Question 1

The Great Recession of 2007-09 illustrated the situation where a negative demand shock occurred and

Accepted Answer

A) prices adjusted but the output level was inflexible. 
B) the economy's overall price level was very flexible. 
C) the economy's overall price level was "sticky." 
D) prices and production were both "sticky," or inflexible. 
A) prices adjusted but the output level was inflexible. 
B) the economy's overall price level was very flexible. 
C) the economy's overall price level was "sticky." 
D) prices and production were both "sticky," or inflexible.

Question 2

In order to achieve modern economic growth, a nation's output must grow faster than its population.

Accepted Answer

A) True 
 B)False

Question 3

(Consider This) Which of the following is an example of economic investment?

Accepted Answer

A) Volvo buys an old factory building from General Motors. 
B) Nike buys a new machine that increases shoe production. 
C) Bill Gates buys shares of stock in IBM. 
D) Warren Buffet buys U.S.savings bonds. 
A) Volvo buys an old factory building from General Motors. 
B) Nike buys a new machine that increases shoe production. 
C) Bill Gates buys shares of stock in IBM. 
D) Warren Buffet buys U.S.savings bonds.

Question 4

A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth.

Accepted Answer

A) True 
 B)False

Question 5

A higher rate of investment now will generate

Accepted Answer

A) more saving now. 
B) more current consumption. 
C) more future production. 
D) more future inflation. 
A) more saving now. 
B) more current consumption. 
C) more future production. 
D) more future inflation.

Question 6

Economists and policymakers are committed to encouraging a high and growing level of real GDP because

Accepted Answer

A) this implies a lower price level. 
B) this means a higher level of unemployment. 
C) this implies an increase in investment. 
D) this means greater consumption opportunities. 
A) this implies a lower price level. 
B) this means a higher level of unemployment. 
C) this implies an increase in investment. 
D) this means greater consumption opportunities.

Question 7

Explanations about what caused the Great Recession differ sharply among economists.The so-called Austrian Explanation involves the following factors, except

Accepted Answer

A) a massive euphoric bubble in housing prices that popped. 
B) government actions that kept interest rates very low for a long period. 
C) excessive borrowing for consumption, construction, and investment. 
D) a huge negative demand shock in the economy. 
A) a massive euphoric bubble in housing prices that popped. 
B) government actions that kept interest rates very low for a long period. 
C) excessive borrowing for consumption, construction, and investment. 
D) a huge negative demand shock in the economy.

Question 8

If prices are "sticky" in the short run, then

Accepted Answer

A) the economy will respond to demand shocks primarily through changes in output and employment. 
B) the economy will respond to demand shocks primarily through changes in prices and inflation. 
C) prices will adjust to equalize the quantities demanded and supplied of goods and services. 
D) unemployment will not change in response to a demand shock. 
A) the economy will respond to demand shocks primarily through changes in output and employment. 
B) the economy will respond to demand shocks primarily through changes in prices and inflation. 
C) prices will adjust to equalize the quantities demanded and supplied of goods and services. 
D) unemployment will not change in response to a demand shock.

Question 9

Real GDP measures the change in the price level over time.

Accepted Answer

A) True 
 B)False

Question 10

Before the late 1700s, living standards in the richest part of the world were

Accepted Answer

A) about five times higher than living standards in the poorest parts of the world. 
B) at most only two to three times higher than living standards in the poorest parts of the world. 
C) about 50 times higher than living standards in the poorest parts of the world. 
D) about the same as living standards in the poorest parts of the world. 
A) about five times higher than living standards in the poorest parts of the world. 
B) at most only two to three times higher than living standards in the poorest parts of the world. 
C) about 50 times higher than living standards in the poorest parts of the world. 
D) about the same as living standards in the poorest parts of the world.

Question 11

Short-run fluctuations in output and employment are referred to as

Accepted Answer

A) economic growth. 
B) business cycles. 
C) inventory cycles. 
D) recession and inflation. 
A) economic growth. 
B) business cycles. 
C) inventory cycles. 
D) recession and inflation.

Question 12

Savings are generated whenever

Accepted Answer

A) prices are rising. 
B) current spending exceeds current income. 
C) current income exceeds current spending. 
D) real GDP exceeds nominal GDP. 
A) prices are rising. 
B) current spending exceeds current income. 
C) current income exceeds current spending. 
D) real GDP exceeds nominal GDP.

Question 13

Savings are transferred from savers to borrowers through the following intermediaries, except

Accepted Answer

A) mutual funds. 
B) pension funds. 
C) real estate brokers. 
D) insurance companies. 
A) mutual funds. 
B) pension funds. 
C) real estate brokers. 
D) insurance companies.

Question 14

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that prices are sticky in the short-run.Which of the following best describes the economy's response to a negative 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 16

If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.

Accepted Answer

A) True 
 B)False

Question 17

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

Accepted Answer

A) purchasing power parity 
B) the quantity of resources available to the economy 
C) population size 
D) different currency values 
A) purchasing power parity 
B) the quantity of resources available to the economy 
C) population size 
D) different currency values

Question 18

Real gross domestic product is a measure of the

Accepted Answer

A) average price level in the economy. 
B) value of final output produced within a country in one year, using current prices. 
C) value of final output produced within a country in one year, adjusted for changing prices. 
D) total value of available resources in a nation. 
A) average price level in the economy. 
B) value of final output produced within a country in one year, using current prices. 
C) value of final output produced within a country in one year, adjusted for changing prices. 
D) total value of available resources in a nation.

Question 19

Output per person has grown steadily since the beginning of the Roman Empire.

Accepted Answer

A) True 
 B)False

Question 20

If prices are inflexible, then a negative demand shock will lead to

Accepted Answer

A) a short-run increase in real GDP. 
B) a short-run decrease in real GDP. 
C) a short-run decrease in prices. 
D) no change in real GDP in the short run. 
A) a short-run increase in real GDP. 
B) a short-run decrease in real GDP. 
C) a short-run decrease in prices. 
D) no change in real GDP in the short run.

Exam 26: An Introduction to Macroeconomics

The Great Recession of 2007-09 illustrated the situation where a negative demand shock occurred and

In order to achieve modern economic growth, a nation's output must grow faster than its population.

(Consider This) Which of the following is an example of economic investment?

A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth.

A higher rate of investment now will generate

Economists and policymakers are committed to encouraging a high and growing level of real GDP because

Explanations about what caused the Great Recession differ sharply among economists.The so-called Austrian Explanation involves the following factors, except

If prices are "sticky" in the short run, then

Real GDP measures the change in the price level over time.

Before the late 1700s, living standards in the richest part of the world were

Short-run fluctuations in output and employment are referred to as

Savings are generated whenever

Savings are transferred from savers to borrowers through the following intermediaries, except

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.

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

If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

Real gross domestic product is a measure of the

Output per person has grown steadily since the beginning of the Roman Empire.

If prices are inflexible, then a negative demand shock will lead 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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