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Econ 252x Akbulut Marshall School of Business Spring 2011 Answer Key - Study Questions 1. What is a business cycle? a. The long-run growth trend of the economy. b. The short-run movements (expansions and recessions) of economic activity. c. The short-run movements (inflations and deflations) of prices. d. The relationship between political activity and economic activity. 2. A period of rising prices and high unemployment is known as a. stagflation b. recession. c. inflation. d. deflation. 3. If a country employs many foreign workers a. GDP is likely to be higher than GNP. b. GDP is likely to be lower than GNP. c. GDP and GNP will most likely be equal. d. the gap between GDP and GNP will not be effected by this fact. 4. Classical economists believe that the best way to solve the problem of high unemployment is a. increases in the money supply to increase investment. b. increase in government spending to stimulate demand. c. increase in taxes to reduce consumption. d. to do nothing; the economy will rapidly adjust its own. 5. Economists could agree about the effects of a particular economic policy but disagree about the desirability of implementing the policy. This would occur if they _______ about the positive analysis of the policy and _______ about the normative analysis of the policy. a. disagree; agree b. agree; agree c. agree; disagree d. disagree; disagree 6. Average labor productivity is the a. amount of workers per machine. b. amount of machines per worker. c. ratio of employed to unemployed workers. d. amount of output per worker. 7. A farmer grows wheat, which he sells to a miller for $100. The miller turns the wheat into flour which he sells to a baker for $150. The baker turns the wheat into bread, which he sells to consumers for $180. Consumers eat bread. What is GDP in this economy? a. $80 b. $180 c. $250 d. $430 8. Which of the following is the best example of an intermediate good? a. a tire purchased by an auto company b. a new house purchased by a newly married couple c. grain sold to foreign farmers d. All off the above are intermediate goods.... View Full Document

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