Econ Final Study Guide

38 Questions | Attempts: 110
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Survey of Economics Univesity of Akron practice test.


Questions and Answers
  • 1. 
    A business cycle is the:
    • A. 

      Period of time in which there is continuous growth in the economy.

    • B. 

      Period of time in which there are two phases, which are: peak and depression.

    • C. 

      Economic fluctuations of real GDP along a long-term growth trend.

    • D. 

      Period of time in which a business is established and ceases operations.

  • 2. 
    The business cycle consists of four phases. At the top we have:
    • A. 

      Recovery, followed by depression, and then recession followed by a peak.

    • B. 

      Recovery, followed by a recession, and then peak followed by depression.

    • C. 

      Peak, then a depression, followed by recovery, and then recession

    • D. 

      Peak, then a recession, followed by depression, and finally, recovery.

  • 3. 
    A general rule is that a recession is a decline in real GDP lasting at least:
    • A. 

      One year.

    • B. 

      Six months.

    • C. 

      Three months.

    • D. 

      One month.

  • 4. 
    If there are 150 million people in the total labor force of which 135 million are employed, then the unemployment rate is:
    • A. 

      10%

    • B. 

      12%

    • C. 

      20%

    • D. 

      90%

  • 5. 
    Frictional unemployment refers to:
    • A. 

      People who are out of work and don’t have the required job skills.

    • B. 

      Short periods of unemployment needed to best match right jobs to the right job seekers.

    • C. 

      People who are unemployed during certain seasons of the year

    • D. 

      Unemployment related to the ups and downs of the business cycle

  • 6. 
    In an economic expansion, people used their charge cards to purchase many goods. Now the economy is in a recession and people must use much of their reduced incomes to pay back debts. If employees manufacturing the goods people used to buy are laid off, they will suffer from:
    • A. 

      Cyclical unemployment.

    • B. 

      Structural unemployment.

    • C. 

      Permanent unemployment.

    • D. 

      Frictional unemployment.

  • 7. 
    The economy is fully employed when there is zero
    • A. 

      Seasonal unemployment.

    • B. 

      Frictional unemployment.

    • C. 

      Structural unemployment.

    • D. 

      Cyclical unemployment

  • 8. 
    Inflation is an increase in:
    • A. 

      Prices of every single product in the economy.

    • B. 

      Homes, autos and basic resources.

    • C. 

      The general and average price level of products.

    • D. 

      None of the above.

  • 9. 
    A measure comparing the prices of consumer goods and services that a household typically purchases to the prices of those goods and services purchased in a base year is
    • A. 

      The GDP deflator.

    • B. 

      The consumer price index.

    • C. 

      The price level.

    • D. 

      Inflation.

  • 10. 
    Price indexes like the CPI are calculated using a base year. The term base year refers to:
    • A. 

      The first year that price data are available.

    • B. 

      Any year in which inflation was higher than 5 percent.

    • C. 

      The most recent year in which the business cycle hit the trough.

    • D. 

      A specifically chosen reference year.

  • 11. 
    Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is:
    • A. 

      Currently $130.

    • B. 

      130 percent more in Year X than in the base year.

    • C. 

      130 percent more in the base year than in Year X.

    • D. 

      30 percent more in Year X than in the base year.

  • 12. 
    This year the Smith family income went up by 10%. In an economy with an inflation rate of 5%, which of the following is correct?
    • A. 

      The Smith’s nominal income and real income have both fallen.

    • B. 

      The Smith’s nominal income and real income have both risen.

    • C. 

      The Smith’s nominal income has increased and their real income has fallen.

    • D. 

      The Smith’s nominal income has decreased and their real income has risen.

  • 13. 
    The aggregate demand curve:
    • A. 

      Shows the level of real GDP purchased in the economy at different possible price levels during a period of time.

    • B. 

      Shows the level of real GDP supplied in the economy at different possible price levels during a period of time.

    • C. 

      Shifts to the left whenever there is an increase in aggregate expenditures.

    • D. 

      Slopes upward.

  • 14. 
    Which of the following is a reason for the downward slope of an aggregate demand curve?
    • A. 

      Real balance or wealth effect.

    • B. 

      Interest-rate effect.

    • C. 

      Foreign trade effect.

    • D. 

      All of the above are reasons.

  • 15. 
    The idea that lower prices increase the buying power of money and lead to more spending on real GDP, is known as the:
    • A. 

      Real balance effect.

    • B. 

      Interest rate effect.

    • C. 

      Foreign purchases effect.

    • D. 

      Net export effect.

  • 16. 
    The aggregate supply curve:
    • A. 

      Shows the level of real GDP produced in the economy at different possible price levels during a period of time.

    • B. 

      Is relatively flat in the beginning and then gets steeper

    • C. 

      Is upward-sloping

    • D. 

      All of the above.

  • 17. 
    Fiscal policy
    • A. 

      Uses the federal government's powers of spending and taxation to affect employment, the price level, and GDP

    • B. 

      Can affect employment and prices, but not the level of GDP

    • C. 

      Can affect employment and the level of GDP, but not the price level

    • D. 

      Uses the federal government's powers over the money supply to affect employment, the price level, and GDP

  • 18. 
    If the MPC equals 0.8 and G increases by $200 million, real GDP demanded will increase by
    • A. 

      $160 million

    • B. 

      $200 million

    • C. 

      $1000 million

    • D. 

      $1250 million

  • 19. 
    If taxes decline by $200 million and the MPC = 0.8, then equilibrium real GDP demanded
    • A. 

      Declines by $200 million

    • B. 

      Increases by $200 million

    • C. 

      Increases by $800 million

    • D. 

      Increases by $1000 million

  • 20. 
    A supply-side policy approach to achieving both lower prices and full employment would be to:
    • A. 

      Increase the growth of the money supply.

    • B. 

      Manipulate aggregate supply by a decreasing taxes and reducing government regulation.

    • C. 

      Wait until natural market forces establish full employment.

    • D. 

      Change government spending or taxes to affect aggregate demand

  • 21. 
    Which of the following is not a function of money?
    • A. 

      To provide a double coincidence of wants

    • B. 

      To act as a medium of exchange

    • C. 

      To act as a unit of account

    • D. 

      To act as a store of value

  • 22. 
    If a money is acceptable because the government requires that it be accepted in payment for debt, the money is
    • A. 

      Legal tender

    • B. 

      Commodity money

    • C. 

      Guaranteed to be a good store of wealth

    • D. 

      Convertible to a valuable commodity

  • 23. 
    M1 is defined as
    • A. 

      Coins, currency, checkable deposits and traveler’s checks

    • B. 

      Coins, currency, checkable deposits, traveler’s checks and savings accounts

    • C. 

      Coins, currency, checkable deposits and traveler’s checks and small time deposits

    • D. 

      It is the same as M2 and M3

  • 24. 
    Which of the following is not part of the Federal Reserve System?
    • A. 

      The President’s Council of Economic Advisors.

    • B. 

      Board of Governors.

    • C. 

      Federal Open Market Committee.

    • D. 

      12 Federal Reserve District Banks.

  • 25. 
    Which of the following is not a function of the Federal Reserve System?
    • A. 

      To control the money supply.

    • B. 

      To lend money to households.

    • C. 

      To supervise and regulate banks.

    • D. 

      To aid in the check clearing process.

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