Question 1

High rates of unemployment

Accepted Answer

A)   indicate that society is not using a large portion of the talent and skills of its people.
B)   are associated with higher price levels.
C)   always correspond to a decrease in nominal GDP.
D)   do not affect an economy's output of goods and services.E) A) and D)
F) B) and C)

Question 2

Economists believe that most short-run ﬂuctuations

Accepted Answer

A)   are the result of demand shocks.
B)   are the result of supply shocks.
C)   will not last long because prices will adjust to equalize the quantities demanded and supplied of goods and services.
D)   will always have a negative effect on real GDP, inﬂation, and unemployment.E) B) and C)
F) A) and C)

Question 3

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) C) and D)
F) A) and B)

Question 4

Inﬂation is deﬁned as

Accepted Answer

A)   a general increase in the price level.
B)   the rate of growth in nominal GDP.
C)   a situation where all prices in the economy rise simultaneously.
D)   the growth phase of the business cycle.E) A) and C)
F) C) and D)

Question 5

Savings are generated whenever

Accepted Answer

A)   prices are rising.
B)   current spending exceeds current income.
C)   current income exceeds current spending.
D)   real GDP exceeds nominal GDP.E) A) and C)
F) None of the above

Question 6

If nominal GDP is rising faster than real GDP, then inﬂation must be occurring.

Accepted Answer

A) True 
 B)False

Question 7

If nominal GDP increases from one year to the next, then we know that the economy's output has
grown.

Accepted Answer

A) True 
 B)False

Question 8

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) B) and C)
F) A) and D)

Question 9

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 appear to be permanent.E) B) and C)
F) None of the above

Question 10

Saving in the economy

Accepted Answer

A)   occurs when current spending is less than current incomes.
B)   is generally not a determinant of future output.
C)   and investment are essentially the same concept.
D)   occurs when current consumption is more than current output.E) A) and C)
F) All of the above

Question 11

China's GDP per person in 2017 was less than one-third of U.S. GDP per person in the same year.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?

Accepted Answer

A)   Nominal GDP doubles.
B)   Nominal GDP is halved.
C)   Nominal GDP doesn't change.
D)   There is not enough information to determine what happens to nominal GDP.E) A) and B)
F) B) and D)

Question 13

Which of the following statements is accurate about most 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) B) and C)
F) C) and D)

Question 14

Situations in which ﬁrms expect one thing to happen but then something else happens are called

Accepted Answer

A)   recessions.
B)   shocks.
C)   business cycles.
D)   ﬂuctuations.E) B) and D)
F) A) and B)

Question 15

Investment is ultimately limited by the amount of savings in the economy.

Accepted Answer

A) True 
 B)False

Question 16

Which among the following countries had the highest GDP per person in 2017?

Accepted Answer

A)   Mexico
B)   India
C)   Russia
D)   ChinaE) A) and C)
F) None of the above

Question 17

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 D)
F) A) and C)

Question 18

"Households are the principal source of savings. But businesses are the main economic investors."
How does the pool of savings by households get transferred to businesses?

Accepted Answer

Banks and other ﬁnancial institutions (s...

Question 19

There is a trade-off between

Accepted Answer

A)   saving and investment.
B)   current production and future consumption.
C)   current consumption and future consumption.
D)   consumption and spending.E) B) and D)
F) All of the above

Question 20

What is the opportunity cost of unemployment for an economy?

Accepted Answer

The opportunity cost of unempl...

Exam 6: An Introduction to Macroeconomics

There is a trade-off between

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Rapid and sustained economic growth of nations

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Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?

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China's GDP per person in 2017 was less than one-third of U.S. GDP per person in the same year.

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Which of the following statements about price wars is true?

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Situations in which ﬁrms expect one thing to happen but then something else happens are called

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Which of the following statements is accurate about most economies?

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Which among the following countries had the highest GDP per person in 2017?

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

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If nominal GDP increases from one year to the next, then we know that the economy's output has grown.

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High rates of unemployment

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What is the opportunity cost of unemployment for an economy?

Correct AnswerverifiedThe opportunity cost of unempl...View AnswerShow Answer

Saving in the economy

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

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"Households are the principal source of savings. But businesses are the main economic investors." How does the pool of savings by households get transferred to businesses?

Correct AnswerverifiedBanks and other ﬁnancial institutions (s...View AnswerShow Answer

If nominal GDP is rising faster than real GDP, then inﬂation must be occurring.

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Economists believe that most short-run ﬂuctuations

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Inﬂation is deﬁned as

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Savings are generated whenever

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Investment is ultimately limited by the amount of savings in the economy.

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The opportunity cost of unempl...
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Banks and other ﬁnancial institutions (s...
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