Principles of Macroeconomics Brief Edition 3rd Edition Frank Test Bank 1

Test Bank for Principles of Microeconomics Brief
Edition 3rd Edition Frank Bernanke Antonovics

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File: Chapter 12 Macroeconomics: The Bird's-Eye View of the Economy
Multiple Choice Questions
1. The Great Depression:

A. occurred only in the United States.
B. resulted in the development of microeconomics.
C. was a period of low production and high unemployment.
D. ended a few months after the stock market crash of 1929.
Answer: C
Difficulty: 01 Easy
Topic: The Major Macroeconomic Issues
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 12-01
Feedback: The Great Depression was a period of low production and extremely high
unemployment that lasted throughout the 1930s.
2. Among economists today, the most widely accepted cause of the Great Depression is:
A. poor economic policymaking.
B. wild stock market speculation on Wall Street.
C. globalization.
1
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D. Adolf Hitler's election as Chancellor of Germany.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: Among economists who study this time period today, the most widely accepted cause
of the Great Depression is poor economic policymaking both in the United States and in other
nations.
3. A key indicator of the hardship experienced during the Great Depression is the:
A. high rate of inflation.
B. high rate of unemployment.
C.large trade deficits.
D. large budget deficits.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: The Great Depression was a period of extremely high unemployment.
4. Macroeconomics first developed as a new subfield of economics:

A. when Adolph Hitler ordered economists to learn more about national economies.
B. following the oil price increases of the 1970s.
C. as a result of Adam Smith's publication of The Wealth of Nations in 1776.
D. in response to the severe economic hardships of the Great Depression.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: Macroeconomics first developed as a subfield of economics in response to the
severity and hardship of The Great Depression in the 1930s.
5. ALL of the following describe economic conditions during the Great Depression in the United
States EXCEPT:
A. high rates of unemployment.
B. high rates of inflation.
C. low levels of production.
2
D. a sharp decline in stock prices.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: The Great Depression was a period of low production, sharp decline in stock prices,
and extremely high unemployment that lasted throughout the 1930s.
6. The field of macroeconomics developed when economists looked for causes of:
A. the wealth of nations.
B. the Great Depression
D. World War I.
D. poverty and inflation.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Macroeconomics first developed as a subfield of economics in response to the
severity and hardship of The Great Depression in the 1930s.
7. Most economists who have studied it believe that the Great Depression was caused by:
A. the stock market crash.
B. poor economic policymaking.
C. illegal immigration.
D. a sharp decline in average labor productivity.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Among economists who study this time period today, the most widely accepted cause
of the Great Depression is poor economic policymaking both in the United States and in other
nations.
8. Macroeconomic policies are government policies designed to affect:

A. the environmental impact of all industries.
B. the performance of the economy as a whole.
C.the economic activity of the government.
3
D. particular sectors of the economy.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Macroeconomic policies are government policies designed to affect the performance
of the economy as a whole.
9. Government actions designed to affect the performance of the economy as a whole are called
_______ policies.
A. global
B. microeconomic
C. macroeconomic
D. social
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: Macroeconomic policies are government policies designed to affect the performance
of the economy as a whole.
10.Since 1950, the standard of living in the United States has:

A. increased when measured by output per person, but decreased when measured by total output.
B. increased when measured by both total output and output per person.
C. decreased when measured by output per person, but increased when measured by total output.
D. decreased when measured by both total output and output per person.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Both U.S. real GDP and real GDP per person went up enormously from 1870 to 2010,
and especially fast in the years 1950 to 2010.
11. The degree to which people have access to goods and services that make their lives easier,
healthier, safer, and more enjoyable is called the:
A. microeconomic standard
B. global standard
4
C. scarcity standard
D. standard of living.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: Standard of living, regularly measured as Real GDP per capita, indicates how much
the average person produces and thus, how much goods and services are available to the typical
person.
12. People who enjoy high standards of living usually have all of the following EXCEPT:
A. higher literacy rates.
B. longer life expectancies.
C. freedom from scarcity.
D. better general health.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
person. But no matter how high a nation’s standard of living is, there will always be a limit to the
resources available and therefore scarcity.
13. The standard of living in an economy is best measured by:

A. average labor productivity.
B. total output.
C. output per person.
D. the inflation rate.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
person.
5
14. If Country A and Country B have the same population size, then the standard of living in
these two countries can still be different depending on:
A. their respective political systems
B. their respective inflation rates
C. their relative geographic size
D. the relative sizes of total output
Answer: D
Difficulty: 02 Medium
Blooms: Understand
Feedback: Because of population growth, increases in total output cannot be equated with
improvements in the general standard of living. Instead output per person is a better indicator of
the average living standard. So two nations with the same population size can have different
living standards if the level of output produced and shared within each nation is different.
15. If Country A and Country B have the same total output, then the standard of living in these
two countries can be different depending on:
A. their respective political systems
B. their respective inflation rates
C. their relative geographic size
D. population size
Answer: D
Blooms: Understand
the average living standard. So two nations with the same if the level of output produced can
have different living standards if the population sharing that output is different.
16. When comparing the standard of living in two countries it is important to adjust total output
for differences in:
A. geographic area
B. employment levels
C. political systems
D. population
Answer: D
Difficulty: 01 Easy
6
Blooms: Remember
the average living standard. So two nations with the same if the level of output produced can
have different living standards if the population sharing that output is different.
17. If total output increases from $1 trillion to $2 trillion as population increases from 100
million to 200 million, then output per person:
A. doubles.
B. increases, but by less than 100 percent.
C. remains constant.
D. decreases
Answer: C
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Because of population growth, improvements in the general standard of living are
measured by output per person. If total output is doubled, and the population doubles too, then
the output per person and the nation’s living standards will remain the same.
18. If total output increases from $100 billion to $200 billion as population increases from 100
A. doubles.
D. decreases
Answer: B
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
measured by output per person. If total output is doubled, while the population increases by 50%,
then the output per person and the nation’s living standards will increase by less than 100
percent.
19. If total output increases from $1 trillion to $2 trillion as population increases from 100
A. doubles.
7
D. decreases
Answer: D
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
measured by output per person. If total output is doubled, while the population more than
doubles, then the output per person and the nation’s living standards will decrease as the increase
in output is not enough to keep up with population growth.
20.If living standards in a country, as measured by output per person, increase, then total output
must have:
A. increased more rapidly than population increased.
B. increased at the same rate that population increased.
C. increased more slowly than population increased.
D. decreased more rapidly than population decreased.
Answer: A
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
measured by output per person. So a nation’s living standards will increase if total output is
growing more rapidly than the population is increasing or if total output is decreasing slower
than the population is decreasing.
21. If living standards in a country, as measured by output per person, decrease, then total output
must have:
A. increased more rapidly than population increased.
B. increased at the same rate that population increased.
C. increased more slowly than population increased.
D. decreased more slowly than population decreased.
Answer: C
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
8
measured by output per person. So a nation’s living standards will decrease if total output is
growing slower than the population is increasing or if total output is decreasing faster than the
population is decreasing.
22. The process of steady increase in the quantity and quality of goods and services the economy
can produce is called:
A. aggregation..
B. globalization.
C. production.
D. economic growth.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: Economic growth is the steady increase in the quantity and quality of goods and
services the economy can produce.
23. Compared to 1929, total output per person in the U.S. today is approximately ____ times
larger.
A. 2
B. 5
C. 15
D. 25
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: In 2014 a typical U.S. resident consumed more than five times the quantity of goods
and services available to a typical resident at the onset of the Great Depression.
24. Compared to 1929, total output in the U.S. today is approximately ____ times larger.
A. 2
B. 5
C. 15
D. 25
Answer: C
Difficulty: 01 Easy
9
Blooms: Remember
Feedback: In 2014, the output of the U.S. economy was more than 15 times what it was 1929.
25. Average labor productivity equals:

