Question 1

Real gross domestic product

Accepted Answer

A)   is a measure of inﬂation.
B)   will increase if the price level increases.
C)   will increase if the level of output increases.
D)   can change from one year to the next even if there is no change in output.

Question 2

The business cycle reﬂects both short-run ﬂuctuations in output and long-run economic growth.

Accepted Answer

A) True 
 B)False

Question 3

The Great Recession was triggered by a

Accepted Answer

A)   steep rise in bond values.
B)   steep decline in housing prices.
C)   sharp increase in oil prices.
D)   sharp decline in the value of the U.S. dollar.

Question 4

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.

Question 5

As ﬁrms face reduced demand for their goods and services and they need to reduce their output price, they ﬁnd

Accepted Answer

A)   it's best to renegotiate the rent they pay in order to get enough of a reduction in their per- unit costs.
B)   that they can get substantial savings by ﬁnding ways to reduce their raw materials costs rather than cutting their labor force.
C)   it's necessary to cut production and their labor force to get any signiﬁcant reduction in per- unit costs.
D)   they need to ﬁnd a way to increase the per-unit selling price of their product.
E)   None of these choices are correct.

Question 6

What accounts for differences in living standards between rich and poor countries today?

Accepted Answer

The difference in the living standards a...

Question 7

If prices are inﬂexible, then a negative demand shock will lead to

Accepted Answer

A)   a short-run increase in real GDP.
B)   a short-run decrease in real GDP.
C)   a short-run decrease in prices.
D)   no change in real GDP in the short run.

Question 8

What are the three primary measures used in macroeconomics to assess the performance of an
economy?

Accepted Answer

The three key statistics are real GDP, u...

Question 9

De?ne saving.

Accepted Answer

Saving is disposable income no...

Question 10

Output per person has grown steadily since the beginning of the Roman Empire.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following results from ﬁrms holding inventories?

Accepted Answer

A)   The economy is much more susceptible to business cycle ﬂuctuations.
B)   Demand shocks occur with greater frequency.
C)   Demand shocks occur less frequently.
D)   Firms can maintain production levels and adjust inventories in response to demand shocks.

Question 12

Describe two reasons why businesses hesitate to change prices.

Accepted Answer

Companies that sell ﬁnal goods and servi...

Question 13

Higher rates of unemployment are linked with

Accepted Answer

A)   greater political stability because the employed tend to be more politically active.
B)   higher crime rates, as the unemployed seek to replace lost income.
C)   lower rates of heart disease, as the unemployed have eliminated job stress.
D)   improvements in overall health, as the unemployed have more leisure time to be physically active.

Question 14

Macroeconomics is mainly concerned with two topics. What are these two topics, and how are they
related to each other?

Accepted Answer

The two topics are long-run economic gro...

Question 15

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 16

1." class="answers-bank-image d-inline" rel="preload" > Refer to the ﬁgures. As the economy moves from the very short run to the longer run, we would expect

Accepted Answer

A)   the representation of the economy to move from Figure A to Figure B.
B)   the representation of the economy to move from Figure B to Figure A.
C)   demand shocks to be eliminated.
D)   the economy to gravitate to P1.

Question 17

Which of the following is the best example of investment as deﬁned by economists?

Accepted Answer

A)   A restaurant owner buys a freezer to store ingredients for the restaurant meals.
B)   A college professor buys a truck to drive around in.
C)   A business manager purchases stock on the New York Stock Exchange.
D)   A worker deposits money into a long-term retirement account.

Question 18

(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 19

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.

Question 20

Which is more useful for measuring change in the economy over time, nominal GDP or real GDP?
Why?

Accepted Answer

Real GDP is more useful for comparing ch...

Exam 6: An Introduction to Macroeconomics

Output per person has grown steadily since the beginning of the Roman Empire.

Correct AnswerverifiedShow Answer

As ﬁrms face reduced demand for their goods and services and they need to reduce their output price, they ﬁnd

Correct AnswerverifiedShow Answer

Higher rates of unemployment are linked with

Correct AnswerverifiedShow Answer

Describe two reasons why businesses hesitate to change prices.

Correct AnswerverifiedCompanies that sell ﬁnal goods and servi...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following results from ﬁrms holding inventories?

Correct AnswerverifiedShow Answer

Which of the following is the best example of investment as deﬁned by economists?

Correct AnswerverifiedShow Answer

Macroeconomics is mainly concerned with two topics. What are these two topics, and how are they related to each other?

Correct AnswerverifiedThe two topics are long-run economic gro...View AnswerShow Answer

If prices are inﬂexible, then a negative demand shock will lead to

Correct AnswerverifiedShow Answer

The Great Recession was triggered by a

Correct AnswerverifiedShow Answer

Real gross domestic product

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

De?ne saving.

Correct AnswerverifiedSaving is disposable income no...View AnswerShow Answer

What are the three primary measures used in macroeconomics to assess the performance of an economy?

Correct AnswerverifiedThe three key statistics are real GDP, u...View AnswerShow Answer

The business cycle reﬂects both short-run ﬂuctuations in output and long-run economic growth.

Correct AnswerverifiedShow Answer

Refer to the ﬁgures. As the economy moves from the very short run to the longer run, we would expect

Correct AnswerverifiedShow Answer

Which is more useful for measuring change in the economy over time, nominal GDP or real GDP? Why?

Correct AnswerverifiedReal GDP is more useful for comparing ch...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

What accounts for differences in living standards between rich and poor countries today?

Correct AnswerverifiedThe difference in the living standards a...View AnswerShow Answer

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Companies that sell ﬁnal goods and servi...
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Correct Answer
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Correct Answer
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The two topics are long-run economic gro...
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Correct Answer
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Correct Answer
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Saving is disposable income no...
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The three key statistics are real GDP, u...
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Correct Answer
verified

Correct Answer
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Real GDP is more useful for comparing ch...
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Correct Answer
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Correct Answer
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The difference in the living standards a...
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