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1. Which of the following is correct?
a.
Short run fluctuations in economic activity happen only in developing countries.
b.
During economic contractions most firms experience rising profits.
c.
Recessions come at irregular intervals and are easy to predict.
d.
When real GDP falls, the rate of unemployment generally rises.
2. When we say that economic fluctuations are “irregular and unpredictable,” we mean that
a.
the relationship between output and unemployment is erratic and difficult to characterize.
b.
when one macroeconomic variable that measures income or spending is falling, other macroeconomic
variables that measure income or spending are likely to be rising.
c.
recessions do not occur at regular intervals.
d.
All of the above are correct.
3. Which of the following is correct?
a.
Economic fluctuations are easily predicted by competent economists.
b.
Recessions have never occurred very close together.
c.
Spending, income, and production do not fluctuate closely with real GDP.
d.
None of the above is correct.
4. Which of the following is correct?
a.
Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations
can be predicted with a much accuracy.
b.
Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost
impossible to predict these fluctuations with much accuracy.
c.
Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These
fluctuations can be predicted with some accuracy.
d.
Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost
impossible to predict these fluctuations with much accuracy.
5. Which of the following is most commonly used to monitor short-run changes in economic activity?
a.
the inflation rate.
b.
real GDP.
c.
interest rates.
d.
value of the U.S. dollar in the foreign exchange market.
6. Real GDP
a.
is the current dollar value of all goods produced by the citizens of an economy within a given time.
b.
measures economic activity and income.
c.
is used primarily to measure long-run changes rather than short-run fluctuations.
d.
All of the above are correct.
7. During recessions
a.
sales and profits fall.
b.
sales and profits rise.
c.
sales rise, profits fall.
d.
profits fall, sales rise.
8. Which of the following is correct?
a.
Over the business cycle investment fluctuates more than consumption.
b.
Economic fluctuations are easy to predict.
c.
During recessions employment rises.
d.
Because of government policy the U.S. had zero recessions in the last 25 years.
9. Which of the following fall during a recession?
a.
both retail sales and employment
b.
retail sales but not employment
c.
employment but not retail sales
d.
neither employment nor retail sales
10. During recessions which type of spending falls?
a.
consumption and investment
b.
investment but not consumption
c.
consumption but not investment
d.
neither consumption nor investment
11. The investment component of GDP measures spending on
a.
financial assets such as stocks and bonds. During recessions it declines by a relatively large amount.
b.
residential construction, business equipment, business structures, and changes in inventory. During recessions
it declines by a relatively large amount.
c.
financial assets such as stocks and bonds. During recessions it declines by a relatively small amount.
d.
residential construction, business equipment, business structures, and changes in inventory. During recessions
it declines by a relatively small amount.
12. During recessions investment
a.
falls by a larger percentage than GDP.
b.
falls by about the same percentage as GDP.
c.
falls by a smaller percentage than GDP.
d.
falls but the percentage change is sometimes much larger and sometimes much smaller.
13. During recessions declines in investment account for about
a.
1/6 of the decline in real GDP.
b.
1/7 of the decline in real GDP.
c.
1/3 of the decline in real GDP.
d.
2/3 of the decline in real GDP.
Figure 33-1.
14. Refer to Figure 33-1. Line A is
a.
investment spending.
b.
real GDP.
c.
unemployment rate.
d.
CPI.
CUSTOM ID:
014.33.1 - MC - MANK08
Figure 33-2.
15. Refer to Figure 33-2. Line X is
a.
investment spending.
b.
real GDP.
c.
unemployment rate.
d.
CPI.
16. Historically, the change in real GDP during recessions has been
a.
mostly a change in investment spending.
b.
mostly a change in consumption spending.
c.
about equally divided between consumption and investment spending.
d.
sometimes mostly a change in consumption and sometimes mostly a change in investment.
17. Investment is a
a.
small part of real GDP, so it accounts for a small share of the fluctuation in real GDP.
b.
small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
c.
large part of real GDP, so it accounts for a large share of the fluctuation in real GDP.
d.
large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.
