Question 1

(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.

Accepted Answer

A) True 
 B)False

Question 2

Increased optimism about the future will lead to

Accepted Answer

A) less current investment and less future consumption. 
B) more current investment and more future consumption. 
C) more current investment and less future consumption. 
D) less current investment and more future consumption. 
A) less current investment and less future consumption. 
B) more current investment and more future consumption. 
C) more current investment and less future consumption. 
D) less current investment and more future consumption.

Question 3

Purchasing power parity refers to

Accepted Answer

A) converting each country's GDP into U.S.dollars. 
B) dividing each country's GDP by the size of its population. 
C) adjusting GDP figures for the fact that prices are much lower in some countries than in others. 
D) adjusting different GDP figures for inflation over time. 
A) converting each country's GDP into U.S.dollars. 
B) dividing each country's GDP by the size of its population. 
C) adjusting GDP figures for the fact that prices are much lower in some countries than in others. 
D) adjusting different GDP figures for inflation over time.

Question 4

The Great Recession of 2007-09 was triggered by a

Accepted Answer

A) steep rise in bond values. 
B) steep decline in housing prices. 
C) sharp increase in oil prices. 
D) sharp decline in the value of the U.S.dollar. 
A) steep rise in bond values. 
B) steep decline in housing prices. 
C) sharp increase in oil prices. 
D) sharp decline in the value of the U.S.dollar.

Question 5

Suppose a small economy produces only HDTV sets.In year one, 100,000 sets are produced and sold at a price of $1,200 each.In year two, 100,000 sets are produced and sold at a price of $1,000 each.As a result,

Accepted Answer

A) nominal GDP stays constant, while real GDP decreases. 
B) nominal GDP decreases, while real GDP stays constant. 
C) nominal GDP and real GDP both decrease. 
D) nominal GDP decreases, and real GDP decreases even more. 
A) nominal GDP stays constant, while real GDP decreases. 
B) nominal GDP decreases, while real GDP stays constant. 
C) nominal GDP and real GDP both decrease. 
D) nominal GDP decreases, and real GDP decreases even more.

Question 6

Economists were sharply divided over how to best fight the Great Recession.A vocal minority of economists favored the "Structural Solution," arguing that the economy needs to undergo some structural adjustments and that government should, therefore,

Accepted Answer

A) rely on the invisible hand of the market to reallocate resources, by letting weak firms die out quickly. 
B) take serious actions to increase the total demand for output in the economy. 
C) fix prices so that consumers can afford the basic stuff they need and also to control inflation. 
D) set up social programs and welfare structures to help out those who are suffering most from the recession. 
A) rely on the invisible hand of the market to reallocate resources, by letting weak firms die out quickly. 
B) take serious actions to increase the total demand for output in the economy. 
C) fix prices so that consumers can afford the basic stuff they need and also to control inflation. 
D) set up social programs and welfare structures to help out those who are suffering most from the recession.

Question 7

Price stickiness tends to moderate over time.

Accepted Answer

A) True 
 B)False

Question 8

(Consider This) The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses.

Accepted Answer

A) True 
 B)False

Question 9

At the core of understanding economic growth is the idea that to raise living standards over time, an economy must

Accepted Answer

A) produce and consume goods and services. 
B) save and invest. 
C) export and import. 
D) employ resources and earn incomes. 
A) produce and consume goods and services. 
B) save and invest. 
C) export and import. 
D) employ resources and earn incomes.

Question 10

Economists believe that most short-run fluctuations

Accepted Answer

A) are the result of demand shocks. 
B) are the result of supply shocks. 
C) will not last long because prices will adjust to equalize the quantities demanded and supplied of goods and services. 
D) will always have a negative effect on real GDP, inflation, and unemployment. 
A) are the result of demand shocks. 
B) are the result of supply shocks. 
C) will not last long because prices will adjust to equalize the quantities demanded and supplied of goods and services. 
D) will always have a negative effect on real GDP, inflation, and unemployment.

Question 11

Suppose a family's income increases by 5 percent at the same time that inflation is 6 percent.Then the family's living standard

Accepted Answer

A) will increase by 5 percent. 
B) will not change. 
C) will increase by 1 percent. 
D) will decrease. 
A) will increase by 5 percent. 
B) will not change. 
C) will increase by 1 percent. 
D) will decrease.

Question 12

Situations in which firms expect one thing to happen but then something else happens are called

Accepted Answer

A) recessions. 
B) shocks. 
C) business cycles. 
D) fluctuations. 
A) recessions. 
B) shocks. 
C) business cycles. 
D) fluctuations.

