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Economics 203/Test 5 1. Choose the answer below which makes an accurate statement about the nature of post World War II business cycles a. the time between recessions is not consistent b. the intensity of recessions varies from one to another c. recessions since World War II have tended be shorter and less frequent than before WWII d. all of the above 2. The most recent U.S. recession a. began in late 2007 and lasted into 2009 b. resembled the Great Depression in length and severity c. resulted in unemployment rates reaching 8% d. none of the above 3. Reference Figure 1 for the correct answer below a. A represents a “peak” b. B represents a “trough” c. C represents long run trend growth d. all of the above 4. During the Great Depression in the US, a. unemployment reached a peak of about 25% b. real GDP declined by just over 10% c. about 1000 banks failed d. all of the above 5. Accumulated evidence to date indicates that recessions arise from a. large shocks to resources such as oil prices b. financial market overinvestment and collapse c. shifts and readjustments in types of goods produced d. all of the above 6. A fiscal policy greater than 1.0 implies that a. GDP will increase more than the increase in government spending b. GDP will increase times more than the increase in the money supply c. GDP will increase less than the increase in government debt d. GDP will increase by 1% 7. Countercyclical fiscal policy refers to a. the U.S. Treasury increasing the money supply in order to boost lending-borrowing b. actions by the Fed to lower interest rates to boost consumer spending c. additional government spending financed by the issuance of additional debt d. none of the above 8. In the 1970s, the U.S. used countercyclical monetary stimulus to pull the economy out of recessions and slow growth. These efforts resulted in a. lower the unemployment rate by about 2% b. increasing real GDP growth rates by about 1% c. doubling the size of the federal debt d. inflation of 10% and interest rates of 20% 9. Over the long run, real gdp has grown at about what rate (trend) per year? a. 1% b. 3% c. 5% d. 7% d. all of the above 10. The last three recessions in the U.S. occurred in a. 90-91, 01-02, 09-10 b. 85-87, 94-95, 00-01 c. 90-91, 98-99, 07-09 d. none of the above 11. To find a recession equal to the most recent one in length and intensity, you would need to go back to a. 1929-33 b. 1969-70 c. 1980-82 d. 1990-91 12. In order for monetary stimulus or and fiscal stimulus to work, a. individuals must be willing to live with higher than normal interest rates b. time is needed for the effects to work through the economy c. markets must treat additional money or bonds as if they were increases in real income d. the amount of stimulus must exceed the growth rate of the labor force 13. In the fall 2008, “QE1” monetary stimulus a. the Fed injected about $600 billion dollars into the economy b. the Treasury sold about $1 trillion in additional government bonds c. the Fed injected about $1.7 trillion dollars into the economy d. the Fed spent about $1 trillion buying consumer goods in markets 14. One adjustment to economic data during the Great Depression is that a. GDP grew faster than reported data because of WWII b. unemployment was lower than reported data because of WWII c. prices would have fallen by more without the price restrictions imposed during WWII d. none of the above 15. What are the two most widely watched economic figures indicating whether an economy is in an expansion or recession? a. unemployment rate and money supply b. GDP growth rate and fed funds rate c. unemployment rate and GDP growth rate d. fed funds rate and CPI 16. The term “quantitative easing” is the same thing as a. increasing the money supply b. issuing government bonds c. lowering taxes d. lowering the CPI 17. A problem with a gold standard with a fixed conversion rate between gold and dollars that emerged during the Great Depression was that a. instead of gold prices increasing, all other prices significantly fell b. banks could not hold enough gold in their vaults c. silver replaced gold as the preferred precious metal d. none of the above 18. During the Great Depression, countries that went off the gold standard quickests a. experienced the highest inflation rates b. experienced the highest unemployment rates c. experienced the smallest economic contractions d. experienced the largest deflations 19. For the past 100+ years of U.S. living standards, a. recessions have been a bigger influence than long run growth b. the Great Depression dominated the impact of long run growth for more than 40 years c. long run growth has dominated the effects of recessions, even the Great Depression d. the effects of long run growth and recessions have been about equal 20. On average, evidence suggests that the government spending multiplier is about a. 0.2 b. 0.7 c. 1.0 d. 1.5 21. Put “A” for the answer Correct Answers: 1d, 2a, 3c, 4a, 5d, 6a, 7c, 8d, 9b, 10d, 11c, 12c, 13c, 14d, 15c, 16a, 17a, 18c, 19c, 20b, 21a