Econ 101 CHP 6

The topics studied in macroeconomics include:

-monopolies.
-mergers.
-inflation.
-spillovers, such as pollution.

inflation

Which would NOT be classified as a MACROECONOMIC question?

-What determines the overall level of prices?
-How many people are employed in the economy as a whole?
-What determines a university’s cost of offering a new course?
-What determines the overall trade in goods, services, and financial assets between the United States and the rest of the world?

-What determines a university’s cost of offering a new course?

Which question is the most appropriate to the study of MACROECONOMICS?

How much will Sony charge for the new game system to be introduced later this year?
How does the level of interest rates affect Delta’s decision to buy a new airplane?
How does the aggregate price level affect overall consumer spending?
What determines whether Wachovia opens a new office in Beijing?

How does the aggregate price level affect overall consumer spending?

The view that the government should take an active role in the macroeconomy dates to:

the Civil War.
the Vietnam War.
World War I.
the Great Depression.

great depression

The central mission of modern macroeconomics is to prevent:

-shortages.
-surpluses.
-high gas prices.
-a deep recession like the Great Depression.

-a deep recession like the Great Depression.

Keynesian economics stressed:

that the Depression should run its course to bring down the high cost of living.
the importance of total spending.
the self-correcting power of free markets.
the long run.

the importance of total spending.

If during several months the economy is simultaneously increasing its levels of output and employment, then the economy is in a(n):

-expansion.
-turning point between a recovery and a downturn.
-recession.
-depression.

expansion

An economic expansion in the United States is typically associated with a(n):

increase in the poverty rate.
falling unemployment rate.
falling inflation rate.
decrease in corporate profits.

falling unemployment rate

Figure: The Business Cycle

Reference: Ref 6-1
******(GOES UP THE CURVE)
(Figure: The Business Cycle) Look at the figure The Business Cycle. The movement from point B to C is called a(n):

-trough.
-expansion.
-peak.
-depression.

Expansion

Long-run growth is the sustained upward trend in:

aggregate output per person over several decades.
aggregate output per person over the business cycle.
interest rates over time.
the unemployment rate over time.

aggregate output per person over several decades.

Long-run economic growth is best measured by:

-the rate of private saving.
-a sustained rise in the production of goods and services.
-the growth of the money supply.
-trade surpluses in the long run.

-a sustained rise in the production of goods and services.

Which of the following statements is TRUE?

-Long-run growth models and business cycle models are the same.
-The level of saving is important for long-run growth.
-In the past century, the population of the United States has grown faster than output.
-Since World War II, the economy of Argentina has grown faster than the economy of Canada.

-The level of saving is important for long-run growth.

If workers’ nominal wages have risen by 50% over a 10 years and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services workers can buy has:

decreased in quality.
fallen.
increased.
not changed.

increased

Price stability occurs when:

the overall cost of living is changing very slowly.
food prices have remained the same.
the overall price level is zero.
the economy is at full employment.

the overall cost of living is changing very slowly.

A nation whose value of imports exceeds its value of exports is said to have:

a trade deficit.
hyperinflation.
price stability.
a trade surplus.

a trade deficit.

One of the issues of importance to macroeconomists is:

-the behavior of individuals and their allocation of income.
-the behavior of individual markets.
-how firms determine the profit-maximizing level of output.
-understanding how living standards change over time.

-understanding how living standards change over time.

Setting government spending and taxes in an effort to change overall spending in an economy is use of:

fiscal policy.
monetary policy.
the stock market.
investment.

fiscal policy.

One normally expects that unemployment increases while aggregate output and aggregate incomes decrease during:

a recession.
government intervention.
the peak of the business cycle.
an expansion.

a recession.

If an economy is open:

it does not trade with other countries.
trading with other countries makes up a portion of its economy.
anyone can immigrate to the country.
Its real GDP will drop.

trading with other countries makes up a portion of its economy.

The relation between a country’s level of saving and investment:

pertains to trade surpluses only.
does not affect an open economy.
affects its trade balances.
has often been used to correct a trade deficit but not a tra

affects its trade balances.