A. average production per year.
B. total output.
C. output per person.
D. output per employed worker.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: Average labor productivity is output per employed worker.
26. Output per employed worker is called:

A. total output.
B. average standard of living.
C.average labor productivity.
D. output per person.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: Average labor productivity is output per employed worker.
27. The country of Northland produced $1,000 billion of output in one year. The population of
Northland was 50 million, of whom 30 million were employed. What was average labor
productivity in Northland?
A. $20
B. $33
C. $20,000
D. $33,333
Answer: D
Difficulty: 03 Hard
AACSB: Analytic
10
Blooms: Apply
Feedback: Average labor productivity is output per employed worker, which is $33,333 ($1,000
billion / 30 million).
28.The country of Southland produced $2,000 billion of output in one year. The population of
Southland was 100 million, of whom 60 million were employed. What was average labor
productivity in Southland?
A. $20
B. $33
C. $20,000
D. $33,333
Answer: D
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Average labor productivity is output per employed worker, which is $33,333 ($2,000
billion / 60 million).
29. The value of output was $1,000 billion in Northland and $2,000 billion in Southland. The
population of Northland was 50 million and the population of Southland was 120 million. There
were 30 million employed workers in Northland and 75 million employed workers in Southland.
Average labor productivity was higher in _________ and the standard of living was _______.
A. Northland; the same in both countries
B. Northland; higher in Northland
C. Southland; the same in both countries
D. Southland; higher in Southland
Answer: B
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Average labor productivity, which is output per employed worker, was $33,333
($1,000 billion / 30 million) in Northland and 26,667 ($2,000 billion / 75 million) in Southland.
So average labor productivity was higher in Northland. The standard of living, as measured by
output per person, was $20,000 ($1,000 billion / 50 million) in Northland and 16,667 ($2,000
billion / 120 million) in Southland. So the standard of living was also higher in Northland.
30. The value of output was $100 billion in Northland and $200 billion in Southland. The
population of Northland was 50 million and the population of Southland was 30 million. There
were 30 million employed workers in Northland and 20 million employed workers in Southland.
A. Northland; the same in both countries
11
B. Northland; higher in Northland
C. Southland; the same in both countries
D. Southland; higher in Southland
Answer: D
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Average labor productivity, which is output per employed worker, was $3,333 ($100
billion / 30 million) in Northland and 10,000 ($200 billion / 20 million) in Southland. So average
labor productivity was higher in Southland. The standard of living, as measured by output per
person, was $2,000 ($100 billion / 50 million) in Northland and 6,667 ($200 billion / 30 million)
in Southland. So the standard of living was also higher in Southland.
31. Average consumption in an economy is best measured by _____, while average productivity
in an economy is best measured by _____.
A. total output; output per worker
B. output per worker; total output
C.output per person; output per worker
D. output per worker; output per person
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: Average consumption in an economy is best measured by output per person, while
average productivity in an economy is best measured by output per worker.
32. Output per worker must be _____ output per person.

