1. Macroeconomics does not try to answer the question of:
A) why some countries experience rapid growth.
B) what is the rate of return on education.
C) why some countries have high rates of inflation.
D) what causes recessions and depressions.
2. A typical trend during a recession is that:
A) the unemployment rate falls.
B) the popularity of the incumbent president rises.
C) incomes fall.
D) the inflation rate rises.
3. Macroeconomics is the study of the:
A) activities of individual units of the economy.
B) decisionmaking by households and firms.
C) economy as a whole.
D) interaction of firms and households in the marketplace.
4. The study of the economy as a whole is called:
A) household economics.
B) business economics.
C) microeconomics.
D) macroeconomics.
5. The ability of macroeconomists to predict the future course of economic events:
A) is no better than a meteorologist's ability to predict the next month's weather.
B) is much better than a meteorologist's ability to predict the next month's weather.
C) has gotten worse over time.
D) is less precise than it was in the 1920s.
6. Which of the combinations listed is not a U.S. president and an important economic
issue of his administration?
A) President Carter, inflation
B) President Reagan, budget deficits
C) President G. H. W. Bush, budget deficits
D) President Clinton, inflation
Page 1
7. All of the following are types of macroeconomics data except the:
A) price of a computer.
B) growth rate of real GDP.
C) inflation rate.
D) unemployment rate.
8. All of the following except _______ are important macroeconomic variables.
A) real GDP
B) the unemployment rate
C) the marginal rate of substitution
D) the inflation rate
9. The total income of everyone in the economy adjusted for the level of base year prices is
called:
A) a recession.
B) an inflation.
C) real GDP.
D) a business fluctuation.
10. A measure of how fast the general level of prices is rising is called the:
A) growth rate of real GDP.
B) inflation rate.
C) unemployment rate.
D) market-clearing rate.
11. The inflation rate is a measure of how fast:
A) the total income of the economy is growing.
B) unemployment in the economy is increasing.
C) the general level of prices in the economy is rising.
D) the number of jobs in the economy is expanding.
12. Real GDP ______ over time, and the growth rate of real GDP ______.
A) grows; fluctuates
B) is steady; is steady
C) grows; is steady
D) is steady; fluctuates
Page 2
13. Two striking features of a graph of U.S. real GDP per capita over the twentieth century
are the:
A) overall upward trend interrupted by a large downturn due to the economic
depression in the 1930s.
B) nearly constant level with a large downturn in the 1930s.
C) downward trend in the first half of the century followed by the upward trend in the
second half.
D) constant level in the first half of the century followed by the upward trend in the
second half.
14. In the U.S. economy today, real GDP per person, compared with its level in 1900, is
about:
A) 50 percent higher.
B) twice as high.
C) three times as high.
D) eight times as high.
15. Recessions are periods when real GDP:
A) increases slowly.
B) increases rapidly.
C) decreases mildly.
D) decreases severely.
16. Compared with real GDP during a recession, real GDP during a depression:
A) increases more rapidly.
B) increases at approximately the same rate.
C) decreases at approximately the same rate.
D) decreases more severely.
17. A severe recession is called a(n):
A) depression.
B) deflation.
C) exogenous event.
D) market-clearing assumption.
18. The annual inflation rate in the United States averaged:
A) nearly zero between 1900 and 1950.
B) nearly zero between 1950 and 2000.
C) about 10 percent between 1900 and 1950.
D) about 10 percent between 1950 and 2000.
Page 3
19. Deflation occurs when:
A) real GDP decreases.
B) the unemployment rate decreases.
C) prices fall.
D) prices increase but at a slower rate.
20. A period of falling prices is called:
A) deflation.
B) inflation.
C) a depression.
D) a recession.
21. A graph of the rate of inflation in the United States over the twentieth century shows:
A) an overall upward trend interrupted by a large downturn in the 1930s.
B) some periods of deflation mixed with mostly positive rates of inflation before 1955
but only positive rates of inflation after 1955.
