Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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) All of the above
F) None of the above

Question 3

Rapid and sustained economic growth of nations

Accepted Answer

A)  started around the time of Jesus.
B)  started a few centuries before the time of Jesus.
C)  was triggered by the establishment of the Roman Empire in the first millennium.
D)  is a relatively modern phenomenon.E) A) and B)
F) C) and D)

Question 4

Suppose that prices are sticky in the short-run.Which of the following best describes the economy's response to a positive 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.E) B) and D)
F) None of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.E) A) and B)
F) A) and C)

Question 7

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 8

In the very short run, firms tend to respond to demand shocks by changing their prices.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about price wars is true?

Accepted Answer

A)  Firms that have to deal with the possibility of price wars often have extremely flexible prices.
B)  Firms that do not have to deal with the possibility of price wars often have sticky prices.
C)  Price wars tend to increase the short-run flexibility of prices.
D)  Firms that have to deal with the possibility of price wars often have sticky prices.E) A) and B)
F) None of the above

Question 10

Suppose a small economy produces only MP3 players.In year one, 10,000 MP3 players are produce 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) B) and C)
F) B) and D)

Question 11

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except

Accepted Answer

A)  real gross domestic product.
B)  inflation statistics.
C)  prices of oil and gasoline.
D)  unemployment data.E) A) and D)
F) A) and C)

Question 12

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.E) A) and B)
F) A) and D)

Question 13

In situations of sticky prices and negative demand shocks, we would expect firms to

Accepted Answer

A)  deplete inventories before increasing production.
B)  reduce production before building up inventories.
C)  build up inventories before reducing production.
D)  lower prices before reducing production or building up inventories.E) A) and D)
F) None of the above

Question 14

Financial institutions reward savers with the following, except

Accepted Answer

A)  interest.
B)  wages.
C)  dividends.
D)  capital gains.E) None of the above
F) All of the above

Question 15

Between 2007 and 2009, the unemployment rate in the U.S.

Accepted Answer

A)  fell from 6.5 percent to 4.5 percent.
B)  rose from 4.6 percent to 10.1 percent.
C)  rose slightly from 5.5 percent to 7.4 percent.
D)  remained stagnant at about 7 percent.E) B) and C)
F) A) and C)

Question 16

Demand shocks may be positive or negative.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is an example of a supply shock?

Accepted Answer

A)  A surge in consumer optimism prompts increased buying of goods and services.
B)  A surprise tax rebate from the government gives people more money to spend.
C)  A dramatic increase in energy prices increases production costs for firms in the economy.
D)  Government increases spending on education.E) A) and C)
F) B) and C)

Question 18

Economists use the word investment to refer to the purchase of assets such as stocks, bonds, and real estate.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about price stickiness or flexibility is true?

Accepted Answer

A)  Prices of many raw materials are less flexible than the prices of final goods and services.
B)  Prices of many raw materials are much more flexible than the prices of final goods and services.
C)  Prices of many raw materials are about as flexible as the prices of final goods and services.
D)  Prices of many raw materials are only slightly more flexible than the prices of final goods and services.E) A) and C)
F) All of the above

Question 20

Economists believe that most short-run fluctuations are the result of supply shocks.

Accepted Answer

A) True 
 B)False

Exam 26: An Introduction to Macroeconomics

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

In the very short run, firms tend to respond to demand shocks by changing their prices.

Correct AnswerverifiedShow Answer

Financial institutions reward savers with the following, except

Correct AnswerverifiedShow Answer

Between 2007 and 2009, the unemployment rate in the U.S.

Correct AnswerverifiedShow Answer

Demand shocks may be positive or negative.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists believe that most short-run fluctuations are the result of supply shocks.

Correct AnswerverifiedShow Answer

Macroeconomics is primarily concerned with studying two broad topics:

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

In situations of sticky prices and negative demand shocks, we would expect firms to

Correct AnswerverifiedShow Answer

Which of the following statements about price stickiness or flexibility is true?

Correct AnswerverifiedShow Answer

Which of the following is an example of a supply shock?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about price wars is true?

Correct AnswerverifiedShow Answer

Economists use the word investment to refer to the purchase of assets such as stocks, bonds, and real estate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except

Correct AnswerverifiedShow Answer

Rapid and sustained economic growth of nations

Correct AnswerverifiedShow Answer

Suppose a small economy produces only MP3 players.In year one, 10,000 MP3 players are produce 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

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