- D. Structural unemployment refers to an individual not having the necessary skills to perform a required task.
When an individual loses his job because he does not know how to use a new computer, he is lacking the skills
necessary to perform his job. Structural unemployment usually occurs as a result of new technology. Technology
creates growth; however, the full impact of its growth cannot be felt until the long run because people need to
acquire the skills to use the new technology. - A.In a product market, businesses pay or send a monetary flow to households for land, labor, and capital.
Households are the beneficiaries of a monetary flow in this instance and give businesses aid in production. - B.An increase in the price for raw materials would trigger a twofold problem. First, it would initiate a rise in the
price level because producers would have to increase prices to compensate for expensive raw materials. Second, it
would force producers to cut back on labor and thus add to the unemployment rate. - C.According to Keynesians, fiscal policy could most effectively remedy low aggregate demand. When aggregate
demand is lacking, government spending increases consumption and disposable income. - D. The production possibilities curve represents efficiency. Every point on the curve is a representation of being
efficient with resources. If a country is underachieving or underutilizing, the country’s production possibilities are
located inside the line of efficiency. - D. An increase in government spending encourages long-run economic growth because it creates employment
and increases disposable income. When more resources are employed, the economy has a better chance of
attaining efficient use of its resources. - C.Selling securities is a tool of monetary policy. It is also the most common tool used by the Fed because it can
quickly be altered. Also, the effects of buying and selling securities on the money supply can be felt almost
immediately. - D. Consumption spending, exports/imports, government spending, and investment are all calculated as the
nation’s income. Total income is measured for GDP. - A.To fight a recession, the Fed should buy securities to increase the money supply. When the money supply is
increased, individuals are given the incentive to consume more. This is an example of “loose” monetary policy. - A.If the economy is performing below its capacity, aggregate demand can increase without a substantial impact
on the price level. The economy can welcome growth because resources are not fully employed. When the
economy reaches its productive capacity, it has reached a point where resources are fully employed; after this
point, there is little or no room for growth. - D. Unemployment is not a phase of the business cycle. Unemployment may be a result of the contraction or
trough phase of the business cycle, but it is not a phase itself. The four phases are expansion, peak, contraction,
and trough. - B.To fight demand-pull inflation, the government will decrease spending and/or raise taxes. Decreasing
spending slows economic growth. Raising taxes decreases disposable income, which in turn decreases aggregate
demand. A decrease in aggregate demand stabilizes the price level. - D. Classical economists argue that the economy is self-correcting and should be left alone. Any governmental
intervention is considered detrimental to an economy. - E.It is not the responsibility of the Fed to reduce the government’s budget debt. The Fed’s responsibilities are to
monitor and control the money supply. - B.The main reason the Fed requires reserves for banks is to give the Fed more control over the money supply.
With control over the money-creation process, the Fed can monitor bank activities and ensure that transactions
are being handled properly. - B.When foreign countries increase their demand for U.S. goods, the value of the dollar increases because
demand for the dollar increases. In time, however, U.S. exports could become too expensive for Italy and the
demand for U.S. exports would decrease, lessening the power of the dollar.
Macroeconomics Full-Length Practice Test 1Macroeconomics Full-Length
Practice Test 1