TEST BANK Macroeconomics 6th Edition Stephen Williamson
Chapter 1 Introduction
1.1 Multiple-Choice Questions
1) In 2014, the per-capita GDP in the United States, in 2005 dollars, was about
A) $17,500.
B) $27,500.
C) $50,000
D) $47,500.
Answer: C
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: easy
Classification: concept
AACSB: application of knowledge
2) Which of the following topics is NOT a primary concern of macroeconomists?
A) fluctuations in the level of economic activity
B) differences in standards of living across countries
C) relative wages of skilled and unskilled workers
D) unemployment
Answer: C
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: moderate
Classification: concept
AACSB: analytical thinking
3) Primarily, macroeconomists use microeconomic principles to study
A) business cycles and trends in the stock market.
B) long-run economic growth and antitrust policies.
C) trends in the stock market and long-term economic growth.
D) long-run economic growth and business cycles.
Answer: D
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
1
,4) Which is a question of interest in this book?
A) What causes growth in the long term?
B) How should a labor contract be structured?
C) How should a government be elected?
D) What is the impact of government provided health care?
Answer: A
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: difficult
Classification: concept
AACSB: analytical thinking
5) Which is a question of interest in this book?
A) Where is the stock market heading?
B) What is the optimal inflation rate?
C) How are stock options priced?
D) What are commodity futures?
Answer: B
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
6) Over the course of the twentieth century, the typical American
A) remained equally as rich.
B) became twice as rich.
C) became five times as rich
D) became ten times as rich.
Answer: D
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: easy
Classification: application
AACSB: analytical thinking
7) Which of the following assertions is false?
A) The Great Depression was a typical business cycle.
B) Very rapid growth occurred during World War II.
C) Real GDP per capita dipped about 30% during the Great Depression.
D) On average, the U.S. economy grows at a rate of 2.1%.
Answer: A
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: moderate
Classification: application
AACSB: application of knowledge
2
,8) The business cycle component of the log of real per-capita GNP is equal to
A) log of actual real GNP - log of trend GNP.
B) log of trend GNP ÷ log of actual real GNP.
C) log of trend GNP - log of actual real GNP.
D) log of actual real GNP ÷ log of trend GNP.
Answer: A
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: easy
Classification: concept
AACSB: analytical thinking
9) For the study of economic growth, it is most helpful to examine movements in ________; for
the study of business cycles, it is most helpful to examine movements in ________.
A) trend GNP; trend GNP
B) trend GNP; deviations from trend in GNP
C) deviations from trend in GNP; trend GNP
D) deviations from trend in GNP; deviations from trend in GNP
Answer: B
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: difficult
Classification: application
AACSB: application of knowledge
10) A useful macroeconomic model
A) is extremely realistic.
B) is simple.
C) never generates testable hypotheses.
D) provides a lot of intricate details.
Answer: B
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
11) Macroeconomic models are
A) never wrong.
B) accurate descriptions of the economy.
C) simple abstractions of reality.
D) consistent with all economic data.
Answer: C
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: easy
Classification: concept
AACSB: application of knowledge
12) What characterizes a competitive equilibrium?
3
, A) Markets are rationed.
B) Governments stay out of the market.
C) Economic agents are price-takers.
D) It is costly to experiment with policies.
Answer: C
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
13) What do we assume about households and firms?
A) They act irrationally.
B) They do what the government tells them to do.
C) They look after each other.
D) They optimize.
Answer: D
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
14) According to the Lucas critique, the effects of changes in economic policy
A) can be determined by looking at macroeconomic data.
B) cannot always be predicted by looking at historical macroeconomic relationships.
C) are easy to predict.
D) do not require macroeconomic theory.
Answer: B
LO: 1.4: Discuss how microeconomic principles are important in constructing useful
macroeconomic models.
Difficulty: difficult
Classification: concept
AACSB: analytical thinking
15) Which aspect of macroeconomics generates the most controversy?
A) economic growth
B) the causes of business cycles
C) supply and demand
D) competitive equilibrium
Answer: B
LO: 1.5: Explain why there is disagreement among macroeconomists, and what they disagree
about.
Difficulty: moderate
Classification: application
AACSB: application of knowledge
16) According to Keynesian coordination failure theory, the primary causes of business cycles
are
A) shocks to aggregate demand.
4
Chapter 1 Introduction
1.1 Multiple-Choice Questions
1) In 2014, the per-capita GDP in the United States, in 2005 dollars, was about
A) $17,500.
