Question 1

Demand shocks may be positive or negative.

Accepted Answer

A) True 
 B)False

Question 2

Savings are generated when current consumption is less than current output.

Accepted Answer

A) True 
 B)False

Question 3

Between 2007 and 2009, the unemployment rate in the U.S.

Accepted Answer

A) fell from 6.5 percent to 4.5 percent. 
B) rose from 4.6 percent to 10.1 percent. 
C) rose slightly from 5.5 percent to 7.4 percent. 
D) remained stagnant at about 7 percent. 
A) fell from 6.5 percent to 4.5 percent. 
B) rose from 4.6 percent to 10.1 percent. 
C) rose slightly from 5.5 percent to 7.4 percent. 
D) remained stagnant at about 7 percent.

Question 4

In the very short run, firms tend to respond to demand shocks by changing their prices.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements about price stickiness or flexibility is true?

Accepted Answer

A) Prices of many raw materials are less flexible than the prices of final goods and services. 
B) Prices of many raw materials are much more flexible than the prices of final goods and services. 
C) Prices of many raw materials are about as flexible as the prices of final goods and services. 
D) Prices of many raw materials are only slightly more flexible than the prices of final goods and services. 
A) Prices of many raw materials are less flexible than the prices of final goods and services. 
B) Prices of many raw materials are much more flexible than the prices of final goods and services. 
C) Prices of many raw materials are about as flexible as the prices of final goods and services. 
D) Prices of many raw materials are only slightly more flexible than the prices of final goods and services.

Question 6

Economists use the word investment to refer to the purchase of assets such as stocks, bonds, and real estate.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about price wars is true?

Accepted Answer

A) Firms that have to deal with the possibility of price wars often have extremely flexible prices. 
B) Firms that do not have to deal with the possibility of price wars often have sticky prices. 
C) Price wars tend to increase the short-run flexibility of prices. 
D) Firms that have to deal with the possibility of price wars often have sticky prices. 
A) Firms that have to deal with the possibility of price wars often have extremely flexible prices. 
B) Firms that do not have to deal with the possibility of price wars often have sticky prices. 
C) Price wars tend to increase the short-run flexibility of prices. 
D) Firms that have to deal with the possibility of price wars often have sticky prices.

Question 8

Which of the following is an example of a supply shock?

Accepted Answer

A) A surge in consumer optimism prompts increased buying of goods and services. 
B) A surprise tax rebate from the government gives people more money to spend. 
C) A dramatic increase in energy prices increases production costs for firms in the economy. 
D) Government increases spending on education. 
A) A surge in consumer optimism prompts increased buying of goods and services. 
B) A surprise tax rebate from the government gives people more money to spend. 
C) A dramatic increase in energy prices increases production costs for firms in the economy. 
D) Government increases spending on education.

Question 9

Rapid and sustained economic growth of nations

Accepted Answer

A) started around the time of Jesus. 
B) started a few centuries before the time of Jesus. 
C) was triggered by the establishment of the Roman Empire in the first millennium. 
D) is a relatively modern phenomenon. 
A) started around the time of Jesus. 
B) started a few centuries before the time of Jesus. 
C) was triggered by the establishment of the Roman Empire in the first millennium. 
D) is a relatively modern phenomenon.

Question 10

In the very short run, demand shocks will tend to change the level of output but have little effect on prices.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that prices are sticky in the short-run.Which of the following best describes the economy's response to a positive demand shock?

Accepted Answer

A) Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will decrease and unemployment will increase. 
B) Firms' inventories will decrease, causing them to increase production.Ultimately, real GDP will increase and unemployment will decrease. 
C) Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will increase and unemployment will increase. 
D) Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will decrease and unemployment will decrease. 
A) Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will decrease and unemployment will increase. 
B) Firms' inventories will decrease, causing them to increase production.Ultimately, real GDP will increase and unemployment will decrease. 
C) Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will increase and unemployment will increase. 
D) Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will decrease and unemployment will decrease.

Question 12

Real GDP can change due to changes in the price level.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that Techno TV produces LCD televisions.At a price of $2,000 per television, Techno determines that its optimal output is 3,000 television sets per week.If prices are sticky and fears of a recession reduce demand for LCD televisions, we would expect Techno to

Accepted Answer

A) reduce output in the long run. 
B) reduce output in the short run. 
C) raise prices in the short run to compensate for lost revenue. 
D) lower prices in the short run to offset the reduced demand. 
A) reduce output in the long run. 
B) reduce output in the short run. 
C) raise prices in the short run to compensate for lost revenue. 
D) lower prices in the short run to offset the reduced demand.

