Aggregate demand differs from regular
demand in that aggregate demand
1.
2.
3.
4.
Measures demand for the
entire economy, rather than
one market
Is only used when trying to
measure money markets
Includes supply as well as
demand
Is inelastic while regular
demand is elastic
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2
3
0%
4
If the U.S. economy was in a recession,
which fiscal policy would be most
appropriate to get out of the recession?
1.
2.
3.
4.
Decrease government
spending, the citizens will
have more money to spend
Decrease taxes, people
have more disposable
income
Raise the reserve
requirement, banks will
have more money to loan
Buy bonds on the open
market, the money supply
will increase
0%
1
0%
0%
2
3
0%
4
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When the Fed is conducting open
market operations, they are
1.
2.
3.
4.
Buying or selling
government bonds
Buying or selling stocks
on the New York Stock
Exchange
Buying or selling factors
in the factor market
Buying or selling goods
in the product market
0%
1
0%
0%
2
3
0%
4
When the Federal Reserve buys securities
on the open market, they are hoping to
1.
2.
3.
4.
Encourage people to
save more money.
Expand the money
supply and increase
GDP.
Reduce the amount of
money banks are
required to hold the
reserves.
Shrink the money
supply and discourage
inflation.
0%
1
0%
0%
2
3
0%
4
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Unemployment that occurs as a result of a
recession or an economic downturn is
1.
2.
3.
4.
Frictional
Seasonal
Structural
Cyclical
0%
1
0%
0%
2
3
0%
4
Which is NOT something governments
typically do in market economies?
1. Resolve market
failures
2. Protect rights
3. Set prices
4. Provide public
goods
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1
0%
0%
2
3
0%
4
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The total amount of goods and services
produced throughout the economy is
1.
2.
3.
4.
Aggregate supply
Quantity supplied
Supply shock
Aggregate
demand
0%
1
0%
0%
2
3
0%
4
A person trying to find the unemployment
rate in a country needs which two pieces of
information?
1.
2.
3.
4.
The total number of jobs and
the number of people without
jobs
The number of unemployed
people and the number of
discouraged workers
The number of unemployed
people and the population
The number of unemployed
people and the number in the
labor force
0%
1
0%
0%
2
3
0%
4
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The unemployment rate, GDP, and
CPI can be used to determine
1.
2.
3.
4.
The supply and demand of a
market
Which stage of the business
cycle and economy is on
If a country uses a market or
command economy
How likely a person is to get
credit
0%
1
0%
0%
2
3
0%
4
In country A, everyone pays a 10% income
tax. This type of tax system is known as
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Sales
Progressive
Regressive
Proportional
1
4
If an economy experiences the following: 12% inflation
(very high), 2.5% unemployment (very low), and high
investment, they are MOST LIKELY on which part of the
business cycle?
1.
2.
3.
4.
Recession
Contraction
Expansion
Trough
0%
1
0%
0%
2
3
0%
4
Adding everything the U.S.
Government owes calculates the
25%
25%
25%
2
3
25%
1. National deficit
2. Unemployment
rate
3. National debt
4. Balance of
payments
1
4
Fastest Responders
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Assume the U.S. Government’s most recent fiscal
policy slowly caused the economy to speed up and
enter an expansion. Most likely, the government
25%
25%
25%
2
3
25%
1. Increased taxes
2. Increased the
reserve
requirement
3. Decreased the
discount rate
4. Decreased taxes
1
4
You hear on the radio that the Fed is lowering the discount
rate and buying a large number of treasury bonds. Based
on this information, which part of the business cycle does
25% is in?
25%
25%
the Fed most likely believe the 25%
economy
1.
2.
3.
4.
Expansion
Peak
Contraction
Unemployment
1
2
3
4
National deficits are different
than the national debt because
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Deficits occur when
expenditures exceed
revenues for 1 fiscal year
Only deficits vary from year
to year
Deficits are calculated using
all previous deficits
Debts are consistently repaid
and deficits cannot be
1
4
Fastest Responders
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By comparing the real GDP of two time
periods a person can measure the
1. Consumer price
index
2. Inflation rate
3. Economic growth
rate
4. Unemployment
rate
0%
1
0%
0%
2
3
0%
4
Assume an economy is having high unemployment
and low GDP. Which fiscal policy would be most
appropriate to correct this situation?
1. Increase the discount
rate
2. Decrease government
spending
3. Decrease taxes
4. Increase the reserve
requirement
0%
1
0%
0%
2
3
0%
4
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If the CPI for the last three months has been 100,
101, 104, then what DEFINITE conclusion can you
make about the economy?
1. The production
possibilities curve has
shifted
2. Prices have increased
3. GDP is improving
4. Unemployment has
decreased
0%
1
0%
0%
2
3
0%
4
Comparing real GDP between two
consecutive years is MOST useful in
determining which economic measurement?
1.
2.
3.
4.
Equity
Exchange rates
Equilibrium price
Economic growth
0%
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2
3
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An economy that is at full
employment
1.
2.
3.
4.
Has close to zero
cyclical unemployment
Has found a job for
everyone
Has close to zero
frictional and structural
unemployment
Has only seasonal
unemployment
0%
1
0%
0%
2
3
0%
4
A market basket represents a long list of goods and services that the
average household buys in a given time period. By dividing a market
basket of goods and services from one time period by a market basket
from another time period a person can calculate the
1. Gross domestic
product
2. Consumer price
index
3. Unemployment rate
4. Aggregate supply
0%
1
0%
0%
2
3
0%
4
Which person would be hurt the
MOST by sudden inflation?
