Question 1

In the long run, an increase in consumer spending would cause output to ________ and the price level to ________.

Accepted Answer

A)   rise; rise
B)   rise; stay constant
C)   stay constant; stay constant
D)   stay constant; rise

Question 2

A variable that tends to move later than aggregate economic activity is called

Accepted Answer

A)   a leading variable.
B)   a coincident variable.
C)   a lagging variable.
D)   an acyclical variable.

Question 3

Economists use the term shocks to mean

Accepted Answer

A)   unexpected government actions that affect the economy.
B)   typically unpredictable forces that have major impacts on the economy.
C)   sudden rises in oil prices.
D)   the business cycle.

Question 4

Which of the following is correct?

Accepted Answer

A)   An adverse aggregate demand shock reduces output and price in both the short run and the long run.
B)   An adverse aggregate demand shock reduces output but increases price in the short run and will have no effect on output and price in the long run.
C)   An adverse aggregate demand shock reduces output in the short run, but will have no effect on output in the long run.
D)   An adverse aggregate demand shock reduces output and price in the short run and increases both in the long run.

Question 5

Which of the following macroeconomic variables would you include in an index of leading economic indicators?

Accepted Answer

A)   employment
B)   inflation
C)   real interest rates
D)   residential investment

Question 6

How has the severity and duration of business cycles changed over time in Canada?

Accepted Answer

Though it is a controversial subject, it...

Question 7

A decline in the stock market, which makes consumers poorer, would cause

Accepted Answer

A)   the aggregate demand curve to shift to the right.
B)   the aggregate demand curve to shift to the left.
C)   a movement down and to the right along the aggregate demand curve.
D)   a movement up and to the left along the aggregate demand curve.

Question 8

Industries that are extremely sensitive to the business cycle are the

Accepted Answer

A)   durable goods and service sectors.
B)   nondurable goods and service sectors.
C)   capital goods and nondurable goods sectors.
D)   capital goods and durable goods sectors.

Question 9

The longest economic expansion in Canada occurred during the

Accepted Answer

A)   1920s.
B)   1940s.
C)   1960s.
D)   1980s.

Question 10

According to classical macroeconomists, prices adjust ________ to shocks, so the government should ________.

Accepted Answer

A)   slowly; do little
B)   rapidly; do little
C)   rapidly; fight recessions
D)   slowly; fight recessions

Question 11

One of the first organizations to investigate the business cycle was

Accepted Answer

A)   the Federal Reserve System.
B)   the National Bureau of Economic Research.
C)   the Council of Economic Advisors.
D)   the Brookings Institution.

Question 12

According to Keynesian macroeconomists, prices adjust ________ to shocks, so the government should ________.

Accepted Answer

A)   slowly; do little
B)   rapidly; do little
C)   rapidly; fight recessions
D)   slowly; fight recessions

Question 13

Christina Romer's criticism of the belief that business cycles had moderated since World War II depended on the fact that

Accepted Answer

A)   estimates of the timing of business cycles since World War II had been inaccurate.
B)   misuse of historical data had caused economists to understate the size of cyclical fluctuations in the post-World War II era.
C)   economists had ignored the roles of the government and international trade in mitigating economic fluctuations prior to World War II.
D)   economists had left out important components of GDP, such as wholesale and retail distribution, transportation, and services, in their pre-World War II estimates.

Question 14

When aggregate economic activity is declining, the economy is said to be in

Accepted Answer

A)   a contraction.
B)   an expansion.
C)   a trough.
D)   a turning point.

Question 15

Which of the following macroeconomic variables is countercyclical?

Accepted Answer

A)   real interest rates
B)   unemployment
C)   the money supply
D)   consumption

Question 16

Inventory investment displays business cycle patterns that differ from other forms of expenditure because

Accepted Answer

A)   inventory investment is countercyclical, but expenditures are generally procyclical.
B)   inventory investment is procyclical, but expenditures are generally coincident with the business cycle.
C)   inventory investment displays large fluctuations that are not associated with business cycle peaks and troughs.
D)   inventory investment lags the business cycle, but expenditures generally lead the business cycle.

