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- 1. Multiple ChoiceThe business cycle describes the fact thatunemployment levels are constantly changing.an economy’s level of output fluctuates between times of recession and expansion.inflation rates are constantly changing.politicians usually pass laws that cause the economy to react in unpredictable ways.
- 2. Multiple ChoiceIn the long run, the economy of the United States hassteadily grown over time.steadily declined over time.behaved in ways that cannot be explained by modern macroeconomists.experienced drastic fluctuations, but it is back to its old levels now.
- 3. Multiple ChoiceThe general relationship between GDP and unemployment can be described asdirect; meaning that an increase in one variable usually signals an increase in the other variable.direct; meaning that an increase in one variable usually signals no change in the other variable.inverse; meaning that a decrease in one variable usually signals a decrease in the other variable.inverse; meaning that an increase in one variable usually signals a decrease in the other variable.
- 4. Multiple ChoiceWhen the economy experiences an expansion, it is most likely the case thatGDP is increasing, unemployment is increasing, and inflation is decreasing.GDP is increasing, unemployment is decreasing, and inflation is increasing.GDP is decreasing, unemployment is decreasing, and inflation is increasing.GDP is decreasing, unemployment is decreasing, and inflation is decreasing.
- 5. Multiple ChoiceIt is important to control the strength of expansions becauselong run growth is not desirable.it will help prevent recessions from happening.it is important to keep unemployment from getting too high.it is important to keep inflation from getting too high.
- 6. Multiple ChoiceDuring recessions all of the following usually happen EXCEPTGDP decreases.unemployment increases.inflation increases.inflation decreases.
- 7. Multiple ChoiceGDP is an important economic measurement because itprovides valuable data on unemployment rates.provides valuable data on unemployment rates.measures all final goods and services produced by a country.includes all economic activity, including financial transactions and purchases of used goods.
- 8. Multiple ChoiceSuppose a miner harvests a ton of iron ore, an iron smelter turns the iron ore into steel, and a carmanufacturer turns the steel into a car. If the miner adds a value of $1000, the iron smelter sells the steelfor $3500, and the car manufacturer sells the car for $9000, how much has been added to GDP?$4,500$8,000$9,000$13,500
- 9. Multiple ChoiceWhich of the following is NOT included when calculating GDP for the United States?Cars manufactured in Japan, but sold in the United StatesCars manufactured in the United States, but sold in JapanCars manufactured in Michigan, but sold in MinnesotaCars manufactured in Michigan, but sold to the government
- 10. Multiple ChoiceIn order to accurately compare GDP between different years, what must be removed from GDP?Investment spendingThe value added amountGovernment spendingChanges in price caused by inflation
- 11. Multiple ChoiceWhen using the income approach to calculate GDP, all of the following are necessary components EXCEPTwages.interest paid to lenders.consumer expenditures.profits.
- 12. Multiple ChoiceWhich of the following statements about nominal GDP and real GDP is true?Nominal GDP and real GDP are always the same in whichever base year has been chosen for calculation.Nominal GDP is always a larger number than real GDP.Nominal GDP and real GDP may have different levels, but they are always increasing.Nominal GDP is a more useful measurement when comparing levels of GDP over time.
- 13. Multiple ChoiceWhen using the expenditure approach to calculate GDP, which of the following gets excluded?Consumer spendingBusiness investment spendingImportsGovernment spending
- 14. Multiple ChoiceAll of the following people are considered employed EXCEPTJen, who has been home sick for the last two weeks.Peter, who only worked at his job for three hours last week.John, who has been on vacation from his job for one week.Harold, who began his job three weeks ago on his 15th birthday.
- 15. Multiple ChoiceAll of the following people are considered unemployed EXCEPTMolly, who filled out three applications this week.Ryan, who currently serves in the military.Kyle, who only worked for 30 minutes last week.Brittany, who was recently fired from her job.
- 16. Multiple ChoiceOne of the problems with the unemployment rate is that itdoes not reflect workers who have given up searching for a job.is not measured accurately.counts underemployed workers as unemployed workers.does not count any workers above the age of 55.
- 17. Multiple ChoiceA worker who was laid off due to a downturn in the business cycle would be consideredfrictionally unemployed.structurally unemployed.cyclically unemployed.seasonally unemployed.
- 18. Multiple ChoiceIf an economy is at full employment, it has an unemployment rate that is called thenatural rate of unemployment.frictionally-adjusted unemployment rate.cyclically-adjusted unemployment rate.potential rate of unemployment.
- 19. Multiple ChoiceDuring times of economic recession the unemployment rate usuallystays around 25%.stays the same.increases.decreases.
- 20. Multiple ChoiceWhen the unemployment rate is relatively high,the growth in real GDP is high.the growth in real GDP is low.inflation is also relatively high.the amount of physical capital available has decreased.
- 21. Multiple ChoiceThe Consumer Price Index (CPI)consists of items a typical 18-year old might buy for himself or herself.uses a representative market basket to calculate current price levels in an economy.is equal to 200 in whichever year is considered the base year.only increases during times of economic expansion.
- 22. Multiple ChoiceThe difference between demand-pull inflation and cost-push inflation is thatdemand-pull inflation is caused by a drop in aggregate demand and cost-push inflation is caused by a rise in aggregate supply.demand-pull inflation is caused by a drop in aggregate supply and cost-push inflation is caused by a rise in aggregate demand.demand-pull inflation is caused by a rise in aggregate supply and cost-push-inflation is caused by a drop in aggregate demand.demand-pull inflation is caused by a rise in aggregate demand and cost-push inflation is caused by a drop in aggregate supply.
- 23. Multiple ChoiceIf a government decides to pay its debts by printing more money, the economy will likely encounterdramatic decreases in inflation rates.excessive rates of inflation, which may lead to hyperinflation.high rates of inflation but very low levels of unemployment.problems with deflation.
- 24. Multiple ChoiceWhich of the following is not considered a cost of inflation?Shoe-leather costsOutput costsMenu costsunit of account costs
- 25. Multiple ChoiceMost policy makers try to achieve an inflation rate of around 2% - 3% becauseboth lenders and borrowers have come to expect these levels of inflation.this ensures the economy will run at full employment.it is high enough to avoid the problems of deflation, but low enough to avoid most problems associated with inflation.it is ideal to have expected inflation equal unexpected inflation.
- 26. Multiple ChoiceWhich one of the following items is considered an intermediate good?breadflourcakebrownies
- 27. Multiple ChoiceWhich of the following would count towards GDP?a previously owned carstocks and bondsitems produced by a US company in another countrya newly built home
- 28. Multiple ChoiceWhat is the formula for calculating GDP if using the expenditure approach?consumption + investment + government spending + net exportswages + interest + rent + profitadd up all values added to the goodnone of these
- 29. Multiple ChoiceWhat is the formula for calculating GDP if using the income approach?consumption + investment + government spending + net exportswages + interest + rent + profitadd up all values added to the goodnone of these
- 30. Multiple ChoiceWhat is considered "interest" in the GDP income approach?worker's wagesmoney paid for the use of landthe remaining income after all expenses have been paid outmoney paid to people that lend money to the business
- 31. Multiple ChoiceWhat is considered "profit" in the GDP income approach?workers' wagesmoney paid for the use of landthe remaining income after all expenses have been paid outmoney paid to people that lend money to the business
- 32. Multiple ChoiceWhat usually happens to inflation during a recession?it stays the sameit increasesit decreasesit is zero
- 33. Multiple ChoiceWhich of the following is not a component of the business cycle?expansionrecessionpeakdecline
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