1. Fiscal policy attempts to affect the level of overall spending in the economy by changes in:
A) the interest rate.
B) the money supply.
C) banking regulations.
D) taxes and spending.

2. Economists have identified several consecutive months of falling employment and forecasts for the next few months are for more of the same. At what point in the business cycle is the economy apparently located?
A) recession
B) expansion
C) business cycle peak
D) business cycle trough

3. The onset of the Great Depression:
A) was not a shock to anyone since most economists predicted the "roaring 20s" were bound to end in disaster.
B) created a disagreement between the Hoover administration and conventional economists because Hoover wanted the government to intervene much more quickly than most others.
C) came as a considerable shock to the conventional wisdom of economics at that time and opened the door for critiques of mainstream thought by economists like JM Keynes.
D) was in 1918 at the end of World War I.

4. When economists measure economic growth, they often use:
A) the inflation rate.
B) the unemployment rate.
C) nominal GDP.
D) real GDP.

5. In a typical business cycle, the business cycle peak is immediately followed by the:
A) recession.
B) business cycle trough.
C) expansion.
D) depression.

6. Suppose an economy experiences rising total output accompanied by increasing employment, this is generally known as:
A) stagflation.
B) recession.
C) inflation.
D) expansion.

7. Controlling interest rates is an example of:
A) fiscal policy.
B) tax policy.
C) monetary policy.
D) exchange rate policy.

8. The alternation between recessions and expansions is known as the:
A) unemployment rate.
B) long-run economic growth.
C) business cycle.
D) macroeconomy.

9. A recession in America is typically associated with:
A) a falling unemployment rate.
B) a decrease in the number of people living in poverty.
C) a decrease in the percentage of Americans with health insurance.
D) an increase in corporate profits.

10. The purpose of macroeconomic policy is to:
A) bring unemployment closer to the natural rate.
B) reduce the severity of recessions.
C) rein in excessively strong expansions.
D) bring unemployment closer to the natural rate and to reduce the severity of recessions.

11. The trade balance is the difference between the value of the:
A) trade deficit and the budget deficit.
B) goods and services that one country sells to other countries and the value of the goods and services it buys in return.
C) exchange rates of two countries that are engaged in international trade.
D) national debt and the foreign debt.

12. Increasing the total amount of available productive resources is the focus of __________.
A) macroeconomics
B) fiscal policy
C) monetary policy
D) microeconomics

13. The point on a business cycle when real GDP stops rising and begins falling is a(n):
A) peak.
B) trough.
C) expansion.
D) recession.

14. During a recession, one will often observe:
A) aggregate output rising.
B) unemployment rates will be increasing while aggregate output is falling.
C) employment rates will be rising.
D) zero unemployment rates.

15. Monetary policy involves:
A) changes in government spending.
B) changes in government tax receipts.
C) changes in the quantity of money.
D) changes in tax rates.

16. The trough of the business cycle:
A) comes right after the expansion phase.
B) comes before the recession phase.
C) is a temporary maximum level of real GDP.
D) is a temporary minimum level of real GDP.

17. Which one of the following statements about the U.S. economy is not accurate?
A) Since the Second World War, aggregate output grew at a rate lower than the average annual growth rate of population.
B) Since the Second World War, aggregate output grew at a rate higher than the average annual growth rate of population.
C) Since the Second World War, macroeconomic policy has helped make the economy more stable.
D) Long-run growth per capita is the key to higher wages and a rising standard of living.

18. An economic recovery is all of the following except:
A) economic growth of a sustained nature.
B) a short-run increase in aggregate production in an economy.
C) a time of increasing employment.
D) the end of the business cycle.

19. Which of the following would NOT be classified as a macroeconomic question?
A) How many people are employed in the economy as a whole?
B) What determines the overall level of prices in the economy as a whole?
C) What determines the overall trade in goods, services, and financial assets between the United States and the rest of the world?
D) What determines the cost to a university or college of offering a new course?

