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ECON303 FINAL > ECON303exam3chp8 > Flashcards

ECON303exam3chp8 Flashcards

1
Q

The 1973-1975 recession was caused by
A. the Fed’s easy monetary policy.
B. the Fed’s tight monetary policy.
C. business pessimism about investment caused by high tax rates on capital.
D. the quadrupling of oil prices by OPEC.

A

D. the quadrupling of oil prices by OPEC.

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2
Q

The idea that the business cycle is recurrent means that
A. declines in economic activity tend to be followed by further declines, and growth in economic activity tends to be followed by more growth.
B. the standard pattern of contraction-trough-expansion-peak occurs again and again in industrial economies.
C. many economic variables to move together in a predictable way over the business cycle.
D. peaks and troughs of the business cycle occur at regular intervals.

A

B. the standard pattern of contraction-trough-expansion-peak occurs again and again in industrial economies.

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3
Q 
Which of the following macroeconomic variables doesn't vary much over the seasons?
A. The nominal money stock	
B. The unemployment rate	
C. The real wage	
D. Average labor productivity
A

C. The real wage

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4
Q 
Which of the following macroeconomic variables is procyclical and leads the business cycle?
A. Business fixed investment	
B. Residential investment	
C. Nominal interest rates	
D. Unemployment
A

B. Residential investment

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5
Q 
The probability that an employed worker will lose his or her job in the next month is known as
A. the unemployment rate.	
B. the job finding rate.	
C. the underemployment rate.	
D. the job loss rate.
A

D. the job loss rate.

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6
Q 
Which of the following macroeconomic variables is procyclical and lags the business cycle?
A. Business fixed investment	
B. Employment	
C. Stock prices	
D. Nominal interest rates
A

D. Nominal interest rates

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7
Q

Industries that are extremely sensitive to the business cycle are the
A. durable goods and service sectors.
B. nondurable goods and service sectors.
C. capital goods and nondurable goods sectors.
D. capital goods and durable goods sectors.

A

D. capital goods and durable goods sectors.

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8
Q 
Which of the following is not a leading variable?
A. Inflation	
B. Stock prices	
C. Average labor productivity	
D. Residential investment
A

A. Inflation

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9
Q 
Which of the following macroeconomic variables is procyclical and coincident with the business cycle?
A. Residential investment	
B. Nominal interest rates	
C. Industrial production	
D. Unemployment
A

C. Industrial production

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10
Q

Real interest rates are
A. procyclical, just like nominal interest rates.
B. acyclical, while nominal interest rates are procyclical.
C. acyclical, just like nominal interest rates.
D. countercyclical, while nominal interest rates are procyclical.

A

B. acyclical, while nominal interest rates are procyclical.

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11
Q

Stock and Watson found that ________ was responsible for about 20-30 % of the reduction in output volatility that occurred in the mid-1980s.
A. reduced shocks to productivity
B. reduced shocks to food and commodity prices
C. better monetary policy
D. better inventory control

A

C. better monetary policy

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12
Q 
Stock and Watson found that monetary policy was responsible for about \_\_\_\_\_\_\_\_ % of the reduction in output volatility that occurred in the mid-1980s.
A. 0 to 10	
B. 10 to 20	
C. 20 to 30	
D. 30 to 40
A

C. 20 to 30

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13
Q

You want to invest in a firm whose profits show large fluctuations throughout the business cycle. Which of the following would you invest in?
A. A corporation that depends heavily on business fixed investment
B. A corporation that depends heavily on consumer services
C. A corporation that depends heavily on consumer nondurables
D. A corporation that depends heavily on government purchases

A

A. A corporation that depends heavily on business fixed investment

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14
Q

According to research by Stock and Watson, the recent decline in volatility in many macroeconomic variables was a
A. sudden drop that occurred around 1984.
B. gradual decline throughout the 1980s.
C. sudden drop that occurred around 1990.
D. gradual decline throughout the 1990s.

