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

Refer to the ﬁgure. Assuming this market is representative of the economy as a whole, a positive demand shock will

Accepted Answer

A)  increase both the price level and the quantity of output produced. 
B)  increase output but leave prices unchanged. 
C)  lower the price level but leave output unchanged. 
D)  raise the price level but leave output unchanged. 
A)  increase both the price level and the quantity of output produced. 
B)  increase output but leave prices unchanged. 
C)  lower the price level but leave output unchanged. 
D)  raise the price level but leave output unchanged.

Question 3

The Great Recession illustrated the situation where a negative demand shock occurred and

Accepted Answer

A)  prices adjusted but the output level was inﬂexible. 
B)  the economy's overall price level was very ﬂexible. 
C)  the economy's overall price level was "sticky." 
D)  prices and production were both "sticky," or inﬂexible. 
A)  prices adjusted but the output level was inﬂexible. 
B)  the economy's overall price level was very ﬂexible. 
C)  the economy's overall price level was "sticky." 
D)  prices and production were both "sticky," or inﬂexible.

Question 4

Economists believe that expectations have little impact on macroeconomic outcomes.

Accepted Answer

A) True 
 B)False

Question 5

Unemployment describes the condition where

Accepted Answer

A)  equipment and machinery are going unused. 
B)  a person cannot get a job but is willing to work and is actively seeking work. 
C)  a person does not have a job, regardless of whether or not he or she wants one. 
D)  any resource sits idle. 
A)  equipment and machinery are going unused. 
B)  a person cannot get a job but is willing to work and is actively seeking work. 
C)  a person does not have a job, regardless of whether or not he or she wants one. 
D)  any resource sits idle.

Question 6

Inventories held by ﬁrms

Accepted Answer

A)  tend to increase the severity of short-run ﬂuctuations. 
B)  tend to reduce the severity of short-run ﬂuctuations. 
C)  are held by businesses because they are a costless way of responding to demand shocks. 
D)  are the result of positive demand shocks. 
A)  tend to increase the severity of short-run ﬂuctuations. 
B)  tend to reduce the severity of short-run ﬂuctuations. 
C)  are held by businesses because they are a costless way of responding to demand shocks. 
D)  are the result of positive demand shocks.

Question 7

Businesses are the main economic investors, while households are the main savers.

Accepted Answer

A) True 
 B)False

Question 8

In situations of sticky prices and negative demand shocks, we would expect ﬁrms to

Accepted Answer

A)  deplete inventories before increasing production. 
B)  reduce production before building up inventories. 
C)  build up inventories before reducing production. 
D)  lower prices before reducing production or building up inventories. 
A)  deplete inventories before increasing production. 
B)  reduce production before building up inventories. 
C)  build up inventories before reducing production. 
D)  lower prices before reducing production or building up inventories.

Question 9

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 10

Refer to the ﬁgure. Assuming this market is representative of the economy as a whole, a negative demand shock will

Accepted Answer

A)  cause inﬂation. 
B)  increase unemployment. 
C)  lower prices but leave output unaffected. 
D)  reduce both prices and output. 
A)  cause inﬂation. 
B)  increase unemployment. 
C)  lower prices but leave output unaffected. 
D)  reduce both prices and output.

Question 11

Refer to the graphs. 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 A 
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 A

Question 12

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where ﬁrms are likely to hold inventories to accommodate unexpected changes in demand?

Accepted Answer

A)  A only 
B)  B only 
C)  both A and B 
D)  neither A nor B 
A)  A only 
B)  B only 
C)  both A and B 
D)  neither A nor B

Question 13

In 2008-2009, the U.S. economy lost 8 million jobs and saw the economic growth rate fall to
negative 2.4 percent.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A period of declining output and living standards is referred to as a recession.

Accepted Answer

A) True 
 B)False

Question 16

(Last Word) Studies in behavioral economics show that when ﬁrms cut worker's pay in order to reduce costs during recessions, the workers

Accepted Answer

A)  feel like they are being taken advantage of. 
B)  may begin organizing unions. 
C)  retaliate by stealing supplies and vandalizing equipment. 
D)  call in sick and show up late more often. 
E)  All of these choices are correct. 
A)  feel like they are being taken advantage of. 
B)  may begin organizing unions. 
C)  retaliate by stealing supplies and vandalizing equipment. 
D)  call in sick and show up late more often. 
E)  All of these choices are correct.

Question 17

When economists refer to "investment," they are describing a situation where

Accepted Answer

A)  people are buying shares of corporate stock. 
B)  resources are devoted to increasing future output. 
C)  money is saved in a bank account. 
D)  ﬁnancial assets are purchased in the hope of a monetary gain. 
A)  people are buying shares of corporate stock. 
B)  resources are devoted to increasing future output. 
C)  money is saved in a bank account. 
D)  ﬁnancial assets are purchased in the hope of a monetary gain.

Question 18

The ﬁgure depicts a situation where

Accepted Answer

A)  prices are sticky, but output is ﬂexible. 
B)  prices are ﬂexible, but output is constant. 
C)  prices and output are both ﬂexible. 
D)  prices are sticky and output is constant. 
A)  prices are sticky, but output is ﬂexible. 
B)  prices are ﬂexible, but output is constant. 
C)  prices and output are both ﬂexible. 
D)  prices are sticky and output is constant.

Question 19

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 changes. 
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 changes.

Question 20

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

Accepted Answer

A)  newspapers 
B)  haircuts 
C)  microwave ovens 
D)  airline tickets 
A)  newspapers 
B)  haircuts 
C)  microwave ovens 
D)  airline tickets

Exam 6: An Introduction to Macroeconomics

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

Refer to the ﬁgure. Assuming this market is representative of the economy as a whole, a positive demand shock will

The Great Recession illustrated the situation where a negative demand shock occurred and

Economists believe that expectations have little impact on macroeconomic outcomes.

Unemployment describes the condition where

Inventories held by ﬁrms

Businesses are the main economic investors, while households are the main savers.

In situations of sticky prices and negative demand shocks, we would expect ﬁrms to

Nominal gross domestic product

Refer to the ﬁgure. Assuming this market is representative of the economy as a whole, a negative demand shock will

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

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where ﬁrms are likely to hold inventories to accommodate unexpected changes in demand?

In 2008-2009, the U.S. economy lost 8 million jobs and saw the economic growth rate fall to negative 2.4 percent.

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

A period of declining output and living standards is referred to as a recession.

(Last Word) Studies in behavioral economics show that when ﬁrms cut worker's pay in order to reduce costs during recessions, the workers

When economists refer to "investment," they are describing a situation where

The ﬁgure depicts a situation where

Nominal gross domestic product

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

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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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