Chapter 16 Review
1. Which is an example of the
uncertainty caused by economic
instability?
A.
B.
C.
D.
A consumer delays a purchase
A manufacturer increases output
A politician is reelected
An economist measures the GDP gap
2. The social cost of economic instability
include all of the following except:
A.
B.
C.
D.
Stagflation
Wasted resources
Political instability
Crime and damage to family values
3. Which of the following statements is FALSE?
A. Economic Instability is at the root of all social
problems
B. A healthy economy helps the country deal with
its social problems
C. Economic instability can lead to reduced
spending on social programs
D. A healthy economy helps people feel more
certain about the future
4. Economists measure the cost of
economic instability with
A.
B.
C.
D.
The misery index
The GDP gap
Constant GDP
Both a and b
5. Economic instability wastes all of the
following except:
A. Tax revenues
B. Human resources
C. Natural resources
D. Capital resources
6. Macroeconomic equilibrium is
determined by the
A. The aggregate demand curve
B. Aggregate supply curve
C. Intersection of the aggregate supply
curve and the aggregate demand curve
D. Intersection of the supply curve and the
demand curve
7. What effect would a decrease in
production cost for all firms have on
the aggregate supply curve? The
Curve would
A.
B.
C.
D.
Level off
Not change
Shift to the left
Shift to the right
8. What effect would a decrease in
consumer savings have on the
aggregate demand curve? The curve
would
A.
B.
C.
D.
Level off
Not change
Shift to the right
Shift to the left
9. The aggregate demand curve has the
slope it does because
A. The market tends toward equilibrium
B. It must intersect the aggregate supply
curve
C. People willing to purchase less at higher
prices
D. There is a single money supply of a fixed
size in the economy at any one time
10. All of the following would cause
aggregate supply to increase EXCEPT
A.
B.
C.
D.
An increase in interest rates
An increase in labor productivity
The development of new technologies
A decrease in government regulations
11. All of the following are elements of
Keynesian economic framework
EXCEPT
A.
B.
C.
D.
The multiplier
The Laffer curve
The accelerator
The consumption function
12. All of the following are related to
demand-side policies EXCEPT
A.
B.
C.
D.
Fiscal policy
Monetarism
Keynesian economics
The output-expenditure model
13. Those who favor supply-side polices
would tend to support the government
playing
A.
B.
C.
D.
No role in the economy
An expanded role in the economy
A reduced role in the economy
A role in monetary policies only
14. Unemployment insurance and federal
entitlement programs are two
examples of
A.
B.
C.
D.
Monetarism
Supply side policy
Wage price controls
Automatic stabilizers
15. Which of the following policies would likely
be favored by a monetarist?
A. Increasing the money supply at a steady rate
determined by growth in real GDP
B. Increasing government spending to offset a
reduction in spending in the investment sector
C. Lowering business tax rates to provide an
incentive for businesses to produce more
D. Deregulating industries to minimize the
government’s role in the economy
16. The use of discretionary fiscal policy has
declined for all of the following reasons
EXCEPT
A. government gridlock
B. The relatively short duration of recessions
C. Congressional budget caps have limited federal
spending
D. The government usually knows of upcoming
recessions far in advance
17. The United States relies most on
which of the following policies
A.
B.
C.
D.
Monetary policy
Passive fiscal policies
Structural fiscal policies
Discretionary fiscal policies
18. All of the following describes economist
EXCEPT
A. Economists have different backgrounds
B. Economists sometime seem to offer conflicting
advice
C. Economists are continually seeking new
answers to new problems
D. Economists are sharply divided into competing
schools of thought with little overlap of ideas
and beliefs
19. Which is the best description of the
role of the Council of Economic
Advisors?
A. Carry out monetary policy
B. Report economic developments and
propose strategies
C. Implement presidential economic
policies
D. Keep the public informed about
economic issues
20. A president might ignore the
recommendations of professional
economic advisors in order to
A. Avoid an unpopular decision
B. Avoid participating in economic politics
C. Maintain presidential monetary authority
D. Adhere to the principles of political
economics
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
A
A
A
D
A
C
D
C
D
A
B
B
C
D
A
D
A
D
B
A
Review from ALL Chapters
What is this a
Picture of?
A
D
B
E
C
• Production Possibilities Frontier
What does point
A, B, and C
represent?
A
D
B
E
C
• Using our resources efficiently
What does it
mean when we
are at point E?
A
D
B
E
C
• Using our resources inefficiently
• Unused resources
How do we get
from point B to
point D?
A
D
B
E
C
• Economic growth
Unlimited
Wants
Choices
Limited
Resources
• Scarcity
• Three basic economic questions
– What to produce
– How to produce
– For whom to produce