Question 1

Demand shocks cause problems in the macroeconomy primarily because prices are sticky.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Real GDP is calculated using current prices of outputs.

Accepted Answer

A) True 
 B)False

Question 4

The term "shock"

Accepted Answer

A)   always refers to an unexpectedly bad event.
B)   always refers to an increase in inﬂation.
C)   does not tell us whether what has happened is unexpectedly bad or unexpectedly good.
D)   always refers to a decrease in real GDP and an increase in unemployment.

Question 5

The amount of investment is ultimately limited by the amount of

Accepted Answer

A)   production.
B)   saving.
C)   employment.
D)   inﬂation.

Question 6

In the very short run, demand shocks will tend to change the level of output but have little effect on
prices.

Accepted Answer

A) True 
 B)False

Question 7

Investment happens when

Accepted Answer

A)   current income is greater than current spending.
B)   current consumption is greater than current output.
C)   resources are devoted toward increasing current output.
D)   resources are devoted toward increasing future output.

Question 8

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 9

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. What happens to the ﬁrm's inventory of computers if there is a negative demand
Shock and prices are inﬂexible?

Accepted Answer

A)   The ﬁrm's inventories will not change.
B)   The ﬁrm's inventories will increase by 200 computers per week.
C)   The ﬁrm's inventories will decrease by 150 computers per week.
D)   The ﬁrm's inventories will increase by 350 computers per week.

Question 10

How does an economy adjust to demand shocks when prices are inﬂexible?

Accepted Answer

If demand falls off for many goods and s...

Question 11

In 2017, output (GDP)  per person in the U.S. was about

Accepted Answer

A)   $32,000.
B)   $21,000.
C)   $60,000.
D)   $76,000.

Question 12

High rates of unemployment are undesirable because they

Accepted Answer

A)   always lead to a decline in nominal GDP.
B)   are associated with higher levels of crime and illness.
C)   cannot be reduced through government policy.
D)   are associated with increases in the price level.

Question 13

Economists refer to purchases of stocks and bonds as "investment."

Accepted Answer

A) True 
 B)False

Question 14

Macroeconomics is mostly focused on

Accepted Answer

A)   the individual markets within an economy.
B)   only the largest industries in the economy.
C)   the economy as a whole.
D)   why speciﬁc businesses fail.

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

Under modern economic growth, the annual average increase in output per person is

Accepted Answer

A)   often not large, perhaps 2 percent per year.
B)   often large, perhaps greater than 5 percent per year.
C)   often small, perhaps less than 1 percent per year.
D)   often the same in rich countries as in poor countries.

Question 17

Who are the main economic investors in a market economy?

Accepted Answer

A)   savers
B)   government
C)   businesses
D)   households

Question 18

Refer to the ﬁgures. Which ﬁgure(s)  represent(s)  a situation where negative demand shocks can result in a recession?

Accepted Answer

A)   A only
B)   B only
C)   both A and B
D)   neither A nor B

Question 19

(Consider This) What is the difference between economic investment and ﬁnancial investment? Give
an example for each type of investment.

Accepted Answer

An economic investment relates to the ex...

Question 20

The Industrial Revolution began in

Accepted Answer

A)   the U.S. in the mid-1900s
B)   England in the late 1700s.
C)   the Roman Empire around 500 B.C.
D)   China in A.D. 1800.

Exam 6: An Introduction to Macroeconomics

Real GDP is calculated using current prices of outputs.

Correct AnswerverifiedShow Answer

Demand shocks cause problems in the macroeconomy primarily because prices are sticky.

Correct AnswerverifiedShow Answer

Economists refer to purchases of stocks and bonds as "investment."

Correct AnswerverifiedShow Answer

Macroeconomics is mostly focused on

Correct AnswerverifiedShow Answer

Who are the main economic investors in a market economy?

Correct AnswerverifiedShow Answer

In the very short run, demand shocks will tend to change the level of output but have little effect on prices.

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

The amount of investment is ultimately limited by the amount of

Correct AnswerverifiedShow Answer

How does an economy adjust to demand shocks when prices are inﬂexible?

Correct AnswerverifiedIf demand falls off for many goods and s...View AnswerShow Answer

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where negative demand shocks can result in a recession?

Correct AnswerverifiedShow Answer

Investment happens when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(Consider This) What is the difference between economic investment and ﬁnancial investment? Give an example for each type of investment.

Correct AnswerverifiedAn economic investment relates to the ex...View AnswerShow 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

In 2017, output (GDP) per person in the U.S. was about

Correct AnswerverifiedShow Answer

The term "shock"

Correct AnswerverifiedShow Answer

The Industrial Revolution began in

Correct AnswerverifiedShow Answer

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. What happens to the ﬁrm's inventory of computers if there is a negative demand Shock and prices are inﬂexible?

Correct AnswerverifiedShow Answer

Under modern economic growth, the annual average increase in output per person is

Correct AnswerverifiedShow Answer

High rates of unemployment are undesirable because they

Correct AnswerverifiedShow Answer

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If demand falls off for many goods and s...
View Answer

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An economic investment relates to the ex...
View Answer

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