Econ Final Study Guide
Survey of Economics Univesity of Akron practice test.
- 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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