Macroeconomics Principles and Policy 13th Edition by William J. Baumol - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below True / False 1. The key characteristic of macroeconomics is the process of aggregation. a. True b. False ANSWER: True POINTS: 1 …
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Macroeconomics Principles and Policy 13th Edition by William J. Baumol – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
| True / False |
1. The key characteristic of macroeconomics is the process of aggregation.
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2. Someone who studies the pricing policies of the Microsoft Corporation would be a microeconomist.
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3. Economic aggregates are not observable in the “real world.”
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4. Aggregation involves adding together different products and services.
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5. Abstract terms like “cost of living” and “price level” are meaningless to ordinary individuals.
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6. Macroeconomists pay little attention to the composition of aggregate output.
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7. During economic fluctuations, individual markets usually move in different directions.
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8. From 2000 to 2001, the U.S. economy’s annual growth rate slowed down abruptly.
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9. Individuals live and work in both individual and aggregate economic entities.
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10. Two of the most important macroeconomic issues are unemployment and inflation.
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11. An increase in aggregate demand will result in inflation.
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12. Supply and demand provides the basic explanatory framework for constructing both microeconomic and macroeconomic models.
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13. In macroeconomics, the vertical axis in a supply-demand model measures the price level rather than a particular product’s price.
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14. If aggregate demand keeps shifting rightward month after month and aggregate supply remains constant, the economy will experience a recession.
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15. Gross Domestic Product represents the money value of all final goods and services produced in the domestic economy within the year.
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16. Nominal GDP includes the current value of services produced in the economy.
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17. Real GDP values current output of goods and services at their current prices.
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18. GDP in 2015 would not include the resale of a house built in 2000.
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19. Gross Domestic Product includes the sale of intermediate goods and services.
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20. If a woman marries her housekeeper, GDP would remain constant.
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21. Cars produced by General Motors in Mexico would be included in U.S. Gross Domestic Product.
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22. When the Art Institute of Chicago purchases a painting by Mary Cassatt that she produced in Paris in 1885, this would not be included in the U.S. GDP for 2015.
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23. Illegal gambling on the NCAA Final Four would be included in GDP.
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24. GDP consistently measures the output of goods and services in all countries.
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25. The existence of the “underground economy” causes measured GDP to overestimate actual output.
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26. Gross Domestic Product accurately measures the environmental costs of producing all goods and services.
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27. Changes in nominal GDP always reflect changes in real output.
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28. Production for war and environmental clean-up services are not included in GDP.
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29. In the United States, GDP has grown slower than the population since 1870.
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30. Business cycles are a persistent feature of the U.S. economy.
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31. Economic fluctuations in the United States have been less extreme since the 1950s.
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32. In terms of macroeconomic conditions, the 1930s were the “good old days.”
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33. John Maynard Keynes wrote that economies can suffer recession or depression for many years if the government does not intervene.
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34. If aggregate demand shifts outward, the result will be inflation.
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35. Stagflation is the simultaneous occurrence of inflation and high unemployment.
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36. In the early 1980s, the economy experienced high unemployment with falling inflation.
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37. One of the initial problems facing the newly elected President Clinton was a large budget deficit.
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38. Part of the good economic performance of the United States in the 1990s can be explained by a rightward-shifting aggregate supply curve.
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39. Stabilization policy often faces a trade-off between inflation and unemployment.
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40. In 2001, the first year of the Bush administration, Americans learned that recessions were a thing of the past.
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41. In response to the “Great Depression 2.0” the Obama administration responded with more tax cuts, increased federal spending, and aid to state and local governments.
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| 42. Economist John Maynard Keynes wrote that the economy naturally gravitates toward smooth growth and high levels of employment.
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43. The composition of demand and supply in various markets is not important to the question of inflation. .
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44. The Great Depression changed the prevailing thinking about economics.
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| Multiple Choice |
45. A macroeconomist would concentrate on which of the following issues?
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46. In economics, aggregation refers to
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47. Macroeconomists are distinguished from microeconomists because macroeconomists are more interested in
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48. Macroeconomists think that
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49. An economist who studies the sales and profits of a large corporation would be classified as a(n)
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50. Combining various goods and services into a convenient grouping is called
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51. Macroeconomics stresses
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52. How do macroeconomists differ from microeconomists?
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53. Microeconomics focuses on ____; macroeconomics concentrates on ____.
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54. Economists define an aggregate as
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55. If a macroeconomist aggregates many markets into one, then
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56. China is the world’s largest wheat producer. If China’s domestic product grew by eleven percent in the previous year, it implies that
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57. During economic fluctuations, markets tend to move
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58. For a macroeconomist, the case for aggregation is based on two principles⎯1) the composition of demand and supply may not matter for some purposes, and 2)
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59. During the first year of the Bush administration in 2001, the American economy
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60. It might be useful to think of macroeconomics as a study of ____ and microeconomics as a study of ____.
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61. An example of an abstraction used in macroeconomics is
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62. While their respective subject matters differ greatly, both microeconomists and macroeconomists rely on the same basic tools; that is, both rely on
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63. The horizontal axis on the aggregate demand-aggregate supply model measures
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64. The aggregate demand curve shows the quantity of domestic product
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65. The basic organizing framework for both microeconomic and macroeconomic models is
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66. If aggregate demand shifts outward over a long period of time, with aggregate supply held constant, the economy should experience
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67. If aggregate demand shifts inward over a long period of time, with aggregate supply held constant, the economy should experience
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68. A recession is a period during which
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69. The vertical axis of the aggregate demand-aggregate supply model measures the amount of
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70. In the aggregate demand-aggregate supply model, economic growth can be illustrated by an
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71. The clearest sign of inflation would be a(n)
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72. Gross Domestic Product is best described as the
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73. Nominal GDP is
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74. Real GDP
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75. Which of the following is a true measure of national output?
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76. Gross Domestic Product is the
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77. Gross Domestic Product is calculated by adding together
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78. If the prices of all goods and services rise during the year,
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79. The clearest sign of economic growth is a(n)
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80. A good produced in 2009 and held in inventory until it is sold in 2010 would be included in which measure of GDP?
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81. A real estate salesperson sells a house in 2015 that was built in 2005. How does this transaction get counted in the GDP statistics?
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82. In 2015, you buy a beautiful vintage 1965 Thunderbird convertible. This purchase would
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83. Macroeconomic models use abstract concepts such as “price level” and “national income” that are calculated by combining many markets into one. This process is known as
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84. You are a collector of antique coins. You purchase a silver dollar minted in 1898. Is this sale included in GDP for the current year?
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85. Aneta has owned an Italian sports car for several years and now she wants to sell it. She paid $8,500 for it in 1993 and she has just sold it for $39,000 in 2015. How is this sale included in the GDP for 2015?
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86. Real GDP differs from nominal GDP in that nominal GDP measures
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87. Intermediate goods, like milk sold by a farmer to a supermarket, are
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88. General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country’s GDP is it included?
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89. If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which country’s GDP will the car be counted?
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90. Which of the following transactions would be included in GDP for 2015?
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91. If hot dogs cost $2 this year and $3 next year, then 100 hotdogs will contribute
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92. E&S Cooling Co. installs air conditioning systems in new houses for homebuilders, and replacement systems for homeowners. Sales of which systems are included in this year’s GDP?
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93. In periods of generally rising prices,
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94. Inflation refers to an increase in the
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95. The major difference between nominal GDP and real GDP is that
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96. Suppose that in 2015 you paid $150,000 for a house that was built in 2005 and sold that year for $210,000. The amount this transaction would add to the GDP in 2015 is
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97. Which of the following would tend to increase the value of officially measured GDP?
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98. Gross Domestic Product is a monetary measure of
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99. An example of an intermediate good would be a(n)
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100. Real GDP is another term for
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101. Nominal GDP is another term for
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102. The definition of Gross Domestic Product is
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103. Does GDP for a particular year include items produced in a previous year?
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104. A product that is produced in 2015 and not sold until 2016 will be counted in the GDP for
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105. Trish grows oregano in her backyard to use in her homemade pesto sauce. How is this gardening included in GDP?
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106. Dissatisfaction with public school education has led many parents to try home schooling for their children. If parents cut back on their jobs outside the home in order to spend time teaching their children at home, how will this affect GDP?
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107. Which of the following is counted in GDP?
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108. Which of the following is included in GDP?
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109. In 2015, Richard buys a 2003 Chevrolet minivan from a neighbor. Will this be counted in the GDP for 2015?
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110. Amazon.com, an Internet retailer of books, buys a shipment of economics textbooks from a publisher. Is this included in GDP?
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111. In March 2015, many college students bet on the NCAA finals in dorm gambling pools. This is an example of
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112. Mitsubishi Corporation of America builds a car in Normal, Illinois, and ships it to Japan for sale. In which country’s GDP is this production included?
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113. Gross Domestic Product is an economic aggregate that represents the
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114. Gross Domestic Product is a dollar measure of
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115. Nominal GDP is calculated by using
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116. Phoebe and Rachel quit running in Central Park and join a health club to run on treadmills. This decision
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117. Poor Asian countries may have per-capita GDP’s that may be less than $250. Why is this somewhat misleading for comparative purposes?
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118. Is GDP an accurate measure of a country’s well being?
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119. The Italian government collects a smaller amount of the taxes it is owed than the U.S. government. Other things being equal,
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120. Growth in GDP systematically understates the growth in national well being because
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121. Consider the economic effects of the September 11, 2001 terrorist attacks. Which of the following statements is correct?
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122. International per capita GDP comparisons are misleading when countries involved differ greatly in
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123. Since countries differ in the amount of economic activity that is transacted in organized markets,
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124. “Underground” economic activity can best be described as
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125. In her book on the American work week, economist Juliet Schorr argues that Americans work too much. Her argument may be interpreted as concluding that this behavior
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126. In 2001 the United States and its NATO allies dropped millions of dollars’ worth of bombs on Afghanistan. These bombs and the aircraft from which they were dropped
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127. When people smoke cigarettes, their friends and family members may become sick. This affects GDP by
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128. Large sport utility vehicles (SUVs) add significantly to air pollution because they do not have to meet passenger auto emission standards. The purchase of an SUV
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129. How does the calculation of GDP include the costs of natural resource depletion that occurs when output is produced?
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130. The Great Depression of the 1930s
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131. One major effect of the Great Depression was
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132. In the 1960s, U.S. economy experienced
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133. In the past 100 years the U.S. economy has primarily experienced
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| Figure 5-1 |
134. Figure 5-1 plots potential and real output for a hypothetical economy. Based on this graph, the recession occurred
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135. A period in which the price level is rising is experiencing
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136. In the United States during the period from 1870 to 1940, the price level was most likely to
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137. In the period of U.S. economic history known as the Great Depression, the rate of inflation was generally
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138. Before the Great Depression of the 1930s, most economists believed that
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139. John Maynard Keynes wrote The General Theory of Employment, Interest, and Money (1936) to
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140. During the Great Depression of the 1930s, unemployment peaked at _____%.
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141. In The General Theory of Employment, Interest, and Money, Keynes rejected the idea that
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142. According to Keynes, a pessimistic outlook causes consumers and businesspersons to ____, and a recession could occur.
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143. The Great Depression of the 1930s led to a revolution in macroeconomic thinking, following the work of
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144. The most severe depression in the United States was the 30 percent decrease in real GDP that occurred between
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145. Keynes’ great book offered the promise of ending depressions through
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146. Technically speaking, in what year did the “Great Recession” end?
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147. The Great Depression ended in the United States when
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148. Which of the following would be counted in the U.S. GDP for 2015?
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149. What was suggested by Keynes to move the economy out of a depressed state?
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150. The human consequences of the Great Depression included
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151. The price controls on consumer goods during World War II led to
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152. The 1960s are remembered by most economists as a period of
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153. The successes of the 1960s were ascribed to the effects of
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154. Usually, increased government spending for war increases inflationary pressures. The principal reason that inflation occurred during the Vietnam War and not during World War II was the existence, during World War II, of
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155. In contrast to the typical Republican Party laissez-faire policies, President Richard Nixon in 1971 introduced
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156. The international organization most responsible for rising prices during the 1970s was
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157. The recession of 1973-1975 was unusual in that both inflation and unemployment increased at the same time. This suggests that the primary cause of the recession was an
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158. The movements of real GDP and inflation during the 1973-1975 recession can be best explained by a:
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159. The period of 1973 to 1980 can best be described as a time of
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160. The term “stagflation” was invented in the 1970s to describe an economy experiencing both
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161. The stagflation in the United States during the 1974-1975 period can be attributed to
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162. Stagflation can be defined as a combination of ____.
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163. The significantly high rates of inflation in the 1970s occurred, in part,
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164. The Iranian Revolution in 1979 led to another interruption of oil supplies to the United States. This caused the reoccurrence of
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165. The worst post-World War II recession in the United States occurred in
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166. In 1981, the Reagan administration employed a policy that included tax ____ while at the same time the Federal Reserve’s strategy was to combat ____.
