Question 1

An unexpected negative demand shock would lead to a decrease in real GDP.

Accepted Answer

A) True 
 B)False

Question 2

When prices are inflexible, the economy will respond to demand shocks through short-run changes in output and unemployment.

Accepted Answer

A) True 
 B)False

Question 3

Price wars among firms

Accepted Answer

A)  tend to reduce short-run price stickiness because firms know they can lower their own prices without rival firms lowering their prices.
B)  occur when one firm lowers its price and rival firms react by lowering their prices.
C)  occur when firms use advertising to take customers away from rival firms.
D)  have no effect on the degree of short-run price stickiness.

Question 4

The business cycle depicts

Accepted Answer

A)  fluctuations in the general price level.
B)  the phases a business goes through from when it first opens to when it finally closes.
C)  the evolution of technology over time.
D)  short-run fluctuations in output and employment.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which among the following countries had the highest GDP per person in 2014?

Accepted Answer

A)  Switzerland
B)  United States
C)  Japan
D)  China

Question 7

Which of the following is most closely related to recessions?

Accepted Answer

A)  positive long-run economic growth
B)  rapid growth in the price level
C)  falling rates of unemployment
D)  negative real growth in output

Question 8

Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each.This year Harry's produced 11,000 large 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 pizzas

Accepted Answer

A)  increased nominal GDP from last year, but real GDP was unaffected.
B)  increased both nominal and real GDP from last year.
C)  increased real GDP from last year, but nominal GDP was unaffected.
D)  did not change either nominal or real GDP from last year.

Question 9

In economics, the word "shocks" refers to

Accepted Answer

A)  situations where firms' expectations are not met.
B)  any change in the demand for goods and services.
C)  any change in the supply of goods and services.
D)  a decrease in real GDP.

Question 10

Supply shocks occur any time there is a change in the supply of goods and services.

Accepted Answer

A) True 
 B)False

Question 11

Any person without a job is considered to be unemployed.

Accepted Answer

A) True 
 B)False

Question 12

What impact will a negative demand shock have on the main measures of economic performance?

Accepted Answer

A)  Real GDP will increase, inflation will increase, and unemployment will decrease.
B)  Real GDP will decrease, inflation will decrease, and unemployment will increase.
C)  Real GDP will decrease, inflation will increase, and unemployment will increase.
D)  Real GDP will increase, inflation will decrease, and unemployment will decrease.

Question 13

Business cycle fluctuations typically arise because

Accepted Answer

A)  the actual supply of goods and services ends up being more or less than what consumers were expecting.
B)  the actual demand for goods and services ends up being more or less than the expected supply of goods and services.
C)  the actual demand for goods and services ends up being more or less than what firms were expecting.
D)  prices tend to be flexible in the short run.

Question 14

(Consider This)  In 2008 and 2009, the United States experienced what has come to be known as the

Accepted Answer

A)  Great Depression.
B)  Great Recession.
C)  Great Expansion.
D)  Great Stagnation.

Question 15

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.

Accepted Answer

A) True 
 B)False

Question 16

(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.

Question 17

Economists use different models of the economy because the economy behaves differently depending on how much time has passed after a demand shock.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that inventories are rising.We can expect that, in the future,

Accepted Answer

A)  real GDP will likely increase
B)  real GDP will likely decrease.
C)  real GDP could increase or decrease, as its direction cannot be predicted based on inventories.
D)  firms will raise prices of their goods and services.

Question 19

In earlier centuries, the Roman and Chinese economies

Accepted Answer

A)  expanded in such a way that output per person increased.
B)  expanded in such a way that output per person decreased.
C)  declined in such a way that output per person decreased.
D)  expanded, but output per person remained virtually stagnant.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 26: An Introduction to Macroeconomics

The business cycle depicts

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In economics, the word "shocks" refers to

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(Consider This) In 2008 and 2009, the United States experienced what has come to be known as the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that inventories are rising.We can expect that, in the future,

Correct AnswerverifiedShow Answer

An unexpected negative demand shock would lead to a decrease in real GDP.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Supply shocks occur any time there is a change in the supply of goods and services.

Correct AnswerverifiedShow Answer

Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each.This year Harry's produced 11,000 large 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 pizzas

Correct AnswerverifiedShow Answer

Which of the following is most closely related to recessions?

Correct AnswerverifiedShow Answer

Economists use different models of the economy because the economy behaves differently depending on how much time has passed after a demand shock.

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Price wars among firms

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

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Which among the following countries had the highest GDP per person in 2014?

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Any person without a job is considered to be unemployed.

Correct AnswerverifiedShow Answer

In earlier centuries, the Roman and Chinese economies

Correct AnswerverifiedShow Answer

What impact will a negative demand shock have on the main measures of economic performance?

Correct AnswerverifiedShow Answer

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.

Correct AnswerverifiedShow Answer

Business cycle fluctuations typically arise because

Correct AnswerverifiedShow Answer

When prices are inflexible, the economy will respond to demand shocks through short-run changes in output and unemployment.

Correct AnswerverifiedShow Answer

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