This study guide prepares you for the Final Examination you complete in the last week of the course. It contains practice questions, which are related to each week’s objectives. Highlight the correct response, and then refer to the answer key at the end of this Study Guide to check your answers.
Use each week’s questions as a self-test at the start of a new week to reflect on the previous week’s concepts. When you come across concepts that you are unfamiliar with, refer to the Student Guide for that particular week.
Week One: Fundamentals of Macroeconomics
Objective: Explain the economic interaction of resources among households, government, and businesses.
1. Which group has ultimate control over the U.S. economy? a. Business
2. When a government intervenes in an economy in a way that influences the relationship between households and businesses, it is a. serving as an economic actor
b. serving as an economic referee
c. serving the public good
d. reducing social welfare by interfering with the invisible hand
Objective: Describe gross domestic product, inflation rate, unemployment rate, and interest rate.
3. Per capita real output would most likely increase if
a. both real GDP and population increase
b. both real GDP and population decrease
c. real GDP increases and population decreases
d. real GDP decreases and population increases
4. In 2006, U.S. real GDP increased by 3.3 percent. Based on this information, we can infer that the U.S. experienced a. a recession in 2006
b. an expansion in 2006
c. a depression in 2006
d. a trough in 2006
Objective: Identify sources of historical economic data and economic forecasts.
5. The Bureau of Economic Analysis is responsible for which of the following? a. Setting interest rates
b. Managing the money supply
c. Calculating U.S. gross domestic product
d. Paying unemployment benefits.
6. The Federal Reserve will most likely _______ the money supply when the economy is experiencing a recession a. increase
Week Two: Aggregate Demand and Supply Models
Objective: Analyze the impact of various factors on aggregate demand and supply.
7. The AD curve
a. will shift as much as the initial shift factor when the multiplier is greater than one b. will shift by more than initial shift factor when the multiplier is greater than one c. will shift by less than the initial shift factor due to leakages d. could shift by more or less than the initial shift factor
8. Theparadox paradox of thrift occurs when
a. an increase in saving raises output
b. an increase in saving reduces output
c. saving is unrelated to output
d. a decrease in saving reduces output
9. Suppose output exceeds potential output and a contractionary fiscal policy is enacted. According to the AS/AD model, in the long run, this fiscal policy will produce a. a lower output level and a lower price level than would otherwise have occurred b. a lower price level than would otherwise have occurred c. a lower output level than would otherwise have occurred d. neither a lower price level nor a lower output level than would otherwise have occurred
10. According to the AS/AD model, an expansionary monetary policy a. increases interest rates, raises investment, and increases income b. decreases interest rates, raises investment, and increases income c. increases interest rates, reduces investment, and decreases income d. decreases interest rates, reduces investment, and decreases income
Objective: Evaluate the effectiveness of changes in fiscal policies using Keynesian and Classical models