and ends up at ______ when the aggregate supply curve shifts from AS’ to AS’’.
a. 4; 2
b. 2; 3
c. 2; 2
d. 3; 1
e. 2; 4
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
83.In Exhibit 5-1 in period 2, which of the following would cause the aggregate supply curve to shift from AS to AS’.
a. an increase in resource prices, improved technology, or an extension of patent protection
b. a decrease in resource prices, improved technology, or an extension of patent protection
c. a decrease in resource prices, improved technology, or a shortening of patent protection
d. an appreciation of the dollar, higher inflation in Europe, a decrease in resource prices
e. a depreciation of the doller, higher inflation in Asia, improved technology
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Analysis
84.Between 1929 and the depth of the Great Depression in 1933, the United States encountered the following:
a. the aggregate supply curve shifted inward with no change in the aggregate demand curve
b. the aggregate demand curve shifted inward with no change in the aggregate supply curve
c. the aggregate demand curve shifted outward with no change in the aggregate supply curve
d. the aggregate supply curve shifted outward with no change in the aggregate demand curve
e. the aggregate supply and demand curves both shifted outward
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 1. The Great Depression and Before KEY: Bloom’s: Comprehension
85.Given the aggregate demand curve, an increase in aggregate supply lowers the price level and decreases output.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
86.Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.
a. True
b. False
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY:Bloom’s: Analysis
87.Properly applied, a federal budget deficit can simultaneously reduce inflation and unemployment.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
88.If both aggregate demand and aggregate supply increase, then employment will increase.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
89.Keynes believed that the best method for ending the Great Depression was to reduce government spending and raise taxes, thereby reducing the federal budget deficit.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
90.If spending by the federal government exceeds tax revenues, aggregate demand decreases.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
91.If tax revenues increase more than government spending does, the price level will rise.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
92.An increase in the price level
a. means that the aggregate demand curve has shifted leftward
b. means that inflation occurred
c. means the employment level has decreased
d. will shift both the aggregate supply curve and the aggregate demand curve leftward
e. will shift both the aggregate supply curve and the aggregate demand curve rightward
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
93.An increase in government spending, other things constant, would cause a
a. leftward shift of the aggregate supply curve
b. rightward shift of the aggregate supply curve
c. leftward shift of the aggregate demand curve
d. rightward shift of the aggregate demand curve
e. movement toward equilibrium, along curves that do not shift
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
94.According to Keynes, “animal spirits”
a. make investment spending unstable
b. make consumption spending unstable
c. make government spending inherently stable
d. guide the economy back to equilibrium after a disruption
e. create the federal government budget deficits that have become so common today
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
95.Which is true of John Maynard Keynes?
a. He believed that serious economic contractions were natural phases in an otherwise healthy system.
b. He provided a model that closely resembled that of Adam Smith.
c. He advocated a decrease in the money supply to stabilize the economy.
d. He argued that increased government demand should offset reduced private sector demand to prevent depression.
e. He advocated tax increases to balance the federal government’s budget during the Great Depression.
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
96.According to Keynes, in order to get the economy out of a recession, the government should
a. plan for a budget deficit
b. encourage firms to export to other nations, thereby jump-starting the economy
c. follow an expansionary monetary policy
d. follow a contractionary monetary policy
e. do nothing and rely on the market system to heal itself
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
97.According to Keynes, the policy of incurring budget deficits will cause the equilibrium price level to __________ and equilibrium output to __________.
a. rise; rise
b. rise; fall
c. fall; rise
d. fall; fall
e. remain the same; remain the same
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
98.According to Keynes, the policy of incurring budget surpluses will cause the equilibrium price level to __________ and equilibrium output to __________.
a. rise; rise
b. rise; fall
c. fall; rise
d. fall; fall
e. remain the same; remain the same
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
99.Which of the following best describes the Keynesian approach to economic policy?
