Question 1

Under modern economic growth, the annual average increase in output per person is:

Accepted Answer

A)   Often not large, perhaps 2% per year
B)   Often large, perhaps greater than 5% per year
C)   Often small, perhaps less than 1% per year
D)   Often the same in rich countries as in poor countriesE) A) and C)
F) A) and D)

Question 2

An increase in worker productivity will lead to a:

Accepted Answer

A)   Negative demand shock
B)   Positive demand shock
C)   Negative supply shock
D)   Positive supply shockE) All of the above
F) A) and D)

Question 3

Inventories rise when:

Accepted Answer

A)   Actual demand for output is more than expected
B)   Actual demand for output is less than expected
C)   Actual supply of output is less than expected
D)   Actual demand for output is about the same as expectedE) B) and D)
F) None of the above

Question 4

Economists are sharply divided over how to best fight the Great Recession. The majority of economists favor the "Stimulus Solution," which involves:

Accepted Answer

A)   Relying on the invisible hand of the market to set things right
B)   Government actions to increase the total demand for output in the economy
C)   Making prices become more flexible so that equilibrium can be attained once more
D)   Stimulus from abroad through international trade and treatiesE) A) and D)
F) All of the above

Question 5

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

Accepted Answer

A)   Real GDP doubles
B)   Real GDP is halved
C)   Real GDP doesn't change
D)   There is not enough information to determine what happens to real GDPE) C) and D)
F) A) and C)

Question 6

2 to D3 in graph B B)  The shift from D2 to D3 in graph A C)  The shift from D2 to D1 in graph B D)  The shift from D2 to D1 in graph A" class="answers-bank-image d-inline" rel="preload" > Refer to the graphs above. Which of the following best represents negative demand shock when prices are inflexible?

Accepted Answer

A)   The shift from D2 to D3 in graph B
B)   The shift from D2 to D3 in graph A
C)   The shift from D2 to D1 in graph B
D)   The shift from D2 to D1 in graph AE) B) and C)
F) All of the above

Question 7

Who are the main economic investors in a market economy?

Accepted Answer

A)   Savers
B)   Government
C)   Businesses
D)   HouseholdsE) A) and B)
F) A) and C)

Question 8

High rates of unemployment are undesirable because they:

Accepted Answer

A)   Always lead to a decline in nominal GDP
B)   Are associated with higher levels crime and illness
C)   Cannot be reduced through government policy
D)   Are associated with increases in the price levelE) All of the above
F) B) and C)

Question 9

For many decades prior to the Industrial Revolution, the standards of living in England and China:

Accepted Answer

A)   Remained roughly constant
B)   Increased steadily
C)   Declined substantially
D)   Increased many times overE) B) and D)
F) B) and C)

Question 10

In 2011, output per person in the U.S. was about:

Accepted Answer

A)   $32,000
B)   $21,000
C)   $48,000
D)   $65,000E) A) and D)
F) A) and B)

Question 11

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

Accepted Answer

A)   Fell from 6% to 4.5%
B)   Rose from 4.7% to 10%
C)   Rose slightly from 5.5% to 7%
D)   Remained stagnant at about 7%E) None of the above
F) B) and D)

Question 12

Which of the following statements is true?

Accepted Answer

A)   Financial investment refers to the creation and expansion of business enterprises
B)   Economic investment refers to the creation and expansion of business enterprises
C)   Economic investment refers to the purchase of assets such as stocks, bonds, and real estate
D)   Both economic investment and financial investment refer to the purchase of assets such as stocks, bonds, and real estateE) A) and B)
F) A) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Nominal gross domestic product:

Accepted Answer

A)   Is a measure of the overall level of prices
B)   Measures the value of final output produced within a nation in one year, using current prices
C)   Measures the value of final output produced within a nation in one year, adjusted for changing prices
D)   Only changes when the level of output changesE) A) and D)
F) C) and D)

Question 15

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 phenomenonE) A) and D)
F) C) and D)

Question 16

2 to D3 in graph B B)  The shift from D2 to D3 in graph A C)  The shift from D2 to D1 in graph B D)  The shift from D2 to D1 in graph A" class="answers-bank-image d-inline" rel="preload" > Refer to the graphs above. Which of the following best represents a positive demand shock when prices are flexible?

Accepted Answer

A)   The shift from D2 to D3 in graph B
B)   The shift from D2 to D3 in graph A
C)   The shift from D2 to D1 in graph B
D)   The shift from D2 to D1 in graph AE) All of the above
F) A) and D)

Question 17

In earlier centuries, the Roman and Chinese economies:

Accepted Answer

A)   Expanded in such a way that output per person increased
B)   Expanded in such a way that output per person decreased
C)   Declined in such a way that output per person decreased
D)   Expanded but output per person remained virtually stagnantE) B) and D)
F) A) and B)

Question 18

Economists are sharply divided over how to best fight the Great Recession. A vocal minority of economists favor the "Structural Solution," arguing that the economy needs to undergo some structural adjustments and:

Accepted Answer

A)   Relying on the invisible hand of the market to reallocate resources, by letting weak firms die out quickly
B)   Government taking serious actions to increase the total demand for output in the economy
C)   Fixing prices so that consumers can afford the basic stuff they need, and also to control inflation
D)   Setting up social programs and welfare structures, to help out those who are suffering most from the recessionE) All of the above
F) B) and C)

Question 19

Suppose that prices are sticky in the short-run. Which of the following best describes the economy's response to a negative 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 C)
F) All of the above

Question 20

Economists are in general agreement as to what caused the Great Recession and how to properly deal with it.

Accepted Answer

A) True 
 B)False

Exam 6: An Introduction to Macroeconomics

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

Correct AnswerverifiedShow Answer

Under modern economic growth, the annual average increase in output per person is:

Correct AnswerverifiedShow Answer

Economists are in general agreement as to what caused the Great Recession and how to properly deal with it.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists are sharply divided over how to best fight the Great Recession. The majority of economists favor the "Stimulus Solution," which involves:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists are sharply divided over how to best fight the Great Recession. A vocal minority of economists favor the "Structural Solution," arguing that the economy needs to undergo some structural adjustments and:

Correct AnswerverifiedShow Answer

An increase in worker productivity will lead to a:

Correct AnswerverifiedShow Answer

Rapid and sustained economic growth of nations:

Correct AnswerverifiedShow Answer

In 2011, output per person in the U.S. was about:

Correct AnswerverifiedShow Answer

Nominal gross domestic product:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the graphs above. Which of the following best represents a positive demand shock when prices are flexible?

Correct AnswerverifiedShow Answer

Refer to the graphs above. Which of the following best represents negative demand shock when prices are inflexible?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

In earlier centuries, the Roman and Chinese economies:

Correct AnswerverifiedShow Answer

Who are the main economic investors in a market economy?

Correct AnswerverifiedShow Answer

Inventories rise when:

Correct AnswerverifiedShow Answer

For many decades prior to the Industrial Revolution, the standards of living in England and China:

Correct AnswerverifiedShow Answer

High rates of unemployment are undesirable because they:

Correct AnswerverifiedShow Answer

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