6th Quiz

A short-run change in ________ is referred to as a business cycle. *

1 point

A) the growth rate of real GDP

B) the aggregate price level
C) the currency exchange rate
D) the expenditure incurred by the government

Which of the following is true of growth in developed and developing countries? *

1 point

A) Growth is completely steady in both developed and developing countries.

B) Growth is completely steady in developed countries but fluctuates in developing countries.
C) Growth fluctuates in developed countries but is completely steady in developing countries.
D) Growth fluctuates in both developed and developing countries.

Which of the following is true of economic expansions? *

1 point

A) Governments can correctly predict the duration of economic expansions.

B) Economic expansions are defined as the periods between recessions.
C) Output grows and unemployment is high during periods of economic expansion.
D) Consumption increases but investment falls during periods of economic expansion.

What can government policies do about the business cycle? *

1 point

A) Government policies can completely negate the business cycle.

B) Government policies can eliminate expansions but not recessions.
C) Government policies can reduce the severity of the business cycle.
D) Government policies cannot affect the business cycle at all.

) The Great Depression and World War II both caused major deviations from trend
GDP. The Great Depression resulted in real GDP moving significantly ________ trend
GDP; World War II resulted in real GDP moving significantly ________ trend GDP.
1 point

A) above; above
B) above; below
C) below; above
D) below; below
The major recession that occurred sometime between 2005 and 2015 occurred during
which years? *
1 point

A) 2006−2008
B) 2007−2009
C) 2008−2010
D) 2009−2011

Another common term for a recession is a(n) ________. *

1 point

A) expansion
B) boom
C) peak
D) contraction

Which of the following falls during an economic boom? *

1 point

A) Unemployment
B) GDP
C) Consumption
D) Investment

Which of the following rises during a recession? *

1 point

A) Consumption
B) Investment
C) GDP
D) Unemployment

Which of the following is true? *

1 point

A) Investment growth tends to be high when GDP growth is low.

B) Investment growth tends to be high when consumption growth is high.
C) Consumption growth tends to be high when GDP growth is low.
D) Unemployment growth tends to be high when GDP growth is high.

Which of the following is true? *

1 point

A) Expansions have different durations.

B) Expansions are always shorter than recessions.
C) Recessions are always accompanied by high rates of inflation.
D) Economists can accurately predict the end of a recession.

During a recession, real GDP falls. Which of the following also tends to fall? *
1 point

A) Real consumption
B) Real investment
C) Employment
D) All of the above

During an expansion, real GDP rises. Which of the following also tends to rise? *
1 point

A) Real consumption
B) Real investment
C) Employment
D) All of the above

How do consumption and investment tend to move during the business cycle? *
1 point

A) Consumption and investment both tend to rise or fall together

B) Consumption tends to rise when investment falls, and vice versa
C) Consumption always rises, even while investment rises and falls with the business cycle
D) Investment always rises, even while consumption rises and falls with the business cycle

Consumption spending adjusted for inflation is known as ________. *

1 point

A) investment
B) nominal consumption
C) real consumption
D) GDP

Which of the following terms refers to an unusually severe, prolonged recession,

typically with an unemployment rate that exceeds 20 percent? *
1 point

A) Depression
B) Inflation
C) Deflation
D) Stagflation

When did the Great Depression occur? *

1 point

A) The early 1930s

B) The late 1930s
C) The early 1940s
D) The late 1940s

What event is associated with the start of the Great Depression? *

1 point

A) The beginning of World War I

B) The beginning of World War II
C) A stock market crash
D) A government coup

Which group anticipated the Great Depression? *

1 point

A) Policymakers
B) Economists
C) Business leaders
D) None of the above

Which of the following describes how much policymakers and economists anticipated
the Great Depression? *
1 point

A) Both policymakers and economists knew the Great Depression was coming.
B) Policymakers, but not economists, knew the Great Depression was coming.
C) Economists, but not policymakers, knew the Great Depression was coming.
D) Neither policymakers nor economists knew the Great Depression was coming.

The demand for automobiles fell when gasoline prices increased. Which of the
following is likely to happen in this case, assuming all else equal? *
1 point

A) The labor demand curve of automobile companies will shift to the right.
B) The labor demand curve of automobile companies will shift to the left.
C) The supply of labor to the automobile industry will increase.
D) The supply of labor to the automobile industry will decrease.