A. greater than or equal to
B. less than or equal to
C. no more than half the size of
D. equal to
Answer: A
Blooms: Understand
Feedback: Output per worker must be greater than or equal to output per person, as a nation can
never have fewer workers than people and the output divided is the same in both computations.
12
33. Output per person must be _____ output per worker.
A. greater than or equal to
B. less than or equal to
C. no more than half the size of
D. equal to
Answer: B
Blooms: Understand
Feedback: Output per person must be less than or equal to output per worker, as a nation can
never have fewer workers than people and the output divided is the same in both computations.
34. Which of the following correctly ranks the amounts from largest to smallest?
A. average labor productivity, output per person, total output
B. output per person, total output, average labor productivity
C. total output, average labor productivity, output per person
D.total output, output per person, average labor productivity
Answer: C
Blooms: Understand
Feedback: Total output must be the largest value as the other two measurements are obtained by
dividing this output value with a number greater than one. Furthermore, output per worker must
be greater than output per person, as a nation is bound to have some people who are not workers
– such as children, retired, students, etc.
35. Which of the following correctly ranks the amounts from smallest to largest?
A. output per person, average labor productivity, total output
B. output per person, total output, average labor productivity
C. total output, average labor productivity, output per person
D.total output, output per person, average labor productivity
Answer: A
Blooms: Understand
Feedback: Total output must be the largest value as the other two measurements are obtained by
dividing this output value with a number greater than one. Furthermore, output per person must
13
be smaller than output per worker, as a nation is bound to have some people who are not workers
– such as children, retired, students, etc.
36. In Econland population and average labor productivity are constant. If a larger proportion of
the population enters retirement, then total output will _____ and output per person will ______.
A. increase; increase
B. decrease; decrease
C. remain constant; remain constant
D. decrease; remain constant
Answer: B
Blooms: Understand
Feedback: If a larger proportion of a constant population enters retirement, and average labor
productivity is also constant, then total output must decrease, as fewer people are actively
producing output. With less output and a constant population, output per person must also be
decreasing.
37. In Econland population and average labor productivity are constant. If a larger proportion of
the population becomes employed workers, then total output will _____ and output per person
will ______.
A. increase; increase
B. decrease; decrease
C. remain constant; remain constant
D. decrease; remain constant
Answer: A
Blooms: Understand
Feedback: If a larger proportion of a constant population becomes employed, and average labor
productivity is also constant, then total output must increase as more people are actively
producing output. With more output and a constant population, output per person must also be
increasing.
38. In Econland population increased from 1 million to 1. 1 million, the number of employed
workers increased from 500,000 to 600,000, but average labor productivity decreased from
$20,000 per worker per year to $19,000 per worker per year. Total output in Econland _____ and
the average standard of living _____.
A. decreased; decreased
14
B. decreased; increased
C. increased; decreased
D. increased; increased
Answer: D
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Total output, which is the average labor productivity per worker times the number of
workers, increased from $10 billion (500,000 * $20,000) to $11.4 billion (600,000 * $19,000).
At the same time, the average standard of living, which is total output per person, increased from
$10,000 ($10 billion / 1 million) to $10,364 ($11.4 billion / 1.1 million).
39. In Econland population increased from 1 million to 1. 1 million, the number of employed
workers increased from 500,000 to 600,000, but average labor productivity decreased from
$20,000 per worker per year to $18,000 per worker per year. Total output in Econland _____ and
the average standard of living _____.
A. decreased; decreased
B. decreased; increased
C. increased; decreased
D. increased; increased
Answer: C
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Total output, which is the average labor productivity per worker times the number of
workers, increased from $10 billion (500,000 * $20,000) to $10.8 billion (600,000 * $18,000).
At the same time, the average standard of living, which is total output per person, decreased from
$10,000 ($10 billion / 1 million) to $9,818 ($10.8 billion / 1.1 million).
40. Compared to the 1950-1973 period, output per worker _____ in the 1974-1995 period.
A. increased more rapidly
B. increased more slowly
D. decreased more rapidly
C. decreased more slowly
Answer: B
Difficulty: 01 Easy
Blooms: Remember
15
Feedback: Between 1950 and 1973 in the United States, output per employed worker increased
by more than 2 percent per year. But from 1974 to 1995 the average rate of increase in output per
worker was close to 1 percent per year.
41. If average labor productivity increases while population and the number of employed
workers remain constant, then total output:
A. increases.
B. decreases.
D. may increase or decrease.
Answer: A
Blooms: Understand
Feedback: If the population and the number of employed workers remain constant, while each
worker becomes more productive, then total output must increase as each worker now
contributes more output.
42. If average labor productivity increases while population and the number of employed
workers remain constant, then output per person:
A. increases.
B. decreases.
Answer: A
Blooms: Understand
worker becomes more productive, then total output must increase as each worker now
contributes more output. If more output is distributed on the same population, than output per
person must also increase.
43. If average labor productivity decreases while population and the number of employed
workers remain constant, then total output:
A. increases.
B. decreases.
16
Answer: B
Blooms: Understand
worker becomes less productive, then total output must decrease as each worker now contributes
less output.
44. If average labor productivity decreases while population and the number of employed
workers remain constant, then output per person:
A. increases.
B. decreases.
Answer: B
Blooms: Understand
worker becomes less productive, then total output must decrease as each worker now contributes
less output. If less output is to be distributed on the same population, than output per person must
also decrease.
45. In Econland total output is $8 billion, population equals 500,000 people, and, of these,
400,000 are employed workers. Output per person in Econland equals _______ and average
labor productivity equals ______.
A. $20,000; $16,000
B. $16,000; $20,000
C. $20,000; $20,000
D. $16,000; $16,000
Answer: B
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Output per person equals $16,000 ($18 billion / 500,000), and average labor
productivity, which is output per employed worker, equals $20,000 ($18 billion / 400,000).
17
46. In Econland total output is $6 billion, population equals 250,000 people, and, of these,
200,000 are employed workers. Output per person in Econland equals _______ and average
labor productivity equals ______.
A. $30,000; $24,000
B. $24,000; $30,000
C. $30,000; $30,000
C. $24,000; $24,000
Answer: B
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: Output per person equals $24,000 ($6 billion / 250,000), and average labor
productivity, which is output per employed worker, equals $30,000 ($6 billion / 200,000).
47. In both Gamma and Delta average labor productivity is $20,000 per worker per year. The
population of Gamma is 200,000 and the population of Delta is 400,000. Sixty percent of the
population in each country is employed. Total output in Gamma is _____ and total output in
Delta is _____.
A. $2.4 billion; $4.8 billion
B. $8 billion; $4 billion
C. $120,000; $800,000
D. $4 billion; $8 billion
Answer: A
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: The number of workers in Gamma is 120,000 (60% of 200,000) and 240,000 (60% of
400,000) in Delta. Total output, which is the average labor productivity per worker times the
number of workers, is $2.4 billion (120,000 * $20,000) in Gamma and $4.8 billion (240,000 *
$20,000) in Delta.
48. In both Gamma and Delta average labor productivity is $40,000 per worker per year. The
population of Gamma is 200,000 and the population of Delta is 400,000. Fifty percent of the
population in each country is employed. Total output in Gamma is _____ and total output in
Delta is _____.
A. $2. 4 billion; $4. 8 billion
B. $4 billion; $8 billion
C. $100,000; $200,000
D. $8 billion; $16 billion
Answer: B
18
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
Feedback: The number of workers in Gamma is 100,000 (50% of 200,000) and 200,000 (50% of
400,000) in Delta. Total output, which is the average labor productivity per worker times the
number of workers, is $4 billion (100,000 * $40,000) in Gamma and $8 billion (200,000 *
$40,000) in Delta.
49. If average labor productivity increases, then the same number of employed workers will
always produce:
A. more total output.
B. more output per person.
C. less total output.
D. less output per person.
Answer: A
Blooms: Understand
Feedback: If average labor productivity increases, then the same number of employed workers
will always produce more total output.
50. If average labor productivity decreases, then the same number of employed workers will
always produce:
A. more total output.
B. more output per person.
C. less total output.
D. less output per person.
Answer: C
Blooms: Understand
Feedback: If average labor productivity decreases, then the same number of employed workers
will always produce less total output.
51. After increasing at more than 2 percent per year between 1950 and 1973, the growth rate of
average labor productivity _____ between 1973 and 1995, and ____ between 1996 to 2007.
A. slowed; decreased even more
19
B. speeded up; accelerated even more
C. slowed; picked up
D. speeded up; slowed
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: Between 1950 and 1973 output per employed worker increased by more than 2
percent per year. But from 1974 to 1995 the average rate of increase in output per worker was
close to 1 percent per year. From 1996 to 2007 the pace of productivity growth picked up again,
to nearly 2 percent per year before slowing down again to around 1 percent per year since 2008.
52. Over the entire period since 1950, average labor productivity in the United States has
_______ although between 1973 and 1995 the rate of change ________.
A. increased; slowed
B. decreased; accelerated
C. increased; accelerated
D. decreased; slowed
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: Since 1950, average labor productivity in the United States has continuously
increased. However, the rate of growth slowed from 1974 to 1995 and again after 2008.
53. The growth of total output in the United States since 1929 has been:
A. rapid and smoothd.
B. slow with fluctuations
C. slow and steady
D. rapid but with fluctuations
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: 53. The growth of total output in the United States since 1929 has rapid but with
fluctuations.
20
54. A particularly severe recession is called a(n):
A. super recession.
B. lull.
C. growth recession.
D. depression.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: A particularly strong and protracted recession is known as a depression.
55.A particularly strong expansion is called a(n):

