Question 1

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be
considered an economic investment.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. What happens to the ﬁrm's inventory of computers if there is a negative demand
Shock and prices are inﬂexible?

Accepted Answer

A)  The ﬁrm's inventories will not change. 
B)  The ﬁrm's inventories will increase by 200 computers per week. 
C)  The ﬁrm's inventories will decrease by 150 computers per week. 
D)  The ﬁrm's inventories will increase by 350 computers per week. 
A)  The ﬁrm's inventories will not change. 
B)  The ﬁrm's inventories will increase by 200 computers per week. 
C)  The ﬁrm's inventories will decrease by 150 computers per week. 
D)  The ﬁrm's inventories will increase by 350 computers per week.

Question 4

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 5

Investment happens when

Accepted Answer

A)  current income is greater than current spending. 
B)  current consumption is greater than current output. 
C)  resources are devoted toward increasing current output. 
D)  resources are devoted toward increasing future output. 
A)  current income is greater than current spending. 
B)  current consumption is greater than current output. 
C)  resources are devoted toward increasing current output. 
D)  resources are devoted toward increasing future output.

Question 6

How does an economy adjust to demand shocks when prices are inﬂexible?

Accepted Answer

If demand falls off for many goods and s

Question 7

Who are the main economic investors in a market economy?

Accepted Answer

A)  savers 
B)  government 
C)  businesses 
D)  households 
A)  savers 
B)  government 
C)  businesses 
D)  households

Question 8

Demand shocks cause problems in the macroeconomy primarily because prices are sticky.

Accepted Answer

A) True 
 B)False

Question 9

Economists refer to purchases of stocks and bonds as "investment."

Accepted Answer

A) True 
 B)False

Question 10

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 11

Macroeconomics is mostly focused on

Accepted Answer

A)  the individual markets within an economy. 
B)  only the largest industries in the economy. 
C)  the economy as a whole. 
D)  why speciﬁc businesses fail. 
A)  the individual markets within an economy. 
B)  only the largest industries in the economy. 
C)  the economy as a whole. 
D)  why speciﬁc businesses fail.

Question 12

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 13

The term "shock"

Accepted Answer

A)  always refers to an unexpectedly bad event. 
B)  always refers to an increase in inﬂation. 
C)  does not tell us whether what has happened is unexpectedly bad or unexpectedly good. 
D)  always refers to a decrease in real GDP and an increase in unemployment. 
A)  always refers to an unexpectedly bad event. 
B)  always refers to an increase in inﬂation. 
C)  does not tell us whether what has happened is unexpectedly bad or unexpectedly good. 
D)  always refers to a decrease in real GDP and an increase in unemployment.

Question 14

The Industrial Revolution began in

Accepted Answer

A)  the U.S. in the mid-1900s 
B)  England in the late 1700s. 
C)  the Roman Empire around 500 B.C. 
D)  China in A.D. 1800. 
A)  the U.S. in the mid-1900s 
B)  England in the late 1700s. 
C)  the Roman Empire around 500 B.C. 
D)  China in A.D. 1800.

Question 15

Real GDP is calculated using current prices of outputs.

Accepted Answer

A) True 
 B)False

Question 16

High rates of unemployment are undesirable because they

Accepted Answer

A)  always lead to a decline in nominal GDP. 
B)  are associated with higher levels of crime and illness. 
C)  cannot be reduced through government policy. 
D)  are associated with increases in the price level. 
A)  always lead to a decline in nominal GDP. 
B)  are associated with higher levels of crime and illness. 
C)  cannot be reduced through government policy. 
D)  are associated with increases in the price level.

Question 17

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where negative demand shocks can result in a recession?

Accepted Answer

A)  A only 
B)  B only 
C)  both A and B 
D)  neither A nor B 
A)  A only 
B)  B only 
C)  both A and B 
D)  neither A nor B

Question 18

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

Accepted Answer

A)  real GDP will likely increase 
B)  real GDP will likely decrease. 
C)  real GDP could increase or decrease, as its direction cannot be predicted based on inventories. 
D)  ﬁrms will raise prices of their goods and services. 
A)  real GDP will likely increase 
B)  real GDP will likely decrease. 
C)  real GDP could increase or decrease, as its direction cannot be predicted based on inventories. 
D)  ﬁrms will raise prices of their goods and services.

Question 19

(Consider This) What is the difference between economic investment and ﬁnancial investment? Give
an example for each type of investment.

Accepted Answer

An economic investment relates to the ex

Question 20

In 2017, output (GDP) per person in the U.S. was about

Accepted Answer

A)  $32,000. 
B)  $21,000. 
C)  $60,000. 
D)  $76,000. 
A)  $32,000. 
B)  $21,000. 
C)  $60,000. 
D)  $76,000.

Exam 6: An Introduction to Macroeconomics

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.

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

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. What happens to the ﬁrm's inventory of computers if there is a negative demand Shock and prices are inﬂexible?

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

Investment happens when

How does an economy adjust to demand shocks when prices are inﬂexible?

Who are the main economic investors in a market economy?

Demand shocks cause problems in the macroeconomy primarily because prices are sticky.

Economists refer to purchases of stocks and bonds as "investment."

The amount of investment is ultimately limited by the amount of

Macroeconomics is mostly focused on

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

The term "shock"

The Industrial Revolution began in

Real GDP is calculated using current prices of outputs.

High rates of unemployment are undesirable because they

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where negative demand shocks can result in a recession?

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

(Consider This) What is the difference between economic investment and ﬁnancial investment? Give an example for each type of investment.

In 2017, output (GDP) per person in the U.S. was about

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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