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Multiple Choice Quiz
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1
Classical economists believe that:
A)The economy was inherently unstable
B)Recessions are caused by a lack of effective demand
C)The economy self-adjusts out of recessions
D)Intervention of the government in the economy
2
The business cycle is:
A)The short run fluctuations in real GDP
B)Periods of expansion and contraction of economic activity
C)Variations around long term average real GDP
D)All of the above
3
The 1930's was a period of:
A)Inflation
B)A prolonged departure from potential GDP
C)Low cyclical unemployment
D)The longest expansion in U.S. history
4
A recession is:
A)When the economy expands too slowly
B)At least six months of declining real GDP
C)A period of low cyclical unemployment
D)A severe economic contraction such as occurred in the 1930's
5
Which of the following is not a macro outcome?
A)Price stability
B)Economic growth
C)An external shock
D)Full employment
6
Aggregate demand does not include:
A)The purchases of consumers
B)The purchases of businesses
C)The purchases of imported goods
D)The purchases of new goods and services made by the government
7
The aggregate demand is downward sloping because:
A)At higher prices people have a lower purchasing power
B)At lower prices Americans buy more imported goods
C)At higher prices interest rates are low and people buy more goods
D)At lower price levels peoples cash balances have more purchasing power
8
Aggregate supply is:
A)The ability and willingness of a seller to supply a good to a specific market
B)The ability and willingness of buyers to purchase goods at various price levels
C)The total quantity of output producers are willing and able to supply at various price levels
D)Downward sloping because of the cost effect
9
Macro equilibrium is defined as:
A)Where aggregate demand and aggregate supply are equal at the same output and price level
B)Where the intentions of buyers in the economy is the same as the sellers
C)Buyers and sellers are willing to trade the same quantity of output at the same price level
D)All of the above
10
A macro equilibrium:
A)Is the same thing as full employment equilibrium
B)Can be disturbed by changes in aggregate demand and aggregate supply
C)Is a level of output where there is zero cyclical unemployment
D)All of the above
11
The fall in consumer confidence after September 11th caused:
A)A shift to the right in aggregate demand
B)A shift to the right in aggregate supply
C)A shift to the left in aggregate supply
D)A shift to the left in aggregate demand
12
A macro goal is:
A)To produce a level of output where the economy is in macro equilibrium
B)That there is a high level of cyclical unemployment
C)That the economy is in equilibrium at full employment output
D)To bring about zero unemployment
13
If aggregate supply shifts left and aggregate demand remains the same:
A)Equilibrium GDP rises and the price level rises
B)Equilibrium GDP falls and the price level falls
C)Equilibrium GDP falls and the price level rises
D)Equilibrium GDP stays the same but price level rises
14
If aggregate demand shifts left and aggregate supply remains the same then:
A)Equilibrium GDP rises and the price level rises
B)Equilibrium GDP falls and the price level falls
C)Equilibrium GDP falls and the price level rises
D)Equilibrium GDP stays the same but price level rises
15
As of 2002 businesses:
A)Had begun to hire new workers and build new plants
B)Were still lacking enough confidence to hire or expand
C)Had fully recovered from the recession of 2001
D)Had cut supply sufficiently to meet demand





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