Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

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. 
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. A

Question 3

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. 
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. B

Question 4

(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. 
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.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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. 
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.

Question 7

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 8

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. 
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.

Question 9

Economists believe that expectations have little impact on macroeconomic outcomes.

Accepted Answer

A) True 
 B)False

Question 10

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. 
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.

Question 11

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. 
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.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

(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. 
A)  Great Depression. 
B)  Great Recession. 
C)  Great Expansion. 
D)  Great Stagnation.

Question 14

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 15

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

Question 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

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. 
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.

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

(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

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

Prices tend to be sticky because:

The overall behavior of the economy:

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

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

Banks and other financial institutions:

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.

Real GDP measures the:

Economists believe that expectations have little impact on macroeconomic outcomes.

The business cycle depicts:

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

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

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

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

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

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

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

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

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

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

The Balance of Payments, Exchange Rates, and Trade Deficits

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

The United States and the Global Economy

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Exam 25: An Introduction to Macroeconomics

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

Prices tend to be sticky because:

The overall behavior of the economy:

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

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

Banks and other financial institutions:

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.

Real GDP measures the:

Economists believe that expectations have little impact on macroeconomic outcomes.

The business cycle depicts:

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

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

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

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

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

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

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

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

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

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

The Balance of Payments, Exchange Rates, and Trade Deficits

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

The United States and the Global Economy

Filters