On an aggregate demand and aggregate supply graph, the stagflation of the 1970s

ECO 102/ ECO 102 Midterm Exam (Score 100%)
1) On an aggregate demand and aggregate supply graph, the stagflation of the 1970s can be represented as a
a. leftward shift of the aggregate supply curve
b. rightward shift of the aggregate supply curve
c. rise in the price level that caused an excess demand for output
d. rightward shift of the aggregate demand curve
e. decrease in the price level that caused an excess supply of output
2) Economic fluctuations (or business cycles)
a. Are changes in the number of business started
b. are fluctuations in the Dow Jones industrial average relative to a long-term growth trend
c. look at the role of business in the hiring resources
d. are fluctuations in the level of economic activity, relative to a long-term growth trend
e. are changes in govt spending that occur over a period of years
3) According to Keynes, “animal spirits”
a. make investment spending unstable
b. make consumption spending unstable
c. make government spending inherently stable
d. guide the economy back to equilibrium after a disruption
e. create the federal government budget deficits that have become so common today
4) The Reagan administration’s 1981 investment tax changes were designed to
a. stimulate aggregate demand and thereby reduce unemployment
b. stimulate aggregate demand and thereby increase economic growth
c. stimulate aggregate supply and thereby increase economic growth
d. decrease aggregate demand in order to reduce inflation
e. increase tax revenues to reduce the federal budget deficit
5) A recession is a period during which
a. employment, production, and income decrease
b. the price level is increasing
c. inventories are falling dramatically
d. the unemployment rate is falling while the price level is rising
e. the government attempts to reduce a budget deficit by reducing taxes and increasing government spending

6) Double counting in the value added approach to GDP refers to
a. corporate income being taxed twice
b. the amount of income taxes paid to states that is taxable by the federal government
c. calculating GDP twice using the income and expenditures methods
d. adding the value of exports to GDP and subtracting the value of imports
e. counting the total value of a final output in addition to the value of the inputs used to make it
7) The GDP price index
a. involves all final goods and services produced in the economy
b. is derived from looking at quantities of goods sold rather than at prices
c. is derived using the prices of only imported and exported goods and services
d. is derived using the implicit prices of goods and services produced by the government
e. involves all goods and services sold in the economy
8) Value added is
a the sum of all income earned by resource suppliers
b. actual investment minus planned investment
c. any payment of income that adds to the domestic spending stream
d. the value of a product minus the cost of materials
e. the increase in the value of a financial asset such as a stock or bond
9) Nominal GDP is measured in
A. current-year prices
B. base-year prices
C. real dollars
D. quantity of goods produced
E. hours of employment
10) Which of the following is an injection into the spending stream?
a. planned investment
b. imports
c. indirect business taxes
d. disposable income
e. interest on savings
11) Seasonal unemployment results from
A. unrealistic expectations about the availability of employment
B. being in the wrong geographical location
C. taking the time to find the best job
D. decreases in demand for labor at certain times of the year
E. periodic increases in business activity

12) a recent college graduate who is still looking for their first job, would be considered as
a. a discouraged worker
b. underemployed
c. overemployed
d. unemployed
e. not in the labor force
13) In the United States
a. the average inflation rate was higher before 1950 than after
b. the average inflation rate was higher after 1950 than before
c. inflation caused no serious problems before World War II
d. inflation caused no serious problems after World War II
e. the implicit price deflator was used to measure inflation before World War II, and the consumer price index has been used since then.
14) Since World War II, the U.S. economy has experienced
a. a decrease in the civilian labor force
b. a decrease in the number of unemployed persons
c. a decrease in the number of employed persons
d. an increase in the labor force
e. a declining unemployment rate as a general trend
15) When the economy is at full employment, what types of unemployment may exist?
a. None
b. structural and frictional
c. seasonal and cyclical
d. frictional, cyclical, and structural
e. cyclical
16) Over the last 100 years, the U.S. labor productivity growth rate experienced its largest declines
a. during the Great Depression
b. in the 1940s
c. during the 1950s
d. during the 1980s
17) The term industrial policy refers to
a. the policy industries develop to promote growth
b. industry policy related to marketing strategies
c. the illegal activity that firms sometimes engage in to reduce competition
d. government policy arrived at enhancing our competitiveness with foreign industry
18) which of the following would not be considered a developed country?
a. Pakistan
b. The US
c. Japan
d. Australia
e. Belgium
19) Which of the following is the best indicator of the standard of living?
a. Nominal GDP
b. Real GDP
c. Real GDP per capita
d. Productivity
e. Productivity per unit of labor
20) Over the last 100 years, U.S. labor productivity grew the fastest
a. During the depression
b. In the 1940s
c. In the first half of the period
d. During the 1960s
e. During the 1980s an increase in the labor force participation rate of women

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