Question 1

Before the late 1700's, living standards in the richest part of the world were:

Accepted Answer

A)  About five times higher than living standards in the poorest parts of the world 
B)  At most only two to three times higher than living standards in the poorest parts of the world 
C)  About 50 times higher than living standards in the poorest parts of the world 
D)  About the same as living standards in the poorest parts of the world 
A)  About five times higher than living standards in the poorest parts of the world 
B)  At most only two to three times higher than living standards in the poorest parts of the world 
C)  About 50 times higher than living standards in the poorest parts of the world 
D)  About the same as living standards in the poorest parts of the world B

Question 2

If expectations are always met, then firms would never contribute to any of the short-run fluctuations in employment and output that are observed in real-world economies.

Accepted Answer

A) True 
 B)False  True

Question 3

The period when output and living standards decline is referred to as:

Accepted Answer

A)  Inflation 
B)  Economic decline 
C)  An inventory downturn 
D)  A recession 
A)  Inflation 
B)  Economic decline 
C)  An inventory downturn 
D)  A recession D

Question 4

Financial institutions reward savers with the following, except:

Accepted Answer

A)  Interest 
B)  Wages 
C)  Dividends 
D)  Capital gains 
A)  Interest 
B)  Wages 
C)  Dividends 
D)  Capital gains

Question 5

Buying 100 shares of Google stock would be an example of economic investment.

Accepted Answer

A) True 
 B)False

Question 6

Business cycles refer to short term fluctuations in prices.

Accepted Answer

A) True 
 B)False

Question 7

The period known as the "Industrial Revolution" began in the United States in the late 1800's.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the overall level of prices in an economy is called:

Accepted Answer

A)  Growth 
B)  Expansion 
C)  Inflation 
D)  Nominal GDP growth 
A)  Growth 
B)  Expansion 
C)  Inflation 
D)  Nominal GDP growth

Question 9

Modern economic growth:

Accepted Answer

A)  Started occurring since the time of the Roman Empire 
B)  Has been experienced by all countries around the world 
C)  Refers to the phenomenon when a country's total output rises 
D)  Makes a country's output per person rise at a compounded rate 
A)  Started occurring since the time of the Roman Empire 
B)  Has been experienced by all countries around the world 
C)  Refers to the phenomenon when a country's total output rises 
D)  Makes a country's output per person rise at a compounded rate

Question 10

Explanations about what caused the Great Recession differ sharply among economists. The so-called Austrian Explanation involves the following factors, except:

Accepted Answer

A)  A massive euphoric bubble in housing prices that popped 
B)  Government actions that kept interest rates very low for a long period 
C)  Excessive borrowing for consumption, construction, and investment 
D)  A huge negative demand shock in the economy 
A)  A massive euphoric bubble in housing prices that popped 
B)  Government actions that kept interest rates very low for a long period 
C)  Excessive borrowing for consumption, construction, and investment 
D)  A huge negative demand shock in the economy

Question 11

Which of the following statements about price wars is true?

Accepted Answer

A)  Firms that have to deal with the possibility of price wars often have extremely flexible prices. 
B)  Firms that do not have to deal with the possibility of price wars often have sticky prices. 
C)  Price wars tend to increase the short-run flexibility of prices. 
D)  Firms that have to deal with the possibility of price wars often have sticky prices. 
A)  Firms that have to deal with the possibility of price wars often have extremely flexible prices. 
B)  Firms that do not have to deal with the possibility of price wars often have sticky prices. 
C)  Price wars tend to increase the short-run flexibility of prices. 
D)  Firms that have to deal with the possibility of price wars often have sticky prices.

Question 12

Which of the following groups is the principal source of savings in an economy?

Accepted Answer

A)  Banks 
B)  Government 
C)  Businesses 
D)  Households 
A)  Banks 
B)  Government 
C)  Businesses 
D)  Households

Question 13

Investment is ultimately limited by the amount of savings in the economy.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  Apple builds a new plant to manufacture iPads 
B)  Your college purchases a 5-year old building in order to have more classrooms 
C)  A retiree purchases U.S. government bonds 
D)  A company like Bank of America acquires another company like Merrill Lynch 
A)  Apple builds a new plant to manufacture iPads 
B)  Your college purchases a 5-year old building in order to have more classrooms 
C)  A retiree purchases U.S. government bonds 
D)  A company like Bank of America acquires another company like Merrill Lynch

Question 15

Which of the following is most likely to be an indication of higher unemployment?

Accepted Answer

A)  An increase in real GDP 
B)  An increase in nominal GDP 
C)  A decrease in real GDP 
D)  A decrease in nominal GDP 
A)  An increase in real GDP 
B)  An increase in nominal GDP 
C)  A decrease in real GDP 
D)  A decrease in nominal GDP

Question 16

Suppose a family's income increases by 5% at the same time that inflation is 6%. Then the family's living standard:

Accepted Answer

A)  Will increase by 5% 
B)  Will not change 
C)  Will increase by 1% 
D)  Will decrease 
A)  Will increase by 5% 
B)  Will not change 
C)  Will increase by 1% 
D)  Will decrease

Question 17

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 18

Refer to the graphs above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. How will the firm respond to a negative demand shock if prices are flexible?

Accepted Answer

A)  The firm will continue to produce 500 computers per week and charge a price of $600 
B)  The firm will continue to produce 500 computers per week and charge a price of $1200 
C)  The firm will cut production to 300 computers per week and charge a price of $1000 
D)  The firm will cut production to 300 computers per week and charge a price of $600 
A)  The firm will continue to produce 500 computers per week and charge a price of $600 
B)  The firm will continue to produce 500 computers per week and charge a price of $1200 
C)  The firm will cut production to 300 computers per week and charge a price of $1000 
D)  The firm will cut production to 300 computers per week and charge a price of $600

Question 19

Businesses are the main economic investors, while households are the main savers.

Accepted Answer

A) True 
 B)False

Question 20

If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.

Accepted Answer

A) True 
 B)False

Exam 6: An Introduction to Macroeconomics

Before the late 1700's, living standards in the richest part of the world were:

If expectations are always met, then firms would never contribute to any of the short-run fluctuations in employment and output that are observed in real-world economies.

The period when output and living standards decline is referred to as:

Financial institutions reward savers with the following, except:

Buying 100 shares of Google stock would be an example of economic investment.

Business cycles refer to short term fluctuations in prices.

The period known as the "Industrial Revolution" began in the United States in the late 1800's.

An increase in the overall level of prices in an economy is called:

Modern economic growth:

Explanations about what caused the Great Recession differ sharply among economists. The so-called Austrian Explanation involves the following factors, except:

Which of the following statements about price wars is true?

Which of the following groups is the principal source of savings in an economy?

Investment is ultimately limited by the amount of savings in the economy.

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

Which of the following is most likely to be an indication of higher unemployment?

Suppose a family's income increases by 5% at the same time that inflation is 6%. Then the family's living standard:

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

Refer to the graphs above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. How will the firm respond to a negative demand shock if prices are flexible?

Businesses are the main economic investors, while households are the main savers.

If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.

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

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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