Question 1

Price stickiness tends to moderate over time.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Which of the following is most likely to indicate higher unemployment?

Accepted Answer

A)   an increase in real GDP
B)   an increase in nominal GDP
C)   a decrease in real GDP
D)   a decrease in nominal GDP

Question 4

Why are economists concerned about inﬂation?

Accepted Answer

A)   Inﬂation generally causes unemployment rates to rise.
B)   Real GDP is necessarily falling when there is inﬂation.
C)   Inﬂation lowers the standard of living for people whose income does not increase as fast as the price level.
D)   Inﬂation increases the value of people's savings and encourages overspending on goods and services.

Question 5

If a family's income doesn't change, but inﬂation is 3.5 percent, then the

Accepted Answer

A)   family will need to spend more in order to maintain its standard of living.
B)   family will need to spend less in order to maintain its standard of living.
C)   family's standard of living is not affected by inﬂation.
D)   family will need to spend the same amount in order to maintain its standard of living.

Question 6

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. How will the ﬁrm respond to a positive demand shock if prices are inﬂexible?

Accepted Answer

A)   The ﬁrm will increase production to 650 computers per week and charge a price of $1,000.
B)   The ﬁrm will continue to produce 500 computers per week and charge a price of $1,000.
C)   The ﬁrm will cut production to 300 computers per week and charge a price of $1,000.
D)   The ﬁrm will cut production to 300 computers per week and charge a price of $600.

Question 7

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 8

(Consider This)  The U.S. recession that occurred in 2008 and 2009 represented a case where

Accepted Answer

A)   government policy intervention effectively offset the negative demand shock and minimized the effects on output and employment.
B)   prices were somewhat ﬂexible, so the impact of the demand shock was felt about the same in terms of price and output changes.
C)   prices were relatively ﬂexible, minimizing the impact on total output and employment.
D)   prices were relatively sticky and most of the impact was on total output.

Question 9

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 10

Any person without a job is considered to be unemployed.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

If prices of goods and services were free to quickly adjust, then

Accepted Answer

A)   a negative demand shock would lead to increased unemployment in the short run.
B)   a positive demand shock would lead to increased unemployment in the short run.
C)   a negative demand shock would have no short-run effect on unemployment.
D)   there would be no short-run demand shocks.

Question 14

The ﬁgure depicts a situation where

Accepted Answer

A)   prices are sticky, but output is ﬂexible.
B)   prices are ﬂexible, but output is constant.
C)   prices and output are both ﬂexible.
D)   prices are sticky and output is constant.

Question 15

If prices of goods and services quickly adjusted to demand shocks, then

Accepted Answer

A)   ﬁrms would ﬁnd it diﬃcult to produce at their optimal output rates.
B)   output rates would quickly adjust to changes in demand.
C)   ﬁrms would ﬁnd it easier to produce at their optimal output rates.
D)   the economy would experience severe short-run ﬂuctuation.

Question 16

Modern economic growth refers to countries that have experienced an increase in

Accepted Answer

A)   real GDP over time.
B)   nominal GDP over time.
C)   real output spread evenly across all sectors of the economy.
D)   output per person.

Question 17

Increasing investment in the present means forgoing future consumption.

Accepted Answer

A) True 
 B)False

Question 18

Macroeconomics is primarily concerned with studying two broad topics:

Accepted Answer

A)   long-run economic growth and short-run business cycles.
B)   the price of oil and gas abroad and prices of energy in the domestic market.
C)   the stock market and the housing market.
D)   household incomes and ﬁrms' proﬁts.

Question 19

Today, living standards in the richest part of the world are

Accepted Answer

A)   about ﬁve times higher than living standards in the poorest parts of the world.
B)   about 50 times higher than living standards in the poorest parts of the world.
C)   about the same as living standards in the poorest parts of the world.
D)   expected to double every 10 years.

Question 20

Economic growth deﬁned as rising GDP per person has occurred since the Roman Empire
(approximately 2,000 years ago).

Accepted Answer

A) True 
 B)False

Exam 6: An Introduction to Macroeconomics

In earlier centuries, the Roman and Chinese economies

Correct AnswerverifiedShow Answer

Macroeconomics is primarily concerned with studying two broad topics:

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Economic growth deﬁned as rising GDP per person has occurred since the Roman Empire (approximately 2,000 years ago).

Correct AnswerverifiedShow Answer

If a family's income doesn't change, but inﬂation is 3.5 percent, then the

Correct AnswerverifiedShow Answer

(Consider This) The U.S. recession that occurred in 2008 and 2009 represented a case where

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Price wars among ﬁrms

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

Correct AnswerverifiedShow Answer

Any person without a job is considered to be unemployed.

Correct AnswerverifiedShow Answer

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. How will the ﬁrm respond to a positive demand shock if prices are inﬂexible?

Correct AnswerverifiedShow Answer

If prices of goods and services were free to quickly adjust, then

Correct AnswerverifiedShow Answer

Modern economic growth refers to countries that have experienced an increase in

Correct AnswerverifiedShow Answer

Price stickiness tends to moderate over time.

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Which of the following is most likely to indicate higher unemployment?

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The ﬁgure depicts a situation where

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Increasing investment in the present means forgoing future consumption.

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If prices of goods and services quickly adjusted to demand shocks, then

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

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Why are economists concerned about inﬂation?

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Today, living standards in the richest part of the world are

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

Correct AnswerverifiedShow Answer

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