Question 17

Business cycles all display the following characteristics except

Accepted Answer

A)   a period of expansion followed by one of contraction.
B)   co-movement of many economic variables.
C)   rising prices during an expansion and falling prices during the contraction.
D)   they last a period of one to twelve years.

Question 18

The fact that business cycles are periodic but not recurrent means that

Accepted Answer

A)   business cycles occur at predictable intervals, but do not last a predetermined length of time.
B)   the business cycle's standard contraction-trough-expansion-peak pattern has been observed to recur over and over again, but not at predictable intervals.
C)   business cycles occur at predictable intervals, but do not all follow a standard contraction-trough-expansion-peak pattern.
D)   business cycles last a predetermined length of time, but do not all follow a standard contraction-trough-expansion-peak pattern.

Question 19

By 1937, when a new recession began in the midst of the Great Depression,

Accepted Answer

A)   GDP had almost recovered to its 1929 level, but unemployment was still above the 1929 level.
B)   unemployment had almost fallen back to its 1929 level but GDP had yet to recover to its 1929 level.
C)   neither GDP nor unemployment had returned to near their 1929 levels.
D)   both GDP and unemployment had returned to near their 1929 levels.

Question 20

A higher level of consumer confidence will lead

Accepted Answer

A)   output to increase and price to decrease in the short run.
B)   output to increase and price to increase in the short run.
C)   output to increase and price to remain the same in the short run.
D)   output to remain the same and price to increase in the short run.

Exam 8: Business Cycles

Which of the following is correct?

Correct AnswerverifiedShow Answer

Inventory investment displays business cycle patterns that differ from other forms of expenditure because

Correct AnswerverifiedShow Answer

One of the first organizations to investigate the business cycle was

Correct AnswerverifiedShow Answer

A decline in the stock market, which makes consumers poorer, would cause

Correct AnswerverifiedShow Answer

Business cycles all display the following characteristics except

Correct AnswerverifiedShow Answer

According to Keynesian macroeconomists, prices adjust ________ to shocks, so the government should ________.

Correct AnswerverifiedShow Answer

The longest economic expansion in Canada occurred during the

Correct AnswerverifiedShow Answer

When aggregate economic activity is declining, the economy is said to be in

Correct AnswerverifiedShow Answer

Economists use the term shocks to mean

Correct AnswerverifiedShow Answer

Industries that are extremely sensitive to the business cycle are the

Correct AnswerverifiedShow Answer

In the long run, an increase in consumer spending would cause output to ________ and the price level to ________.

Correct AnswerverifiedShow Answer

According to classical macroeconomists, prices adjust ________ to shocks, so the government should ________.

Correct AnswerverifiedShow Answer

A higher level of consumer confidence will lead

Correct AnswerverifiedShow Answer

Christina Romer's criticism of the belief that business cycles had moderated since World War II depended on the fact that

Correct AnswerverifiedShow Answer

Which of the following macroeconomic variables is countercyclical?

Correct AnswerverifiedShow Answer

Which of the following macroeconomic variables would you include in an index of leading economic indicators?

Correct AnswerverifiedShow Answer

How has the severity and duration of business cycles changed over time in Canada?

Correct AnswerverifiedThough it is a controversial subject, it...View AnswerShow Answer

By 1937, when a new recession began in the midst of the Great Depression,

Correct AnswerverifiedShow Answer

The fact that business cycles are periodic but not recurrent means that

Correct AnswerverifiedShow Answer

A variable that tends to move later than aggregate economic activity is called

Correct AnswerverifiedShow Answer

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According to Keynesian macroeconomists, prices adjust to shocks, so the government should .

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In the long run, an increase in consumer spending would cause output to and the price level to .

Correct Answer
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According to classical macroeconomists, prices adjust to shocks, so the government should .

Correct Answer
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Though it is a controversial subject, it...
View Answer

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