Question 1

De?ne saving.

Accepted Answer

Saving is disposable income no

Question 2

Refer to the ﬁgures. As the economy moves from the very short run to the longer run, we would expect

Accepted Answer

A)  the representation of the economy to move from Figure A to Figure B. 
B)  the representation of the economy to move from Figure B to Figure A. 
C)  demand shocks to be eliminated. 
D)  the economy to gravitate to P1. 
A)  the representation of the economy to move from Figure A to Figure B. 
B)  the representation of the economy to move from Figure B to Figure A. 
C)  demand shocks to be eliminated. 
D)  the economy to gravitate to P1.

Question 3

As ﬁrms face reduced demand for their goods and services and they need to reduce their output price, they ﬁnd

Accepted Answer

A)  it's best to renegotiate the rent they pay in order to get enough of a reduction in their per- unit costs. 
B)  that they can get substantial savings by ﬁnding ways to reduce their raw materials costs rather than cutting their labor force. 
C)  it's necessary to cut production and their labor force to get any signiﬁcant reduction in per- unit costs. 
D)  they need to ﬁnd a way to increase the per-unit selling price of their product. 
E)  None of these choices are correct. 
A)  it's best to renegotiate the rent they pay in order to get enough of a reduction in their per- unit costs. 
B)  that they can get substantial savings by ﬁnding ways to reduce their raw materials costs rather than cutting their labor force. 
C)  it's necessary to cut production and their labor force to get any signiﬁcant reduction in per- unit costs. 
D)  they need to ﬁnd a way to increase the per-unit selling price of their product. 
E)  None of these choices are correct.

Question 4

The Great Recession was triggered by a

Accepted Answer

A)  steep rise in bond values. 
B)  steep decline in housing prices. 
C)  sharp increase in oil prices. 
D)  sharp decline in the value of the U.S. dollar. 
A)  steep rise in bond values. 
B)  steep decline in housing prices. 
C)  sharp increase in oil prices. 
D)  sharp decline in the value of the U.S. dollar.

Question 5

What are the three primary measures used in macroeconomics to assess the performance of an
economy?

Accepted Answer

The three key statistics are real GDP, u

Question 6

What accounts for differences in living standards between rich and poor countries today?

Accepted Answer

The difference in the living standards a

Question 7

Which is more useful for measuring change in the economy over time, nominal GDP or real GDP?
Why?

Accepted Answer

Real GDP is more useful for comparing ch

Question 8

Which of the following results from ﬁrms holding inventories?

Accepted Answer

A)  The economy is much more susceptible to business cycle ﬂuctuations. 
B)  Demand shocks occur with greater frequency. 
C)  Demand shocks occur less frequently. 
D)  Firms can maintain production levels and adjust inventories in response to demand shocks. 
A)  The economy is much more susceptible to business cycle ﬂuctuations. 
B)  Demand shocks occur with greater frequency. 
C)  Demand shocks occur less frequently. 
D)  Firms can maintain production levels and adjust inventories in response to demand shocks.

Question 9

Real gross domestic product

Accepted Answer

A)  is a measure of inﬂation. 
B)  will increase if the price level increases. 
C)  will increase if the level of output increases. 
D)  can change from one year to the next even if there is no change in output. 
A)  is a measure of inﬂation. 
B)  will increase if the price level increases. 
C)  will increase if the level of output increases. 
D)  can change from one year to the next even if there is no change in output.

Question 10

Describe two reasons why businesses hesitate to change prices.

Accepted Answer

Companies that sell ﬁnal goods and servi

Question 11

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.

Question 12

In the short run, ﬁrms are more likely to respond to demand shocks by altering inventory levels than
by changing how much they produce.

Accepted Answer

A) True 
 B)False

Question 13

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 14

The business cycle reﬂects both short-run ﬂuctuations in output and long-run economic growth.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Macroeconomics is mainly concerned with two topics. What are these two topics, and how are they
related to each other?

Accepted Answer

The two topics are long-run economic gro

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

(Consider This) What is the difference between ﬁnancial investment and economic investment?

Accepted Answer

A)  There is no difference between the two. 
B)  Financial investment refers to the purchase of ﬁnancial assets only; economic investment refers to the purchase of any new or used capital goods. 
C)  Economic investment is adjusted for inﬂation; ﬁnancial investment is not. 
D)  Financial investment refers to the purchase of assets for ﬁnancial gain; economic investment refers to the purchase of newly created capital goods. 
A)  There is no difference between the two. 
B)  Financial investment refers to the purchase of ﬁnancial assets only; economic investment refers to the purchase of any new or used capital goods. 
C)  Economic investment is adjusted for inﬂation; ﬁnancial investment is not. 
D)  Financial investment refers to the purchase of assets for ﬁnancial gain; economic investment refers to the purchase of newly created capital goods.

Question 19

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 20

Higher rates of unemployment are linked with

Accepted Answer

A)  greater political stability because the employed tend to be more politically active. 
B)  higher crime rates, as the unemployed seek to replace lost income. 
C)  lower rates of heart disease, as the unemployed have eliminated job stress. 
D)  improvements in overall health, as the unemployed have more leisure time to be physically active. 
A)  greater political stability because the employed tend to be more politically active. 
B)  higher crime rates, as the unemployed seek to replace lost income. 
C)  lower rates of heart disease, as the unemployed have eliminated job stress. 
D)  improvements in overall health, as the unemployed have more leisure time to be physically active.

Exam 6: An Introduction to Macroeconomics

De?ne saving.

Refer to the ﬁgures. As the economy moves from the very short run to the longer run, we would expect

As ﬁrms face reduced demand for their goods and services and they need to reduce their output price, they ﬁnd

The Great Recession was triggered by a

What are the three primary measures used in macroeconomics to assess the performance of an economy?

What accounts for differences in living standards between rich and poor countries today?

Which is more useful for measuring change in the economy over time, nominal GDP or real GDP? Why?

Which of the following results from ﬁrms holding inventories?

Real gross domestic product

Describe two reasons why businesses hesitate to change prices.

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

In the short run, ﬁrms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.

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

The business cycle reﬂects both short-run ﬂuctuations in output and long-run economic growth.

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

Macroeconomics is mainly concerned with two topics. What are these two topics, and how are they related to each other?

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

(Consider This) What is the difference between ﬁnancial investment and economic investment?

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

Higher rates of unemployment are linked with

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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