Question 1

Real GDP is preferred to nominal GDP as a measure of economic performance because:

Accepted Answer

A)  nominal GDP uses current prices and thus may over- or understate true changes in output. 
B)  nominal GDP only includes goods and excludes services. 
C)  nominal GDP is not adjusted for population changes. 
D)  real GDP accounts for changes in the quality of goods and services produced. 
A)  nominal GDP uses current prices and thus may over- or understate true changes in output. 
B)  nominal GDP only includes goods and excludes services. 
C)  nominal GDP is not adjusted for population changes. 
D)  real GDP accounts for changes in the quality of goods and services produced.

Question 2

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 3

Supply shocks:

Accepted Answer

A)  occur more frequently than demand shocks. 
B)  usually result from fiscal and monetary policy changes. 
C)  occur when sellers face unexpected changes in the availability and/or prices of key inputs. 
D)  have been responsible for most of the recessions in the United States since World War II. 
A)  occur more frequently than demand shocks. 
B)  usually result from fiscal and monetary policy changes. 
C)  occur when sellers face unexpected changes in the availability and/or prices of key inputs. 
D)  have been responsible for most of the recessions in the United States since World War II.

Question 4

Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy.

Accepted Answer

A) True 
 B)False

Question 5

Shocks occur when actual events do not match expectations.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each.This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas)but sold them for $12 each.Based on this information we can conclude that Harry's production of large pepperoni pizzas this year:

Accepted Answer

A)  increased nominal GDP by $20,000 but left real GDP unchanged. 
B)  increased nominal GDP by $120,000 and increased real GDP by $100,000. 
C)  left nominal GDP unchanged but increased real GDP by $20,000. 
D)  increased nominal GDP by $120,000 but left real GDP unchanged. 
A)  increased nominal GDP by $20,000 but left real GDP unchanged. 
B)  increased nominal GDP by $120,000 and increased real GDP by $100,000. 
C)  left nominal GDP unchanged but increased real GDP by $20,000. 
D)  increased nominal GDP by $120,000 but left real GDP unchanged.

Question 9

Negative demand shocks have a more significant impact on output and employment when prices are flexible.

Accepted Answer

A) True 
 B)False

Question 10

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 11

(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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

The two topics of primary concern in macroeconomics are:

Accepted Answer

A)  short-run fluctuations in output and employment and long-run economic growth. 
B)  unemployment and wage rates in labor markets. 
C)  monopoly power of corporations and small business profitability. 
D)  oil prices and housing markets. 
A)  short-run fluctuations in output and employment and long-run economic growth. 
B)  unemployment and wage rates in labor markets. 
C)  monopoly power of corporations and small business profitability. 
D)  oil prices and housing markets.

Question 15

Nominal GDP measures a nation's output in current year prices.

Accepted Answer

A) True 
 B)False

Question 16

Increased present saving:

Accepted Answer

A)  comes at the expense of reduced current investment. 
B)  comes at the expense of reduced current consumption. 
C)  can only occur if the government increases the amount of money in circulation. 
D)  is only possible if the economy is experiencing positive growth in real GDP. 
A)  comes at the expense of reduced current investment. 
B)  comes at the expense of reduced current consumption. 
C)  can only occur if the government increases the amount of money in circulation. 
D)  is only possible if the economy is experiencing positive growth in real GDP.

Question 17

For which of the following goods and services are prices most sticky?

Accepted Answer

A)  Taxi fares. 
B)  Beer. 
C)  Coin-operated laundry machines. 
D)  Airline tickets. 
A)  Taxi fares. 
B)  Beer. 
C)  Coin-operated laundry machines. 
D)  Airline tickets.

Question 18

For which of the following goods are services are prices least sticky?

Accepted Answer

A)  Taxi fares. 
B)  Haircuts. 
C)  Microwave ovens. 
D)  Airline tickets. 
A)  Taxi fares. 
B)  Haircuts. 
C)  Microwave ovens. 
D)  Airline tickets.

Question 19

Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation?

Accepted Answer

A)  Minsky explanation. 
B)  Austrian explanation. 
C)  Stimulus explanation. 
D)  Structural explanation. 
A)  Minsky explanation. 
B)  Austrian explanation. 
C)  Stimulus explanation. 
D)  Structural explanation.

Real GDP is preferred to nominal GDP as a measure of economic performance because:

Shocks to the economy occur:

Supply shocks:

Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy.

Shocks occur when actual events do not match expectations.

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

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

Negative demand shocks have a more significant impact on output and employment when prices are flexible.

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

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

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

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

The two topics of primary concern in macroeconomics are:

Nominal GDP measures a nation's output in current year prices.

Increased present saving:

For which of the following goods and services are prices most sticky?

For which of the following goods are services are prices least sticky?

Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation?

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

The Balance of Payments, Exchange Rates, and Trade Deficits

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

The United States and the Global Economy

Filters

Exam 25: An Introduction to Macroeconomics

Real GDP is preferred to nominal GDP as a measure of economic performance because:

Shocks to the economy occur:

Supply shocks:

Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy.

Shocks occur when actual events do not match expectations.

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

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

Negative demand shocks have a more significant impact on output and employment when prices are flexible.

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

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

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

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

The two topics of primary concern in macroeconomics are:

Nominal GDP measures a nation's output in current year prices.

Increased present saving:

For which of the following goods and services are prices most sticky?

For which of the following goods are services are prices least sticky?

Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation?

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

The Balance of Payments, Exchange Rates, and Trade Deficits

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

The United States and the Global Economy

Filters