A. output excess.
B. boom.
C. growth recession.
D. bonanza.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: A particularly strong and protracted expansion is known as a boom.
56. When jobs are hard to find, profits are low, few wage increases are given, and many
companies go out of business, the economy is most likely in a(n):
A. expansion.
B. boom.
C. recession.
D. shortage.
Answer: C
Blooms: Understand
Feedback: A period in which the economy is growing at a rate significantly below normal is
called a recession or a contraction.
57. When jobs are easy to find, wage increases are frequently given, and businesses are doing
well, the economy is most likely in a(n):
21
A. expansion.
B. depression.
C. recession.
D. surplus.
Answer: A
Blooms: Understand
Feedback: A period of rapid economic growth is called an expansion, during which jobs are
easier to find, more people get raises and promotions, and most businesses thrive
58. The fraction of people who would like to be employed, but can't find work is called the:
A. inflation rate.
B. average labor productivity rate
C. unemployment rate.
D. Participation rate
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: The unemployment rate is the fraction of people who would like to be employed but
can’t find work,
59. The largest change in the unemployment rate from the beginning of a recession to the peak
unemployment rate occurred during the recession beginning in:
A. 1929.
B. 1973.
C. 1980.
D. 2007
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: The Great Depression was a period of low production and extremely high
unemployment that began in 1929.
60. Unemployment typically _______ during a recession.
22
A. only exist
B. rises
C. falls
D. remains constant
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Unemployment usually rises during recessions.
61. The unemployment rate in the United States at the peak of the Great Depression was _____
percent.
A. 5
B. 10
C. 20
D. 25
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: During the Great Depression, the unemployment rate rose from about 3 percent in
1929 to about 25 percent in 1933.
62. In the 1950's and 1960's the European unemployment rate tended to be ______ the U.S.
unemployment rate, while in the 1990's the European unemployment rate tended to be ____ the
U.S. unemployment rate.
A. higher than; higher than
B. lower than; higher than
C. higher than ; lower than
D. lower than; lower than
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: During the 1950s and 1960s, European unemployment rates were generally much
lower than those in the United States, while in the 1980s and 1990s unemployment rates in
Western Europe were roughly double those in the United States.
23
63. The unemployment rate is the:
A. number of workers unemployed.
B. number of workers in the labor force.
C. percentage of the population that is out of work.
D. percentage of the labor force that is out of work.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: The unemployment rate is computed as the number of unemployed divided with the
labor force.
64. The unemployment rate in the United States:

A. falls to zero during expansions.
B. never falls to zero.
C. equals zero during booms.
D. can be zero in both expansions and recessions.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Even in the so-called good times, such as the1960s and the 1990s, some people are
unemployed as people move between jobs or lack the skills needed for the existing jobs.
65. If the unemployment rate increases from 4 percent to 10 percent, then the economy is mostly
likely in a(n):
A. expansion.
B. boom.
C. recession.
D. aggregation.
Answer: C
Blooms: Understand
Feedback: Unemployment usually rises during recessions and falls during expansions.
24
66. The rate at which prices in general are increasing is called:
A. the inflation rate.
B. the standard of living.
C. the unemployment rate.
D.the trade balance.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: The inflation rate is the rate at which prices in general are increasing over time.
67. Inflation was a major problem in the United States during the:
A. 1950s.
B. 1960s.
C. 1970s.
D. 2000s.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: In recent years inflation has been relatively low in the United States, but that has not
always been the case. During the 1970s, inflation was a major problem; even described as
“public enemy number one.
68. Inflation is the increase in:

A. total output.
B. imports relative to exports.
C. total output per worker.
D.the general level of prices.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: The inflation rate is the rate at which prices in general are increasing over time.
69. The United States exports approximately ____ percent of all goods and services produced in
the country.
25
A. 3.
B. 8.
C. 13.
D. 16.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: In 2014 the United States exported about 13 percent of all the goods and services it
produced and imported from abroad 16 percent of the goods and services that Americans used.
70. The United States imports approximately ____ percent of all goods and services produced in
the country.
A. 3.
B. 8.
C. 13.
D. 16.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: In 2014 the United States exported about 13 percent of all the goods and services it
produced and imported from abroad 16 percent of the goods and services that Americans used.
71. A trade deficit occurs when:

A. government spending exceeds government revenue.
B. government revenue exceeds government spending.
C. exports exceed imports.
D. exports are less than imports.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: A trade deficit occurs when exports are less than imports.
26
72. A trade surplus occurs when:
A. government spending exceeds government revenue.
B. government revenue exceeds government spending.
D. exports are less than imports.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: A trade surplus occurs when exports exceed imports.
73. If its exports are greater than its imports, then a country has a:
A. government budget deficit.
B. trade surplus.
C. government budget surplus.
D.trade deficit.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
74. A trade imbalance occurs when:

A. exports from and imports to a country suddenly decline.
B. the quantity of imports equals the quantity of exports, but are large relative to total output.
C. a country does not import or export any goods or services.
D. the quantity of a country's exports differs significantly from the quantity of imports.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
Feedback: A trade imbalance occurs when the quantity of a country's exports differs significantly
from the quantity of imports.
27
75. In Econland exports equal 15% of total output, while imports equal 20% of total output.
Econland has:
A. a budget surplus.
B. a budget deficit.
C. a trade surplus.
D. a trade deficit.
Answer: D
Blooms: Understand
Feedback: A trade deficit occurs when exports are less than imports.
76. In Econland exports equal 25% of total output, while imports equal 20% of total output.
Econland has:
A. a budget surplus.
B. a budget deficit.
C. a trade surplus.
D. a trade deficit.
Answer: C
Blooms: Understand
77. Before 1970 the United States generally had a trade _____ and since 1970 the United States
has generally run a trade _____.
A. surplus; surplus
B. surplus; deficit
C. deficit; deficit
D. deficit; surplus
Answer: B
Difficulty: 01 Easy
Blooms: Remember
Feedback: Prior to the 1970s the United States generally had a trade surplus, exporting more than
it imported. Since the 1970s, however, imports to the United States have outstripped exports,
creating a trade deficit.
28
78. Major macroeconomic questions include all of the following EXCEPT:
A. What causes economic growth?
B. What causes differences in wages between men and women?
C. Why does inflation vary over time and across countries?
D.What are the causes of unemployment?
Answer: B
Blooms: Understand
Feedback: Major macroeconomic questions include the causes economic growth, why inflation
vary over time and across countries, and what are the causes of unemployment.
79. Major macroeconomic issues include differences across countries in all of the following
EXCEPT:
A. infant mortality rates
B. inflation rates
C. unemployment rates
D. economic growth rates
Answer: A
Blooms: Understand
Feedback: Major macroeconomic issues include differences across countries in inflation rates,
unemployment rates, and economic growth, rates.
80. Major macroeconomic questions include all of the following EXCEPT:

