Question 1

Shocks to the economy occur when

Accepted Answer

A)   stock prices rise by more than 10 percent per year.
B)   government takes a more active role in the economy.
C)   prices are ﬂexible.
D)   actual economic events do not match what people expected.E) A) and D)
F) B) and C)

Question 2

Which of the following is not a factor that increases short-run price stickiness?

Accepted Answer

A)   Consumers tend to prefer stable prices.
B)   Stable prices make it easier for consumers to plan their spending.
C)   A ﬁrm can lower its price without fear that rival ﬁrms will also lower their prices.
D)   Firms try to avoid price wars.E) B) and C)
F) A) and D)

Question 3

Because prices are sticky, a positive demand shock will lead to

Accepted Answer

A)   no change in unemployment.
B)   an increase in unemployment.
C)   a decrease in unemployment.
D)   an unpredictable change in unemployment.E) A) and B)
F) A) and C)

Question 4

When ﬁrms face reduced demand for their goods and services during recessions, behavioral economics suggests that the ﬁrm should

Accepted Answer

A)   cut production and lay off workers according to the percent decline in sales.
B)   explain to the workers that in order to make it through the recession, they all need to take a pay cut.
C)   shut down until the recession is over.
D)   increase morale by increasing production and hiring more workers.
E)   reduce pay just for the salaried employees, not the hourly production workers.F) A) and D)
G) All of the above

Question 5

Real GDP can change due to changes in the price level.

Accepted Answer

A) True 
 B)False

Question 6

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.E) None of the above
F) A) and C)

Question 7

Refer to the ﬁgures. Which of the following events would most likely result in inﬂation?

Accepted Answer

A)   a shift from D2 to D1 in Figure A
B)   a shift from D2 to D3 in Figure A
C)   a shift from D2 to D1 in Figure B
D)   a shift from D2 to D3 in Figure BE) None of the above
F) A) and D)

Question 8

Which of the following is used to compare the average standard of living across countries?

Accepted Answer

A)   real GDP
B)   nominal GDP
C)   purchasing power parity
D)   GDP per personE) B) and D)
F) A) and D)

Question 9

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.E) B) and C)
F) None of the above

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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.E) B) and D)
F) All of the above

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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.E) None of the above
F) All of the above

Question 14

What are demand shocks? Describe a positive demand shock and a negative demand shock.

Accepted Answer

Demand shocks are unexpected changes in ...

Question 15

Economists and policymakers are committed to encouraging a high and growing level of real GDP because

Accepted Answer

A)   this implies a lower price level.
B)   this means a higher level of unemployment.
C)   this implies an increase in investment.
D)   this means greater consumption opportunities.E) None of the above
F) All of the above

Question 16

Which of the following statements is true?

Accepted Answer

A)   Financial investment refers to the creation and expansion of business enterprises.
B)   Economic investment refers to the expansion of the economy's productive capability.
C)   Economic investment refers to the purchase of assets such as stocks, bonds, and real estate.
D)   Both economic investment and ﬁnancial investment refer to the purchase of assets such as stocks, bonds, and real estate.E) All of the above
F) None of the above

Question 17

Which among the following countries had the highest GDP per person in 2017?

Accepted Answer

A)   Switzerland
B)   United States
C)   Japan
D)   ChinaE) A) and B)
F) A) and C)

Question 18

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

Accepted Answer

A)   Real GDP will increase and unemployment will decrease.
B)   Real GDP will decrease and unemployment will increase.
C)   Real GDP will decrease and unemployment will decrease.
D)   Real GDP will increase and unemployment will increase.E) C) and D)
F) B) and C)

Question 19

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

Accepted Answer

A)   banks
B)   government
C)   businesses
D)   householdsE) C) and D)
F) A) and D)

Question 20

Suppose a small economy produces only MP3 players. In year one, 10,000 MP3 players are produced and sold at a price of $100 each. In year two, 12,000 MP3 players are produced and sold
At a price of $80 each. Which of the following statements is true?

Accepted Answer

A)   Real GDP and nominal GDP both increase.
B)   Real GDP increases, while nominal GDP remains constant.
C)   Real GDP decreases, while nominal GDP increases.
D)   Real GDP increases, while nominal GDP decreases.E) None of the above
F) C) and D)

Exam 6: An Introduction to Macroeconomics

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

Correct AnswerverifiedShow Answer

Economists and policymakers are committed to encouraging a high and growing level of real GDP because

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which among the following countries had the highest GDP per person in 2017?

Correct AnswerverifiedShow Answer

What are demand shocks? Describe a positive demand shock and a negative demand shock.

Correct AnswerverifiedDemand shocks are unexpected changes in ...View AnswerShow Answer

Which of the following is not a factor that increases short-run price stickiness?

Correct AnswerverifiedShow Answer

Because prices are sticky, a positive demand shock will lead to

Correct AnswerverifiedShow Answer

Refer to the ﬁgures. Which of the following events would most likely result in inﬂation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is used to compare the average standard of living across countries?

Correct AnswerverifiedShow Answer

Shocks to the economy occur when

Correct AnswerverifiedShow Answer

In economics, the word "shocks" refers to

Correct AnswerverifiedShow Answer

Real GDP can change due to changes in the price level.

Correct AnswerverifiedShow Answer

When ﬁrms face reduced demand for their goods and services during recessions, behavioral economics suggests that the ﬁrm should

Correct AnswerverifiedShow Answer

Suppose a small economy produces only MP3 players. In year one, 10,000 MP3 players are produced and sold at a price of $100 each. In year two, 12,000 MP3 players are produced and sold At a price of $80 each. Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Demand shocks are unexpected changes in ...
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