Chapter 45
Business Cycles and Unemployment
MULTIPLE CHOICE
496.
a. because they believe that government can easily restore the economy to equilibrium.
b. because they believe the economy will always restore itself to equilibrium.
c. because they believe the economy is always in equilibrium.
d. because they believe all problems in the economy are caused by its equilibrium
tendencies.
497. Robert Lucas, a well-known University of Chicago economist and winner of the 1995
Nobel Prize, argued that shocks to the economy come primarily from
a. forces internal to the capitalist system.
b. mistakes by government.
c. technological change.
d. major shifts in commodity prices.
498.
a. outside shocks disrupt the economy and require government action to stabilize
expectations.
b. the most important shocks to the economy come from technological change.
c. the most important shocks to the economy come from government policy mistakes.
d. business cycles are caused by the internal dynamics of capitalism.
499. According to conservative economists, how does the economy recover from an external
shock?
a. government policy can help to stabilize the economy.
b. the economy will restore itself to equilibrium automatically.
c. another outside shock will counteract the first shock.
d. external shocks have no impact on an economy as large as the U.S.
500. How are profits calculated?
a. Profits = Revenue Costs
b. Profits = Revenue/Costs
c. Profits = Revenue Taxes
d. Profits = Revenues + Costs
501. According to Progressives, what is the most important factor in causing business cycles?
a. business cycles are caused by external shocks to the economy.
b. business cycles are caused by misguided government policies.
c. busines cycles are caused by the drive for profits.
d. business cycles are caused by technological change.
502. According to Progressives, what happens during a recovery?
a. There is a rapid rise in interest rates.
b. Revenues are falling due to rising costs.
c. Revenues are rising rapidly while costs are still low.
d. Consumers begin to save more to recover from the recession.
503. According to Progressives, what causes the expansion to come to an end?
a. Profits are squeezed by rising costs and lower revenues.
b. Excessive exuberance leads to investment mistakes.
c. Outside shocks to the economy increase consumer spending.
d. Profits expand reducing money available for investment.
504. According to Progressives, what is occurring at the peak of the cycle?
a. slowdown in consumer spending, falling raw materials costs and falling production.
b. increasing consumer spending, increasing raw materials costs and increasing production.
c. slowdown in consumer spending, increasing raw materials costs and increasing
production.
d. rising profits, increasing labor income, rising costs.
505. According to Progressives, what are the four phases of a business cycle?
a. recovery, prosperity, crisis, recession
b. recovery, expansion, contraction, recession
c. recovery, peak, recession, depression.
d. properity, crisis, peak, expansion