A. Are free trade agreements beneficial?
B. Can inflation be reduced without generating additional unemployment?
C. What causes slowdowns in productivity growth?
D. How do monopoly firms set prices and determine quantities to produce?
Answer: D
Blooms: Understand
Feedback: Major macroeconomic questions include whether free trade agreements beneficial, if
inflation be reduced without generating additional unemployment, and what causes slowdowns
in productivity growth
29
81. Macroeconomic issues include all of the following EXCEPT:
A. productivity
B. economic growth
C.energy reserves
D. recessions and expansions
Answer: C
Blooms: Understand
Feedback: Major macroeconomic issues include productivity, economic growth, and recessions
and expansions.
82. Macroeconomic issues include all of the following EXCEPT:

A. economic interdependence among nations
B. regulation of natural monopolies
C. inflation
C. economic growth and living standards
Answer: B
Blooms: Understand
Feedback: Major macroeconomic issues include economic interdependence among nations,
inflation, and economic growth and living standards
83. All of the following statements are correct EXCEPT:

A. Economies grow steadily over time.
B. There are unemployed people even during expansions.
C. Unemployment increases during recessions.
D. A trade surplus exists when a country exports more than it imports.
Answer: A
Blooms: Understand
Feedback: Note that while economies often grow over time, that growth is hardly ever steadily.
Instead, economies go through short-term fluctuations know as recessions and expansions as it
try to reach its goal of long-term growth.
30
Level of Learning: Comprehension Type: Word Problem Source: Unique
84.In the United States decisions to increase interest rates are made by the _____ and decisions
to increase taxes are made by ____.
A. Congress; the Federal Reserved.
B. Congress; Congress
C. the Federal Reserve; the Federal Reserve
D. the Federal Reserve; Congress
Answer: D
Difficulty: 01 Easy
Topic: Macroeconomic Policy
Blooms: Remember
Feedback: A government institution called the central bank conducts monetary policy, which
controls interest rates. The Federal Reserve System (the Fed for short) is the central bank of the
United States. Fiscal policy refers to decisions that determine the government’s budget, and
includes decisions on the amount taxes collected. In the United States, Congress conducts fiscal
policy.
85. The Federal Reserve makes decisions regarding _____ policy while the Congress makes
decisions regarding _____ policy.
A. monetary; fiscal
B. structural; fiscal
C. fiscal; structural
D. fiscal; monetary
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: The Federal Reserve System, the central bank of the United States, conducts monetary
policy, which controls interest rates. In the United States, Congress conducts fiscal policy, which
refers to decisions that determine the government’s budget, and includes decisions on the amount
taxes collected.
86. The Federal Reserve makes decisions regarding:

A. monetary policy only.
B. fiscal policy only.
C. monetary and fiscal policy.
D. structural policy only.
Answer: A
31
Difficulty: 01 Easy
Blooms: Remember
policy, which controls interest rates.
87. The central bank of the United States is called:

A. the Federal Reserve System.
B. Bank of the United States.
C. Bank of America.
D. AmeriBank.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
88. A decision to join a free trade association, such as NAFTA, is an example of _____ policy.
A. monetary
B. fiscal
C. structural
D. normative
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: Structural policy refers to government policies aimed at changing the underlying
structure or institutions of the economy.
89. Monetary policy refers to:

A. decisions to determine the government's budget.
B. policy directed toward increasing exports and reducing imports.
C. the determination of the nation's money supply.
D. government policies aimed at changing the underlying structure or institutions of the
economy.
Answer: C
32
Difficulty: 01 Easy
Blooms: Remember
Feedback: A central bank conducts monetary policy, which focuses on the determination of the
nation's money supply and thereby controlling the nation’s interest rates.
90. Fiscal policy refers to:

economy.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: Fiscal policy refers to decisions that determine the government’s budget, and includes
decisions on the amount taxes collected.
91. Structural policy refers to:

economy.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
92. The determination of the nation's money supply is called:

A. structural policy.
B. trade policy.
C. monetary policy.
D. fiscal policy.
33
Answer: C
Difficulty: 01 Easy
Blooms: Remember
93. Decisions to determine the government's budget are called:

B. trade policy.
C. monetary policy.
D. fiscal policy.
Answer: D
Difficulty: 01 Easy
Blooms: Remember
94. Government polices aimed at changing the underlying structure or institutions of the nation's
economy are called:
B. trade policy.
C. monetary policy.
D. fiscal policy.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
95. A nation's central bank:

A. determines the nation's fiscal policy.
B. controls the nation's monetary policy.
C. is the bank that holds deposits for the most customers in the nation.
D. is the bank that has the most neutral lending policy.
34
Answer: B
Difficulty: 01 Easy
Blooms: Remember
96. When government revenue is less than government spending, the nation has a:
A. government budget surplus.
B. trade surplus.
C. government budget deficit.
D. trade deficit.
Answer: C
Difficulty: 01 Easy
Blooms: Remember
Feedback: A government is running a budget deficit if government revenue is less than
government spending.
97. A government is running a budget deficit if:

A. government revenue exceeds government spending.
B. government revenue is less than government spending.
D. imports exceed exports.
Answer: B
Difficulty: 01 Easy
Blooms: Remember
98. A government is running a budget surplus if:

A. government revenue exceeds government spending.
B. government revenue is less than government spending.
D. imports exceed exports.
Answer: A
35
Difficulty: 01 Easy
Blooms: Remember
Feedback: A government is running a budget surplus if government revenue exceeds government
spending.
99. When government revenue exceeds government spending, the nation has a:
B. trade surplus.
D. trade deficit.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
spending.
100. A government decision to privatize a sector of the economy formerly operated by the
government is an example of _____ policy.
A. aggregation
B. monetary
C. fiscal
D. structural
Answer: D
Difficulty: 01 Easy
Blooms: Remember
101. Decisions to reduce the money supply are made by _____ and are an example of _____
policy.
A. the President; monetary
B. the Federal Reserve; monetary
C. Congress; monetary
D. the Federal Reserve; fiscal
36
Answer: B
Difficulty: 01 Easy
Blooms: Remember
102. Decisions to cut taxes are made by _____ and are an example of _____ policy.
A. the President; monetary
B. Congress; monetary
C. Congress; fiscal
D. the Federal Reserve; fiscal
Answer: C
Blooms: Understand
Feedback: In the United States, Congress conducts fiscal policy, which refers to decisions that
determine the government’s budget, and includes decisions on the amount taxes collected.
103. An increase in interest rates by the Federal Reserve is an example of _______ policy.
A. aggregation
B. fiscal
C. monetary
D. structural
Answer: C
Blooms: Understand
104. An decrease in the federal income tax is an example of ______ policy.

