Question 1

Suppose that inventories are falling.We can expect that, in the future,

Accepted Answer

A) unemployment will likely increase. 
B) unemployment will likely decrease. 
C) unemployment could increase or decrease, as its direction cannot be predicted based on inventories. 
D) real GDP will likely decrease. 
A) unemployment will likely increase. 
B) unemployment will likely decrease. 
C) unemployment could increase or decrease, as its direction cannot be predicted based on inventories. 
D) real GDP will likely decrease.

Question 2

Which of the following is the best example of investment as defined by economists?

Accepted Answer

A) A restaurant owner buys a freezer to store ingredients for the restaurant meals. 
B) A college professor buys a truck to drive around in. 
C) A business manager purchases stock on the New York Stock Exchange. 
D) A worker deposits money into a long-term retirement account. 
A) A restaurant owner buys a freezer to store ingredients for the restaurant meals. 
B) A college professor buys a truck to drive around in. 
C) A business manager purchases stock on the New York Stock Exchange. 
D) A worker deposits money into a long-term retirement account.

Question 3

China's GDP per person in 2014 was about one-third of U.S.GDP per person in the same year.

Accepted Answer

A) True 
 B)False

Question 4

The overall behavior of the economy

Accepted Answer

A) is remarkably stable over time. 
B) differs over time as prices become increasingly flexible in the months and years following a shock. 
C) differs over time as prices become increasingly sticky in the months and years following a shock. 
D) is easily controlled and stabilized by government policy. 
A) is remarkably stable over time. 
B) differs over time as prices become increasingly flexible in the months and years following a shock. 
C) differs over time as prices become increasingly sticky in the months and years following a shock. 
D) is easily controlled and stabilized by government policy.

Question 5

Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness.

Accepted Answer

A) True 
 B)False

Question 6

What effect will a negative supply shock have on the main measures of economic performance?

Accepted Answer

A) Real GDP will increase, inflation will increase, and unemployment will decrease. 
B) Real GDP will decrease, inflation will decrease, and unemployment will increase. 
C) Real GDP will decrease, inflation will increase, and unemployment will increase. 
D) Real GDP will increase, inflation will decrease, and unemployment will decrease. 
A) Real GDP will increase, inflation will increase, and unemployment will decrease. 
B) Real GDP will decrease, inflation will decrease, and unemployment will increase. 
C) Real GDP will decrease, inflation will increase, and unemployment will increase. 
D) Real GDP will increase, inflation will decrease, and unemployment will decrease.

Question 7

Which of the following markets is most likely to exhibit extremely flexible prices?

Accepted Answer

A) the oil market 
B) the market for taxi services 
C) the market for newspapers 
D) the market for coin-operated laundry 
A) the oil market 
B) the market for taxi services 
C) the market for newspapers 
D) the market for coin-operated laundry

Question 8

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Accepted Answer

A) Nominal and real GDP would both rise. 
B) Nominal and real GDP would both be unchanged. 
C) Real GDP would rise, but nominal GDP would be unchanged. 
D) Nominal GDP would rise, but real GDP would be unchanged. 
A) Nominal and real GDP would both rise. 
B) Nominal and real GDP would both be unchanged. 
C) Real GDP would rise, but nominal GDP would be unchanged. 
D) Nominal GDP would rise, but real GDP would be unchanged.

Question 9

Which of the following statements best describes price flexibility in the economy?

Accepted Answer

A) Prices tend to be sticky in the short run and stuck in the long run. 
B) Prices tend to be just as sticky in the short run as in the long run. 
C) Prices tend to be sticky in the short run but become more flexible over time. 
D) Prices tend to be flexible in the short run but become more sticky over time. 
A) Prices tend to be sticky in the short run and stuck in the long run. 
B) Prices tend to be just as sticky in the short run as in the long run. 
C) Prices tend to be sticky in the short run but become more flexible over time. 
D) Prices tend to be flexible in the short run but become more sticky over time.

Question 10

Economists believe that expectations have little impact on macroeconomic outcomes.

Accepted Answer

A) True 
 B)False

Question 11

An unexpected negative demand shock would lead to a decrease in inventories.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is most accurate about advanced economies?