Question 13

(Consider This) Suppose that Toyota buys a factory previously owned by Chrysler Motors.Economists would

Accepted Answer

A) consider this to be an economic investment. 
B) not consider this to be an economic investment, because Toyota is less efficient than Chrysler. 
C) not consider this to be an economic investment, because no new capital is created through the purchase. 
D) not consider this to be an economic investment, because there is no way to know how it will affect stock holdings in the two companies. 
A) consider this to be an economic investment. 
B) not consider this to be an economic investment, because Toyota is less efficient than Chrysler. 
C) not consider this to be an economic investment, because no new capital is created through the purchase. 
D) not consider this to be an economic investment, because there is no way to know how it will affect stock holdings in the two companies.

Question 14

Under modern economic growth, the annual average increase in output per person is

Accepted Answer

A) often not large, perhaps 2 percent per year. 
B) often large, perhaps greater than 5 percent per year. 
C) often small, perhaps less than 1 percent per year. 
D) often the same in rich countries as in poor countries. 
A) often not large, perhaps 2 percent per year. 
B) often large, perhaps greater than 5 percent per year. 
C) often small, perhaps less than 1 percent per year. 
D) often the same in rich countries as in poor countries.

Question 15

If prices of goods and services were inflexible, then

Accepted Answer

A) a negative demand shock would lead to increased real GDP in the short run. 
B) a positive demand shock would lead to increased real GDP in the short run. 
C) a negative demand shock would have no short-run effect on real GDP. 
D) there would be no short-run demand shocks. 
A) a negative demand shock would lead to increased real GDP in the short run. 
B) a positive demand shock would lead to increased real GDP in the short run. 
C) a negative demand shock would have no short-run effect on real GDP. 
D) there would be no short-run demand shocks.

Question 16

There is a trade-off between

Accepted Answer

A) saving and investment. 
B) current production and future consumption. 
C) current consumption and future consumption. 
D) consumption and spending. 
A) saving and investment. 
B) current production and future consumption. 
C) current consumption and future consumption. 
D) consumption and spending.

Question 17

The amount of investment is ultimately limited by the amount of

Accepted Answer

A) production. 
B) saving. 
C) employment. 
D) inflation. 
A) production. 
B) saving. 
C) employment. 
D) inflation.

Question 18

In 2008-2009, the U.S.economy lost 8 million jobs and saw the unemployment rate rise from 4.6 percent to as high as 10.1 percent.

Accepted Answer

A) True 
 B)False

Question 19

Economists need different models of the economy because

Accepted Answer

A) the economy behaves differently depending on how much time has passed after a demand shock. 
B) we need a different model to analyze a positive demand shock than we need to analyze a negative demand shock. 
C) the way economic performance is measured changes over time. 
D) prices tend to be less flexible over time. 
A) the economy behaves differently depending on how much time has passed after a demand shock. 
B) we need a different model to analyze a positive demand shock than we need to analyze a negative demand shock. 
C) the way economic performance is measured changes over time. 
D) prices tend to be less flexible over time.

Exam 26: An Introduction to Macroeconomics

(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.

Increased optimism about the future will lead to

Purchasing power parity refers to

The Great Recession of 2007-09 was triggered by a

Suppose a small economy produces only HDTV sets.In year one, 100,000 sets are produced and sold at a price of $1,200 each.In year two, 100,000 sets are produced and sold at a price of $1,000 each.As a result,

Economists were sharply divided over how to best fight the Great Recession.A vocal minority of economists favored the "Structural Solution," arguing that the economy needs to undergo some structural adjustments and that government should, therefore,

Price stickiness tends to moderate over time.

(Consider This) The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses.

At the core of understanding economic growth is the idea that to raise living standards over time, an economy must

Economists believe that most short-run fluctuations

Suppose a family's income increases by 5 percent at the same time that inflation is 6 percent.Then the family's living standard

Situations in which firms expect one thing to happen but then something else happens are called

(Consider This) Suppose that Toyota buys a factory previously owned by Chrysler Motors.Economists would

Under modern economic growth, the annual average increase in output per person is

If prices of goods and services were inflexible, then

There is a trade-off between

The amount of investment is ultimately limited by the amount of

In 2008-2009, the U.S.economy lost 8 million jobs and saw the unemployment rate rise from 4.6 percent to as high as 10.1 percent.

Economists need different models of the economy because

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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