C) a relatively steady, positive level throughout the century except for deflation in the
A) why some countries experience rapid growth.
B) what is the rate of return on education.
C) why some countries have high rates of inflation.
D) what causes recessions and depressions.
2. A typical trend during a recession is that:
A) the unemployment rate falls.
B) the popularity of the incumbent president rises.
C) incomes fall.
D) the inflation rate rises.
3. Macroeconomics is the study of the:
A) activities of individual units of the economy.
B) decisionmaking by households and firms.
C) economy as a whole.
D) interaction of firms and households in the marketplace.
4. The study of the economy as a whole is called:
A) household economics.
B) business economics.
C) microeconomics.
D) macroeconomics.
5. The ability of macroeconomists to predict the future course of economic events:
A) is no better than a meteorologist's ability to predict the next month's weather.
B) is much better than a meteorologist's ability to predict the next month's weather.
C) has gotten worse over time.
D) is less precise than it was in the 1920s.
6. Which of the combinations listed is not a U.S. president and an important economic
issue of his administration?
A) President Carter, inflation
B) President Reagan, budget deficits
C) President G. H. W. Bush, budget deficits
D) President Clinton, inflation
Page 1
7. All of the following are types of macroeconomics data except the:
A) price of a computer.
B) growth rate of real GDP.
C) inflation rate.
D) unemployment rate.
8. All of the following except _______ are important macroeconomic variables.
A) real GDP
B) the unemployment rate
C) the marginal rate of substitution
D) the inflation rate
9. The total income of everyone in the economy adjusted for the level of base year prices is
called:
A) a recession.
B) an inflation.
C) real GDP.
D) a business fluctuation.
10. A measure of how fast the general level of prices is rising is called the:
A) growth rate of real GDP.
B) inflation rate.
C) unemployment rate.
D) market-clearing rate.
11. The inflation rate is a measure of how fast:
A) the total income of the economy is growing.
B) unemployment in the economy is increasing.
C) the general level of prices in the economy is rising.
D) the number of jobs in the economy is expanding.
12. Real GDP ______ over time, and the growth rate of real GDP ______.
A) grows; fluctuates
B) is steady; is steady
C) grows; is steady
D) is steady; fluctuates
Page 2
13. Two striking features of a graph of U.S. real GDP per capita over the twentieth century
are the:
A) overall upward trend interrupted by a large downturn due to the economic
depression in the 1930s.
B) nearly constant level with a large downturn in the 1930s.
C) downward trend in the first half of the century followed by the upward trend in the
second half.
D) constant level in the first half of the century followed by the upward trend in the
second half.
14. In the U.S. economy today, real GDP per person, compared with its level in 1900, is
about:
A) 50 percent higher.
B) twice as high.
C) three times as high.
D) eight times as high.
15. Recessions are periods when real GDP:
A) increases slowly.
B) increases rapidly.
C) decreases mildly.
D) decreases severely.
16. Compared with real GDP during a recession, real GDP during a depression:
A) increases more rapidly.
B) increases at approximately the same rate.
C) decreases at approximately the same rate.
D) decreases more severely.
17. A severe recession is called a(n):
A) depression.
B) deflation.
C) exogenous event.
D) market-clearing assumption.
18. The annual inflation rate in the United States averaged:
A) nearly zero between 1900 and 1950.
B) nearly zero between 1950 and 2000.
C) about 10 percent between 1900 and 1950.
D) about 10 percent between 1950 and 2000.
Page 3
19. Deflation occurs when:
A) real GDP decreases.
B) the unemployment rate decreases.
C) prices fall.
D) prices increase but at a slower rate.
20. A period of falling prices is called:
A) deflation.
B) inflation.
C) a depression.
D) a recession.
21. A graph of the rate of inflation in the United States over the twentieth century shows:
A) an overall upward trend interrupted by a large downturn in the 1930s.
B) some periods of deflation mixed with mostly positive rates of inflation before 1955
but only positive rates of inflation after 1955.
C) a relatively steady, positive level throughout the century except for deflation in the