macro economics
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U.S. Inflation, Unemployment, and Business Cycle
1 Inflation Cycles
1)
Which of the following can start an inflation?
A)
an increase in aggregate demand
B)
an increase in aggregate supply
C)
a decrease in aggregate supply
D)
Both answers A and C are correct.
Answer: D
2)
Inflation can be started by
A)
a decrease in aggregate supply or a decrease in aggregate demand.
B)
a decrease in aggregate supply or an increase in aggregate demand.
C)
an increase in aggregate supply or an increase in aggregate demand.
D)
an increase in aggregate supply or a decrease in aggregate demand.
Answer: B
3)
Demand-pull inflation starts with
A)
an increase in aggregate demand.
B)
a decrease in aggregate demand.
C)
an increase in short-run aggregate supply.
D)
a decrease in short-run aggregate supply.
Answer: A
4)
Demand-pull inflation is an inflation that results from an initial ________.
A)
increase in aggregate demand
B)
decrease in aggregate demand
C)
increase in wage rates
D)
increase in natural resource prices
Answer: A
5)
Demand-pull inflation starts with a shift of the
A)
SAS curve rightward.
B)
AD curve rightward.
C)
SAS curve leftward.
D)
AD curve leftward.
Answer: B
6)
Demand-pull inflation starts as the
A)
LAS curve shifts leftward.
B)
LAS curve shifts rightward.
C)
AD curve shifts rightward.
D)
AD curve shifts leftward.
Answer: C
7)
Demand-pull inflation can start when
A)
money wage rates rise but the price level does not change.
B)
money wage rates rise faster than prices.
C)
the short-run aggregate supply curve shifts rightward.
D)
the aggregate demand curve shifts rightward.
Answer: D
8)
Increases in the quantity of money can start a ________ inflation and an
increase in government expenditure can start a ________ inflation.
A)
demand-pull; demand-pull
B)
demand-pull; cost-push
C)
cost-push; cost-push
D)
cost-push; demand-pull
Answer: A
9)
Which of the following is a change that would NOT start a demand-pull
inflation?
A)
an increase in exports
B)
an increase in labor productivity
C)
an increase in government expenditure on goods and services
D)
an increase in the quantity of money
Answer: B
10)
Which of the following could NOT start a demand-pull inflation?
A)
increases in government expenditure
B)
increases in net exports
C)
increases in oil prices
D)
increases in the quantity of money
Answer: C
11)
Suppose the expected inflation rate is 8 percent and the unemployment rate is 3
percent. If the inflation rate rises to 10 percent and the expected inflation
rate does not change,
A)
the short-run Phillips curve will shift upward.
B)
the short-run Phillips curve will shift downward.
C)
there will be a movement along the short-run Phillips curve.
D)
the natural unemployment rate will rise.
Answer: C
12)
Suppose that last year the economy of Suffera was experiencing an expected
inflation rate of 8 percent and unemployment rate of 12 percent. An unexpected
increase in the inflation rate would
A)
increase the unemployment rate.
B)
increase the inflation rate and decrease the unemployment rate.
C)
increase the inflation rate but have no effect on the unemployment rate.
D)
None of the above answers is correct.
Answer: B
13)
Which of the following leads to an rightward shift in the short-run Phillips
curve?
I. a
reduction in the expected inflation rate
II. an
increase in the natural unemployment rate
A)
I only
B)
II only
C)
I and II
D)
neither I nor II
Answer: B
14)
An increase in the expected inflation rate shifts the
A)
short-run Phillips curve downward.
B)
short-run Phillips curve upward.
C)
long-run Phillips curve upward.
D)
long-run Phillips curve downward.
Answer: B
15)
Which of the following leads to a downward shift in the short-run Phillips
curve?
A)
People expected inflation to be 5 percent last year and now expect inflation to
be 3 percent
this
year.
B)
People expect the unemployment rate to increase.
C)
The long-run Phillips curve shifts rightward.
D)
Unexpected inflation increases.
Answer: A
16)
Suppose the expected inflation rate is 12 percent and the unemployment rate is
5 percent. If the expected inflation rate increases to 13 percent,
A)
the short-run Phillips curve will shift upward.
B)
the short-run Phillips curve will shift downward.
C)
there will be a movement along the short-run Phillips curve.
D)
the natural unemployment rate will rise.
Answer: A
17)
In the above figure, suppose the economy is at point A. An unexpected
increase in the inflation rate to 6 percent will result in a movement to point
A)
A, that is, there is no movement.
B)
B.
C)
C.
D)
D.
Answer: B
18)
In the above figure, suppose the economy is at point A. An expected
increase in the inflation rate to 6 percent will result in a movement to point
A)
A, that is, there is no movement.
B)
B.
C)
C.
D)
D.
Answer: C
19)
The long-run Phillips curve shows the relationship between the inflation rate
and the unemployment rate when the
A)
real interest rate equals the nominal interest rate.
B)
real interest rate is zero.
C)
actual inflation rate equals the expected inflation rate.
D)
inflation rate is zero.
Answer: C
20)
The long-run Phillips curve is
A)
vertical at potential GDP.