a. supply-side
b. classical
c. demand-side
d. mercantilist
e. laissez-faire
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
100.Keynes proposed that government should shock the economy out of the Great Depression by
a. increasing aggregate supply
b. increasing aggregate demand
c. raising prices so that firms could earn higher profits and employ more people
d. reducing prices so that people could afford to buy more goods and services
e. subsidizing firms that wanted to buy stocks after the crash
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
101.Keynes believed that the best method for ending the Great Depression was to
a. increase the money supply so that individuals would have more to spend
b. cut government spending and increase taxes to reduce or even eliminate the government’s deficit
c. increase government spending and cut taxes so that consumers could spend more
d. cut both government spending and taxes so that government would not be such a large part of the economy
e. increase both government spending and taxes to increase the role government played in the economy
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY:Bloom’s: Analysis
102.The Keynesian approach to government economic policy
a. has emphasized the role of individual self-interest as a powerful stabilizing force
b. has consistently failed to reduce fluctuations in economic activity
c. was ineffective during the 1960s
d. highlighted the role of aggregate demand
e. was rechristened supply-side economics around 1980
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
103.According to Keynes, if private-sector demand is insufficient to maintain full employment, the government should
a. act to make the economy’s natural transition to the lower level of employment as easy as possible
b. shock the economy with an increase in aggregate demand
c. reduce aggregate supply to reduce inflation
d. print money to promote consumer spending
e. act to make the economy’s natural transition back to full employment as easy as possible
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
104.Keynes was in favor of a federal budget __________ to cure __________.
a. deficit; inflation
b. surplus; unemployment
c. deficit; a depression
d. deficit; a trade deficit
e. surplus; low aggregate output
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
105.The Keynesian approach to fiscal policy calls for
a. budget deficits during periods of inflationary pressure
b. budget surpluses during periods of high unemployment
c. a balanced budget despite the state of the economy
d. tax cuts during recession
e. spending increases during inflation
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
106.The Employment Act of 1946
a. guaranteed full employment
b. obliged the federal government to hire as many people as it could to achieve full employment
c. gave the federal government the power to levy an income tax
d. imposed a responsibility on the federal government to foster full employment
e. obligated the federal government to run budget surpluses to achieve full employment
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
107.Fine-tuning the economy means
a. making government economic policy more “people oriented”
b. using government policies to adjust the economy and promote economic stability
c. tinkering with microeconomic problems such as externalities and losing sight of the big picture
d. placing fewer regulations on the private sector, thereby eliminating the need for government intervention
e. designing policies based exclusively on the leading economic indicators
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
108.In the 1960s, government policy makers believed that they could
a. stabilize the economy by letting the market system solve all problems
b. reduce unemployment by running federal budget surpluses
c. eliminate government’s role in stabilization policy
d. use changes in the money supply to virtually eliminate business cycles
e. use taxation and government spending to fine-tune the economy
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
109.Which decade is known as the “Golden Age of Keynesian Economics”?
a. the 1930s
b. the 1950s
c. the 1960s
d. the 1970s
e. the 1980s
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY:Bloom’s: Knowledge
110.Inflation is
a. a rise in the value of money
b. a decline in nominal income
c. a sustained increase in the price level
d. a general reduction in prices
e. an economic problem only for the retired population
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY:Bloom’s: Knowledge
111.Who wrote The General Theory of Employment, Interest, and Money?
a. Adam Smith
b. Jean Baptiste Say
c. François Quesnay
d. John Maynard Keynes
e. Alfred Marshall
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY:Bloom’s: Knowledge
112.Which of the following was a central argument of Keynes’s General Theory?
a. Competition does not allocate resources efficiently in a modern industrial economy.
b. Full employment can be maintained even during a major recession if wage rates are lowered far enough.
c. Modern industrial economies do not tend automatically toward full employment rates of output.
d. Money does not play an important role in either causing or curing recession.
e. Government can best stabilize the economy by letting the market system automatically adjust toward full employment.
ANS:CPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
113.If spending by the federal government exceeds revenue,
a. the price level tends to fall
b. the money supply must increase
c. the aggregate demand curve shifts leftward
d. the aggregate supply curve shifts rightward
e. there is a federal budget deficit
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 2. The Age of Keynes: After the Great Depression to the Early 1970s
KEY: Bloom’s: Comprehension
114.Keynesian demand management policies are not effective in fighting stagflation.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
115.Stagflation is a situation with high unemployment rates, high inflation rates, and little or no growth in the economy.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
116.Suppose the economy is initially in equilibrium and then an energy shock occurs, such as when OPEC raised oil prices. Which of the following is likely to result?
a. Both the price level and aggregate output will rise.
b. Both aggregate output and the price level will fall.
c. Employment will rise.
d. Stagflation.
e. The price level will fall.
