ECO 102 Macroeconomics Unit 4 Challenge 1 and 2 Sophia Course

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Unit 4 Challenge 1 and 2 Challenge 1 Using the graph, which of the following statements is true? 

a.)

Public policy should be aimed at increasing AD. 

b.)

Level of output can be sustained indefinitely. 

c.)

Prices will decrease until the cycle reaches equilibrium. 

d.)

The economy could correct itself naturally through prices rising.

Using the graph, which of the following statements is true? 

a.)

On the business cycle, this graph would be near a peak. 

b.)

The economy is fully employed. 

c.)

Producers are using resources faster than they're being replaced. 

d.)

The economy is producing at a real GDP less than the LRAS. Using the graph, which of the following statements is true? 

a.)

The economy is producing the maximum amount possible given current resources. 

b.)

The economy is producing at a real GDP greater than the LRAS. 

c.)

The level of output cannot be sustained indefinitely. 

d.)

The unemployment rates are falling.

Which of the following, regarding contractionary policy, is true?  a.)

Raises interest rates b.)

Creates demand for goods and services through government expenditures 

c.)

Entices banks to make loans 

d.)

Influenced by the multiplier effect 

Which of the following statements regarding expansionary monetary policy is FALSE?  a.)

It increases the money supply. b.)

It decreases consumer willingness to purchase goods, ceteris paribus. 

c.)

It makes AD shift to the right. 

d.)

It encourages job creation in the economy. 

Government expenditures create demand for goods and services.

This is known as __________ and will cause AD to shift to the __________.



a.)

contractionary fiscal policy; right 

b.)

expansionary monetary policy; left 

c.)

expansionary fiscal policy; right 

d.)

contractionary monetary policy; left During the 1970s, some economists argued that the cause of the woes of the economy were due to __________.  a.) brain drain due to ineffective education and training b.) supply shock due to issues with the supply of oil 

c.) increase in unemployment, as women entered the labor force 

d.) low taxes and a government surplus that should have been spent on social programs 

Which of the following is a reason why monetary policy might NOT be helpful in resolving an economic crisis?  a.)

Changes in interest rates can only affect unemployment, doing little to curb inflation. b.)

At high levels of unemployment, expansionary policy will increase economic growth. 

c.)

Businesses may have invested in capital based on predictions of future revenues that might not turn out to be profitable. 

d.)

Monetary policy can sometimes affect the economy too quickly, as people respond overnight to changes in interest rates. 

When the government borrows money, some economists claim it leads to __________. 

a.)

lower interest rates 

b.)

crowding out 

c.)

decrease in the demand for money 

d.)

increase in the money supply Which of the following describes what will happen if the euro becomes weak in relation to other currency?  a.)

European consumers will increase their purchases of foreign products. b.)

Foreign consumers will find European products more expensive. 

c.)

Consumer behavior will not change. 

d.)

Foreign consumers will increase their purchases of European products. 

Which of the following is true regarding the relationship between international trade and AD?  a.)

A recession in the U.S. could lead to a reduction in imports. b.)

If the U.S. economy is doing well, AD in other countries will decrease. 

c.)

Chinese economic policies have resulted in a lower standard of living in the U.S. 

d.)

An increase in exports will have a negative effect on AD. 

Which of the following describes what will happen to international trade when the dollar is weak? 

a.)

A decrease in the amount of goods Americans can buy abroad 

b.)

A negative effect on GDP in the U.S. 

c.)

A decrease in net exports for the U.S. 

d.)

An increase in the U.S. standard of living A trade deficit occurs when __________.  a.) imports are greater than exports b.) exports are greater than imports 

c.) tax revenues are less than government expenditures 

d.) tax revenues are greater than government expenditures 

China has a __________ with the United States, meaning that it exports more than it imports.  a.) trade surplus b.) floating rate 

c.) trade deficit 

d.) trader barrier 

The United States currently has a trade deficit with China, meaning that the ________ has a negative balance. 

a.)

current account 

b.)

balance of payments 

c.)

capital account 

d.)

trade barrier Which of the following, relating to comparative advantage, is true?  a.)

It occurs when a country has a lower opportunity cost for production of a good than its trading partner. b.)

It will always belong to the country with the absolute advantage in production of a good. 

c.)

It is the best rationale for quotas and import taxes. 

d.)

It occurs when a country's production of a good is less efficient that its trading partner's. 

Which conclusions can be reached about China based on the information in the graph shown here? 

a.)

China has a comparative advantage in the area of clothing. 

b.)

China has an absolute advantage in the area of petroleum products. 

c.)

China has to give up more petroleum products to produce clothing. 

d.)

China has a comparative advantage in the area of petroleum products.

Which of the following is true regarding absolute advantage, given the information above? 

a.)

Country A has an absolute advantage in producing clothing. 

b.)

Country A has an absolute advantage in producing both clothing and computers. 

c.)

Country A has an absolute advantage in producing computers. 

d.)

Country B has an absolute advantage in producing both clothing and computers.

Which of the following represents the advantages of using trade barriers?  a.)

They can be useful during economic downturns. b.)