18. Which part of real GDP fluctuates most over the course of the business cycle?
a.
consumption expenditures
b.
government expenditures
c.
investment expenditures
d.
net exports
19. Recession come at
a.
regular intervals. During recessions consumption spending falls relatively more than investment spending.
b.
regular intervals. During recessions investment spending falls relatively more than consumption spending.
c.
irregular intervals. During recessions consumption spending falls relatively more than investment spending.
d.
irregular intervals. During recessions investment spending falls relatively more than consumption spending.
20. Which of the following typically rises during a recession?
a.
investment.
b.
unemployment.
c.
tax revenues.
d.
new home construction.
21. Real GDP
a.
moves in the opposite direction as unemployment.
b.
increases as production falls.
c.
falls when households save a smaller fraction of their income.
d.
All of the above are correct.
22. During recessions, income
a.
and unemployment both rise.
b.
rises and unemployment falls.
c.
falls and unemployment rises.
d.
and unemployment both fall.
23. Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these
pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?
a.
10 percent, 1 percent
b.
2 percent, 12 percent
c.
-1 percent, 8 percent
d.
-2 percent, 2 percent
24. Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these
pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?
a.
5 percent, 1 percent
b.
3 percent, 5 percent
c.
-1 percent, 3 percent
d.
-2 percent, 4 percent
25. In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is
a.
above the natural rate, so real GDP growth was likely low.
b.
above the natural rate, so real GDP growth was likely high.
c.
below the natural rate, so real GDP growth was likely low.
d.
below the natural rate, so real GDP growth was likely high.
26. During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that
this is
a.
above the natural rate, so real GDP growth was likely low.
b.
above the natural rate, so real GDP growth was likely high.
c.
below the natural rate, so real GDP growth was likely low.
d.
below the natural rate, so real GDP growth was likely high.
27. During recessions employment typically
a.
falls substantially. As the recession ends, employment rises rapidly.
b.
rises substantially. As the recession ends, employment declines gradually.
c.
falls substantially. As the recession ends, employment rises gradually.
d.
rises substantially. As the recession ends, employment declines rapidly.
28. Historically, as recessions have ended the unemployment rate declined
a.
gradually to near zero.
b.
rapidly to near zero.
c.
gradually to a rate of about 5%-6%.
d.
rapidly to a rate of about 5%-6%.
29. Historical evidence for the U.S. economy indicates that
a.
recessions have occurred roughly once every six years since the 1960s.
b.
the unemployment rate usually decreases during a recession and increases shortly after the recession ends.
c.
real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends.
d.
changes in real GDP over the business cycle are largely attributable to changes in investment over the business
cycle.
30. Which of the following rises during recessions?
a.
layoffs and consumer spending
b.
layoffs but not consumer spending
c.
consumer spending but not layoffs
d.
neither layoffs nor consumer spending
31. In 2008, the United States was in recession. Which of the following things would you not expect to have happened?
a.
increased layoffs and firings.
b.
a higher rate of bankruptcy.
c.
increased claims for unemployment insurance.
d.
increased real GDP.
32. Which of the following is correct concerning recessions?
a.
They come at fairly regular and predictable intervals.
b.
They are associated with comparatively large increases in investment spending.
c.
They are any period when real GDP growth is less than average.
d.
They tend to be associated with rising unemployment rates.
33. Which of the following decreases during recessions?
a.
real GDP
b.
unemployment
c.
layoffs and consumer spending
d.
layoffs but not consumer spending
34. Investment averages about ____ of GDP.
a.
1/6
b.
1/8
c.
1/4
d.
1/2
35. The best example of recessions being close to each other in the United States can be found in the
a.
1980s.
b.
1970s.
c.
1990s.
d.
2000s.
36. Many macroeconomic variables
a.
fluctuate together and by different amounts.
b.
fluctuate together by the same amounts.
c.
never fluctuate together.
d.
fluctuate together about half of the time and by the same amount.