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
117.Confidence in Keynesian economics
a. diminished in the 1960s as the unemployment rate fell
b. flourished in the 1960s despite two major recessions
c. diminished in the 1960s as unemployment increased
d. diminished in the 1970s as inflation occurred simultaneously with two recessions
e. flourished through the 1980s despite Reagan’s supply-side policies
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
118.Stagflation refers to
a. a simultaneous reduction in output and the price level
b. a simultaneous increase in output and the price level
c. a decline in the price level accompanied by increases in real output and employment
d. an increase in the price level accompanied by decreases in real output and employment
e. a simultaneous increase in both the trade deficit and the budget deficit
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
119.Which of the following events did not occur in the 1970s?
a. the U.S. inflation rate soared above 5 percent annually
b. crop failures in major grain-producing countries
c. substantial oil price increases
d. growing confidence that Keynesian policies could stabilize the economy
e. stagflation
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
120.To control inflation, President Nixon
a. ordered wage and salary reductions for all government employees
b. increased government spending
c. dramatically reduced transfer payments such as Social Security
d. applied price floors to all goods and services
e. froze wages and prices
ANS:EPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:3. Stagflation: 1973 to 1980KEY:Bloom’s: Knowledge
121.Stagflation refers to
a. a combination of rising unemployment and rising trade deficits
b. a combination of high unemployment and rising prices
c. high and rapidly increasing inflation
d. extremely high unemployment
e. a combination of rising trade deficits and rising federal government budget deficits
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
122.President Nixon fought the inflation of the early 1970s with
a. increased taxes
b. increased government spending
c. decreased taxes
d. decreased government spending
e. wage and price controls
ANS:EPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
123.On an aggregate demand and aggregate supply graph, the stagflation of the 1970s can be represented as a
a. leftward shift of the aggregate supply curve
b. rightward shift of the aggregate supply curve
c. rise in the price level that caused an excess demand for output
d. rightward shift of the aggregate demand curve
e. decrease in the price level that caused an excess supply of output
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
124.The word stagflation describes a situation in which a higher price level occurs simultaneously with
a. higher employment
b. economic growth
c. lower aggregate output
d. federal budget deficits
e. federal budget surpluses
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
125.The word stagflation describes a situation in which a higher price level occurs simultaneously with
a. lower employment
b. lower unemployment
c. higher aggregate output
d. federal budget deficits
e. federal budget surpluses
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
126.If the economy experiences stagflation,
a. government can quickly restore full employment by doing nothing to interfere with the economy’s natural self-correcting forces
b. only Keynesian policies can remedy the situation
c. only anti-unemployment policies can remedy the situation
d. Keynesian anti-inflation policies will raise the inflation rate
e. increasing a federal budget surplus will worsen inflation
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
127.In the United States before 1970,
a. most macroeconomic instability was caused by simultaneous shifts of aggregate demand and aggregate supply
b. most macroeconomic instability was caused by shifts of aggregate supply
c. most macroeconomic instability was caused by shifts of aggregate demand
d. the government assumed no direct responsibility for the level of employment
e. the government itself was a much less important player in the macroeconomy than it is today
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
128.Keynesian policies are ineffective at combating stagflation because stagflation is caused by
a. budget surpluses
b. decreases in aggregate supply
c. trade deficits
d. trade surpluses
e. budget deficits
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
129.In combating stagflation, a government-induced
a. increase in aggregate demand would help reduce inflation but aggravate unemployment
b. decrease in aggregate demand would help reduce unemployment but aggravate inflation
c. increase in aggregate demand would help reduce unemployment but aggravate inflation
d. decrease in aggregate demand would help reduce both unemployment and inflation
e. increase in aggregate demand would help reduce both unemployment and inflation
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:3. Stagflation: 1973 to 1980KEY:Bloom’s: Analysis
130.Stagflation is best described as
a. increasing output and decreasing prices
b. increasing output and increasing prices
c. no change in output or prices
d. decreasing output and decreasing prices
e. decreasing output and increasing prices
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 3. Stagflation: 1973 to 1980 KEY: Bloom’s: Comprehension
131.The Reagan administration’s policies were aimed at managing aggregate demand.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Knowledge
132.The Reagan tax cut of 1981 was an attempt at supply-side economics.