A

A. sudden drop that occurred around 1984.

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15
Q 
The Great Depression consisted of how many business cycles?
A. 1	
B. 2	
C. 3	
D. 4
A

B. 2

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16
Q 
An economic variable that moves in the opposite direction as aggregate economic activity (down in expansions, up in contractions) is called
A. procyclical.	
B. countercyclical.	
C. acyclical.	
D. a leading variable.
A

B. countercyclical.

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17
Q 
When aggregate economic activity is declining, the economy is said to be in
A. a contraction.	
B. an expansion.	
C. a trough.	
D. a turning point.
A

A. a contraction.

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18
Q 
The NBER's Business Cycle Dating Committee picks recession dates by looking at many variables, the four most important of which are industrial production, manufacturing and trade sales, nonfarm employment, and real personal income. These variables are known as
A. leading indicators.	 
B. coincident indicators.	
C. lagging indicators.	
D. recession indicators.
A

B. coincident indicators.

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19
Q

Persistence is
A. the tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth.
B. the idea that the standard pattern of contraction-trough-expansion-peak occurs again and again in industrial economies.
C. the tendency of many economic variables to move together in a predictable way over the business cycle.
D. the idea that peaks and troughs of the business cycle occur at regular intervals.

A

A. the tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth.

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20
Q 
The job finding rate
A. equals 1 minus the job loss rate.	
B. remains constant over the business cycle.	
C. rises in recessions.	
D. rises in expansions.
A

D. rises in expansions.

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21
Q

Research on the effects of recessions on the real level of GDP shows that
A. recessions cause only temporary reductions in real GDP, which are offset by growth during the expansion phase.
B. recessions cause large, permanent reductions in the real level of GDP.
C. recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary.
D. recessions cause both temporary and permanent declines in real GDP, but most of the decline is permanent.

A

C. recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary.

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22
Q 
Which of the following macroeconomic variables would you include in an index of leading economic indicators?
A. Employment	
B. Inflation	
C. Real interest rates	
D. Residential investment
A

D. Residential investment

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23
Q

The CFNAI is a
A. leading index based on variables released with different frequencies.
B. coincident index based on variables released with different frequencies.
C. leading index based on 85 monthly variables.
D. coincident index based on 85 monthly variables.

A

D. coincident index based on 85 monthly variables.

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24
Q 
Which of the following macroeconomic variables would you exclude from an index of leading economic indicators?
A. Money supply	
B. Industrial production	
C. Inventory investment	
D. Residential investment
A

B. Industrial production

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25
Q

Christina Romer’s criticism of the belief that business cycles had moderated since World War II depended on the fact that
A. estimates of the timing of business cycles since World War II had been inaccurate.
B. misuse of historical data had caused economists to understate the size of cyclical fluctuations in the post-World War II era.
C. economists had ignored the roles of the government and international trade in mitigating economic fluctuations prior to World War II.
D. economists had left out important components of GDP, such as wholesale and retail distribution, transportation, and services, in their pre-World War II estimates.

A

D. economists had left out important components of GDP, such as wholesale and retail distribution, transportation, and services, in their pre-World War II estimates.

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26
Q

What are the two main components of business cycle theories?
A. A description of shocks and a model of how the economy responds to them
B. A model of how people decide to spend and a description of the government’s role in the economy
C. A model of how equilibrium is reached and a description of the government’s role in the economy
D. A description of shocks and a description of the government’s role in the economy

A

A. A description of shocks and a model of how the economy responds to them

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27
Q 
The tendency of many different economic variables to have regular and predictable patterns over the business cycle is called
A. persistence.	
B. comovement.	
C. periodicity.	
D. recurrence.
A

B. comovement.

28
Q

Comovement is
A. the tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth.
B. the idea that the standard pattern of contraction-trough-expansion-peak occurs again and again in industrial economies.
C. the tendency of many economic variables to move together in a predictable way over the business cycle.
D. the idea that peaks and troughs of the business cycle occur at regular intervals.

A

C. the tendency of many economic variables to move together in a predictable way over the business cycle.

29
Q 
Peaks and troughs of the business cycle are known collectively as
A. volatility.	
B. turning points.	
C. equilibrium points.	
D. real business cycle events.
A

B. turning points.

30
Q

The ADS Business Conditions Index is a
A. leading index based on variables released with different frequencies.
B. coincident index based on variables released with different frequencies.
C. leading index based on 85 monthly variables.
D. coincident index based on 85 monthly variables.

A

B. coincident index based on variables released with different frequencies.

31
Q 
Which group within the National Bureau of Economic Research officially determines whether the economy is in a recession or expansion?
A. The G-4	
B. The Business Cycle Dating Committee	
C. The Business Cycle Governors	
D. The Turning Point Group
A

B. The Business Cycle Dating Committee

32
Q 
The worst recessions after World War II occurred
A. during 1945-1946 and 1973-1975.	
B. during 1957-1958 and 1973-1975.	
C. during 1973-1975 and 1981-1982.	
D. during 1945-1946 and 1981-1982.
A

C. during 1973-1975 and 1981-1982.

33
Q

Economists use the term shocks to mean
A. unexpected government actions that affect the economy.
B. typically unpredictable forces that have major impacts on the economy.
C. sudden rises in oil prices.
D. the business cycle.