They are not involved in a political process so the time to implement them is minimal. 

c.)

They are most useful when the economy is at full employment. 

d.)

They create greater competition among businesses. 

Which statement regarding trade barriers is FALSE?  a.)

Comparative advantage can favor one country over another in the production of a good. b.)

Taxes and subsidies are examples of trade barriers. 

c.)

There is much disagreement as to whether trade barriers are good or bad. 

d.)

Most economists believe trade barriers should only be used at full employment. 

Critics of trade barriers argue that trade barriers __________. 

a.)

are only good at full employment 

b.)

are politically too easy to remove when the economy recovers 

c.)

help a domestic economy be more productive



d.)

reduce the domestic incentive for production efficiency Which statement refers to a practice or situation that is NOT economically sustainable?  a.)

Producing more by using more inputs b.)

Economy at less than full employment 

c.)

New inventions increase productivity with same amount of raw material 

d.)

Current level of output can be maintained indefinitely 

Which statement regarding sustainable economic growth is true?  a.)

New production techniques can cause the level of sustainable output to increase. b.)

Economic output is sustainable if it is caused by expansionary governmental policies. 

c.)

Overuse of current resources without planning for future needs is sustainable. 

d.)

Sustainable sources of growth shift the AD curve to the left. 

Which statement is true regarding sustainable economic growth? 

a.)

It does not factor in the cost of production based waste. 

b.)

It emphasizes the importance of current consumption over future consumption. 

c.)

It is not affected by developments in technology. 

d.)

It considers the impact over time due to natural resource depletion.

Which of the following statements best describes the EPA economic justice initiative?  a.)

This is part of the United Nations Framework Convention on Climate Change. b.)

This organization has taken a more vocal position in recent years that carbon emissions must be reduced. 

c.)

This consists of a panel of leading economists who conduct research on climate change policy. 

d.)

This is a form of regulation intended to reduce the negative effect of externalities. 

Which of the following is a nonprofit organization of economists who conduct cost/benefit analyzes on policies that address global issues? 

a.)

Conference of Parties 

b.)

Kyoto Protocol 

c.)

United Nations Intergovernmental Panel on Climate Change 

d.)

Copenhagen Consensus Which of the following legally binds its member nations to meet emissions reduction targets on a national level?  a.)

The Kyoto Protocol b.)

The United Nations Intergovernmental Panel on Climate Change 

c.)

The Environmental Protection Agency's "Economic Justice" initiative 

d.)

The Copenhagen Consensus 

Which statement is NOT an example of corporate social responsibility?  a.)

Assessing all stages of the supply chain for their environmental impact

b.)

Creating a corporate endowment 

c.)

Emphasizing the importance of short term profits 

d.)

Establishing a sustainability committee at a corporation 

Which of the following statements is true regarding corporate social responsibility (CSR)?  a.)

CSR is monitored by the United Nations. b.)

Corporate governance includes volunteer time and corporate employee matching contributions. 

c.)

CSR refers to practices that firms take to voluntarily engage in actions such as philanthropy. 

d.)

CSR Is managed by state and federal governments. 

Which of the following involves assessing all costs of production, including at a firm's production site and along the entire supply chain?  a.)

Socially responsible investing b.)

Corporate governance 

c.)

Environmental management 

d.)

Philanthropy 

Challenge 2 Which of the following statements regarding economic indicators is FALSE?  a.)

Most indicators provide a snapshot view of the economy. b.)

Stock market performance is a leading indicator. 

c.)

Lagging indicators provides us with a look at what just happened in our economy. 



d.)

Macroeconomic indicators are 100% accurate all of the time.

How does macroeconomic analysis utilize economic indicators?  a.)

Uses coincident indicators only in policy making b.)

Considers leading indicators the most comprehensive 

c.)

Looks to lagging indicators as the best source of information 

d.)

Uses multiple indicators due to the complexity of the economy 

What do economic indicators provide? 

a.)

A view of the whole economy at a specific point in time 

b.)

A look into specific industries only 

c.)

The ability to predict with certainty what will happen next in the economy 

d.)

Data that can be used for decades to come, as indicators are slow to change Which of the following describes real GDP?  a.)

Is the best measure of per capita standard of living b.)

Considers the nominal prices of goods/services 

c.)

Adjusted for inflation to show growth in output 

d.)

Shows changes in prices of goods based on inflation 

GDP measures change in _________.  a.) general well-being

b.) economic growth 

c.) wealth distribution 

d.) standard of living 

Which of the following statements regarding GDP is true? 

a.)

GDP is a strong indicator of general population well-being. 

b.)

GDP is not a good indicator of wealth distribution. 

c.)

When comparing GDP from different time periods, price level is not a factor. 

d.)

GDP counts the value of all goods and services at all stages of production.

The Producer Price Index (PPI) contains measures of all of the following EXCEPT __________.  a.) intermediate goods b.) exported goods 

c.) final goods 

d.) crude goods 

The CPI and PPI are measured by __________ 

a.)

the Bureau of Labor Statistics 

b.)

the Internal Revenue Service



c.)

the Congressional Budget Committee 

d.)

a compilation of state assessments made each month Which of the following is true regarding the Consumer Price Index (CPI)? 

a.)

