Chapter The Realm of Macroeconomics
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1. Amazon.com, an Internet retailer of books, buys a shipment of economics textbooks from a publisher. Is this included in GDP?
a. Yes.
b. No.
c. It depends on how the payment is made.
d. Yes, in real but not nominal GDP.
e. Yes, in nominal but not real GDP.
2. Nominal GDP is calculated by using
a. prices set in a base year.
b. average prices in all major cities.
c. current prices.
d. prices charged by initial producers.
3. The stagflation in the United States during the 1974-1975 period can be attributed to
a. increases in real GDP due to high levels of defense spending.
b. tight monetary and fiscal policies of the Nixon-Ford administrations.
c. rapid increases in petroleum prices, poor harvests, and the removal of wage and price controls.
d. budgets deficits by the federal government and increasing trade deficits by the United States.
4. The supply-side policies of the Reagan and Bush administrations led to high levels of
a. trade surpluses.
b. unemployment.
c. budget deficits.
d. inflation.
5. The macroeconomic conditions during the mid-1990s confounded many economists because of the simultaneous occurrence of
a. low unemployment and decreasing inflation rates.
b. low unemployment and increasing budget deficits.
c. low unemployment and increasing interest rates.
d. high unemployment and increasing inflation rates.
6. The primary cost to the macroeconomy of increasing government spending is a(n)
a. decrease in the price level.
b. decrease in real GDP.
c. increase in the price level.
d. increase in the unemployment rate.
7. In the below Figure, if the aggregate demand curve shifts inward over time, the economy will
a. experience inflation.
b. see a sustained increase in the price level.
c. experience a significant decrease in unemployment.
d. experience economic recession.
8. To fight inflation, the government may
a. decrease aggregate demand, which will also lead to lower unemployment rates.
b. increase aggregate demand, which will also lead to lower unemployment rates.
c. increase aggregate demand, which will also lead to higher unemployment rates.
d. decrease aggregate demand, which will also lead to higher unemployment rates.
9. Stabilization policy is the name given to government economic policies designed to
a. stabilize the price level.
b. shorten and/or prevent recessions.
c. diminish unemployment.
d. All of the above are correct.
10. Which graph best represents the favorable macroeconomy of the late 1990s?
a. Graph (1).
b. Graph (2).
c. Graph (3).
d. Graph (4).
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