20. Which of the following statements regarding price level or inflation is correct?
A) Supply and demand can not explain why a particular good or service becomes more expensive relative to other goods and services.
B) Inflation affects only the more advanced countries whereas less advanced countries face deflation.
C) Prices of most goods and services remained stable during the great depression.
D) In general, when the economy is in recession and jobs are hard to find, inflation tends to fall.

21. If wages grew at a 5% rate last year and average prices grew at a 3% rate, then the average worker is:
A) better off.
B) worse off.
C) no better or worse off.
D) unaffected.

22. In an open economy:
A) the exchange rate is determined by the government.
B) specialization in activities with a comparative advantage is not possible.
C) trade is only beneficial to the relatively larger economy.
D) there is trade in goods, services, or assets with other countries.

23. Changes in government spending and taxes in an effort to change overall spending in an economy is:
A) fiscal policy.
B) monetary policy.
C) investment.
D) the stock market.

24. If an economy is open, this means that:
A) anyone can immigrate to the country.
B) trading with other countries makes up a portion of its economy.
C) it does not trade with other countries.
D) it will experience a drop in its real GDP.

25. Inflation is a situation where:
A) the average price level falls.
B) the average price level increases.
C) the average price level becomes negative.
D) the real price level falls.

26. The topics studied in macroeconomics include:
A) the price of a motorcycle.
B) the wages of engineers.
C) the average price level in the economy.
D) how much ice cream consumers buy.

27. A period of rising real GDP is a(n):
A) peak.
B) trough.
C) expansion.
D) recession.

28. The modern tools of macroeconomic policy are:
A) tax policy and antitrust policy.
B) fiscal policy and monetary policy.
C) monetary policy and exchange rate policy.
D) capital policy and labor policy.

29. A "rubber necking" traffic jam is an example of:
A) microeconomics in action.
B) individual behavior that has a large aggregate impact.
C) the paradox of thrift.
D) an outcome smaller than the sum of its parts.

30. The most painful consequence of a recession is:
A) rising unemployment.
B) increasing inflation.
C) increasing aggregate output.
D) higher interest rates.

31. Per capita economic growth is:
A) economic growth per unit of capital.
B) economic growth per person.
C) economic expansion over the business cycle.
D) sustained increase in aggregate output.

32. Keynesian economics stressed:
A) total spending.
B) the self-regulating power of free markets.
C) the long run.
D) that the Depression should run its course to bring down the high cost of living.

33. When an economy's overall production grows faster than its population, this is referred to as:
A) long-run growth per capita.
B) an increase in nominal GDP.
C) deflation.
D) the paradox of thrift.

34. Fiscal policy attempts to affect the overall level of spending in the economy through:
A) changes in the inflation rate.
B) changes in the quantity of money or the interest rate.
C) changes in tax policy or government spending.
D) discretionary regulation of profits and wages.

35. With regard to the aggregate price level, economists generally believe:
A) price stability is a desirable goal.
B) inflation is worse than deflation.
C) deflation is worse than inflation.
D) inflation actually benefits most retired people.

36. Recessions are periods when:
A) output rises.
B) the aggregate price level rises.
C) the unemployment rate is falling.
D) output and employment are falling.

37. Monetary policy attempts to affect the overall level of spending in the economy by changes in:
A) taxes.
B) taxes and spending.
C) taxes and interest rates.
D) interest rates and the quantity of money.

38. The basic difference between an economic recession and economic depression is that:
A) the latter is a shorter economic downturn than the former.
B) during recessions output falls faster than during depressions.
C) during depressions employment falls faster than during recessions.
D) the former is a longer economic downturn than the latter.

39. The central mission of modern macroeconomics is to prevent _____ from happening again.
A) recessions
B) inflation
C) deflation
D) anything like the Great Depression

40. Fiscal policy refers to:
A) the control of interest rates.
B) the control of government spending and taxations.
C) the control of the quantity of money.
D) the control of interest rates and of government spending.