A

B. typically unpredictable forces that have major impacts on the economy.

34
Q 
The longest economic expansion in the United States occurred during the
A. 1940s.	
B. 1960s.	
C. 1980s.	
D. 1990s.
A

D. 1990s.

35
Q 
An economic variable that doesn't move in a consistent pattern with aggregate economic activity is called
A. procyclical.	
B. countercyclical.	
C. acyclical.	
D. a leading variable.
A

C. acyclical.

36
Q 
A variable that tends to move at the same time as aggregate economic activity is called
A. a leading variable.	
B. a coincident variable.	
C. a lagging variable.	
D. an acyclical variable.
A

B. a coincident variable.

37
Q 
A variable that tends to move in advance of aggregate economic activity is called
A. a leading variable.	
B. a coincident variable.	
C. a lagging variable.	
D. an acyclical variable.
A

A. a leading variable.

38
Q 
An economic variable that moves in the same direction as aggregate economic activity (up in expansions, down in contractions) is called
A. procyclical.	
B. countercyclical.	
C. acyclical.	
D. a leading variable.
A

A. procyclical.

39
Q

The longest contraction in American history occurred
A. during the 1870s.
B. in the years right before World War I began.
C. during the 1930s.
D. during the 1970s.

A

A. during the 1870s.

40
Q

Christina Romer argued that
A. measured properly, GNP before 1929 varied substantially less over time than the official statistics showed.
B. measured properly, GNP after 1929 varied substantially more over time than the official statistics showed.
C. measured properly, economic expansions after 1929 were shorter than the official statistics showed.
D. measured properly, economic expansions before 1929 were shorter than the official statistics showed.

A

A. measured properly, GNP before 1929 varied substantially less over time than the official statistics showed.

41
Q 
The tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth is called
A. persistence.	
B. comovement.	
C. periodicity.	
D. recurrence.
A

A. persistence.

42
Q

One of the first organizations to investigate the business cycle was
A. the Federal Reserve System.
B. the National Bureau of Economic Research.
C. the Council of Economic Advisors.
D. the Brookings Institution.

A

B. the National Bureau of Economic Research.

43
Q

Who officially determines whether the economy is in a recession or expansion?
A. The president of the United States
B. The U.S. Congress
C. The Federal Reserve Board of Governors
D. The National Bureau of Economic Research

A

D. The National Bureau of Economic Research

44
Q

The job finding rate is defined as
A. the probability that someone who has been unemployed for over a year will find a job in the next month.
B. the probability that someone who is not in the labor force will enter the labor force in the next month.
C. the probability that someone who is employed will change jobs in the next month.
D. the probability that someone who is unemployed will find a job in the next month

A

D. the probability that someone who is unemployed will find a job in the next month

45
Q 
Which of the following macroeconomic variables is the most seasonally procyclical?
A. Expenditure on services	
B. The unemployment rate	
C. Expenditure on durable goods	
D. The real wage
A

C. Expenditure on durable goods

46
Q 
The trough of a business cycle occurs when \_\_\_\_\_\_\_\_ hits its lowest point.
A. inflation.	
B. the money supply.	
C. aggregate economic activity.	
D. the unemployment rate.
A

C. aggregate economic activity.

47
Q 
Which of the following macroeconomic variables is acyclical?
A. Real interest rates	
B. Unemployment	
C. Money supply	
D. Consumption
A

A. Real interest rates

48
Q 
The job loss rate
A. equals 1 minus the job finding rate.	
B. remains constant over the business cycle.	
C. rises in recessions.	
D. rises in expansions.
A

C. rises in recessions.

49
Q 
The low point in the business cycle is referred to as the
A. expansion.	
B. boom.	
C. trough.	
D. peak.
A

C. trough.

50
Q 
The long boom occurred in the
A. 1920s and 1930s.	
B. 1940s and 1950s.	
C. 1960s and 1970s.	
D. 1980s and 1990s.
A

D. 1980s and 1990s.

51
Q 
When aggregate economic activity is increasing, the economy is said to be in
A. an expansion.	
B. a contraction.	
C. a peak.	
D. a turning point.
A

A. an expansion.

52
Q 
A variable that tends to move later than aggregate economic activity is called
A. a leading variable.	
B. a coincident variable.	
C. a lagging variable.	
D. an acyclical variable.
A

C. a lagging variable

53
Q

Which of the following statements is true?
A. Both nominal and real interest rates are procyclical and leading.
B. Both nominal and real interest rates are procyclical and lagging.
C. Nominal interest rates are procyclical and real interest rates are countercyclical.
D. Nominal interest rates are procyclical and real interest rates are acyclical.