a. True
b. False
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Knowledge
133.Government debt is a flow variable; the budget deficit is a stock variable.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
134.An increase in aggregate supply will result in
a. lower levels of employment
b. a rightward shift of the aggregate demand curve
c. a higher price level
d. a leftward shift of the aggregate demand curve
e. an economic expansion
ANS:EPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
135.If the government owes $3,500 billion and then borrows $300 billion more this year,
a. the debt is $300 billion and the deficit is $3.8 trillion
b. the debt is $3,800 billion and the deficit is $300 billion
c. the debt is $4,100 billion
d. the deficit is $3,800 billion
e. both the debt and the deficit are $3.8 trillion
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
136.Which of the following statements is correct?
a. A budget deficit is a flow variable; debt is a stock variable.
b. A budget deficit is a stock variable; debt is a flow variable.
c. A budget deficit and the debt are both stock variables.
d. The budget deficit decreases when debt increases.
e. Debt increases when the budget deficit decreases.
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
137.The tax cuts passed during the Reagan administration were designed primarily
a. to make it easier for consumers to spend
b. to shift the aggregate demand curve rightward
c. to reduce the balance-of-payments deficit
d. to increase the supply of productive resources
e. to make filling out tax returns easier for the average taxpayer
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Analysis
138.The aim of supply-side economics is to
a. increase government spending to stimulate aggregate supply
b. stimulate exports to increase the balance of payments
c. decrease wages to make production cheaper
d. lower taxes to increase the supply of resources
e. reduce both the inflation and unemployment problems through an increase in taxes
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
139.The Reagan administration’s 1981 investment tax changes were designed to
a. stimulate aggregate demand and thereby reduce unemployment
b. stimulate aggregate demand and thereby increase economic growth
c. stimulate aggregate supply and thereby increase economic growth
d. decrease aggregate demand in order to reduce inflation
e. increase tax revenues to reduce the federal budget deficit
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
140.All of the following would be considered supply-side approaches to increasing growth except one. Which is the exception?
a. improving the quality of human capital
b. developing an interstate highway system
c. investing in research and development
d. replacing obsolete plants with new ones
e. increasing transfer payments to retirees
ANS:EPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
141.Supply-side economists argue that a cut in personal income tax rates would
a. decrease government revenues
b. increase government revenues
c. have no impact on government revenues
d. increase unemployment
e. decrease economic growth
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: 4. Relatively Normal Times: 1980 to 2007 KEY: Bloom’s: Comprehension
142.Between 1947 and 2003, U.S. real GDP
a. hardly changed at all
b. decreased by about 10 percent
c. doubled
d. increased fivefold
e. grew faster than did nominal GDP
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: CASE STUDY: U.S. Economic Growth Since 1929 KEY: Bloom’s: Knowledge
143.Between 1947 and 1998, total U.S. employment
a. remained about the same while population increased
b. increased faster than the U.S. population
c. grew faster than real GDP so that real GDP per worker fell
d. grew more slowly than real GDP so that real GDP per worker fell
e. more than quadrupled
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: CASE STUDY: U.S. Economic Growth Since 1929 KEY: Bloom’s: Knowledge
144.Since 1947,
a. the U.S. price level has fallen while real GDP rose
b. U.S. real GDP has grown at about the same rate as nominal GDP
c. U.S. employment increased while utilization of capital declined
d. the U.S. price level has doubled, despite eight recessions
e. U.S. real GDP has quintupled, despite eight recessions
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: CASE STUDY: U.S. Economic Growth Since 1929 KEY: Bloom’s: Comprehension
145.Gross world product is
a. the value of all final goods and services produced in the world during a given period
b. the value of all sewage, trash, and bodily fluids produced in the world during a given period
c. the value of all final goods and services produced in the United States during a given period
d. the value of all final goods and services produced in all countries of the world except the United States during a given period
e. the value of all intermediate goods and services produced in the world during a given period
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: The National Economy KEY: Bloom’s: Comprehension
146.The largest and most complex economy in world history is
a. China
b. the United States
c. Mexico
d. Liechtenstein
e. None of the answers is correct
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: What’s Special About the National Economy? KEY: Bloom’s: Knowledge
147.The policy that a nation’s economic vitality would spring from the stock of precious metals accumulated in the public treasury is called monetarism.
a. True
b. False
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:Knowledge and PerformanceKEY:Bloom’s: Knowledge
148.The longest U.S. expansion on record lasted ten years, from
a. April 1854 to April 1864
b. March 1991 to March 2001
c. December 1997 to December 2007
d. September 1929 to September 1939
e. February 1961 to February 1971
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:U.S. Economic FluctuationsKEY:Bloom’s: Knowledge
149.The economy is so __________ that we need to __________ matters.
