Question 1

According to the Austrian School,the best explanation for what caused the Great Recession was that:

Accepted Answer

A)   tax rates that were too high discouraged spending.
B)   government spending that was too low created insufficient public capital.
C)   interest rates that were too low induced excessive borrowing.
D)   interest rates that were too high discouraged firm borrowing and investment.

Question 2

Which of the following statements best describes price flexibility in the economy?

Accepted Answer

A)   Prices tend to be sticky in the short run and stuck in the long run.
B)   Prices tend to be just as sticky in the short run as in the long run.
C)   Prices tend to be sticky in the short run but become more flexible over time.
D)   Prices tend to be flexible in the short run but become more sticky over time.

Question 3

Which of the following statements is most accurate about advanced economies?

Accepted Answer

A)   Economies experience a positive growth trend over the short run but experience significant variability in the long run.
B)   Economies experience a positive growth trend over the long run but experience significant variability in the short run.
C)   Economies experience positive and stable growth over both the long run and short run.
D)   Economies experience little long-run growth in output but can experience significant growth in the short run.

Question 4

Suppose that Techno TV produces LCD televisions.At a price of $2,000 per television,Techno determines that its optimal output is 3,000 television sets per week.If prices are sticky and fears of a recession reduce demand for LCD televisions,we would expect Techno to:

Accepted Answer

A)   reduce output in the long run.
B)   reduce output in the short run.
C)   raise prices in the short run to compensate for lost revenue.
D)   lower prices in the short run to offset the reduced demand.

Question 5

Economists and policymakers are generally more concerned about nominal GDP than real GDP.

Accepted Answer

A) True 
 B)False

Question 6

Demand shocks may be positive or negative.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

Which of the following countries would economists say definitively is achieving modern economic growth?

Accepted Answer

A)   Zimbabwe experiences a 5.6 percent increase in nominal GDP.
B)   South Africa experiences a 4.2 percent increase in real GDP.
C)   Ghana experiences a 3.6 percent increase in nominal GDP per person.
D)   Nigeria experiences a 2.7 percent increase in real GDP per person.

Question 10

Inflation reduces the purchasing power of a person's income and savings.

Accepted Answer

A) True 
 B)False

Question 11

The term "recession" describes a situation where:

Accepted Answer

A)   inflation rates exceed normal levels.
B)   output and living standards decline.
C)   an economy's ability to produce is destroyed.
D)   government takes a less active role in economic matters.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

For an economy to increase investment,it must:

Accepted Answer

A)   increase saving.
B)   increase present consumption.
C)   buy more stocks and bonds.
D)   increase nominal GDP.

Question 14

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 15

Prices tend to be sticky partially because sellers know that consumers prefer stable prices.

Accepted Answer

A) True 
 B)False

Question 16

The average number of months between price changes for gasoline is:

Accepted Answer

A)   0.2.
B)   0.6.
C)   1.0.
D)   1.8.

Question 17

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.

Question 18

(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 19

Increasing investment in the present means forgoing future consumption.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 25: An Introduction to Macroeconomics

According to the Austrian School,the best explanation for what caused the Great Recession was that:

Correct AnswerverifiedShow Answer

Which of the following countries would economists say definitively is achieving modern economic growth?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is most accurate about advanced economies?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that Techno TV produces LCD televisions.At a price of $2,000 per television,Techno determines that its optimal output is 3,000 television sets per week.If prices are sticky and fears of a recession reduce demand for LCD televisions,we would expect Techno to:

Correct AnswerverifiedShow Answer

Economists and policymakers are generally more concerned about nominal GDP than real GDP.

Correct AnswerverifiedShow Answer

Which of the following statements best describes price flexibility in the economy?

Correct AnswerverifiedShow Answer

Demand shocks may be positive or negative.

Correct AnswerverifiedShow Answer

For an economy to increase investment,it must:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Shocks to the economy occur when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inflation reduces the purchasing power of a person's income and savings.

Correct AnswerverifiedShow Answer

Macroeconomics is mostly focused on:

Correct AnswerverifiedShow Answer

Prices tend to be sticky partially because sellers know that consumers prefer stable prices.

Correct AnswerverifiedShow Answer

The term "recession" describes a situation where:

Correct AnswerverifiedShow Answer

Higher rates of unemployment are linked with:

Correct AnswerverifiedShow Answer

Increasing investment in the present means forgoing future consumption.

Correct AnswerverifiedShow Answer

The average number of months between price changes for gasoline is:

Correct AnswerverifiedShow Answer

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