Principles of Macroeconomics

Homework Assignment 7

Multiple Multiple Choice

____ 1. 1. A short period of falling incomes and rising unemployment is called a

a.	depression.
b.	recession.
c.	expansion.
d.	business cycle.

____ 2.
2. During recessions

a.	workers are laid off.
b.	factories are idle.
c.	firms may find they are unable to sell all they produce.
d.	All of the above are correct.

____ 3.
3. During a recession the economy experiences

a.	rising employment and income.
b.	rising employment and falling income.
c.	rising income and falling employment.
d.	falling employment and income.

____ 4.
4. Which of the following is correct about the U.S economy operating in full employment?

a.	GDP growth rate is about 3% per year; unemployment rate is close to 0%; and inflation rate is 2-3%.
b.	GDP growth rate is higher than 10% per year; unemployment rate is about 0%; and inflation rate is 0%.
c.	GDP growth rate is about 3% per year; unemployment rate is about 5.5%; and inflation rate is 2-3%.
d.	GDP growth rate is about 20% per year; unemployment rate is about 0%; and inflation rate is 2%.

____ 5.
5. During the last half of 1980, the U.S. unemployment rate was about 7.5 percent. Historical experience suggests that this is

a.	above the natural rate, so that real GDP growth was likely low.
b.	above the natural rate, so that real GDP growth was likely high.
c.	below the natural rate, so that real GDP growth was likely low.
d.	below the natural rate, so that real GDP growth was likely high.

___ 6.
6. Which of the following would most likely cause economic fluctuation?

a.	A big crash in the stock market that causes households to spend less on consumption and firms cut down investment.
b.	Few people get married on Friday, the 13^th in a particular month.
c.	More people get marries in the month of February and March.
d.	A cold winter that makes households to spend more on heating oil.

____ 7.
7. Primary demand refers to

a. the demand for necessities.

b. the demand for goods and services that households buy to make their living.

c. the demand for products created by first-time buyers.

d. the demand for goods and services that are in the consumer basket.

e. Both b and d are correct.

____ 8.
8. Growth trend is

a.	the upward part of the business cycle including the peak.
b.	a long-run expansion or contraction of an economy’s business activities.
c.	the reoccurring and non-periodic fluctuations in business activities.
d.	the downward part of the business cycle.

____ 9. 9. Which of the following is NOT considered as a cause of economic fluctuation?

a.	Constancy of government policy.
b.	Inflation.
c.	War.
d.	Innovation.

____ 10.
10. Maria purchased her first cell phone in 2005. Since the contract of her 1^st cell expired, she purchased another cell phone in 2008.

a.	The purchases of both cell phones are primary demand.
b.	The purchases of both cell phones are secondary demand.
c.	The purchase of first cell phone is secondary demand and the purchase of second cell phone is primary demand.
d.	The purchase of first cell phone is primary demand and the purchase of second cell phone is secondary demand.

____ 11.
11. The economic expansion during 1921 – 1929 is called

a. the pre-Great Depression.

b. the Weak Recovery.

c. the Roaring 20s.

d. the Great Depression.

____ 12.
12. Stagflation refers to

a. high inflation, and low unemployment.

b. high inflation, and high unemployment.

c. low inflation, and high unemployment.

d. low inflation, and low unemployment.

____ 13.
13. The U.S. economy experienced stagflation during

a. 1929-1933.

b. 1974-1976.

c. 1980-1982.

d. 1991-1994.

e. Both b and c are correct.

____ 14.
14. The major economic problem(s) during a recession is (are)

a.	High unemployment rate and decreasing income and real GDP.
b.	High inflation.
c.	High unemployment rate, high inflation, and decreasing income and real GDP.
d.	No economic problems.

____ 15.
15. The major economic problem(s) during an overheating economy is (are)

a.	High unemployment rate and decreasing income and real GDP.
b.	High inflation.
c.	High unemployment rate, high inflation, and decreasing income and real GDP.
d.	No economic problems.

____ 16.
16. The major economic problem(s) during a stagflation is (are)

a.	High unemployment rate and decreasing income and real GDP.
b.	High inflation.
c.	High unemployment rate, high inflation, and decreasing income and real GDP.
d.	No economic problems.

____ 17.
17. The major economic problem(s) during a full employment and stable growth is (are)

a.	High unemployment rate and decreasing income and real GDP.
b.	High inflation.
c.	High unemployment rate, high inflation, and decreasing income and real GDP.
d.	No economic problems.

____ 18.
18. The U.S. economy experienced overheating during

a.	1929 - 1933, 1991, and 2001.
b.	1920’s, 1992 - 2000, and 2002 - present.
c.	1974 – 1976, and 1980 – 1982.
d.	1940s and 1962 – 1969.

____ 19.
19. Over the past 200 years, the U.S. economy

a.	has not been growing most of the time.
b.	has been suffered from hyperinflation many times.
c.	has been declined with many recession.
d.	is growth oriented.

____ 20.
20. The New Economy from 1994 – 2000 is an example of

a. stagflation.

b. overheating.

c. full employment or stable growth.

d. recession.

21. 21. Bonus (2 points): In May 2009, the U.S. economy is experiencing

a. stagflation.

b. overheating.

c. full employment or stable growth.

d. recession.