a. complex, further complicate
b. simple, further simplify
c. simple, complicate
d. complex, simplify
e. complex, completely ignore
ANS:DPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Demand and Aggregate Supply KEY: Bloom’s: Comprehension
150.During a given period in the economy, aggregate output is the
a. total amount of goods and services produced
b. total amount of goods only produced
c. relationship between the price level and the quantity of output demanded
d. price level
e. relationship between the price level and the quantity of output supplied
ANS:APTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Aggregate Output and the Price Level KEY: Bloom’s: Comprehension
Exhibit 5-2
151.Refer to Exhibit 5-2. Which line or point represents equilibrium?
a. line a
b. line b
c. line c
d. line d
e. point e
ANS:EPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
152.Refer to Exhibit 5-2. Which line or point represents aggregate demand?
a. line a
b. line b
c. line c
d. line d
e. point e
ANS:CPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
153.Refer to Exhibit 5-2. Which line or point represents aggregate supply?
a. line a
b. line b
c. line c
d. line d
e. point e
ANS:DPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
154.Refer to Exhibit 5-2. Which line or point represents the price level?
a. line a
b. line b
c. line c
d. line d
e. point e
ANS:BPTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
155.Refer to Exhibit 5-2. Which line or point represents real GDP?
a. line a
b. line b
c. line c
d. line d
e. point e
ANS:APTS:1DIF:Difficulty: Easy
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:EquilibriumKEY:Bloom’s: Analysis
156.In the history of the U.S. economy, which economic era saw both high unemployment and high inflation at the same time?
a. after the Great Depression to the early 1970s
b. since the early 1980s
c. the colonial period
d. before and during the Great Depression
e. from the early 1970s to the early 1980s
ANS:EPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Brief History of the U.S. Economy KEY: Bloom’s: Comprehension
157.The global financial panic in September 2008 which led to a sharp fall in business investment spending and consumer spending can be viewed as
a. a sharp decrease in aggregate supply
b. a sharp decrease in aggregate demand
c. a sharp decrease in both aggregate supply and aggregate demand
d. a modest increase in aggregate supply
e. no change in either aggregate supply or aggregate demand
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP: Brief History of the U.S. Economy KEY: Bloom’s: Comprehension
158.Between the Troubled Asset Relief Program and the American Recovery and Reinvestment Act, the Federal budget deficit
a. doubled
b. tripled
c. stayed the same
d. was cut in half
e. quadrupled
ANS:BPTS:1DIF:Difficulty: Moderate
NAT:BUSPROG: Analytic
STA:DISC: The study of economics, and definitions in economics
TOP:Brief History of the U.S. EconomyKEY:Bloom’s: Knowledge
Exhibit 5-3
159.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The equilibrium is initially represented by which point?
a. A
b. B
c. C
d. D
e. E
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
160.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The equilibrium price level and real GDP is?
a. P3 and GDP6
b. P6 and GDP5
c. P4 and GDP3
d. P1 and GDP4
e. P5 and GDP2
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
161.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The initial equilibrium is at point A. Suppose that the price level in Europe falls, what will the new equilibrium be?
a. A
b. B
c. C
d. D
e. E
ANS: E PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
162.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The initial equilibrium is at point A. Suppose that the price level in Europe falls, what will the new equilibrium be?
a. P2 and GDP1
b. P3 and GDP6
c. P6 and GDP5
d. P4 and GDP3
e. P5 and GDP2
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
163.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The initial equilibrium is at point A. Suppose that the price level in Mexico rises, what will the new equilibrium be?
a. A
b. B
c. C
d. D
e. E
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
164.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The initial equilibrium is at point A. Suppose that global oil prices rise, what will the new equilibrium be?
a. A
b. B
c. C
d. D
e. E
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis
165.In Exhibit 5-3 AD1 and AS1 represent the initial aggregate demand and aggregate supply. The initial equilibrium is at point A. Suppose that global oil prices fall, what will the new equilibrium be?
a. A
b. B
c. C
d. D
e. E
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT:BUSPROG: Reflective Thinking
STA:DISC: The study of economics, and definitions in economics
TOP:Aggregate Demand CurveKEY:Bloom’s: Analysis

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