A. aggregation
B. fiscal
C. monetary
D. structural
Answer: B
37
Blooms: Understand
105. Deregulation of the airline, trucking, telephone, and electric utility industries are examples
of _______ policy.
A. aggregation
B. fiscal
C. monetary
D. structural
Answer: D
Blooms: Understand
106. A decision by Congress to reduce spending in order to balance the government's budget is
an example of _____ policy.
A. aggregation
B. fiscal
C. monetary
D. structural
Answer: B
Blooms: Understand
107. A decision by a government to sell businesses that currently are operated by the government
to private investors is an example of ________ policy.
A. aggregation
B. fiscal
C. monetary
38
D. structural
Answer: D
Blooms: Understand
108. If tax revenues equal 20 percent of total output and government expenditures equal 25
percent of total output, then there is a:
B. trade surplus.
D. trade deficit.
Answer: C
Blooms: Understand
109. If tax revenues equal 25 percent of total output and government expenditures equal 20
percent of total output, then there is a:
B. trade surplus.
D. trade deficit.
Answer: A
Blooms: Understand
spending.
110. A broad government initiative to reduce a country's reliance on agriculture and promote
high-technology industries is an example of ______ policy.
A. aggregation
39
B. fiscal
C. monetary
D. structural
Answer: D
Blooms: Understand
111.The provision of additional cash to the banking system is an example of _______ policy.
A. aggregation
B. fiscal
C. monetary
D. structural
Answer: C
Blooms: Understand
112. When a government moves from a centrally planned economy to a market economy, this is
an example of ______ policy.
A. aggregation
B. fiscal
C. monetary
D. structural
Answer: D
Blooms: Understand
113. ______ policy focuses on the nation's money supply, while _____ policy focuses on the
government's budget.
40
A. Monetary; structural
B. Fiscal, structural
C. Monetary, fiscal
D. Fiscal, monetary
Answer: C
Blooms: Understand
Feedback: The Federal Reserve System conducts monetary policy, which controls the money
supply and thereby interest rates. The United States Congress conducts fiscal policy, which
refers to decisions that determine the government’s budget.
114. _____ policy focuses on the nation's money supply, while _____ policy aims at changing
the underlying structures or institutions of the economy.
A. Monetary; structural
B. Fiscal, structural
C. Monetary, fiscal
D. Fiscal, monetary
Answer: A
Blooms: Understand
Feedback: Monetary policy is the control of the money supply and thereby interest rates.
Structural policy refers to government policies aimed at changing the underlying structure or
institutions of the economy.
115. Which of the following would be considered an example of monetary policy?

A. A broad government initiative to reduce the country's reliance on agriculture and promote
high-technology industries.
B. A reduction in income tax rates.
C. Provision of additional cash to the banking system.
D. A decision by a developing country to reduce government control of the economy and to
become more market-oriented.
Answer: C
Blooms: Understand
41
Feedback: Monetary policy focuses on the determination of the nation's money supply and
thereby controlling the nation’s interest rates. A provision of additional cash to the banking
system will increase the money supply.
116. Which of the following would be considered an example of fiscal policy?

A. A broad government initiative to reduce the country's reliance on agriculture and promote
high-technology industries.
D. Interest rate hikes generated by a reduction in the money supply.
Answer: B
Blooms: Understand
117. Which of the following would be considered an example of structural policy?

A. A decision by a developing country to reduce government control of the economy and to
become more market-oriented.
D. An attempt to reduce the government budget deficit by reducing spending.
Answer: A
Blooms: Understand
Feedback: Monetary policy is the control of the money supply and thereby interest rates.
Structural policy refers to government policies aimed at changing the underlying structure or
institutions of the economy.
118. Positive analysis:

A. recommends whether a policy should be implemented.
B. aims at determining only the economic consequences of a particular policy.
C. depends on the analyst's values.
D. determines whether the consequences of a policy are desirable.
Answer: B
Difficulty: 01 Easy
42
Blooms: Remember
Feedback: Positive analysis aims at determining only the economic consequences of a particular
event, not whether those consequences are desirable.
119. Normative analysis:

A. addresses the question of whether a policy should be used.
B. aims at determining only the economic consequences of a particular policy.
C. does not depend on the analyst's values.
D. focuses on the actual effects of a policy.
Answer: A
Difficulty: 01 Easy
Blooms: Remember
Feedback: Normative analysis addresses the question of whether a policy should be used, and
inevitably involves the values of the person doing the analysis.
120."U.S. exports will increase as a result of joined CAFTA," is an example of a ______

statement, while "The U.S. should join CAFTA," is an example of a _____ statement.
A. monetary policy; fiscal policy
B. positive; normative
C. structural policy; fiscal policy
D. normative; positive
Answer: B
Blooms: Understand
event, not whether those consequences are desirable. However, normative analysis addresses the
question of whether a policy should be used, and inevitably involves the values of the person
doing the analysis.
121. "The plan to create private accounts in Social Security will reduce benefits for some
workers," is an example of a _____ statement, while "Social Security will be better if the private
accounts are allowed" is an example of a _____ statement.
A. monetary policy; fiscal policy
B. positive; normative
C. structural policy; fiscal policy
43
D. normative; positive
Answer: B
Blooms: Understand
event, not whether those consequences are desirable. However, normative analysis addresses the
question of whether a policy should be used, and inevitably involves the values of the person
doing the analysis.
122. Economic analysis is useful is resolving all of the following types of issues EXCEPT:
A. monetary policy
B. fiscal policy
C. normative
D. positive
Answer: C
Difficulty: 01 Easy
Blooms: Remember
123. _______ analysis addresses the question of whether a policy should be used, while ______
analysis addresses the economic consequences of a particular policy.
A. Normative; positive
B. Monetary; fiscal
C. Positive; normative
D. Fiscal; monetary
Answer: A
Blooms: Understand
inevitably involves the values of the person doing the analysis. Positive analysis aims at
determining only the economic consequences of a particular event, not whether those
consequences are desirable.
124. Which of the following statements is positive?
44
A. When the Federal Reserve increases the money supply, interest rates decrease.
B. Large budget deficits should be avoided.
C. Higher taxes are needed to support education.
D. A tax cut that benefits low-income households is acceptable.
Answer: A
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
event, not whether those consequences are desirable. Economic theory suggests, as you will learn
later in this course, that when the Federal Reserve increases the money supply, interest rates
decrease.
125. Which of the following statements is normative?

A. When the Federal Reserve increases the money supply, interest rates decrease.
B. A large budget surplus is likely to lower interest rates.
C. Large budget deficits should be avoided.
D. High taxes tend to decrease saving.
Answer: C
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
inevitably involves the values of the person doing the analysis. The appropriateness of large
budget deficits will depend on the values of the person doing the analysis.
126. Which of the following statements is positive?

