Business Cycles: Sample Quiz

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1. In an economy in which all markets adjust instantly to equilibrium, a change in the amount of money in circulation will affect:

only price level.
only output, and not prices.
both output and prices.
neither output nor prices.

2. The concept of the natural rate of interest was developed by:

John Maynard Keynes.
Knut Wicksell.
Milton Friedman.
Paul Samuelson.

3. When predators increase, the number of prey decreases. As the number of prey decreases, the number of predators decrease also." The relationship described here is an example of:

dampening feedback.
the accelerator principle.
an exogenous relationship.

4. Recently a number of books have worried about the employment effects of technological progress. They note that employment drops in industries undergoing technological change, and wonder if eventually the same will happen for the entire economy. This concern is the modern version of what idea?

The accelerator principle
Amplifying feedback
Dampening feedback

5. The debate over global warming involves questions of how important various feedback relations are. Which of the following is an example of amplifying feedback?

Higher temperatures increase the amount of water vapor in the air. Water vapor is a greenhouse gas.
Higher temperatures increase the amount of water vapor in the air, which increases clouds. Clouds reflect sunlight.
Burning fossil fuels increases carbon dioxide. Carbon dioxide is a greenhouse gas.
Because the northern hemisphere has much more vegetation, in the summer carbon dioxide decreases and in the winter it increases.

6. The accelerator:

is the reciprocal of the marginal propensity to consume.
says investment spending depends on changes in consumption spending.
quantifies the effect of waves of optimism and pessimism.
tells the effect of the full-employment budget.
is the reciprocal of velocity.

7. What group gives economists the beginning and ending dates of U.S. recessions?

National Bureau of Economic Research
Council of Economic Advisors
U.S. Census Bureau

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Copyright Robert Schenk