Question 1

Prices tend to be sticky because:

Accepted Answer

A)   firms are worried that frequent price changes would annoy consumers.
B)   most firms have agreements with each other to fix prices at profit-maximizing levels.
C)   government controls most prices.
D)   foreign competition discourages domestic firms from price changes.E) A) and B)
F) A) and C) A

Question 2

Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market.

Accepted Answer

A) True 
 B)False

Question 3

(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 4

Advocates for a structural solution to the Great Recession argued that:

Accepted Answer

A)   government should cut taxes across the board to stimulate demand for goods and services.
B)   firms should be allowed to go bankrupt,allowing the economy to correct for resource misallocations.
C)   firms in financial distress should be taken over by the government and run for the public good.
D)   massive public works projects should be implemented to produce public capital,keep people employed,and help workers maintain job skills.E) A) and B)
F) B) and C)

Question 5

(Consider This) In 2008 and 2009,the United States experienced what has come to be known as the:

Accepted Answer

A)   Great Depression.
B)   Great Recession.
C)   Great Expansion.
D)   Great Stagnation.E) A) and C)
F) B) and C)

Question 6

The amount of investment in an economy is ultimately limited by the amount of savings in that economy.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

At the end of the summer driving season,the demand for gasoline typically declines.This is an example of a negative demand shock.

Accepted Answer

A) True 
 B)False

Question 9

The business cycle is primarily concerned with changes in the level of overall prices over time.

Accepted Answer

A) True 
 B)False  False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Prices for airline tickets change on average about once per month.This would suggest that airline ticket prices are:

Accepted Answer

A)   stuck.
B)   determined in a highly competitive market.
C)   relatively sticky.
D)   relatively flexible.E) A) and B)
F) A) and C)

Question 13

Kara's Kittens typically produces and sells at its optimal (lowest per-unit cost) level of 30 scratching posts per week.Kara's also maintains an inventory of 20 scratching posts.If prices are sticky and there is a positive demand shock this week resulting in demand for 40 scratching posts,we would expect Kara's to:

Accepted Answer

A)   sell the additional scratching posts out of its inventory and rebuild the inventory later when a negative demand shock occurs.
B)   permanently expand production to 40 scratching posts per week.
C)   raise prices on scratching posts.
D)   introduce a new line of scratching posts.E) None of the above
F) A) and B)

Question 14

(Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors.Economists would:

Accepted Answer

A)   consider this to be an economic investment.
B)   not consider this to be an economic investment because Toyota is less efficient than Chrysler.
C)   not consider this to be an economic investment because no new capital is created through the purchase.
D)   not consider this to be an economic investment because there is no way to know how it will affect stock holdings in the two companies.E) A) and C)
F) A) and B)

Question 15

Real GDP measures the:

Accepted Answer

A)   total dollar value of all goods and services produced within the borders of a country using current prices.
B)   value of final goods and services produced within the borders of a country,corrected for price changes.
C)   total dollar value of all goods and services consumed within the borders of a country,adjusted for price changes.
D)   value of all goods and services produced in the world,using current prices.E) A) and B)
F) A) and C)

Question 16

Banks and other financial institutions:

Accepted Answer

A)   are the primary investors in equipment,factories,and other capital goods.
B)   lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity.
C)   promote economic growth by helping to direct household saving to businesses that want to invest.
D)   often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods.E) A) and D)
F) None of the above

Question 17

The business cycle depicts:

Accepted Answer

A)   fluctuations in the general price level.
B)   the phases a business goes through from when it first opens to when it finally closes.
C)   the evolution of technology over time.
D)   short-run fluctuations in output and employment.E) None of the above
F) A) and B)

Question 18

Economists believe that expectations have little impact on macroeconomic outcomes.

Accepted Answer

A) True 
 B)False

Question 19

China's GDP per person in 2011 was about one-third of U.S.GDP per person in the same year.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 25: An Introduction to Macroeconomics

Prices tend to be sticky because:

Correct Answer
verified
A

Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market.

Correct Answer
verified

(Consider This)If a farmer purchases 10 acres of farmland from a neighboring farmer,this would be considered an economic investment.

Correct Answer
verified

Advocates for a structural solution to the Great Recession argued that:

Correct Answer
verified

(Consider This) In 2008 and 2009,the United States experienced what has come to be known as the:

Correct Answer
verified

The amount of investment in an economy is ultimately limited by the amount of savings in that economy.

Correct Answer
verified

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

Correct Answer
verified

At the end of the summer driving season,the demand for gasoline typically declines.This is an example of a negative demand shock.

Correct Answer
verified

The business cycle is primarily concerned with changes in the level of overall prices over time.

Correct Answer
verified
False

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

Correct Answer
verified

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

Correct Answer
verified

Prices for airline tickets change on average about once per month.This would suggest that airline ticket prices are:

Correct Answer
verified

Correct Answer
verified

(Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors.Economists would:

Correct Answer
verified

Real GDP measures the:

Correct Answer
verified

Banks and other financial institutions:

Correct Answer
verified

The business cycle depicts:

Correct Answer
verified

Economists believe that expectations have little impact on macroeconomic outcomes.

Correct Answer
verified

China's GDP per person in 2011 was about one-third of U.S.GDP per person in the same year.

Correct Answer
verified

The overall behavior of the economy:

Correct Answer
verified
B

Exam 25: An Introduction to Macroeconomics

Prices tend to be sticky because:

Correct AnswerverifiedA

Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market.

Correct AnswerverifiedShow 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

Advocates for a structural solution to the Great Recession argued that:

Correct AnswerverifiedShow Answer

(Consider This) In 2008 and 2009,the United States experienced what has come to be known as the:

Correct AnswerverifiedShow Answer

The amount of investment in an economy is ultimately limited by the amount of savings in that economy.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

At the end of the summer driving season,the demand for gasoline typically declines.This is an example of a negative demand shock.

Correct AnswerverifiedShow Answer

The business cycle is primarily concerned with changes in the level of overall prices over time.

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Prices for airline tickets change on average about once per month.This would suggest that airline ticket prices are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors.Economists would:

Correct AnswerverifiedShow Answer

Real GDP measures the:

Correct AnswerverifiedShow Answer

Banks and other financial institutions:

Correct AnswerverifiedShow Answer

The business cycle depicts:

Correct AnswerverifiedShow Answer

Economists believe that expectations have little impact on macroeconomic outcomes.

Correct AnswerverifiedShow Answer

China's GDP per person in 2011 was about one-third of U.S.GDP per person in the same year.

Correct AnswerverifiedShow Answer

The overall behavior of the economy:

Correct AnswerverifiedB

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A

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False

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B