A. Tax increases tend to discourage saving.
B. Large budget surpluses should be avoided.
D. A tax cut that benefits high-income households is acceptable.
Answer: A
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
event, not whether those consequences are desirable. Economic theory suggests, as you will learn
later in this course, that tax increases tend to discourage saving.
45
127. Which of the following statement is normative?
A. The interest rate increases are the result of Federal Reserve actions to decrease the money
supply.
B. A large budget surplus is likely to lower interest rates.
D. Trade deficits frequently occur in conjunction with budget deficits.
Answer: C
Difficulty: 03 Hard
AACSB: Analytic
Blooms: Apply
inevitably involves the values of the person doing the analysis. The appropriateness of higher
taxes to support education will depend on the values of the person doing the analysis.
128. Analysis that aims at determining only the economic consequences of a particular policy is
called _____ analysis.
A. monetary
B. fiscal
C. positive
D. normative
Answer: C
Difficulty: 01 Easy
Blooms: Remember
event, not whether those consequences are desirable.
129. Analysis that addresses the question of whether a policy should be used is called ______
analysis.
A. monetary
B. fiscal
C. positive
D. normative
Answer: D
Difficulty: 01 Easy
Blooms: Remember
46
130. All of the following are examples of positive statements EXCEPT:

A. Tax revenues increase as output per person increases.
B. Growth in an economy generates a budget surplus.
C. As output per person increases access to consumer goods increases.
D. High rates of economic growth are undesirable because of the destruction caused to the
environment.
Answer: D
Blooms: Understand
event, not whether those consequences are desirable. So any statement including a term similar
to “undesirable” is a normative statement.
131. All of the following are examples of normative statements EXCEPT:

A. High rates of economic growth are preferable to low rates.
B. Output per person should increase at an average annual rate of 5 percent.
C. Low unemployment is more desirable than low inflation.
D. Output per person typically grows more slowly than output per worker.
Answer: D
Blooms: Understand
inevitably involves the values of the person doing the analysis. Normative statement comments
on the desirability of an action, and often includes terms such as should.
132. All of the following are examples of positive statements EXCEPT:

A. Higher interest rates reduce construction activity.
B. Higher interest rates are achieved by slowing the growth of the money supply.
C. Economic output should not be allowed to increase too fast.
D. Historically higher rates of money growth are associated with higher rates of inflation.
Answer: C
47
Blooms: Understand
event, not whether those consequences are desirable. So any statement including a term similar
to “should” is a normative statement.
133. All of the following are examples of normative statements EXCEPT:

A. Reducing inflation should not be done at the expense of more unemployment.
B. The Federal Reserve should act decisively to reduce inflation.
C. Economic growth should not be allowed to exceed 5 percent per year.
D. Unexpectedly high inflation redistributes wealth from lenders to borrowers.
Answer: D
Blooms: Understand
on the desirability of an action, and often includes terms such as should.
134. "If the Federal Reserve raises interest rates, demand for housing is likely to fall" is a
_______ statement about ________ policy.
A. positive; fiscal
B. normative; fiscal
C. positive; monetary
D.normative; monetary
Answer: C
Blooms: Understand
event, not whether those consequences are desirable. Monetary policy is the control of the money
supply and thereby interest rates.
135. "The Federal Reserve should raise interest rates in order to keep inflation at an acceptably
low level" is a _______ statement about _______ policy.
A. positive; fiscal
48
D. normative; monetary
Answer: D
Blooms: Understand
on the desirability of an action, and often includes terms such as should. Monetary policy is the
control of the money supply and thereby interest rates.
136. "If Congress cuts income taxes, demand for output is likely to increase" is a _______
statement about ______ policy.
A. positive; fiscal
D.normative; monetary
Answer: A
Blooms: Understand
event, not whether those consequences are desirable. Fiscal policy refers to decisions that
137. "Any tax cut to increase demand for output should favor lower-income people" is a ______
statement about ______ policy.
A. positive; fiscal
Answer: B
Blooms: Understand
on the desirability of an action, and often includes terms such as should. Fiscal policy refers to
49
decisions that determine the government’s budget, and includes decisions on the amount taxes
collected.
138. "Privatization of government owned industries is likely to increase unemployment in the

short run" is a __________ statement about _________ policy.
A. positive; fiscal
B. normative; structural
C. positive; structural
Answer: C
Blooms: Understand
event, not whether those consequences are desirable. Structural policy refers to government
policies aimed at changing the underlying structure or institutions of the economy.
Normative analysis addresses the question of whether a policy should be used, and inevitably
involves the values of the person doing the analysis. Normative statement comments on the
desirability of an action, and often includes terms such as should.
139. "Privatization of government owned industries is a more desirable way to operate an

economy" is a _______ statement about ______ policy.
A. positive; fiscal
Answer: B
Blooms: Understand
on the desirability of an action. Structural policy refers to government policies aimed at changing
the underlying structure or institutions of the economy.
140. "Any additional increases in government spending should be for defense," is _____
statement about _____ policy.
A. positive; fiscal
50
Answer: B
Blooms: Understand
on the desirability of an action, and often includes terms such as should. Fiscal policy refers to
decisions that determine the government’s budget, and includes decisions on the amount taxes
collected.
141. "Social Security should be privatized to get the government out of the retirement-financing
business," is an example of a _____ statement about _____ policy.
A. positive; fiscal
Answer: B
Blooms: Understand
on the desirability of an action. Structural policy refers to government policies aimed at changing
the underlying structure or institutions of the economy.
142. Which of the following would not be studied by macroeconomists?

A. The worldwide operations of General Motors
B. Factors affecting average wages in the U.S. economy.
C. Inflation in developing countries.
D. The effects of tax cuts on consumer spending.
Answer:
Topic: Aggregation
Blooms: Understand
Feedback: The worldwide operations of General Motors would be studied by microeconomists
and not macroeconomists, as General Motors is an individual company.
51
143.Which of the following would be studied by macroeconomists?
A. The effect of government subsidies on sugar prices.
B. The impact of the minimum wage on families below the poverty level.
C. Inflation in developing countries.
D. The effect of rent controls on housing prices in New York City.
Answer: C
Topic: Aggregation
Blooms: Understand
Feedback: Inflation is a topic related to the performance of the national economy, and therefore
is a macroeconomic topic. The other issues relate to individual choices and individual markets,
and so are microeconomic topics.
144. Macroeconomists are concerned with each of the following issues EXCEPT:
A. Why does inflation vary over time?
B. Why does inflation vary across countries?
C. Why do the prices of computers increase more slowly than the price of gasoline?
D.What are the costs of inflation?
Answer: C
Topic: Aggregation
Blooms: Understand
Feedback: Inflation is a topic related to the performance of the national economy, and therefore
is a macroeconomic topic. The prices of computers relate to an individual market, and so is a
microeconomic topic.
145. Which of the following is a macroeconomic policy?

