Biology Forums - Study Force

The political business cycle refers to the possibility that:
 a. incumbent politicians will be reelected regardless of the state of the economy.
  b. politicians will manipulate the economy to enhance their chances of being reelected.
  c. there are more recessions prior to elections.
  d. recessions coincide with election years.

QUESTION 2

The base year in the consumer price index (CPI) is:
 a. given a value of zero.
  b. a year chosen as a reference for prices in all other years.
  c. always the first year in the current decade.
  d. established by law.

QUESTION 3

The size of the spending multiplier depends on the marginal propensity to consume (MPC).
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 4

Which of the following best describes the idea of a political business cycle?
 a. Politicians have a bias to cut taxes and increase government spending.
  b. Special interests result in alternating federal deficits.
  c. Politicians will use fiscal and monetary policy to cause output, real incomes, and employment to be rising prior to elections.
  d. Good intentions of politicians influence the business cycle.

QUESTION 5

Deflation:
 a. was prevalent during the oil shocks of the 1970s.
  b. will cause consumers' purchasing power to shrink.
  c. has been persistent in the U.S. economy since the Great Depression.
  d. none of these.

QUESTION 6

If the marginal propensity to consume is 0.80, the value of the spending multiplier will be 5.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 7

When people use recent information to gradually adjust their forecasts of inflation, they are said to have:
 a. static expectations.
  b. adaptive expectations.
  c. rational expectations.
  d. spiraling expectations.

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