Business Cycles

Question 1

For two straight quarters, business inventories increase at a sharp rate. This most likely indicates

A A was wrong so here's the rest of the choices

Ba recovering economy

Cthe beginning of a recession

Dan increase in inflation

Ea record unemployment rate

Question 2

At which point in the business cycle is there the largest inflationary gap?

AThe peak

BThe trough

C was wrong so here's the rest of the choices

DDuring contraction

EAt full employment

Automatic Stabilizers

Question 3

Which of the following accurately describes the relationship between social service programs and the business cycle?

ASocial service programs act completely independently of the business cycle.

Bwas wrong so here's the rest of the choices

CSocial service programs can help with inflation but do not alleviate recessions.

DSocial service programs tend to intensify recessions and inflationary periods.

ESocial service programs help alleviate cyclical unemployment and inflation.

Question 4

Increasing tax revenues and falling transfer payments are an automatic response to

Along-term economic growth

Ban inflationary period

C was wrong so here's the rest of the choices

Dprice level disequilibrium

Ean aggregate demand decrease

Nominal v. Real Interest Rates

Question 5

When a bank provides a loan for a large consumer purchase, the nominal interest rate is

Athe real interest rate minus expected inflation

B was wrong so here's the rest of the choices

Cset with no consideration of expected inflation

Dalways less than the real interest rate

Ethe advertised rate, unadjusted for inflation

Question 6

If the inflation rate increases, which of the following accurately describes people paying fixed-interest rate loans?

AThey will be required to pay more of the principal annually.

BThey will pay a lower real interest rate.

CThey will pay a higher real interest rate.

Dwas wrong so here's the rest of the choices

EThey will pay a higher nominal interest rate.