The ________ in employment during a recession is smaller if wages are ________. *

1 point

A) decline; rigid
B) increase; rigid
C) decline; flexible
D) increase; flexible

The ________ in a country's GDP during a recession is smaller if wages are

________. *
1 point

A) fall; rigid
B) fall; flexible
C) increase; rigid
D) increase; flexible
Employers often end up laying off more workers during a recession because of
________. *
1 point

A) flexible wages
B) downward rigidity of wages
C) higher corporate taxes
D) a tight monetary policy

________ is one source of involuntary unemployment during recessions. *

1 point

A) A lower corporate tax rate

B) A higher income tax rate
C) Flexibility of wages
D) Downward rigidity of wages

7th Quiz

Countercyclical policies ________. *

1 point

A) lead to hyperinflation
B) lower output below an economy's potential level
C) increase the intensity of economic fluctuations in an economy
D) smooth the rate of growth of an economy over time

Countercyclical policies can be ________ and ________. *

1 point

A) recessionary; expansionary
B) contractionary; expansionary
C) recessionary; contractionary
D) counter-expansionary; contractionary

A countercyclical monetary policy is conducted by ________ with the overall goal of

________. *
1 point

A) the government; reducing economic fluctuations

B) the central bank; increasing economic activity
C) the central bank; reducing economic fluctuations
D) the government; increasing economic activity
Which of the following economic variables is affected when the central bank adopts a
countercyclical monetary policy? *
1 point

A) Government spending
B) Transfer payments
C) Tax rates
D) Interest rates

The central bank conducts countercyclical ________ policies by manipulating

________. *
1 point

A) monetary; interest rates and inflation rates

B) monetary; interest rates and bank reserves
C) fiscal; interest rates and bank reserves
D) fiscal; interest rates and inflation rates

Which of the following economic variables is affected when the government adopts a
countercyclical fiscal policy? *
1 point

A) Expenditure on the maintenance of highways

B) Interest rates
C) Bank reserves
D) M2 measure of money supply

A countercyclical fiscal policy is conducted by ________ with the overall goal of

________. *
1 point

A) the government; reducing economic fluctuations

B) the central bank; increasing economic activity
C) the central bank; reducing economic fluctuations
D) the government; increasing economic activity

A countercyclical fiscal policy is conducted by ________ by acting to change

________. *
1 point

A) the government; taxes and interest rates

B) the central bank; interest rates and taxes
C) the government; taxes and government expenditures
D) the government; government expenditures and interest rates

Which of the following statements is true? *

1 point
A) Countercyclical fiscal policy slows down the growth rate of an economy during an expansion by
shifting the labor demand curve to the left.
B) Countercyclical fiscal policy slows down the growth rate of an economy during an expansion by
shifting the labor supply curve to the right.
C) Countercyclical fiscal policy slows down the growth rate of an economy during an expansion by
shifting the labor demand curve to the right.
D) Countercyclical fiscal policy slows down the growth rate of an economy during an expansion by
shifting the labor supply curve to the left.

Which of the following statements is true? *

1 point

A) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand
curve to the left.
B) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand
curve to the right.
C) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply
curve to the left.
D) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply
curve to the right.

If nominal wages are downwardly rigid, a countercyclical policy during a recession

leads to ________. *
1 point

A) an increase in employment
B) an increase in tax rates
C) a fall in investment
D) a fall in consumption

What do countercyclical fiscal and monetary policies have in common? i) They are
both used to reduce economic fluctuations. ii) They both work by shifting the labor
supply curve. *
1 point

A) i) and ii) are both true

B) i) and ii) are both false
C) i) is true and ii) is false
D) i) is false and ii) is true

During a recession, a countercyclical fiscal or monetary policy can be used to

________ the economy by shifting ________. *
1 point

A) slow down; the labor demand curve to the left

B) stimulate; the labor demand curve to the left
C) stimulate; the labor demand curve to the right
D) slow down; the labor demand curve to the right
If the central bank of a country responds to economic contractions by adopting an
expansionary monetary policy, ________.
A) interest rates will increase *
1 point

A) interest rates will increase

B) access to credit will increase
C) government spending will fall
D) tax rates will increase

If the central bank wants to reduce the effects of a recession, it would adopt a(n)
________. *
1 point

A) expansionary fiscal policy

B) contractionary monetary policy
C) contractionary fiscal policy
D) expansionary monetary policy

An expansionary monetary policy ________ in an economy. *

1 point

A) lowers interest rates

B) increases interest rates
C) lowers tax rates
D) increases tax rates

The ultimate goal of an expansionary monetary policy is to ________. *

1 point

A) lower short-term interest rates

B) lower long-term interest rates
C) shift the labor demand curve to the right
D) shift the labor demand curve to the left

A ________ in long-term interest rates ________ households' demand for durable

goods. *
1 point

A) fall; decreases
B) fall; increases
C) rise; increases
D) rise; does not affect

A fall in long-term interest rates leads to a ________. *

1 point

A) leftward shift of the labor demand curve

B) rightward shift of the labor demand curve
C) leftward shift of the labor supply curve
D) rightward shift of the labor supply curve

How do specialized lending channels created by central banks affect the economy
during a recession? *
1 point

- specialized lending channels created by central banks affect the economy

during a recession by eventually helping the economy recover. The central
bank during the recession needs a way to increase credit supply and through
the specialized lending channels created by the central banks, this has
increased lending in the credit market and thus indirectly stimulate the demand
for goods, services, and labor which helps the recovery of the economy.