POL 113Chapter 08 The Business Cycle.......Multiple Choice Questions....NOT GRADED

Great Depression? A. Families lost their farms. B. Automobile production fell. C. The stock market crashed. D. Unemployment reached 50 percent. 2. The study of aggregate economic activity for the economy as a whole is A. Opportunity cost. B. Scarcit y. C. Macroeconomi cs. D. Microeconomi cs. 3. Alternating periods of economic growth and contraction in real GDP define A. Capitalis m. B. The business cycle. C. Macro equilibrium. D. Say's Law. 4. According to classical theory, A. Keynes had "neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand." B. Macro equilibrium might start out badly and get worse in the absence of government intervention. C. Flexible wages and prices allow a laissez faire economy to adjust wages and prices to shifts in aggregate demand. D. Business cycles are not relevant and do not occur. 5. According to the classical view, if consumer demand slowed down, A. Prices would decrease, and the economy would return to its long- term growth trend. B. Prices would increase, and the economy would return to its long-term growth trend. C. Wages would increase, and the economy would return to its long- term growth trend. D. Investment and government demand would increase, and the economy would return to its long-term growth trend. 6. Based on the classical view, A. Unemployment never occurs. B. Cyclical unemployment might occur temporarily. C. All goods produced are always purchased at an unchanging price. D. Persistent unemployment might be a problem. 7. If wages and prices are flexible, then a recession is best eliminated when prices A. And wages both rise. B. And wages both fall. C. Rise and wages drop. D. Drop and wages rise. 8. According to classical economists, market-driven economies A. Are typically self- adjusting. B. Are inherently unstable. C. Require government intervention. D. Are always in long-run equilibrium. 9. Say's Law states that A. Supply creates its own demand. B. Shifts of either supply or demand can achieve a given market equilibrium. C. Wages and prices are inflexible, which prevents the achievement of market equilibrium. D. Increased prices lead to increased supply. A. Falling price levels appeared to limit an increase in unemployment. B. Periods of high unemployment tended to be brief. C. Say's Law seemed to work. D. Government intervention was commonly used to stimulate the economy. 11. Unlike the classical economists, Keynes asserted that A. The economy was inherently unstable. B. Laissez faire policies would lead to macro equilibrium. C. Prices and wages were flexible. D. Markets would naturally self- adjust. 12. Who believed that small disturbances in output, prices, or unemployment were likely to be magnified by the invisible hand of the marketplace? A. President Herbert Hoover. B. Adam Smith. C. John Maynard Keynes. D. Jean-Baptiste Say. A. Buying more output. B. Employing more people. C. Making more money available. D. Raising taxes. 14. According to Keynes, when the economy falters, the government should do any of the following except A. Practice a laissez faire policy approach. B. Provide more dollars for unemployment benefits. C. Make more money available. D. Buy more output. 15. According to Keynes, which of the following should the government do when the economy overheats? A. Employ more people. B. Increase spending. C. Raise taxes. D. Practice laissez faire policies. overheated economy? A. Decrease government purchases. B. Decrease taxes. C. Make more money available. D. Employ more people. 17. Which of the following is true about business cycles in the United States? A. They are remarkably similar in length but vary greatly in intensity. B. They vary greatly in length, frequency, and intensity. C. They are similar in frequency and intensity but not in length. D. They are similar in length, frequency, and intensity. 18. Which of the following is characteristic of a downturn in the business cycle? A. Lower unemployment rates. B. Lower real output. C. Higher interest rates. D. None of the choices are correct. A. The GDP deflator. B. Nominal GDP. C. GDP per capita. D. Real GDP. 20. Real GDP is better than nominal GDP for measuring growth because real GDP has been adjusted for changes in A. The price level. B. Unemployme nt. C. The business cycle. D. Productivit y. 21. Changes in real GDP are used to measure A. Inflatio n. B. Price level changes. C. Business cycles. D. Population growth. A. Follow a period of apparent prosperity. B. Lead to an unemployment rate that reached 25 percent. C. Cause President Roosevelt to declare a "bank holiday" in 1933. D. Lead to a high rate of inflation. 23. Before the year 2000, the most prolonged departure from the long-term growth path for the United States occurred during A. The 1980s. B. The Great Depression. C. World War II. D. The years following World War II. 24. A decline in total real output for two or more consecutive quarters is referred to as A. Laissez faire. B. A recession. C. A growth recession. D. Say's Law. A. Inside the production possibilities curve. B. Outside the production possibilities curve. C. On the production possibilities curve. D. At either end of the production possibilities curve. 26. In which of the following situations is the percentage change in real GDP always positive? A. Depressio n. B. Inflatio n. C. Recessio n. D. Growth recession. 27. A growth recession is said to occur when the economy grows at a A. Rate less than that of population. B. Rate less than the long-term average. C. Slower rate in the current year than the preceding year. D. Negative rate. 28. Which of the following caused a recession in the years immediately following World War II? A. A surge in investment spending. B. Pent-up demand for consumer goods. C. Cutbacks in defense production. D. Technological advances. 29. Which of the following was not true for the U.S. economy during the period from the late 1990s to 2000? A. Economic expansion set a record for longevity. B. The unemployment rate was low. C. Millions of new jobs were created. D. Real GDP declined. 30. Which of the following is not considered a macro outcome? A. The level of unemployment. B. External shocks such as weather. C. The average price of goods and services. D. The year-to-year expansion in overall productive capacity.