Changes monthly as consumer spending changes 

b.)

Includes measures of intermediate goods 

c.)

Shows the inflation rate for all goods in an economy 

d.)

Shows the change in prices for a market basket of goods A marginalized worker is ________.  a.) one who is underemployed b.) always part of the nonfarm payroll statistic 

c.) one who has given up looking for work 

d.) considered part of the labor force 

Which of the following statements about the unemployment rate is true?  a.)

There is no margin of error involved with the unemployment rate. b.)

The unemployment rate is a leading indicator. 

c.)

The unemployment rate is measured by the General Services Administration. 



d.)

The unemployment rate is determined through a survey process.

The Nonfarm Payroll is __________. 

a.)

the amount of money earned by workers outside of the farming sector 

b.)

the labor force that is looking for work outside the farming sector 

c.)

the number of people employed outside of the farming sector 

d.)

the number of people unemployed outside of the farming sector Which of the following descriptions related to retail sales is true?  a.)

Excludes growth of new stores in a chain and are conducted yearly b.)

Includes growth of new stores in a chain and are conducted weekly 

c.)

Includes growth of new stores in a chain and are conducted yearly 

d.)

Excludes growth of new stores in a chain and are conducted weekly 

Retail sales are measured by __________.  a.) self reporting by all retail outlets with over 10 employees b.) the Bureau of Labor Statistics 

c.) the Census Bureau 

d.) self-reporting from chains of over 40 stores 

Which of the following is true if retail sales are increasing? 

a.)

One can expect interest rates to fall. 

b.)

One can expect imports to decrease. 

c.)

One can expect the economy to grow. 

d.)

One can expect unemployment to increase.

Which of the following describes how consumer confidence is measured?  a.)

Measured in the time period between the next six and 12 months b.)

Measured in the time period between the present and next six months 

c.)

Measured in the time period between the present and next 12 months 

d.)

Measured in the time period between the past six months and the present 

Which of the following related to consumer confidence is FALSE?  a.)

Collected and evaluated by the Conference Board b.)

A type of coincident indicator 

c.)

Highly responsive to the influence of media and marketing 

d.)

Measures growth in an economy by looking at how well stores perform from one year to the next 

Consumer Confidence is __________.  a.) immune to time lags b.) not sensitive to the media reports 

c.) a comprehensive indicator and good predictor of the economy 

d.) sensitive to marketing campaigns 

What would the Gini coefficient be if one person retains all of the income in a country?  a.)

0 

b.)

-1 

c.)

50 

d.)

1 What would the Gini coefficient be if a country's income distribution is relatively equal?  a.)

Close to 1 b.)

Close to zero 

c.)

Close to 10 

d.)

A negative integer 

Given the above graph, the Gini coefficient would be _________. 

a.)

a negative integer 

b.)

close to 50 

c.)

close to zero 

d.)

close to one Which statements is true about GDP?  a.)

GDP is lower than GNP with countries that have a great deal of production happening in other nations. b.)

GDP is always a good indicator of the economic health of a country. 

c.)

GDP measures the production of a country’s citizens no matter where they are located. 

d.)

GDP will be less than GNP for countries whose nationals do NOT produce in other countries. 

Which of the following statements is true when a country's citizens' overseas production is met by domestic production by foreigners?  a.)

It is impossible to predict, given different tax rates in different countries. b.)

GDP and GNP are fairly equal. 

c.)

GDP is much larger than GNP. 

d.)

GNP is much larger than GDP. 

Which of the following statements is true when GDP is much lower than GNP?  a.)

Foreign direct investment is more significant than production abroad. b.)

There may be a lot of overseas production by residents. 

c.)

The economy is strong. 

d.)

The economy is in a trade deficit position. 

Which of the following is generally a trait of countries that are developing or underdeveloped?  a.)

Lower birth rate b.)

Lower gender bias in employment 

c.)

Greater life expectancy 



d.)

Greater income disparity If a country were to begin experiencing a higher level of poverty, which of the following might also increase?  a.)

Mortality rate b.)

Infant live birth rate 

c.)

Literacy rate 

d.)

Employment rate 

Which of the following is generally evidence of a country's higher standard of living? 

a.)

Gender bias in employment increasing 

b.)

Infant mortality increasing 

c.)

Birth rate increasing 

d.)

Life expectancy increasing As women have become increasingly employed, which of the following has decreased?  a.)

The labor force b.)

Birth rates 

c.)

Standards of living 

d.)

Economic development 

Which of the following is often associated with an increasing employment rate of women in living wage occupations?  a.)

Less access to education b.)

Fewer resources for children 

c.)

Increased population growth 

d.)

Higher standard of living for families 

Which of the following is an example of how macroeconomists use data on labor force participation rates by gender? 

a.)

It is associated with access and availability of jobs. 

b.)

It matches the Gini coefficient. 

c.)

It is used to calculate GDP. 

d.)

It shows a country's level of education attainment.