Question 1

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

Accepted Answer

A)  purchasing power parity
B)  the quantity of resources available to the economy
C)  population size
D)  different currency values

Question 2

The Great Recession of 2007-09 illustrated the situation where a negative demand shock occurred and

Accepted Answer

A)  prices adjusted but the output level was inflexible.
B)  the economy's overall price level was very flexible.
C)  the economy's overall price level was "sticky."
D)  prices and production were both "sticky," or inflexible.

Question 3

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 4

If prices are "sticky" in the short run, then

Accepted Answer

A)  the economy will respond to demand shocks primarily through changes in output and employment.
B)  the economy will respond to demand shocks primarily through changes in prices and inflation.
C)  prices will adjust to equalize the quantities demanded and supplied of goods and services.
D)  unemployment will not change in response to a demand shock.

Question 5

(Consider This)  Which of the following is an example of economic investment?

Accepted Answer

A)  Volvo buys an old factory building from General Motors.
B)  Nike buys a new machine that increases shoe production.
C)  Bill Gates buys shares of stock in IBM.
D)  Warren Buffet buys U.S.savings bonds.

Question 6

A higher rate of investment now will generate

Accepted Answer

A)  more saving now.
B)  more current consumption.
C)  more future production.
D)  more future inflation.

Question 7

Savings are generated whenever

Accepted Answer

A)  prices are rising.
B)  current spending exceeds current income.
C)  current income exceeds current spending.
D)  real GDP exceeds nominal GDP.

Question 8

Real GDP measures the change in the price level over time.

Accepted Answer

A) True 
 B)False

Question 9

Real gross domestic product is a measure of the

Accepted Answer

A)  average price level in the economy.
B)  value of final output produced within a country in one year, using current prices.
C)  value of final output produced within a country in one year, adjusted for changing prices.
D)  total value of available resources in a nation.

Question 10

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 11

If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.

Accepted Answer

A) True 
 B)False

Question 12

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that prices are sticky in the short-run.Which of the following best describes the economy's response to a negative demand shock?

Accepted Answer

A)  Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will decrease and unemployment will increase.
B)  Firms' inventories will decrease, causing them to increase production.Ultimately, real GDP will increase and unemployment will decrease.
C)  Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will increase and unemployment will increase.
D)  Firms' inventories will increase, causing them to cut production.Ultimately, real GDP will decrease and unemployment will decrease.

Question 14

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.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Savings are transferred from savers to borrowers through the following intermediaries, except

Accepted Answer

A)  mutual funds.
B)  pension funds.
C)  real estate brokers.
D)  insurance companies.

Question 17

In order to achieve modern economic growth, a nation's output must grow faster than its population.

Accepted Answer

A) True 
 B)False

Question 18

Before the late 1700s, living standards in the richest part of the world were

Accepted Answer

A)  about five times higher than living standards in the poorest parts of the world.
B)  at most only two to three times higher than living standards in the poorest parts of the world.
C)  about 50 times higher than living standards in the poorest parts of the world.
D)  about the same as living standards in the poorest parts of the world.

Question 19

A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth.

Accepted Answer

A) True 
 B)False

Question 20

Explanations about what caused the Great Recession differ sharply among economists.The so-called Austrian Explanation involves the following factors, except

Accepted Answer

A)  a massive euphoric bubble in housing prices that popped.
B)  government actions that kept interest rates very low for a long period.
C)  excessive borrowing for consumption, construction, and investment.
D)  a huge negative demand shock in the economy.

Exam 26: An Introduction to Macroeconomics

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

Correct AnswerverifiedShow Answer

Savings are transferred from savers to borrowers through the following intermediaries, except

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Suppose that prices are sticky in the short-run.Which of the following best describes the economy's response to a negative demand shock?

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If prices are "sticky" in the short run, then

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Real GDP measures the change in the price level over time.

Correct AnswerverifiedShow Answer

Real gross domestic product is a measure of the

Correct AnswerverifiedShow Answer

Before the late 1700s, living standards in the richest part of the world were

Correct AnswerverifiedShow Answer

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explanations about what caused the Great Recession differ sharply among economists.The so-called Austrian Explanation involves the following factors, except

Correct AnswerverifiedShow Answer

(Consider This) Which of the following is an example of economic investment?

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Savings are generated whenever

Correct AnswerverifiedShow Answer

A higher rate of investment now will generate

Correct AnswerverifiedShow Answer

In order to achieve modern economic growth, a nation's output must grow faster than its population.

Correct AnswerverifiedShow Answer

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.

Correct AnswerverifiedShow Answer

A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth.

Correct AnswerverifiedShow Answer

The Great Recession of 2007-09 illustrated the situation where a negative demand shock occurred and

Correct AnswerverifiedShow Answer

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