Question 1

Assume that the demand for goods and services falls across the entire economy and for an extended period of time.If the prices are inflexible, the unintended increase in business inventories would force:

Accepted Answer

A) businesses to keep the production at the existing level. 
B) businesses to increase the level of production. 
C) businesses to lower the level of production. 
D) businesses to increase the level of employment.

Question 2

When we say "Prices of many goods and services are inflexible in the short-run" it means:

Accepted Answer

A) prices change too quickly in the short-run. 
B) prices do not change in the long-run. 
C) prices change too slowly in the short- run. 
D) prices are not sticky in the short-run.

Question 3

Knowing that in the real world, the demand for goods and services could change unexpectedly, firms would attempt to deal with it by:

Accepted Answer

A) producing different levels of goods and services according to the changes in demand. 
B) switching to the production of another product in the short-run. 
C) maintaining an inventory. 
D) closing down the production in the short-run with the hope that the situation would change in the future.

Question 4

One major difference between the short-run and long-run macroeconomic analysis is that:

Accepted Answer

A) in the short-run prices are fully flexible while in long-run they are not. 
B) in the short-run prices are sticky while in long-run they are fully flexible. 
C) in the short-run stickiness of prices would guarantee the long-run price inflexibility. 
D) the price stickiness in the long-run guarantees the flexibility of prices in the short-run.

Question 5

The decisions about savings and investments are complicated because:

Accepted Answer

A) it involves uncertainty about the future. 
B) higher savings means higher levels of consumption for individuals. 
C) the investment decisions are independent from the decisions about savings. 
D) savings are taken by businesses while investments are done by households.

Question 6

In economics, the term "investment" includes:

Accepted Answer

A) the purchase of a Microsoft stock. 
B) the purchase of gold by a businessman. 
C) the addition of cash to a savings account. 
D) any increase in business inventories.

Question 7

Which of the following is not an economic investment?

Accepted Answer

A) the purchase of machinery by ABC Manufacturing Company 
B) the purchase of 50 shares of Aliant by a retired business executive 
C) construction of a housing project for the homeless 
D) the increase in the inventory on a grocer's shelf

Question 8

Unemployment occurs when a person cannot get a job despite being willing to work and actively seeking work.

Accepted Answer

A) True 
 B)False

Question 9

Savings are generated when current consumption is less than current output.

Accepted Answer

A) True 
 B)False

Question 10

When consumption is less than output what is this called?

Accepted Answer

A) Savings 
B) Deficit 
C) Shortage 
D) Waste

Question 11

Modern economic growth refers to the idea of experiencing:

Accepted Answer

A) an increase in output per person as compared to an increase in output. 
B) an increase in output as compared to an increase in output per person. 
C) an increase in population at a faster rate than an increase in output. 
D) an increase in population at the same rate as the increase in output.

Question 12

The higher is the current level of saving:

Accepted Answer

A) the higher is the current level of investment and higher the future level of consumption. 
B) the lower is the current level of investment and lower the future level of consumption. 
C) the higher is the current level of investment and lower the future level of consumption. 
D) the lower is the current level of investment and higher the future level of consumption.

Question 13

Which of the following have the most flexible prices?

Accepted Answer

A) airline tickets, gasoline and, electricity. 
B) hair cuts, newspapers and, taxi fares. 
C) computer software and, veterinary services. 
D) coin-operated laundry machines, restaurant menus and, magazines.

Question 14

Refer to the diagram given below.The diagram has two panels: (a) and (b).  Panel (a) represents the demand for and the supply of a brand of automobile (Turbo car) for Fancy Auto, a car manufacturing company.Assume that DL represents the demand for Turbo cars when demand is low, DM represents the demand for Turbo cars when demand is medium, and DH represents the demand for Turbo cars when demand is high.If Fancy Auto's optimal output level is 900 cars per week and the price of Turbo cars is flexible, Fancy Auto:

Accepted Answer

A) can continue to sell its optimal output regardless of the demand level. 
B) can produce at its optimal output level only if the level of demand is DL. 
C) can produce at its optimal output level only if the level of demand is at DM. 
D) can sell more than its optimal output when the level of demand is DH.

Question 15

If the unexpected short-run fluctuations in demand begin to look permanent:

Accepted Answer

A) the firms would allow their prices to change accordingly. 
B) the firms would be hesitant to allow their prices to change accordingly. 
C) the firms would not allow their prices to change. 
D) the firms would change the quality of their products but not the prices.

Question 16

Because prices change too slowly in the short-run and as a result, they do not quickly equalize the quantity demanded and quantity supplied of goods and services, the short-run response of the economy to a demand shock is through:

Accepted Answer

A) changes in output and employment levels rather than through changes in prices. 
B) changes in prices rather than through changes in employment. 
C) changes in employment but not in output. 
D) changes in output but not in the employment.

Question 17

Real GDP and nominal GDP differ because real GDP:

Accepted Answer

A) is adjusted for changes in the nation's distribution of income. 
B) includes the economic effects of international trade. 
C) is equal to the nominal GDP minus the total tax payments. 
D) has been adjusted for changes in the price level.

Question 18

Economic growth is defined as:

Accepted Answer

A) an increase in either real GDP or real GDP per capita. 
B) an increase in the nominal GDP. 
C) an increase in the overall general price level. 
D) an increase in the level of consumption.

Question 19

If prices are flexible, no matter what demand turns out to be, firms can continue selling their optimal output.

Accepted Answer

A) True 
 B)False

Question 20

The financial institutions play an important role in transferring the savings of the individuals to the investments by businesses.Which of the following correctly states this transfer?

Accepted Answer

A) banks collect the savings and invest it in the stock market. 
B) banks collect the savings, rewarding the savings by interest and dividend payments and, lend the funds to businesses who in turn buy equipment, factories and capital goods. 
C) banks collect the savings and lend the funds to the government who in turn redistribute it through different kinds of subsidies. 
D) financial institutions do not have a major role in this process.

Exam 6: B: an Introduction to Macroeconomics

Assume that the demand for goods and services falls across the entire economy and for an extended period of time.If the prices are inflexible, the unintended increase in business inventories would force:

When we say "Prices of many goods and services are inflexible in the short-run" it means:

Knowing that in the real world, the demand for goods and services could change unexpectedly, firms would attempt to deal with it by:

One major difference between the short-run and long-run macroeconomic analysis is that:

The decisions about savings and investments are complicated because:

In economics, the term "investment" includes:

Which of the following is not an economic investment?

Unemployment occurs when a person cannot get a job despite being willing to work and actively seeking work.

Savings are generated when current consumption is less than current output.

When consumption is less than output what is this called?

Modern economic growth refers to the idea of experiencing:

The higher is the current level of saving:

Which of the following have the most flexible prices?

If the unexpected short-run fluctuations in demand begin to look permanent:

Because prices change too slowly in the short-run and as a result, they do not quickly equalize the quantity demanded and quantity supplied of goods and services, the short-run response of the economy to a demand shock is through:

Real GDP and nominal GDP differ because real GDP:

Economic growth is defined as:

If prices are flexible, no matter what demand turns out to be, firms can continue selling their optimal output.

The financial institutions play an important role in transferring the savings of the individuals to the investments by businesses.Which of the following correctly states this transfer?