HW 2 Macroeconomics 102 Due on 06/12 1.What are the three important macroeconomic goals about which most economists, and society at large, agree? a. economic growth, full employment, and low interest rates b. economic growth, full employment, and stable prices c. economic growth, zero unemployment, and falling prices d. economic growth, low unemployment, and a balanced budget e. economic growth, a balanced budget, and balanced international trade ANS: B 2. Macroeconomics is best suited to answering questions such as a. what determines the unemployment rate among students on this campus b. why rent is higher in big cities than in smaller ones c. how fast the overall price level will rise next year d. what determines the demand for public transportation in rural areas e. why sales taxes in this area are increasing ANS: C 3. An understanding of macroeconomics is valuable because it can help a. in making purchase decisions b. us to understand the forces that determine how fast the economy grows c. us to understand why some firms earn more economic profit than others d. to minimize the amount of tax an individual owes e. minimize the opportunity cost of making poor decisions ANS: B 4. Which of the following is a major macroeconomic goal? a. low prices b. declining prices c. pure competition d. stable prices e. high prices ANS: D 5. Economists monitor economic growth by studying a. the unemployment rate b. population growth c. the total quantity of goods and services produced in the United States each year d. the inflation rate e. the distribution of income among U.S. states ANS: C6. In only one of the following situations is a nation's standard of living certain to increase. Which one? a. Real GDP rises faster than population. b. Real GDP rises faster than the price level. c. Real GDP rises. d. Real GDP rises faster than the number of people employed. e. Real GDP rises faster than the growth rate of output. ANS: A 7. Output per person rises when a. the population increases faster than real GDP b. the standard of living decreases c. real GDP increases at the same rate as the population d. real GDP rises slower than the population e. real GDP rises faster than the population ANS: E 8 If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7 percent, the economy is a. not achieving full economic potential b. producing the greatest possible amount of goods and services c. experiencing a slump d. experiencing high prices and low inflation e. producing along its production possibilities frontier ANS: A 9. If the unemployment rate has reached an all-time low, the production of output is probably a. high b. low c. fluctuating d. stable e. inefficient ANS: A 10. The phase of the business cycle characterized by rising output is called a(n) a. peak b. recession c. depression d. trough e. expansion ANS: E 11. Recessions are identified by a. severe and long-lasting phases of decreased output b. high employment c. increasing output d. decreasing output e. low unemploymentANS: D 12. Periodic fluctuations in real GDP are called a. business cycles b. recessions c. peaks d. expansions e. troughs ANS: A 13. Refer to Figure 4-1. If the economy moves from point A to B on the graph, it is going through a(n) a. peak b. trough c. expansion d. boom e. recession ANS: E 14. Which of the following is a period of decreasing output that is severe and long lasting? a. business cycle b. expansion c. peak d. recession e. depression ANS: E 15. The inflation rate a. explains how prices are reacting to economic policies b. indicates the level of output of all firms in the economy c. measures the annual percent increase in the average level of prices d. measures how fast wages and incomes are rising e. determines the prices that firms will offer to customers ANS: C16. Over the past 75 years, the inflation rate has a. generally increased b. been positive in most years c. stayed low d. been negative in most years e. dramatically increased ANS: B 17. John Maynard Keynes, author of The General Theory of Employment, Interest, and Money, argued that a. economists should develop policies to encourage employment b. the government should follow a policy of laissez faire c. the critiques of classical economics were flawed d. the economy does not always perform well in the absence of government guidance e. instead of focusing on money, the government should control interest rates ANS: D 18. The occurrence of the Great Depression offered evidence that supported a. the classical theory of economics b. the need for the government to practice the policy of laissez faire c. the need for the government to control prices d. Congress to take action to stop rising prices e. the Keynesian idea that the government needed to guide the economy ANS: E 19. The term laissez faire can be translated a. "leave it alone" b. "make it equitable (fair)" c. "take an active role" d. "markets work" e. "free of problems" ANS: A 20. The group of economists who believed that the macroeconomy worked very well on its own were a. Microeconomists b. Macroeconomists c. classical economists d. Keynesian economists e. Marxist economists ANS: C21. Gross domestic product (GDP) is a. the total value of all goods and services produced for the marketplace during a given period, within a nation's borders b. the total value of all final goods and services produced for the marketplace during a given period, by a nation's citizens and businesses c. the total value of all final goods and services produced for the marketplace during a given period, within a nation's borders d. the total value of all goods and services produced for the marketplace during a given period, by a nation's citizens and businesses e. the total value of all goods, services and inputs produced for the marketplace during a given period, within a nation's borders ANS: C 22. The precise definition of GDP is: the total value of all a. goods and services produced by a nation, minus household labor b. goods and services produced by a nation, minus depreciation c. goods and services produced for the marketplace during a given period d. final goods and services produced for the marketplace during a given period, within a nation's borders e. final goods and services