Question 1

A well functioning financial system helps to promote economic growth and stability.
Subtopic: Banks and other financial institutions

Accepted Answer

A) True 
 B)False

Question 2

Which would be considered an investment according to economists?

Accepted Answer

A)  the buying of shares of Fidelity mutual funds 
B)  the purchase of a new machinery by McCain Food 
C)  the selling of Boeing stock by a businessman 
D)  the selling of GE corporate bonds

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 5

The official unemployment rate:

Accepted Answer

A)  reveals people over 21 years of age who are currently discouraged and are not looking for a job. 
B)  is the percentage of the labour force which is unemployed. 
C)  is the percentage of the labour force which is working part-time. 
D)  is the percentage of the total population which is not working.

Question 6

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 7

If current prices are used to calculate the value of total output produced by a country during a specific period of time, the result is called:

Accepted Answer

A)  real GDP. 
B)  nominal GDP. 
C)  full employment GDP. 
D)  constant dollar GDP.

Question 8

Demand shocks are the expected changes in the demand for goods and services.

Accepted Answer

A) True 
 B)False

Question 9

In response to some unexpected changes in demand:

Accepted Answer

A)  the economy could always adjust its production level if the prices are inflexible. 
B)  the economy would always produce less than what was expected if the prices of goods and services are inflexible. 
C)  the economy could always produce at its optimal capacity if the prices of goods and services are inflexible. 
D)  the economy could always produce at its optimal capacity if the prices of goods and services are fully flexible.

Question 10

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 11

Sticky prices imply that some firms are afraid to cut their prices because they are afraid of price wars.
Subtopic: How sticky are prices

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

To look at the health of the economy, economists would most probably look at indictors such as:

Accepted Answer

A)  real GDP, unemployment rate and, the inflation rate. 
B)  level of saving, nominal GDP and, the inflation rate. 
C)  nominal GDP, level of investment and, the general price level. 
D)  the general price level, employment rate and, level of saving.

Question 15

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 16

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 17

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 18

To facilitate the international comparisons of living standards around the world, adjustments are supposed to be made to each country's GDP. These adjustments require:

Accepted Answer

A)  calculating each country's GDP in terms of U.S. dollar, dividing it by the general price level and, subtracting the previous year's value of the country's GDP from it. 
B)  converting each country's GDP to U.S. dollars, dividing it by the country's population and, to adjust the resulting figure for the purchasing power parity. 
C)  each country's GDP should be multiplied by its general price level. 
D)  there is no need for any adjustments since, each country's GDP is the representative of its standard of living.

Question 19

Which would be considered an investment according to economists?

Accepted Answer

A)  the purchase of government bonds by the nation's central bank 
B)  the purchase of a laptop by a university student to prepare her class projects 
C)  the construction of a new factory by Intel 
D)  the purchase of shares of stock by Manulife, a mutual fund company

Question 20

The Flamingo Corporation issued $30 million in new common stock in 2008. It used $22 million of the proceeds to replace obsolete equipment in its factory and $8 million to repay bank loans. As a result, investment:

Accepted Answer

A)  of $8 million has occurred. 
B)  of $22 million has occurred. 
C)  of $30 million has occurred. 
D)  has not occurred.

Exam 4: Introduction to Macroeconomics

A well functioning financial system helps to promote economic growth and stability. Subtopic: Banks and other financial institutions

Which would be considered an investment according to economists?

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

The higher is the current level of saving:

The official unemployment rate:

Which of the following have the most flexible prices?

If current prices are used to calculate the value of total output produced by a country during a specific period of time, the result is called:

Demand shocks are the expected changes in the demand for goods and services.

In response to some unexpected changes in demand:

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

Sticky prices imply that some firms are afraid to cut their prices because they are afraid of price wars. Subtopic: How sticky are prices

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

Modern economic growth refers to the idea of experiencing:

To look at the health of the economy, economists would most probably look at indictors such as:

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

In economics, the term "investment" includes:

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:

To facilitate the international comparisons of living standards around the world, adjustments are supposed to be made to each country's GDP. These adjustments require:

Which would be considered an investment according to economists?

The Flamingo Corporation issued $30 million in new common stock in 2008. It used $22 million of the proceeds to replace obsolete equipment in its factory and $8 million to repay bank loans. As a result, investment: