ECON 110 QUIZ 3 QUESTIONS AND
CORRECT ANSWERS
Employment Act of 1946 ✅✅CORRECT ANSW-The Congress hereby declares that it is the
continuing policy and responsibility of the federal government to use all practicable means
consistent with its needs and obligations... to promote maximum employment, production, and
purchasing power
Central questions of macroeconomics ✅✅CORRECT ANSW-1. Why do output and employment
sometimes fall, and how can unemployment be reduced?
2. What are the sources of price inflation, and how can it be kept under control?
3. How can a nation increase its rate of economic growth?
Business cycles ✅✅CORRECT ANSW-Patterns of expansion and contraction shown by market
economies
Inflation ✅✅CORRECT ANSW-Phenomenon of rising prices; price no longer becomes a yardstick
to measure economic values and conduct business
"Inflation targets" ✅✅CORRECT ANSW-Macroeconomic policy has increasingly emphasized low
and stable inflation as a key goal
Role of macroeconomics in managing inflation ✅✅CORRECT ANSW-Macroeconomics can suggest
the proper role of monetary and fiscal policies, of exchange-rate systems, and of an independent
central bank in containing inflation
Macroeconomics ✅✅CORRECT ANSW-Study of the behavior of the economy as a whole
Business cycle ✅✅CORRECT ANSW-Short-term fluctuations in output, employment, financial
conditions, and prices
Economic growth ✅✅CORRECT ANSW-Longer-term trends in output and living standards
Significance of macroeconomic failures ✅✅CORRECT ANSW-Raise life-and-death questions for
countries and even ideologies
, E.g. fall of communism in Soviet Union
Long-term economic growth ✅✅CORRECT ANSW-Growth in the per capita output of the country;
the central factor in determining the rgwoth in real wages and living standards
Key factors in long-term economic growth ✅✅CORRECT ANSW-Reliance on well-regulated private
markets for most economic activity, stable macroeconomic policy, high rates of saving and
investment, openness to international trade, and accountable and noncorrupt governing institutions
Objectives of Macroeconomics ✅✅CORRECT ANSW-- Output: high level and rapid growth of
output
- Employment: high level of employment with low involuntary unemployment
- Stable prices
Instruments of Macroeconomics ✅✅CORRECT ANSW-- Monetary policy: buying and selling goods,
regulating financial institutions
- Fiscal policy: government expenditures, taxation
Ultimate objective of economic activity ✅✅CORRECT ANSW-Proved the goods and services that
the population desires
Gross Domestic Product (GDP) ✅✅CORRECT ANSW-Measure of the market value of all final goods
and services—beer, cars, rock concerts, monkey rides, and so on—produced in a country during a
year
Nominal GDP ✅✅CORRECT ANSW-Measured in actual market prices
Real GDP ✅✅CORRECT ANSW-Calculated in constant or invariant prices (where we measure the
number of cars times the prices of cars in a given year)
Most closely watched measure of output
CORRECT ANSWERS
Employment Act of 1946 ✅✅CORRECT ANSW-The Congress hereby declares that it is the
continuing policy and responsibility of the federal government to use all practicable means
consistent with its needs and obligations... to promote maximum employment, production, and
purchasing power
Central questions of macroeconomics ✅✅CORRECT ANSW-1. Why do output and employment
sometimes fall, and how can unemployment be reduced?
2. What are the sources of price inflation, and how can it be kept under control?
3. How can a nation increase its rate of economic growth?
Business cycles ✅✅CORRECT ANSW-Patterns of expansion and contraction shown by market
economies
Inflation ✅✅CORRECT ANSW-Phenomenon of rising prices; price no longer becomes a yardstick
to measure economic values and conduct business
"Inflation targets" ✅✅CORRECT ANSW-Macroeconomic policy has increasingly emphasized low
and stable inflation as a key goal
Role of macroeconomics in managing inflation ✅✅CORRECT ANSW-Macroeconomics can suggest
the proper role of monetary and fiscal policies, of exchange-rate systems, and of an independent
central bank in containing inflation
Macroeconomics ✅✅CORRECT ANSW-Study of the behavior of the economy as a whole
Business cycle ✅✅CORRECT ANSW-Short-term fluctuations in output, employment, financial
conditions, and prices
Economic growth ✅✅CORRECT ANSW-Longer-term trends in output and living standards
Significance of macroeconomic failures ✅✅CORRECT ANSW-Raise life-and-death questions for
countries and even ideologies
, E.g. fall of communism in Soviet Union
Long-term economic growth ✅✅CORRECT ANSW-Growth in the per capita output of the country;
the central factor in determining the rgwoth in real wages and living standards
Key factors in long-term economic growth ✅✅CORRECT ANSW-Reliance on well-regulated private
markets for most economic activity, stable macroeconomic policy, high rates of saving and
investment, openness to international trade, and accountable and noncorrupt governing institutions
Objectives of Macroeconomics ✅✅CORRECT ANSW-- Output: high level and rapid growth of
output
- Employment: high level of employment with low involuntary unemployment
- Stable prices
Instruments of Macroeconomics ✅✅CORRECT ANSW-- Monetary policy: buying and selling goods,
regulating financial institutions
- Fiscal policy: government expenditures, taxation
Ultimate objective of economic activity ✅✅CORRECT ANSW-Proved the goods and services that
the population desires
Gross Domestic Product (GDP) ✅✅CORRECT ANSW-Measure of the market value of all final goods
and services—beer, cars, rock concerts, monkey rides, and so on—produced in a country during a
year
Nominal GDP ✅✅CORRECT ANSW-Measured in actual market prices
Real GDP ✅✅CORRECT ANSW-Calculated in constant or invariant prices (where we measure the
number of cars times the prices of cars in a given year)
Most closely watched measure of output
