Principles of Economics: Introduction to Macroeconomics Quiz

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What is the main measure of how an economy is doing?

Unemployment rate

Aggregate output (correct)

Inflation rate

Labor force participation rate

What defines a recession in an economy?

Increase in aggregate output

Two consecutive quarters of output increase

A prolonged period of output growth

Decrease in aggregate output (correct)

What happens when a recession becomes prolonged and deep?

Stagflation

Economic boom

Depression (correct)

Economic equilibrium

How is unemployment rate calculated?

Percentage of the labor force that is unemployed Signup and view all the answers

What do policy makers aim to do during a business cycle?

Smooth fluctuations in output Signup and view all the answers

What does the existence of unemployment imply?

The aggregate labor market is not in equilibrium Signup and view all the answers

What type of goods are used in the satisfaction of human wants and needs?

Consumer goods Signup and view all the answers

Which type of goods are used in the production of other goods and services?

Capital goods Signup and view all the answers

What type of goods satisfy the basic needs of man?

Essential goods Signup and view all the answers

Which type of goods contribute to satisfaction but are not essential?

Luxury goods Signup and view all the answers

What type of goods have value attached to them, are useful, and are scarce?

Economic goods Signup and view all the answers

What is the main idea behind the statement 'Everyone’s expenditure is someone else’s receipt'?

One person's spending becomes another person's income. Signup and view all the answers

Which process involves the physical transformation of a commodity into a finished product?

Production Signup and view all the answers

In which market arena do firms and government purchase labor from households?

Labor market Signup and view all the answers

Which of the following best defines 'goods' based on the provided text?

Goods include both tangible (material) items and intangible services. Signup and view all the answers

Which market arena involves the exchange of goods and services between households, firms, and government?

Goods-and-services market Signup and view all the answers

How are labor transactions between firms/government and households described in the text?

Households supply labor to firms/government in exchange for money. Signup and view all the answers

Which statement best describes the concept of expenditure in macroeconomics based on the provided text?

'Expenditure' reflects spending that leads to receipts for others. Signup and view all the answers

What did John Maynard Keynes believe about government intervention in the economy?

Governments can affect the level of output and employment. Signup and view all the answers

Which of the following is NOT a major concern of macroeconomics?

Interest rates Signup and view all the answers

What is deflation?

A sustained decrease in the overall price level Signup and view all the answers

During periods of low private demand, what can the government do to lift the economy out of recession?

Stimulate aggregate demand Signup and view all the answers

What does hyperinflation refer to?

A sustained increase in the overall price level Signup and view all the answers

Why are prolonged periods of deflation considered damaging for the economy?

Deflation decreases the purchasing power of consumers. Signup and view all the answers

What are the three kinds of policy that the government uses to influence the macroeconomy?

Fiscal, Monetary, and Growth or supply-side policies Signup and view all the answers

What does fiscal policy refer to?

Policies concerning taxes and spending Signup and view all the answers

What consists of tools used by the Central Bank to control the quantity of money in the economy?

Monetary policy Signup and view all the answers

Which sector focuses on stimulating aggregate supply instead of aggregate demand?

Public Sector Signup and view all the answers

What does macroeconomics focus on?

Households and Firms Signup and view all the answers

What does the circular flow diagram show?

Income received and payments made by each sector of the economy Signup and view all the answers