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167. The period from 1983 to 1990 was characterized by
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168. The supply-side policies of the Reagan and Bush administrations led to high levels of
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169. The election campaign of George Bush to succeed Ronald Reagan as president was
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170. The main reason that President Clinton was forced to revise his campaign promise to cut taxes was that, in 1993, he faced a large
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171. The macroeconomic conditions during the mid-1990s confounded many economists because of the simultaneous occurrence of
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172. The first year of the Bush administration in 2001 could be represented as a(n)
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173. The tax cut of 2001 turned out to be well-timed because it caused a
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174. The name given to government programs implemented to prevent or shorten recessions and counteract inflation is
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175. Government policy to reduce unemployment and increase national output can be illustrated by an
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176. The primary benefit to the macroeconomy of increasing government spending is a(n)
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177. If the government uses stabilization policies to reduce inflation, the economy may have to suffer
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178. Combating recession may require the government to
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179. In response to significant economic problems, the Obama administration recommended
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| Figure 5-2 |
180. In Figure 5-2, if the aggregate demand curve shifts outward over time, the economy will
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181. In Figure 5-2, an increase in government spending would cause
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182. In Figure 5-2, if the aggregate demand curve moves to the right less rapidly than the aggregate supply curve, then
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183. The economy in the period 1950 to 1998 behaved differently than the economy in the 1870 to 1940 time period. Economists explain this difference
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184. To fight inflation, the government may
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185. To fight recession, the government may
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186. Stabilization policy is the name given to government economic policies designed to
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187. In contrast to the post-World War II period, before 1940 the government
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| Aggregate demand and supply curves have been widely used to analyze the performance of the macroeconomy. Figure 5-3 shows four diagrams that represent different changes in the macroeconomy. Choose the diagram that best represents the situations described in the following questions.
Figure 5-3 |
188. Which graph in Figure 5-3 best represents the aggregate demand-induced Great Depression of the 1930s?
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189. Which graph in Figure 5-3 best represents the supply-side shock of the 1970s oil crisis?
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190. Which graph in Figure 5-3 best represents the favorable macroeconomy of the late 1990s?
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191. Which graph in Figure 5-3 best represents the economic conditions of the American economy in 2001?
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192. An increase in aggregate demand is most likely to result in
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193. A rightward shift in the aggregate demand curve is most likely to result in
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194. Recessions
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195. From the end of World War II until the present, the price level has
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196. Business cycles in the United States after World War II have been
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197. You can generally distinguish an aggregate supply-caused recession from an aggregate demand-caused recession because
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198. What makes the macroeconomic performance of the 1993 to 1998 period so unusual is the
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199. According to the text, the government can use aggregate demand management policies to reduce unemployment rates. A byproduct of this policy will be
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200. If the aggregate demand curve shifts to the left and the aggregate supply curve shifts to the right, the result will be a
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201. Technological change, such as the information technology revolution of the 1990s can shift the aggregate supply curve outward. If, at the same time, the government is decreasing spending, the most likely outcome of these two factors is a(n)
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202. Since the end of World War II, the economy of the United States has been more influenced by stabilization policy. One of the undesirable side effects of this has been that the economy now has a greater tendency to suffer from
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203. GDP does not measure the economic well-being of a nation because:
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204. Corrected for inflation, the real GDP was only about _____ times greater in 2014 than in 1959.
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| Essay |
205. Define the following terms and explain their importance to the study of macroeconomics:
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206. Discuss some of the fundamental differences between microeconomics and macroeconomics.
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207. What is an aggregate? How is it used in macroeconomics? Give two examples of specific aggregates that are used in the study of macroeconomics.
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208. What are the two basic principles of aggregation?
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209. What is Gross Domestic Product? What is included in this statistic? What is excluded? Give two examples of goods or services that are included in GDP and two examples of goods or services that are excluded.
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210. Which of the following items are included in GDP? For those items not included, explain why they are not included in GDP.
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211. Define and distinguish between real and nominal GDP. Explain why the distinction is important to economists.
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212. What are intermediate goods? Why do economists exclude the value of intermediate goods while calculating national income?
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213. Compare and contrast the U.S. economic record prior to 1940 and after 1950. How do the two time periods differ? What best explains the differences according to a macroeconomist?
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214. Why do price levels increase when government adopts fiscal or monetary policy to correct the economy when it faces a recession and high unemployment?
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215. Describe some of the steps used to combat inflation. What are their side-effects?
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216. Contrast the economic performance of the American economy of 2001 with the economic performance of the 1996 to 2001 period. Use the appropriate aggregate demand and aggregate supply curves to distinguish the differing economic condition of the two periods.
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