B) $27,500.
C) $50,000
D) $47,500.
Answer: C
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: easy
Classification: concept
AACSB: application of knowledge
2) Which of the following topics is NOT a primary concern of macroeconomists?
A) fluctuations in the level of economic activity
B) differences in standards of living across countries
C) relative wages of skilled and unskilled workers
D) unemployment
Answer: C
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: moderate
Classification: concept
AACSB: analytical thinking
3) Primarily, macroeconomists use microeconomic principles to study
A) business cycles and trends in the stock market.
B) long-run economic growth and antitrust policies.
C) trends in the stock market and long-term economic growth.
D) long-run economic growth and business cycles.
Answer: D
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
1
,4) Which is a question of interest in this book?
A) What causes growth in the long term?
B) How should a labor contract be structured?
C) How should a government be elected?
D) What is the impact of government provided health care?
Answer: A
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: difficult
Classification: concept
AACSB: analytical thinking
5) Which is a question of interest in this book?
A) Where is the stock market heading?
B) What is the optimal inflation rate?
C) How are stock options priced?
D) What are commodity futures?
Answer: B
LO: 1.1: State the two focuses of study in macroeconomics, the key differences between
microeconomics and macroeconomics, and the similarities between microeconomics
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
6) Over the course of the twentieth century, the typical American
A) remained equally as rich.
B) became twice as rich.
C) became five times as rich
D) became ten times as rich.
Answer: D
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: easy
Classification: application
AACSB: analytical thinking
7) Which of the following assertions is false?
A) The Great Depression was a typical business cycle.
B) Very rapid growth occurred during World War II.
C) Real GDP per capita dipped about 30% during the Great Depression.
D) On average, the U.S. economy grows at a rate of 2.1%.
Answer: A
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: moderate
Classification: application
AACSB: application of knowledge
2
,8) The business cycle component of the log of real per-capita GNP is equal to
A) log of actual real GNP - log of trend GNP.
B) log of trend GNP ÷ log of actual real GNP.
C) log of trend GNP - log of actual real GNP.
D) log of actual real GNP ÷ log of trend GNP.
Answer: A
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: easy
Classification: concept
AACSB: analytical thinking
9) For the study of economic growth, it is most helpful to examine movements in ________; for
the study of business cycles, it is most helpful to examine movements in ________.
A) trend GNP; trend GNP
B) trend GNP; deviations from trend in GNP
C) deviations from trend in GNP; trend GNP
D) deviations from trend in GNP; deviations from trend in GNP
Answer: B
LO: 1.2: Explain the key features of trend growth and deviations from trend in per capita gross
domestic product in the United States from 1900 to 1914.
Difficulty: difficult
Classification: application
AACSB: application of knowledge
10) A useful macroeconomic model
A) is extremely realistic.
B) is simple.
C) never generates testable hypotheses.
D) provides a lot of intricate details.
Answer: B
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
11) Macroeconomic models are
A) never wrong.
B) accurate descriptions of the economy.
C) simple abstractions of reality.
D) consistent with all economic data.
Answer: C
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: easy
Classification: concept
AACSB: application of knowledge
12) What characterizes a competitive equilibrium?
3
, A) Markets are rationed.
B) Governments stay out of the market.
C) Economic agents are price-takers.
D) It is costly to experiment with policies.
Answer: C
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
13) What do we assume about households and firms?
A) They act irrationally.
B) They do what the government tells them to do.
C) They look after each other.
D) They optimize.
Answer: D
LO: 1.3: Explain why models are useful in macroeconomics.
Difficulty: moderate
Classification: concept
AACSB: application of knowledge
14) According to the Lucas critique, the effects of changes in economic policy
A) can be determined by looking at macroeconomic data.
B) cannot always be predicted by looking at historical macroeconomic relationships.
C) are easy to predict.
D) do not require macroeconomic theory.
Answer: B
LO: 1.4: Discuss how microeconomic principles are important in constructing useful
macroeconomic models.
Difficulty: difficult
Classification: concept
AACSB: analytical thinking
15) Which aspect of macroeconomics generates the most controversy?
A) economic growth
B) the causes of business cycles
C) supply and demand
D) competitive equilibrium
Answer: B
LO: 1.5: Explain why there is disagreement among macroeconomists, and what they disagree
about.
Difficulty: moderate
Classification: application
AACSB: application of knowledge
16) According to Keynesian coordination failure theory, the primary causes of business cycles
are
A) shocks to aggregate demand.
4