A. How an early freeze in California will affect the price of fruit.
B. Tax cuts to bring the federal budget into balance
C. Requiring locks on all guns.
D. Regulations limiting automobile emissions.
Answer: B
Topic: Aggregation
Blooms: Understand
Feedback: The federal budget is a topic related to the performance of the national economy, and
52
therefore is a macroeconomic topic. The other issues relate to individual choices and individual
markets, and so are microeconomic topics.
146. Aggregation means the:

A. adding up of individual economic variables to obtain economy wide totals.
B. participation in national economic policy discussions
C. worsening of an economic situation.
D. enhancement of the power and wealth of a nation.
Answer: A
Difficulty: 01 Easy
Topic: Aggregation
Blooms: Remember
Feedback: Aggregation is the adding up of individual economic variables to obtain economywide
totals.
147. The adding up of individual economic variables to obtain economy wide totals is called:
A. average labor productivity.
B. aggregation.
C. normative analysis.
D. monetary policy.
Answer: B
Difficulty: 01 Easy
Topic: Aggregation
Blooms: Remember
totals.
148. Macroeconomists are more likely than microeconomists to deal with:

A. positive analysis
B. aggregation
C. the scarcity principle
D. individual firms
Answer: B
Difficulty: 01 Easy
Topic: Aggregation
Blooms: Remember
53
Feedback: Macroeconomists do a lot of aggregation - the adding up of individual economic
variables to obtain economywide totals.
149. Which of the following is the most aggregated value?

A. total output of a firm
B. total output of a country
C. total output of a city
D. total output of an industry
Answer: B
Topic: Aggregation
Blooms: Understand
totals. The total output of a country is therefore the most aggregated value.
150. Macroeconomists would be most likely to study which of the following?

A. average annual earnings of lawyers
B. average annual earnings of doctors
C. average annual earnings of self-employed workers
D. average annual earnings of all employed workers in the United States
Answer: D
Topic: Aggregation
Blooms: Understand
Feedback: The average annual earnings of all employed workers in the United States is a topic
related to the performance of the national economy, and therefore is a macroeconomic topic. The
other issues relate to individual markets, and so are microeconomic topics.
151. A cost of aggregation is that:

A. details about individual households and firms are lost
B. the "big picture" cannot be studied
C. economy-wide totals cannot be obtained
D. broad economic trends are obscured
Answer: A
Topic: Aggregation
Blooms: Understand
54
Feedback: A cost of aggregation is that the fine details of the economic situation are often
obscured.
152. To aggregate 300 tons of steel, 5,000 bushels of wheat, and 1 million barrels of crude oil,
economists add together the _____ of the three products
A. units
B. dollar value
C. weight
D. number of tons, bushels, and barrels
Answer: B
Topic: Aggregation
Blooms: Understand
Feedback: Macroeconomists can’t add tons, bushels, and barrels of different as the units
aren’t comparable. But they can add the dollar values of each.
153. Aggregation allows economists to ______ at the cost of ________.

A. see the big picture; obscuring the details
B. make positive statements; ignoring normative analysis
C. make normative statements; ignoring positive analysis
D. see the details; obscuring the big picture
Answer: A
Difficulty: 01 Easy
Topic: Aggregation
Blooms: Remember
Feedback: Aggregation allows economists to see the big picture at the cost of obscuring the
details.
154. In a debate on the state of the economy Senator X pointed out that the unemployment rates
for teenagers, blacks, and hispanics had increased over the last year, while Senator Y stated that
the unemployment rate in the United States was at its lowest level in more than 30 years. In this
example, aggregate data is being used by:
A. both senators
B. senator X
C. senator Y
D. neither senators
Answer: C
Topic: Aggregation
55
Blooms: Understand
details. Only senator Y uses aggregate data – the unemployment rate in the United States.
155. In a debate on the state of the economy Senator A pointed out that the price of clothing,
fruits, and computers had decreased slightly over the last year, while Senator B stated that the
inflation rate had increased over the last year. In this example, aggregate data is being used by:
A. both senators
B. senator A
C. senator B
D. neither senators
Answer: C
Topic: Aggregation
Blooms: Understand
details. Only senator B uses aggregate data – the inflation rate.
56

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File: Chapter 12 Macroeconomics: The Bird's-Eye View of the Economy

Multiple Choice Questions

1. The Great Depression:

4. Macroeconomics first developed as a new subfield of economics:

8. Macroeconomic policies are government policies designed to affect:

10.Since 1950, the standard of living in the United States has:

13. The standard of living in an economy is best measured by:

25. Average labor productivity equals:

26. Output per employed worker is called:

32. Output per worker must be _____ output per person.

55.A particularly strong expansion is called a(n):

60. Unemployment typically _______ during a recession.

64. The unemployment rate in the United States:

68. Inflation is the increase in:

71. A trade deficit occurs when:

74. A trade imbalance occurs when:

80. Major macroeconomic questions include all of the following EXCEPT:

82. Macroeconomic issues include all of the following EXCEPT:

83. All of the following statements are correct EXCEPT:

86. The Federal Reserve makes decisions regarding:

87. The central bank of the United States is called:

89. Monetary policy refers to:

90. Fiscal policy refers to:

91. Structural policy refers to:

92. The determination of the nation's money supply is called:

93. Decisions to determine the government's budget are called:

95. A nation's central bank:

97. A government is running a budget deficit if:

98. A government is running a budget surplus if:

104. An decrease in the federal income tax is an example of ______ policy.

115. Which of the following would be considered an example of monetary policy?

116. Which of the following would be considered an example of fiscal policy?

117. Which of the following would be considered an example of structural policy?

118. Positive analysis:

119. Normative analysis:

120."U.S. exports will increase as a result of joined CAFTA," is an example of a ______

124. Which of the following statements is positive?

125. Which of the following statements is normative?

126. Which of the following statements is positive?

130. All of the following are examples of positive statements EXCEPT:

131. All of the following are examples of normative statements EXCEPT:

132. All of the following are examples of positive statements EXCEPT:

133. All of the following are examples of normative statements EXCEPT:

138. "Privatization of government owned industries is likely to increase unemployment in the

139. "Privatization of government owned industries is a more desirable way to operate an

142. Which of the following would not be studied by macroeconomists?

145. Which of the following is a macroeconomic policy?

146. Aggregation means the:

148. Macroeconomists are more likely than microeconomists to deal with:

149. Which of the following is the most aggregated value?

150. Macroeconomists would be most likely to study which of the following?

151. A cost of aggregation is that:

153. Aggregation allows economists to ______ at the cost of ________.

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153. Aggregation allows economists to at the cost of __.