Question 14

Economists believe that most short-run fluctuations are the result of supply shocks.

Accepted Answer

A) True 
 B)False

Question 15

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except

Accepted Answer

A) real gross domestic product. 
B) inflation statistics. 
C) prices of oil and gasoline. 
D) unemployment data. 
A) real gross domestic product. 
B) inflation statistics. 
C) prices of oil and gasoline. 
D) unemployment data.

Question 16

The period when output and living standards decline is referred to as

Accepted Answer

A) inflation. 
B) economic decline. 
C) an inventory downturn. 
D) a recession. 
A) inflation. 
B) economic decline. 
C) an inventory downturn. 
D) a recession.

Question 17

Suppose a small economy produces only MP3 players.In year one, 10,000 MP3 players are produce and sold at a price of $100 each.In year two, 12,000 MP3 players are produced and sold at a price of $80 each.Which of the following statements is true?

Accepted Answer

A) Real GDP and nominal GDP both increase. 
B) Real GDP increases, while nominal GDP remains constant. 
C) Real GDP decreases, while nominal GDP increases. 
D) Real GDP increases, while nominal GDP decreases. 
A) Real GDP and nominal GDP both increase. 
B) Real GDP increases, while nominal GDP remains constant. 
C) Real GDP decreases, while nominal GDP increases. 
D) Real GDP increases, while nominal GDP decreases.

Question 18

Financial institutions reward savers with the following, except

Accepted Answer

A) interest. 
B) wages. 
C) dividends. 
D) capital gains. 
A) interest. 
B) wages. 
C) dividends. 
D) capital gains.

Question 19

Macroeconomics is primarily concerned with studying two broad topics:

Accepted Answer

A) long-run economic growth and short-run business cycles. 
B) the price of oil and gas abroad and prices of energy in the domestic market. 
C) the stock market and the housing market. 
D) household incomes and firms' profits. 
A) long-run economic growth and short-run business cycles. 
B) the price of oil and gas abroad and prices of energy in the domestic market. 
C) the stock market and the housing market. 
D) household incomes and firms' profits.

Question 20

In situations of sticky prices and negative demand shocks, we would expect firms to

Accepted Answer

A) deplete inventories before increasing production. 
B) reduce production before building up inventories. 
C) build up inventories before reducing production. 
D) lower prices before reducing production or building up inventories. 
A) deplete inventories before increasing production. 
B) reduce production before building up inventories. 
C) build up inventories before reducing production. 
D) lower prices before reducing production or building up inventories.

Exam 26: An Introduction to Macroeconomics

Demand shocks may be positive or negative.

Savings are generated when current consumption is less than current output.

Between 2007 and 2009, the unemployment rate in the U.S.

In the very short run, firms tend to respond to demand shocks by changing their prices.

Which of the following statements about price stickiness or flexibility is true?

Economists use the word investment to refer to the purchase of assets such as stocks, bonds, and real estate.

Which of the following statements about price wars is true?

Which of the following is an example of a supply shock?

Rapid and sustained economic growth of nations

In the very short run, demand shocks will tend to change the level of output but have little effect on prices.

Suppose that prices are sticky in the short-run.Which of the following best describes the economy's response to a positive demand shock?

Real GDP can change due to changes in the price level.

Suppose that Techno TV produces LCD televisions.At a price of $2,000 per television, Techno determines that its optimal output is 3,000 television sets per week.If prices are sticky and fears of a recession reduce demand for LCD televisions, we would expect Techno to

Economists believe that most short-run fluctuations are the result of supply shocks.

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except

The period when output and living standards decline is referred to as

Suppose a small economy produces only MP3 players.In year one, 10,000 MP3 players are produce and sold at a price of $100 each.In year two, 12,000 MP3 players are produced and sold at a price of $80 each.Which of the following statements is true?

Financial institutions reward savers with the following, except

Macroeconomics is primarily concerned with studying two broad topics:

In situations of sticky prices and negative demand shocks, we would expect firms to

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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