Question 1

In macroeconomic models, prices are assumed to be completely inflexible in

Accepted Answer

A)  the very short run only.
B)  the short run and remains so over time.
C)  the very long run.
D)  situations when the changes in demand look to be permanent.E) A) and D)
F) A) and C)

Question 2

Which of the following is not an effect of inflation that is troublesome to consumers?

Accepted Answer

A)  Household incomes may be rising slower than the overall prices.
B)  The purchasing power of people's savings would decrease.
C)  Workers' wages may be rising faster than the overall price level.
D)  Their standard of living would fall if their household has a fixed nominal income.E) C) and D)
F) A) and C)

Question 3

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

Accepted Answer

A)  unemployment will likely increase.
B)  unemployment will likely decrease.
C)  unemployment could increase or decrease, as its direction cannot be predicted based on inventories.
D)  real GDP will likely decrease.E) A) and D)
F) B) and C)

Question 4

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

Accepted Answer

A)  Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico.
B)  Consumers become worried about job loss and buy fewer goods and services than expected.
C)  Floods in the Midwest destroy crops.
D)  The federal government unexpectedly requires automobile producers to raise fuel efficiency standards.E) None of the above
F) A) and B)

Question 5

Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness.

Accepted Answer

A) True 
 B)False

Question 6

An unexpected negative demand shock would lead to a decrease in inventories.

Accepted Answer

A) True 
 B)False

Question 7

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Accepted Answer

A)  Nominal and real GDP would both rise.
B)  Nominal and real GDP would both be unchanged.
C)  Real GDP would rise, but nominal GDP would be unchanged.
D)  Nominal GDP would rise, but real GDP would be unchanged.E) None of the above
F) A) and B)

Question 8

Which of the following is the best example of investment as defined by economists?

Accepted Answer

A)  A restaurant owner buys a freezer to store ingredients for the restaurant meals.
B)  A college professor buys a truck to drive around in.
C)  A business manager purchases stock on the New York Stock Exchange.
D)  A worker deposits money into a long-term retirement account.E) All of the above
F) A) and B)

Question 9

Economists believe that expectations have little impact on macroeconomic outcomes.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

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.E) All of the above
F) A) and B)

Question 12

China's GDP per person in 2014 was about one-third of U.S.GDP per person in the same year.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

What effect will a negative supply shock have on the main measures of economic performance?

Accepted Answer

A)  Real GDP will increase, inflation will increase, and unemployment will decrease.
B)  Real GDP will decrease, inflation will decrease, and unemployment will increase.
C)  Real GDP will decrease, inflation will increase, and unemployment will increase.
D)  Real GDP will increase, inflation will decrease, and unemployment will decrease.E) A) and D)
F) All of the above

Question 15

Firms that choose to use a fixed-price policy

Accepted Answer

A)  will tend to experience larger inventory changes than firms that follow a flexible-price policy.
B)  will tend to experience smaller inventory changes than firms that follow a flexible-price policy.
C)  find that their inventories do not respond to demand shocks.
D)  will not hold inventories.E) B) and D)
F) A) and C)

Question 16

The overall behavior of the economy

Accepted Answer

A)  is remarkably stable over time.
B)  differs over time as prices become increasingly flexible in the months and years following a shock.
C)  differs over time as prices become increasingly sticky in the months and years following a shock.
D)  is easily controlled and stabilized by government policy.E) All of the above
F) None of the above

Question 17

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.E) All of the above
F) A) and D)

Question 18

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.E) A) and B)
F) All of the above

Question 19

Which of the following statements is true?

Accepted Answer

A)  Short-run economic fluctuations are made worse because prices are flexible.
B)  Short-run economic fluctuations would be less severe if prices were inflexible.
C)  If prices were fully inflexible, there would be no short-run economic fluctuations.
D)  If prices were fully flexible, there would be no short-run economic fluctuations.E) A) and B)
F) All of the above

Question 20

Which of the following markets is most likely to exhibit extremely flexible prices?

Accepted Answer

A)  the oil market
B)  the market for taxi services
C)  the market for newspapers
D)  the market for coin-operated laundryE) None of the above
F) A) and C)

Exam 26: An Introduction to Macroeconomics

China's GDP per person in 2014 was about one-third of U.S.GDP per person in the same year.

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

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Which of the following is not an effect of inflation that is troublesome to consumers?

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In macroeconomic models, prices are assumed to be completely inflexible in

Correct AnswerverifiedShow Answer

Which of the following is the best example of investment as defined by economists?

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What effect will a negative supply shock have on the main measures of economic performance?

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Which of the following markets is most likely to exhibit extremely flexible prices?

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

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

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If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Correct AnswerverifiedShow Answer

An unexpected negative demand shock would lead to a decrease in inventories.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

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

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Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness.

Correct AnswerverifiedShow Answer

Economists believe that expectations have little impact on macroeconomic outcomes.

Correct AnswerverifiedShow Answer

Firms that choose to use a fixed-price policy

Correct AnswerverifiedShow Answer

The overall behavior of the economy

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Shocks to the economy occur when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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