Question 1

If consumers become pessimistic, the economy is likely to experience a

Accepted Answer

A) negative demand shock. 
B) positive demand shock. 
C) negative supply shock. 
D) positive supply shock. 
A) negative demand shock. 
B) positive demand shock. 
C) negative supply shock. 
D) positive supply shock.

Question 2

Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries.

Accepted Answer

A) True 
 B)False

Question 3

Higher rates of unemployment are linked with

Accepted Answer

A) greater political stability because the employed tend to be more politically active. 
B) higher crime rates, as the unemployed seek to replace lost income. 
C) lower rates of heart disease, as the unemployed have eliminated job stress. 
D) improvements in overall health, as the unemployed have more leisure time to be physically active. 
A) greater political stability because the employed tend to be more politically active. 
B) higher crime rates, as the unemployed seek to replace lost income. 
C) lower rates of heart disease, as the unemployed have eliminated job stress. 
D) improvements in overall health, as the unemployed have more leisure time to be physically active.

Question 4

Increasing investment in the present means forgoing future consumption.

Accepted Answer

A) True 
 B)False

Question 5

In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.

Accepted Answer

A) True 
 B)False

Question 6

A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession.

Accepted Answer

A) True 
 B)False

Question 7

Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Increased present saving

Accepted Answer

A) comes at the expense of reduced current investment. 
B) comes at the expense of reduced current consumption. 
C) can only occur if the government increases the amount of money in circulation. 
D) is only possible if the economy is experiencing positive growth in real GDP. 
A) comes at the expense of reduced current investment. 
B) comes at the expense of reduced current consumption. 
C) can only occur if the government increases the amount of money in circulation. 
D) is only possible if the economy is experiencing positive growth in real GDP.

Question 10

Which of the following best explains why prices tend to be inflexible even when demand changes?

Accepted Answer

A) Government regulations limit the number of times a firm can change prices in a year. 
B) In most industries the profit-maximizing price does not change even when demand changes. 
C) Production costs do not tend to change when a firm varies its level of output. 
D) Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals. 
A) Government regulations limit the number of times a firm can change prices in a year. 
B) In most industries the profit-maximizing price does not change even when demand changes. 
C) Production costs do not tend to change when a firm varies its level of output. 
D) Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.

Question 11

Nominal gross domestic product

Accepted Answer

A) is not affected by the level of inflation. 
B) changes only when there is a change in output. 
C) changes only when there is a change in the price level. 
D) can change when there is a change in either output or the price level. 
A) is not affected by the level of inflation. 
B) changes only when there is a change in output. 
C) changes only when there is a change in the price level. 
D) can change when there is a change in either output or the price level.

Question 12

Explanations about what caused the Great Recession differ sharply among economists.The so-called Minsky Explanation involves the following factors, except

Accepted Answer

A) a massive euphoric bubble in housing prices that eventually burst. 
B) a huge negative demand shock in the economy. 
C) flexible average price levels in the economy. 
D) excessive access to home-mortgage loans. 
A) a massive euphoric bubble in housing prices that eventually burst. 
B) a huge negative demand shock in the economy. 
C) flexible average price levels in the economy. 
D) excessive access to home-mortgage loans.

Question 13

Inflation refers to an increase in the overall level of prices.

Accepted Answer

A) True 
 B)False

Question 14

Nominal GDP measures a nation's output in current year prices.

Accepted Answer

A) True 
 B)False

Question 15

Economists refer to purchases of stocks and bonds as "investment."

Accepted Answer

A) True 
 B)False

Question 16

If an economy wants to increase its current level of investment, it must

Accepted Answer

A) sacrifice future consumption. 
B) print more money. 
C) offer more stocks and bonds to financial investors. 
D) sacrifice current consumption. 
A) sacrifice future consumption. 
B) print more money. 
C) offer more stocks and bonds to financial investors. 
D) sacrifice current consumption.

Question 17

For which of the following goods are services are prices least sticky?

Accepted Answer

A) taxi fares 
B) haircuts 
C) microwave ovens 
D) airline tickets 
A) taxi fares 
B) haircuts 
C) microwave ovens 
D) airline tickets

Question 18

(Last Word) According to the Austrian School, the best explanation for what caused the Great Recession was that

Accepted Answer

A) tax rates that were too high discouraged spending. 
B) government spending that was too low created insufficient public capital. 
C) interest rates that were too low induced excessive borrowing. 
D) interest rates that were too high discouraged firm borrowing and investment. 
A) tax rates that were too high discouraged spending. 
B) government spending that was too low created insufficient public capital. 
C) interest rates that were too low induced excessive borrowing. 
D) interest rates that were too high discouraged firm borrowing and investment.

Question 19

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 expected. 
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 expected.

Question 20

If a family's income increases by 5 percent at the same time that inflation is 3.5 percent, then the

Accepted Answer

A) family will need to spend more in order to maintain its standard of living. 
B) family will need to spend less in order to maintain its standard of living. 
C) family's standard of living is not affected by inflation. 
D) family will need to spend the same amount in order to maintain its standard of living. 
A) family will need to spend more in order to maintain its standard of living. 
B) family will need to spend less in order to maintain its standard of living. 
C) family's standard of living is not affected by inflation. 
D) family will need to spend the same amount in order to maintain its standard of living.

Exam 26: An Introduction to Macroeconomics

If consumers become pessimistic, the economy is likely to experience a

Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries.

Higher rates of unemployment are linked with

Increasing investment in the present means forgoing future consumption.

In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.

A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession.

Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy.

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

Increased present saving

Which of the following best explains why prices tend to be inflexible even when demand changes?

Nominal gross domestic product

Explanations about what caused the Great Recession differ sharply among economists.The so-called Minsky Explanation involves the following factors, except

Inflation refers to an increase in the overall level of prices.

Nominal GDP measures a nation's output in current year prices.

Economists refer to purchases of stocks and bonds as "investment."

If an economy wants to increase its current level of investment, it must

For which of the following goods are services are prices least sticky?

(Last Word) According to the Austrian School, the best explanation for what caused the Great Recession was that

Inventories rise when

If a family's income increases by 5 percent at the same time that inflation is 3.5 percent, then the

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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