1.
2.
3.
4.
Sally, who has a fixed
payment on a mortgage
Jim, who works at a
company that gives raises
every year
Pedro, who receives income
from the stock portfolio
Marie, who is retired and
lives on a fixed income
0%
1
0%
0%
2
3
0%
4
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A market basket is generally
used for
1.
2.
3.
4.
Comparing prices of
standard goods between
years to determine
inflation
Putting things in while you
walk around the store
Advertising new products
for companies
Determining how much
GDP is produced every
year
0%
1
0%
0%
2
3
0%
4
If an economy is in a trough on
the business cycle
1.
2.
3.
4.
Unemployment is high, real
GDP growth is low, and inflation
is low
Unemployment is low, real GDP
growth is high, and inflation is
high
Unemployment is low, real GDP
growth is low, and inflation is low
Unemployment is high, real
GDP growth is high, and
inflation is low
0%
1
0%
0%
2
3
0%
4
Unemployment characterized by large numbers of workers
who have recently been replaced by machines or laid-off
due to technological improvements is considered to be
which kind of unemployment?
1.
2.
3.
4.
Cyclical
Frictional
Structural
Seasonal
0%
1
0%
0%
2
3
0%
4
Gross Domestic Product is a method for
calculating how much a country produces by
adding which four spending categories?
1.
2.
3.
4.
Consumption, Interest Rates,
Government, Net Exports
Consumption, Investment,
Government, Business
expenditures
Consumption, Investment,
Government, Net Exports
Wages, Rent, Interest,
Dividends
0%
1
0%
0%
2
3
0%
4
Participant Leaders
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Which is used to measure
economic growth?
1.
2.
3.
4.
Real GDP
Interest rates
Inflation
Unemployment
0%
1
0%
0%
2
3
0%
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In the United States economy,
the role of money is to
1. Create jobs in the
factor market
2. Control inflation
3. Set prices on goods
and services
4. Facilitate exchange
between buyers and
sellers
0%
1
0%
0%
2
3
0%
4
Which set of information would indicate that
an economy is on the recovery phase of the
business cycle?
1.
2.
3.
4.
Low inflation, increasing
unemployment, decreasing
GDP
Increasing inflation,
decreasing unemployment,
increasing GDP
Increasing inflation,
increasing unemployment,
increasing GDP
Decreasing inflation,
increasing unemployment,
decreasing GDP
0%
1
0%
0%
2
3
0%
4
When calculating GDP, the purchase of
a new factory is counted as
1.
2.
3.
4.
Net exports
Investment
Government
Consumption
0%
1
0%
0%
2
3
0%
4
Participant Leaders
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The consumer price index is
used primarily to measure the
1. Economic growth
of a country
2. Unemployment
rate
3. Production
possibilities curve
4. Inflation rate
0%
1
0%
0%
2
3
0%
4
Sharlee was recently laid off from her job at a
manufacturing plant when the company she worked for
brought in a machine to replace her. This is classified as
what type of unemployment?
1.
2.
3.
4.
Seasonal
Cyclical
Structural
Frictional
0%
1
0%
0%
2
3
0%
4
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Which BEST describes GDP?
1.
2.
3.
GDP is used to determine
the inventories of business
around the US.
GDP measures the market
value of all goods and
services economy in a given
time period.
It is the data used to
determine how many people
are employed.
0%
1
0%
2
0%
3
What is MOST LIKELY to happen to the economy if the Federal
Reserve Bank increases the discount rate at the same time that
Congress passes a law reducing government spending?
1.
2.
3.
4.
Contraction, because both
of the policies are
contractionary.
Expansion, because both
of the policies are
expansionary.
Nothing, because the
policies cancel each other.
Nothing, because one is a
fiscal policy and the other
is a monetary policy.
0%
1
0%
0%
2
3
0%
4
If the Fed buys treasury securities on the open
market at the same time that the government
drastically increases spending, then
1.
2.
3.
4.
It is obvious both institutions
thought the economy was on
a peak.
The business cycle will
invert.
The policies will cancel each
other and there will be no
change in the economy.
Aggregate demand is likely
to increase causing inflation.
0%
1
0%
0%
2
3
0%
4
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Monetary Policy is defined as
1. Decisions of the Federal
Reserve System that
determine the monetary
supply
2. Buying and selling of
currency in foreign
exchange markets
3. Interaction of buyers and
sellers in the market place
4. Taxing and spending
decisions of the United
States Government
0%
1
0%
0%
2
3
0%
4
Assume the Fed has recently made large sales on the
open market and Congress has passed legislation that
includes large tax increases. If this is true then apparently
economic leaders believe
1.
2.
3.
A drastic deficit in the
balance of trade exists
The economy is
performing on the
production possibilities
curve
Hyperinflation and
overproduction is
occurring
0%
1
0%
2
0%
3
The economy is in the trough of the
business cycle. A budget surplus means that
1.
2.
3.
4.
The government has
spent more money than
the Fed.
The Fed has spent more
money than the
government.
The government has
taken in more money than
it spent.
The government has
spent more money than it
took in.
0%
1
0%
0%
2
3
0%
4
If the economy was in a recession and the Federal Reserve
Bank and Congress BOTH wanted to correct it quickly,
which policy combination would be best?
1. Increase
government
spending, sell bonds
2. Raise taxes, sell
bonds
3. Cut taxes, buy
bonds
4. Cut taxes, sell bonds
0%
1
0%
0%
2
3
0%
4
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