Macroeconomics Test
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1. The trend of the economy is A
A) the long run growth path of the economy.
B) the long run inflation rate.
C) the long run unemployment rate.
D) the short run production capacity of an economy.
2. In a business cycle, a peak represents the end of A
________ and a trough represents the end of ________.
A) an expansion; a recession
B) a depression; an expansion
C) a trough; a peak
D) a recession; an expansion
3. The unemployment rate equals D
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) (labor force - employed)/labor force.
4. The unemployment rate equals D
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) unemployed/labor force.
5. Which of the following statements is FALSE? D
A) The rate of change in economic activity is used to
assess whether an economy is expanding or contract-
ing.
B) Short-term ups and downs in the economy are
known as business cycles.
C) During a recession, output and employment are
, Macroeconomics Test
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falling.
D) Business cycles are always symmetricthe length of
an expansion is the same as the length of a contrac-
tion.
6. The employment rate is the number of people em- TRUE
ployed divided by number of people in the labor force.
7. In which of the following markets are funds demand- C
ed and supplied?
A) the labor market
B) the goods and services market
C) the money market
D) the factor market
8. In the goods-and-services market, households B
A) only supply.
B) only demand.
C) both supply and demand.
D) neither supply nor demand.
9. The demanders in the goods-and-services market are D
A) households and business firms.
B) households, the government, and the rest of the
world.
C) the government and business firms.
D) households, the government, business firms, and
the rest of the world.
10. A promissory note issued by a corporation when it B
borrows money is a
A) share.
B) corporate bond.
, Macroeconomics Test
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C) corporate dividend.
D) stock
11. Dividends are B
A) government profits distributed among bondhold-
ers. B) corporate profits distributed among sharehold-
ers.
C) capital gains realized by stockholders.
D) promissory notes issued by corporations.
12. To get the economy out of a slump, Keynes believed D
that the government should
A) cut both taxes and government spending.
B) increase both taxes and government spending.
C) increase taxes and/or decrease government spend-
ing.
D) decrease taxes and/or increase government spend-
ing.
13. To bring the economy out of an inflationary period, C
Keynes argued that the government should
A) cut both taxes and government spending.
B) increase both taxes and government spending.
C) increase taxes and/or decrease government spend-
ing.
D) decrease taxes and/or increase government spend-
ing.
14. According to the Classical model, unemployment B
A) could not persist because wages would rise to elim-
inate the excess supply of labor.
B) could not persist because wages would fall to elim-
inate the excess supply of labor.
, Macroeconomics Test
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C) could be eliminated through fiscal and monetary
policies.
D) could be eliminated only through government in-
tervention.
15. According to Keynes, the level of employment is deter- D
mined by
A) flexible wages and prices.
B) interest rates.
C) price and wages.
D) the level of aggregate demand for goods and ser-
vices.
16. The concept of "market clearing" is adopted and de- B
fended by
A) Keynesian economists.
B) Classical economists.
C) fine-tuning economists.
D) demand-side economists.
17. Rapid increases in the price level during periods of A
recession or high unemployment are known as
A) stagflation.
B) stagnation.
C) depression.
D) inflation.
18. Related to the Economics in Practice on p. 97 [409]: F. C
Scott Fitzgerald's The Great Gatsby is set in the "Roar-
ing '20s". This decade in U.S. history was characterized
by A) economic expansion and high unemployment.
B) recession and high unemployment.
Study online at https://quizlet.com/_22dj9j
1. The trend of the economy is A
A) the long run growth path of the economy.
B) the long run inflation rate.
C) the long run unemployment rate.
D) the short run production capacity of an economy.
2. In a business cycle, a peak represents the end of A
________ and a trough represents the end of ________.
A) an expansion; a recession
B) a depression; an expansion
C) a trough; a peak
D) a recession; an expansion
3. The unemployment rate equals D
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) (labor force - employed)/labor force.
4. The unemployment rate equals D
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) unemployed/labor force.
5. Which of the following statements is FALSE? D
A) The rate of change in economic activity is used to
assess whether an economy is expanding or contract-
ing.
B) Short-term ups and downs in the economy are
known as business cycles.
C) During a recession, output and employment are
, Macroeconomics Test
Study online at https://quizlet.com/_22dj9j
falling.
D) Business cycles are always symmetricthe length of
an expansion is the same as the length of a contrac-
tion.
6. The employment rate is the number of people em- TRUE
ployed divided by number of people in the labor force.
7. In which of the following markets are funds demand- C
ed and supplied?
A) the labor market
B) the goods and services market
C) the money market
D) the factor market
8. In the goods-and-services market, households B
A) only supply.
B) only demand.
C) both supply and demand.
D) neither supply nor demand.
9. The demanders in the goods-and-services market are D
A) households and business firms.
B) households, the government, and the rest of the
world.
C) the government and business firms.
D) households, the government, business firms, and
the rest of the world.
10. A promissory note issued by a corporation when it B
borrows money is a
A) share.
B) corporate bond.
, Macroeconomics Test
Study online at https://quizlet.com/_22dj9j
C) corporate dividend.
D) stock
11. Dividends are B
A) government profits distributed among bondhold-
ers. B) corporate profits distributed among sharehold-
ers.
C) capital gains realized by stockholders.
D) promissory notes issued by corporations.
12. To get the economy out of a slump, Keynes believed D
that the government should
A) cut both taxes and government spending.
B) increase both taxes and government spending.
C) increase taxes and/or decrease government spend-
ing.
D) decrease taxes and/or increase government spend-
ing.
13. To bring the economy out of an inflationary period, C
Keynes argued that the government should
A) cut both taxes and government spending.
B) increase both taxes and government spending.
C) increase taxes and/or decrease government spend-
ing.
D) decrease taxes and/or increase government spend-
ing.
14. According to the Classical model, unemployment B
A) could not persist because wages would rise to elim-
inate the excess supply of labor.
B) could not persist because wages would fall to elim-
inate the excess supply of labor.
, Macroeconomics Test
Study online at https://quizlet.com/_22dj9j
C) could be eliminated through fiscal and monetary
policies.
D) could be eliminated only through government in-
tervention.
15. According to Keynes, the level of employment is deter- D
mined by
A) flexible wages and prices.
B) interest rates.
C) price and wages.
D) the level of aggregate demand for goods and ser-
vices.
16. The concept of "market clearing" is adopted and de- B
fended by
A) Keynesian economists.
B) Classical economists.
C) fine-tuning economists.
D) demand-side economists.
17. Rapid increases in the price level during periods of A
recession or high unemployment are known as
A) stagflation.
B) stagnation.
C) depression.
D) inflation.
18. Related to the Economics in Practice on p. 97 [409]: F. C
Scott Fitzgerald's The Great Gatsby is set in the "Roar-
ing '20s". This decade in U.S. history was characterized
by A) economic expansion and high unemployment.
B) recession and high unemployment.
