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| 1.
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The Great Depression: |
| | A) | was a severe and prolonged reduction in output and employment for the United States during the 1930s. |
| | B) | was a canal built in Panama that reduced the economic cost of shipping products from one coast of the United States to the other. |
| | C) | is a type of migraine headache one gets from studying too much economics. |
| | D) | was a severe and prolonged reduction in output and employment for the United States during the 1980s just prior to the long economic expansion of the 1990s. |
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| 2.
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For the United States it is typically the case: |
| | A) | that the peak following a trough is higher than the trough but lower than the preceding peak. |
| | B) | that the peak following a trough is both higher than the trough and higher than the preceding peak. |
| | C) | that the peak following a trough is lower than the trough but higher than the previous peak. |
| | D) | that, on average, the trough following a peak is lower than the preceding trough. |
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| 3.
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When economists talk about real output they mean: |
| | A) | output that is essential to human existence as opposed to trivial output. |
| | B) | physical output multiplied by changes in the price level to obtain real values. |
| | C) | nominal output adjusted for changes in the price level to obtain real values. |
| | D) | output that addresses the material needs of humans versus their spiritual needs. |
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| 4.
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The scope of the Great Depression: |
| | A) | was limited to the large or great nations, thereby earning it the title "great." |
| | B) | extended to most of the nations of the world. |
| | C) | was limited primarily to the services sector where it had a great effect. |
| | D) | was limited primarily to the agricultural sector where it had its greatest effect. |
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| 5.
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The labor force consists of: |
| | A) | the entire adult population. |
| | B) | that portion of the adult population that is currently employed |
| | C) | that portion of the population over age sixteen that is unemployed but is actively seeking work |
| | D) | that portion of the population over age sixteen who are employed or who are actively seeking employment. |
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| 6.
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The unemployment rate: |
| | A) | is obtained by dividing the number of unemployed people by the number of people in the labor force. |
| | B) | is obtained by dividing the number of unemployed people by that portion of the population that is older than age sixteen. |
| | C) | is obtained by dividing the number of unemployed people by the total population. |
| | D) | is obtained by calculating the ratio of the total number of people employed to the total population and subtracting the result from the number "1" in order to obtain the unemployment rate. |
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| 7.
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When the economy is operating at full employment: |
| | A) | people are earning just enough that they can eat until they are full. |
| | B) | the economy is operating at the lowest rate of unemployment consistent with price stability. |
| | C) | the unemployment rate is zero. |
| | D) | there is cyclical unemployment but no frictional unemployment. |
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| 8.
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When inflation exists: |
| | A) | there is a rise in the purchasing power of the dollar. |
| | B) | there is a change in the relative price of goods but no change in the average price level. |
| | C) | there is a decline in the average price level but no change in relative prices. |
| | D) | there is an increase in the average price level rather than a change in any specific relative price. |
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| 9.
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If the price level doubles from one period to the next and if the price of a particular good increases but by an amount less than double: |
| | A) | the real price of that product declined. |
| | B) | both the real and nominal price of that product declined. |
| | C) | the real price of that product increased while the nominal price declined. |
| | D) | both the real and nominal prices of the product increased. |
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| 10.
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During periods of rising prices: |
| | A) | wages also tend to rise. |
| | B) | wealth gets redistributed from some individuals to others. |
| | C) | some individuals change their consumption, saving, or investment behavior due to the uncertainties associated with inflation. |
| | D) | All of the above are true. |
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| 11.
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The business cycle: |
| | A) | shows the ups and downs of the economy. |
| | B) | is the periods of economic growth and contraction. |
| | C) | resembles a roller coaster. |
| | D) | All of the above are true. |
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| 12.
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What are the three basic measures of macro performance? |
| | A) | taxes, Social Security, and welfare |
| | B) | GDP growth, unemployment, and inflation |
| | C) | interest rates, the money supply, and the Fed |
| | D) | demand, supply, and equilibrium |
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| 13.
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Nominal GDP is in terms of ______ prices. |
| | A) | current |
| | B) | constant |
| | C) | adjusted for inflation |
| | D) | None of the above is true. |
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| 14.
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Between 1929 and 1933, real GDP fell by approximately what percentage? |
| | A) | 75% |
| | B) | 50% |
| | C) | 30% |
| | D) | 10% |
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| 15.
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A recession is technically ______ months or more of declining output or GDP. |
| | A) | three |
| | B) | six |
| | C) | nine |
| | D) | twelve |
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| 16.
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The unemployment rate is the percentage of the ______ that is unemployed. |
| | A) | total population |
| | B) | adult population |
| | C) | overall economy |
| | D) | labor force |
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| 17.
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Which of the following is an example of frictional unemployment? |
| | A) | A recent college graduate who is looking for a job. |
| | B) | A person who has given up trying to find work. |
| | C) | A househusband who chooses to stay at home. |
| | D) | A construction worker who looks for a job during the winter. |
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| 18.
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What does inflation mean? |
| | A) | An increase in the average prices of good and services. |
| | B) | An increase in the overall cost of living. |
| | C) | A decline in the value of money. |
| | D) | All of the above are true. |
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| 19.
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A decrease in the average price level is called: |
| | A) | deflation. |
| | B) | disinflation. |
| | C) | inflation. |
| | D) | hyperinflation. |
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| 20.
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The CPI is: |
| | A) | an indicator of overall inflation. |
| | B) | a measure of changes in the average prices of consumer goods and services. |
| | C) | the consumer price index. |
| | D) | All of the above are true. |
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| 21.
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The unemployment rate during the Great Depression was the highest in U.S. history, about _____%. |
| | A) | 10 |
| | B) | 25 |
| | C) | 50 |
| | D) | 100 |
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| 22.
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Which of the following term represents the lowest point in the business cycle? |
| | A) | peak |
| | B) | recession |
| | C) | trough |
| | D) | contraction |
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| 23.
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Which year did the U.S. economy experience its last or most recent recession? |
| | A) | 2004 |
| | B) | 2001 |
| | C) | 1990 |
| | D) | 1980 |
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| 24.
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What is meant by the term full employment? |
| | A) | The lowest rate of unemployment compatible with price stability. |
| | B) | An unemployment rate of approximately 4-6%. |
| | C) | The best or optimal unemployment rate. |
| | D) | All of the above are true. |
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| 25.
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_____ income is adjusted for inflation or income in constant dollars. |
| | A) | Nominal |
| | B) | Disposable |
| | C) | Real |
| | D) | Current |
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| 26.
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Which of the following is a redistributive mechanism of inflation? |
| | A) | Price effects |
| | B) | Income effects |
| | C) | Wealth effects |
| | D) | All of the above are true. |
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| 27.
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In recent years college tuition costs have been increasing approximately _____ the rate of inflation. |
| | A) | the same as |
| | B) | twice |
| | C) | triple |
| | D) | quadruple |
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