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| 1 | |
The business cycle describes fluctuations in output around the ___________. |
| | A) | trend path of output |
| | B) | boom |
| | C) | recession |
| | D) | short-run fluctuations in output |
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| 2 | |
The ________ path of output is the smooth path of long-run output once its short-term fluctuations are averaged out. |
| | A) | stationary |
| | B) | trend |
| | C) | cyclical |
| | D) | structural |
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| 3 | |
Business cycles are caused by sun spots. |
| | A) | True |
| | B) | False |
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| 4 | |
The output gap is the deviation of __________ output from ___________ output. |
| | A) | real, nominal |
| | B) | actual, potential |
| | C) | real, potential |
| | D) | actual, real |
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| 5 | |
The _____________assumes that firms guess future output, profits and investment by extrapolating past output growth. |
| | A) | multiplier |
| | B) | Keynesian consumption function |
| | C) | accelerator model of investment |
| | D) | law of diminishing returns |
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| 6 | |
Aggregate supply provides a _______ to growth cycles. |
| | A) | ceiling |
| | B) | floor |
| | C) | wall |
| | D) | door |
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| 7 | |
There is a floor, below which aggregate demand cannot fall. |
| | A) | True |
| | B) | False |
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| 8 | |
Holding _______ allows firms to meet short-term fluctuations in demand without incurring the expense of short-run fluctuations in output. |
| | A) | money |
| | B) | stocks |
| | C) | foreign exchange |
| | D) | land |
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| 9 | |
If _____________ has fallen substantially, firms build up stocks of unsold finished output. |
| | A) | supply |
| | B) | savings |
| | C) | demand |
| | D) | price |
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| 10 | |
All of the following are parts of the business cycle except __________. |
| | A) | boom |
| | B) | slump |
| | C) | recovery |
| | D) | acceleration |
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| 11 | |
The political business cycle arises because politicians interfere with the economy for political advantage. |
| | A) | True |
| | B) | False |
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| 12 | |
The theory that explains business cycles by the dynamic interaction of consumption and investment demand is the __________. |
| | A) | sun spot theory |
| | B) | multiplier-accelerator model |
| | C) | Solow theory |
| | D) | new classical theory |
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| 13 | |
The multiplier-accelerator model assumes _________ depends on ___________. |
| | A) | consumption, expected future profits |
| | B) | investment, interest rates |
| | C) | investment, expected future profits |
| | D) | stockbuilding, interest rates |
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| 14 | |
Real business cycle theory suggests that _________ not important in explaining short-term fluctuations around actual output. |
| | A) | aggregate supply is |
| | B) | aggregate demand is |
| | C) | potential output is |
| | D) | real variables are |
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| 15 | |
The impossibility of negative gross investment provides a _________ to fluctuations in _______. |
| | A) | ceiling, stockbuilding |
| | B) | ceiling, capital prices |
| | C) | floor, output |
| | D) | floor, the capital-output ratio |
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| 16 | |
The business cycle is not transmitted from one country to another through __________. |
| | A) | private sector imports and exports |
| | B) | economic policy |
| | C) | the duration of compulsory education |
| | D) | labour supply changes |
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| 17 | |
Output can exceed demand during the recovery phase as firms restore stocks to their target levels. |
| | A) | True |
| | B) | False |
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| 18 | |
Real business cycles are cycles in ____________. |
| | A) | potential output |
| | B) | actual output |
| | C) | real output |
| | D) | international trade |
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| 19 | |
Real business cycle theories suggest that ____________ to correct departures from the desired growth path. |
| | A) | there is a role for fiscal policy |
| | B) | there is a role for monetary policy |
| | C) | there is a role for supply-side policies |
| | D) | there is no case for stabilizing output over the business cycle |
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| 20 | |
Increasing globalization suggests that countries’ trade cycles may be independent of one another. |
| | A) | True |
| | B) | False |
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