Quiz Six

Question 1

If structural unemployment falls, natural rate of employment

Answer 1

Rises

Question 2

Recession

Answer 2

Significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP

Question 3

Peak

Answer 3

End of an expansion, with recession starting next month

Question 4

Trough

Answer 4

End of a recession, expansion starts next month

Question 5

Business cycle

Answer 5

Cycle of expansions and recession

Question 6

What happens to real GDP in a recession

Answer 6

Drops due to a decline in economic activity

Question 7

Depressions

Answer 7

Severe economic recession

Question 8

Interest rate

Answer 8

Rate at which we borrow and lend

Question 9

Federal Reserve

Answer 9

US central bank

Question 10

The Fed’s dual mandate

Answer 10

Effectively promote the goals of maximum employment, stable prices, and mandate long term interest rates

Question 11

Monetary policy and COVID

Answer 11

Federal funds interest rate was about 0 and stayed there until max employment resolved

Question 12

Monetary policy

Answer 12

Actions the federal reserve takes to manage the money supply and interest rates

Question 13

Fiscal policy

Answer 13

Changes in federal taxes and purchases that are intended to achieve macro policy objectives

Question 14

Aggregate demand curve

Answer 14

Shows relationship between the price level and quantity of rGDP demanded by households, firms, and the government

Question 15

Short term aggregate supply curve

Answer 15

Shows short term relationship between price level and quantity of rGDP supplied by firms

Question 16

Why does the demand curve slope downward?

Answer 16

Changes in price level effects each component of demand
International trade effect

Question 17

The curve shifts if

Answer 17

Variables other than price level change

Question 18

The curve moves

Answer 18

Price changes, but other variables remain constant

Question 19

Variables that shift the curve

Answer 19

Changes in monetary and fiscal policy
Changes in the expectations of households and firms
Changes in foreign variables (imports, exports, and prices)

Question 20

Why is the short run aggregate supply curve upward sloping

Answer 20

As price level increases, the quantity of goods and services firms will supply does as well

Question 21

Why do recessions occur

Answer 21

A sudden, negative event occurs