B)
the horizontal sum of the short-run Phillips curves.
C)
vertical at the natural unemployment rate.
D)
the vertical sum of the short-run Phillips curves.
Answer: C
21)
Along the long-run Phillips curve,
A)
actual inflation is greater than expected inflation.
B)
actual inflation is equal to expected inflation.
C)
actual inflation is less than expected inflation.
D)
None of the above answers is correct.
Answer: B
Chapter 13
Fiscal Policy
1 The
Federal Budget
1) Prior to the Great Depression, the purpose of
the federal budget was to ________.
A) stabilize the economy
B) finance the activities of the government
C) maintain low interest rates
D) decrease unemployment
Answer: B
2) The use of the U.S. federal budget to help
stabilize the economy grew in reaction to the ________ and is known as
________.
A) stagflation of the 1970s; fiscal policy
B) Great Depression of the 1930s; fiscal policy
C) stagflation of the 1970s; government policy
D) Great Depression of the 1930s; monetary
policy
Answer: B
3) Fiscal policy includes
A) only decisions related to government expenditure
on goods and services.
B) only decisions related to government
expenditure on goods and services and the value of transfer payments.
C) only decisions related to the value of
transfer payments and tax revenue.
D) decisions related to government expenditure
on goods and services, the value of transfer payments, and tax revenue.
Answer: D
4) Fiscal policy involves
A) the use of interest rates to influence the
level of GDP.
B) the use of tax and spending policies by the
government.
C) decreasing the role of the Federal Reserve in
the everyday life of the economy.
D) the use of tax and money policies by
government to influence the level of interest rates.
Answer: B
5) Fiscal policy
A) is enacted by the Federal Reserve.
B) involves changing interest rates.
C) involves changing taxes and government
spending.
D) involves changing the money supply.
Answer: C
6) Fiscal policy attempts to achieve all of the
following objectives EXCEPT ________.
A) a stable money supply
B) price level stability
C) full employment
D) sustained economic growth
Answer: A
Topic:
Fiscal Policy
7) Changes in which of
the following is included as part of fiscal policy?
A) the quantity of money
B) the level of interest
rates
C) monetary policy
D) tax rates
Answer: D
8) All of the following
are part of fiscal policy EXCEPT
A) setting tax rates.
B) setting government
spending.
C) choosing the size of
the government deficit.
D) controlling the money
supply.
Answer: D
9) The budget process includes the
A) President proposing and Congress passing the
budget.
B) President passing the budget as proposed by
Congress.
C) House of Representatives proposing and the
Senate passing the budget.
D) Senate proposing and the House of
Representatives passing the budget.
Answer: A
10) Which branches of the government play a role
in the enacting the federal budget?
I. the President.
II. the House of Representatives.
III. the Senate.
A) I and II
B) II and III
C) I, II and III
D) I
Answer: C
11) Which of the following government bodies
does NOT participate directly in formulating U.S. fiscal policy?
A) the President and his cabinet
B) the Federal Reserve Board
C) the House of Representatives
D) the Senate
Answer: B
12) The purpose of the Employment Act of 1946
was to
A) establish goals for the federal government
that would promote maximum employment, purchasing power, and production.
B) establish an unemployment compensation
system.
C) set up the Federal Reserve System.
D) set targets for the unemployment rate to be
achieved by the president.
Answer: A
13) The Employment Act of 1946 made it the
responsibility of the federal government to
A) balance its budget because that policy would
create the maximum level of employment.
B) promote maximum employment.
C) provide full employment and a stable balance
of payments.
D) improve the distribution of income.
Answer: B
14) The Employment Act of 1946 states that it is
the responsibility of the federal government to
A) promote full employment.
B) promote economic equality.
C) maintain the inflation rate at below 10
percent per year.
D) All of the above answers are correct.
Answer: A
15) The Council of Economic Advisers
A) proposes the president's budget each year.
B) approves fiscal policy changes.
C) helps the president and the public stay
informed about the state of the economy.
D) helps the president make changes in monetary
policy.
Answer: C
16) The Council of Economic Advisors advises the
A) President.
B) Congress.
C) Senate.
D) House of Representatives.
Answer: A
17) The largest source of government revenues is
________.
A) personal income taxes
B) indirect taxes
C) corporate income taxes
D) social security taxes
Answer: A
18) What is the largest source of revenue for
the federal government?
A) Social Security taxes
B) corporate income taxes
C) personal income taxes
D) sales tax
Answer: C
19) Which of the following is the largest source
of federal government revenue?
A) corporate income taxes
B) Social Security taxes
C) personal income taxes
D) borrowing
Answer: C
20) The government receives tax revenues from
several sources. Rank the following sources from largest to the smallest.
I. corporate income taxes
II. personal income taxes
III. Social Security taxes
A) I, II, III
B) II, III, I
C) I, III, II
D) III, II, I
Answer: B
If you have any test reviews, homeworks, guides, anything school related that you think can be posted on this website, reach out to me at makingschooleasier@gmail.com
If you have any test reviews, homeworks, guides, anything school related that you think can be posted on this website, reach out to me at makingschooleasier@gmail.com