Accepted Answer

A) Economies experience a positive growth trend over the short run but experience significant variability in the long run. 
B) Economies experience a positive growth trend over the long run but experience significant variability in the short run. 
C) Economies experience positive and stable growth over both the long run and short run. 
D) Economies experience little long-run growth in output but can experience significant growth in the short run. 
A) Economies experience a positive growth trend over the short run but experience significant variability in the long run. 
B) Economies experience a positive growth trend over the long run but experience significant variability in the short run. 
C) Economies experience positive and stable growth over both the long run and short run. 
D) Economies experience little long-run growth in output but can experience significant growth in the short run.

Question 13

In macroeconomic models, prices are assumed to be completely inflexible in

Accepted Answer

A) the very short run only. 
B) the short run and remains so over time. 
C) the very long run. 
D) situations when the changes in demand look to be permanent. 
A) the very short run only. 
B) the short run and remains so over time. 
C) the very long run. 
D) situations when the changes in demand look to be permanent.

Question 14

Which of the following statements is true?

Accepted Answer

A) Short-run economic fluctuations are made worse because prices are flexible. 
B) Short-run economic fluctuations would be less severe if prices were inflexible. 
C) If prices were fully inflexible, there would be no short-run economic fluctuations. 
D) If prices were fully flexible, there would be no short-run economic fluctuations. 
A) Short-run economic fluctuations are made worse because prices are flexible. 
B) Short-run economic fluctuations would be less severe if prices were inflexible. 
C) If prices were fully inflexible, there would be no short-run economic fluctuations. 
D) If prices were fully flexible, there would be no short-run economic fluctuations.

Question 15

Which of the following is not an effect of inflation that is troublesome to consumers?

Accepted Answer

A) Household incomes may be rising slower than the overall prices. 
B) The purchasing power of people's savings would decrease. 
C) Workers' wages may be rising faster than the overall price level. 
D) Their standard of living would fall if their household has a fixed nominal income. 
A) Household incomes may be rising slower than the overall prices. 
B) The purchasing power of people's savings would decrease. 
C) Workers' wages may be rising faster than the overall price level. 
D) Their standard of living would fall if their household has a fixed nominal income.

Question 16

Firms that choose to use a fixed-price policy

Accepted Answer

A) will tend to experience larger inventory changes than firms that follow a flexible-price policy. 
B) will tend to experience smaller inventory changes than firms that follow a flexible-price policy. 
C) find that their inventories do not respond to demand shocks. 
D) will not hold inventories. 
A) will tend to experience larger inventory changes than firms that follow a flexible-price policy. 
B) will tend to experience smaller inventory changes than firms that follow a flexible-price policy. 
C) find that their inventories do not respond to demand shocks. 
D) will not hold inventories.

Question 17

Economic growth defined as rising GDP per person has occurred since the Roman Empire (approximately 2,000 years ago).

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico. 
B) Consumers become worried about job loss and buy fewer goods and services than expected. 
C) Floods in the Midwest destroy crops. 
D) The federal government unexpectedly requires automobile producers to raise fuel efficiency standards. 
A) Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico. 
B) Consumers become worried about job loss and buy fewer goods and services than expected. 
C) Floods in the Midwest destroy crops. 
D) The federal government unexpectedly requires automobile producers to raise fuel efficiency standards.

Question 19

Shocks to the economy occur when

Accepted Answer

A) stock prices rise by more than 10 percent per year. 
B) government takes a more active role in the economy. 
C) prices are flexible. 
D) actual economic events do not match what people expected. 
A) stock prices rise by more than 10 percent per year. 
B) government takes a more active role in the economy. 
C) prices are flexible. 
D) actual economic events do not match what people expected.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 26: An Introduction to Macroeconomics

Suppose that inventories are falling.We can expect that, in the future,

Which of the following is the best example of investment as defined by economists?

China's GDP per person in 2014 was about one-third of U.S.GDP per person in the same year.

The overall behavior of the economy

Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness.

What effect will a negative supply shock have on the main measures of economic performance?

Which of the following markets is most likely to exhibit extremely flexible prices?

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Which of the following statements best describes price flexibility in the economy?

Economists believe that expectations have little impact on macroeconomic outcomes.

An unexpected negative demand shock would lead to a decrease in inventories.

Which of the following statements is most accurate about advanced economies?

In macroeconomic models, prices are assumed to be completely inflexible in

Which of the following statements is true?

Which of the following is not an effect of inflation that is troublesome to consumers?

Firms that choose to use a fixed-price policy

Economic growth defined as rising GDP per person has occurred since the Roman Empire (approximately 2,000 years ago).

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

Shocks to the economy occur when

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

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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