A

D. Nominal interest rates are procyclical and real interest rates are acyclical.

54
Q 
The job loss rate
A. equals 1 minus the job finding rate.	
B. remains constant over the business cycle.	
C. rises in recessions.	
D. rises in expansions.
A

C. rises in recessions.

55
Q

Diebold and Rudebusch showed that the composite index of leading indicators did not improve forecasts of industrial production because
A. the index is not produced in a timely manner.
B. the government manipulates the index so it never predicts a recession.
C. the index is not designed for forecasting.
D. data on the components of the index are revised.

A

D. data on the components of the index are revised.

56
Q

By 1937, when a new recession began in the midst of the Great Depression,
A. GDP had almost recovered to its 1929 level, but unemployment was still above the 1929 level.
B. unemployment had almost fallen back to its 1929 level, but GDP had yet to recover to its 1929 level.
C. neither GDP nor unemployment had returned to near their 1929 levels.
D. both GDP and unemployment had returned to near their 1929 levels.

A

A. GDP had almost recovered to its 1929 level, but unemployment was still above the 1929 level.

57
Q

Persistence is
A. the tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth.
B. the idea that the standard pattern of contraction-trough-expansion-peak occurs again and again in industrial economies.
C. the tendency of many economic variables to move together in a predictable way over the business cycle.
D. the idea that peaks and troughs of the business cycle occur at regular intervals.

A

A. the tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth.

58
Q

Which of the following is true?
A. Employment and unemployment are both coincident with the business cycle.
B. Employment and unemployment are both procyclical.
C. Employment is procyclical and unemployment is coincident with the business cycle.
D. Employment is procyclical and unemployment is countercyclical.

A

D. Employment is procyclical and unemployment is countercyclical.

59
Q 
A variable that tends to move at the same time as aggregate economic activity is called
A. a leading variable.	
B. a coincident variable.	
C. a lagging variable.	
D. an acyclical variable.
A

B. a coincident variable.

60
Q

Using the seasonal business cycle as your guide, during which quarter would you be most likely to expect an increase in your corporation’s sales?
A. The first quarter of the year (January-March)
B. The second quarter of the year (April-June)
C. The third quarter of the year (July-September)
D. The fourth quarter of the year (October-December)

A

D. The fourth quarter of the year (October-December)

61
Q 
The recession of 2001 began in \_\_\_\_\_\_\_\_ and ended in \_\_\_\_\_\_\_\_.
A. March; November	
B. February; December	
C. April; October	
D. February; October
A

A. March; November

62
Q 
Which of the following macroeconomic variables doesn't vary much over the seasons?
A. The nominal money stock	
B. The unemployment rate	
C. The real wage	
D. Average labor productivity
A

C. The real wage

63
Q

Which of the following is true?
A. Employment and unemployment are both coincident with the business cycle.
B. Employment and unemployment are both procyclical.
C. Employment is procyclical and unemployment is coincident with the business cycle.
D. Employment is procyclical and unemployment is countercyclical.

A

D. Employment is procyclical and unemployment is countercyclical.

64
Q 
A variable that tends to move at the same time as aggregate economic activity is called
A. a leading variable.	
B. a coincident variable.	
C. a lagging variable.	
D. an acyclical variable.
A

B. a coincident variable.

65
Q

Using the seasonal business cycle as your guide, during which quarter would you be most likely to expect an increase in your corporation’s sales?
A. The first quarter of the year (January-March)
B. The second quarter of the year (April-June)
C. The third quarter of the year (July-September)
D. The fourth quarter of the year (October-December)

A

D. The fourth quarter of the year (October-December)

66
Q 
The recession of 2001 began in \_\_\_\_\_\_\_\_ and ended in \_\_\_\_\_\_\_\_.
A. March; November	
B. February; December	
C. April; October	
D. February; October
A

A. March; November

67
Q 
Which of the following macroeconomic variables doesn't vary much over the seasons?
A. The nominal money stock	
B. The unemployment rate	
C. The real wage	
D. Average labor productivity
A

C. The real wage

ECON303 FINAL (4 decks)

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