Question 1

Refer to the graphs. Which of the following best represents a negative demand shock when prices are inﬂexible?

Accepted Answer

A)  the shift from D2 to D3 in graph B 
B)  the shift from D2 to D3 in graph A 
C)  the shift from D2 to D1 in graph B 
D)  the shift from D2 to D1 in graph A 
A)  the shift from D2 to D3 in graph B 
B)  the shift from D2 to D3 in graph A 
C)  the shift from D2 to D1 in graph B 
D)  the shift from D2 to D1 in graph A

Question 2

The amount of investment in an economy is ultimately limited by the amount of savings in that
economy.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is the best example of ﬁnancial investment?

Accepted Answer

A)  Ford Motor Co. builds a new manufacturing plant. 
B)  A student pursues an MBA degree. 
C)  A retiree purchases Google stock. 
D)  A young couple purchases a new home. 
A)  Ford Motor Co. builds a new manufacturing plant. 
B)  A student pursues an MBA degree. 
C)  A retiree purchases Google stock. 
D)  A young couple purchases a new home.

Question 4

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 5

If an economy wants to increase its current level of investment, it must

Accepted Answer

A)  sacriﬁce future consumption. 
B)  print more money. 
C)  offer more stocks and bonds to ﬁnancial investors. 
D)  sacriﬁce current consumption. 
A)  sacriﬁce future consumption. 
B)  print more money. 
C)  offer more stocks and bonds to ﬁnancial investors. 
D)  sacriﬁce current consumption.

Question 6

The term "recession" describes a situation where

Accepted Answer

A)  inﬂation rates exceed normal levels. 
B)  output and living standards decline. 
C)  an economy's ability to produce is destroyed. 
D)  government takes a less active role in economic matters. 
A)  inﬂation rates exceed normal levels. 
B)  output and living standards decline. 
C)  an economy's ability to produce is destroyed. 
D)  government takes a less active role in economic matters.

Question 7

The three statistics that are the main focus for those measuring macroeconomic health are

Accepted Answer

A)  real GDP, inﬂation, and unemployment. 
B)  real GDP, nominal GDP, and inﬂation. 
C)  nominal GDP, unemployment, and inﬂation. 
D)  real GDP, nominal GDP, and unemployment. 
A)  real GDP, inﬂation, and unemployment. 
B)  real GDP, nominal GDP, and inﬂation. 
C)  nominal GDP, unemployment, and inﬂation. 
D)  real GDP, nominal GDP, and unemployment.

Question 8

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 9

Why are savings and investment so important for economic growth? How do savings and
investment affect present and future consumption? Explain.

Accepted Answer

Saving and investment are important for

Question 10

(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 11

Modern economic growth

Accepted Answer

A)  started occurring during the time of the Roman Empire. 
B)  has been experienced by all countries around the world. 
C)  refers to the phenomenon of a country's total output rising. 
D)  makes a country's output per person rise at a compounded rate. 
A)  started occurring during the time of the Roman Empire. 
B)  has been experienced by all countries around the world. 
C)  refers to the phenomenon of a country's total output rising. 
D)  makes a country's output per person rise at a compounded rate.

Question 12

Shocks to the economy occur

Accepted Answer

A)  when expectations are unmet. 
B)  whenever the price level changes. 
C)  whenever government implements ﬁscal or monetary policy. 
D)  because most economic behavior is unpredictable. 
A)  when expectations are unmet. 
B)  whenever the price level changes. 
C)  whenever government implements ﬁscal or monetary policy. 
D)  because most economic behavior is unpredictable.

Question 13

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 14

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?

Accepted Answer

A)  Real GDP doubles. 
B)  Real GDP is halved. 
C)  Real GDP doesn't change. 
D)  There is not enough information to determine what happens to real GDP. 
A)  Real GDP doubles. 
B)  Real GDP is halved. 
C)  Real GDP doesn't change. 
D)  There is not enough information to determine what happens to real GDP.

Question 15

(Consider This) The so-called Great Recession in the U.S.

Accepted Answer

A)  is another name for the Great Depression. 
B)  was the worst economic downturn since the Great Depression. 
C)  was triggered by oil-supply shocks. 
D)  was caused by a sharp increase in the value of the U.S. dollar. 
A)  is another name for the Great Depression. 
B)  was the worst economic downturn since the Great Depression. 
C)  was triggered by oil-supply shocks. 
D)  was caused by a sharp increase in the value of the U.S. dollar.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The business cycle is primarily concerned with changes in the level of overall prices over time.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Which of the following best explains why prices tend to be inﬂexible even when demand changes?

Accepted Answer

A)  Government regulations limit the number of times a ﬁrm can change prices in a year. 
B)  In most industries the proﬁt-maximizing price does not change even when demand changes. 
C)  Production costs do not tend to change when a ﬁrm varies its level of output. 
D)  Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals. 
A)  Government regulations limit the number of times a ﬁrm can change prices in a year. 
B)  In most industries the proﬁt-maximizing price does not change even when demand changes. 
C)  Production costs do not tend to change when a ﬁrm varies its level of output. 
D)  Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.

Question 20

The business cycle depicts

Accepted Answer

A)  ﬂuctuations in the general price level. 
B)  the phases a business goes through from when it ﬁrst opens to when it ﬁnally closes. 
C)  the evolution of technology over time. 
D)  short-run ﬂuctuations in output and employment. 
A)  ﬂuctuations in the general price level. 
B)  the phases a business goes through from when it ﬁrst opens to when it ﬁnally closes. 
C)  the evolution of technology over time. 
D)  short-run ﬂuctuations in output and employment.

Exam 6: An Introduction to Macroeconomics

Refer to the graphs. Which of the following best represents a negative demand shock when prices are inﬂexible?

The amount of investment in an economy is ultimately limited by the amount of savings in that economy.

Which of the following is the best example of ﬁnancial investment?

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

If an economy wants to increase its current level of investment, it must

The term "recession" describes a situation where

The three statistics that are the main focus for those measuring macroeconomic health are

Increased optimism about the future will lead to

Why are savings and investment so important for economic growth? How do savings and investment affect present and future consumption? Explain.

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

Modern economic growth

Shocks to the economy occur

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

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?

(Consider This) The so-called Great Recession in the U.S.

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

The business cycle is primarily concerned with changes in the level of overall prices over time.

A higher rate of investment now will generate

Which of the following best explains why prices tend to be inﬂexible even when demand changes?

The business cycle depicts

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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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