Question 1

There is a trade-off between:

Accepted Answer

A)  Saving and investment 
B)  Current production and future consumption 
C)  Current consumption and future consumption 
D)  Consumption and spending 
A)  Saving and investment 
B)  Current production and future consumption 
C)  Current consumption and future consumption 
D)  Consumption and spending

Question 2

The amount of investment is ultimately limited by the amount of:

Accepted Answer

A)  Production 
B)  Saving 
C)  Employment 
D)  Inflation 
A)  Production 
B)  Saving 
C)  Employment 
D)  Inflation

Question 3

Saving in the economy:

Accepted Answer

A)  Occurs when current spending is less than current incomes 
B)  Is generally not a determinant of future output 
C)  And investment are essentially the same concept 
D)  Occurs when current consumption is more than current output 
A)  Occurs when current spending is less than current incomes 
B)  Is generally not a determinant of future output 
C)  And investment are essentially the same concept 
D)  Occurs when current consumption is more than current output

Question 4

Sticky prices could be the result of firms being afraid of price wars.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Price stickiness tends to moderate over time.

Accepted Answer

A) True 
 B)False

Question 7

Inflation is troublesome to consumers because of the following effects, except:

Accepted Answer

A)  Household incomes may be rising slower than the overall prices 
B)  The purchasing power of people's savings would decrease 
C)  Workers' wages may be rising faster than the overall price level 
D)  The standard of living would fall if a household has a fixed nominal income 
A)  Household incomes may be rising slower than the overall prices 
B)  The purchasing power of people's savings would decrease 
C)  Workers' wages may be rising faster than the overall price level 
D)  The standard of living would fall if a household has a fixed nominal income

Question 8

If prices of goods and services are inflexible, then:

Accepted Answer

A)  A negative demand shock would lead to increased real GDP in the short run 
B)  A positive demand shock would lead to increased real GDP in the short run 
C)  A negative demand shock would have no short-run effect on real GDP 
D)  There would be no short-run demand shocks 
A)  A negative demand shock would lead to increased real GDP in the short run 
B)  A positive demand shock would lead to increased real GDP in the short run 
C)  A negative demand shock would have no short-run effect on real GDP 
D)  There would be no short-run demand shocks

Question 9

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 level 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 level in the economy 
D)  Excessive access to home-mortgage loans

Question 10

The Great Recession of 2007-09 was triggered by a:

Accepted Answer

A)  Steep rise in bond values 
B)  Steep decline in housing prices 
C)  Sharp increase in oil prices 
D)  Sharp decline in the value of the U.S. dollar 
A)  Steep rise in bond values 
B)  Steep decline in housing prices 
C)  Sharp increase in oil prices 
D)  Sharp decline in the value of the U.S. dollar

Question 11

Which among the following countries had the highest GDP per person in 2011?

Accepted Answer

A)  Mexico 
B)  India 
C)  Russia 
D)  China 
A)  Mexico 
B)  India 
C)  Russia 
D)  China

Question 12

If nominal GDP is rising faster than real GDP, then inflation must be occurring.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Which of the following best represents the effect of an increase in investment?

Accepted Answer

A)  Moving from point a to point b 
B)  Moving from point d to point c 
C)  Moving from point a to point c 
D)  Moving from point b to point d 
A)  Moving from point a to point b 
B)  Moving from point d to point c 
C)  Moving from point a to point c 
D)  Moving from point b to point d

Question 15

The term "shock":

Accepted Answer

A)  Always refers to an unexpectedly bad event 
B)  Always refers to an increase in inflation 
C)  Does not tell us whether what has happened is unexpectedly bad or unexpectedly good 
D)  Always refers to a decrease in real GDP and an increase in unemployment 
A)  Always refers to an unexpectedly bad event 
B)  Always refers to an increase in inflation 
C)  Does not tell us whether what has happened is unexpectedly bad or unexpectedly good 
D)  Always refers to a decrease in real GDP and an increase in unemployment

Question 16

In economics, the word "shocks" refers to:

Accepted Answer

A)  Situations where firms' expectations are not met 
B)  Any change in the demand for goods and services 
C)  Any change in the supply of goods and services 
D)  A decrease in real GDP 
A)  Situations where firms' expectations are not met 
B)  Any change in the demand for goods and services 
C)  Any change in the supply of goods and services 
D)  A decrease in real GDP

Question 17

If prices are "sticky" in the short run, then:

Accepted Answer

A)  The economy will respond to demand shocks primarily through changes in output and employment 
B)  The economy will respond to demand shocks primarily through changes in prices and inflation 
C)  Prices will adjust to equalize the quantities demanded and supplied of goods and services 
D)  Unemployment will not change in response to a demand shock 
A)  The economy will respond to demand shocks primarily through changes in output and employment 
B)  The economy will respond to demand shocks primarily through changes in prices and inflation 
C)  Prices will adjust to equalize the quantities demanded and supplied of goods and services 
D)  Unemployment will not change in response to a demand shock

Question 18

When prices are inflexible, the economy will respond to demand shocks through short run changes in output and unemployment.

Accepted Answer

A) True 
 B)False

Question 19

Purchasing power parity refers to:

Accepted Answer

A)  Converting each country's GDP into U.S. dollars 
B)  Dividing each country's GDP by the size of its population 
C)  Adjusting GDP figures for the fact that prices are much lower in some countries than in others 
D)  Adjusting different GDP figures for inflation over time 
A)  Converting each country's GDP into U.S. dollars 
B)  Dividing each country's GDP by the size of its population 
C)  Adjusting GDP figures for the fact that prices are much lower in some countries than in others 
D)  Adjusting different GDP figures for inflation over time

Question 20

Which of the following is not an adjustment made when comparing standards of living across countries?

Accepted Answer

A)  Converting each country's GDP into U.S. dollars 
B)  Dividing each country's GDP by the size of its population 
C)  Adjusting for different price levels across countries 
D)  Adjusting for different unemployment rates across countries 
A)  Converting each country's GDP into U.S. dollars 
B)  Dividing each country's GDP by the size of its population 
C)  Adjusting for different price levels across countries 
D)  Adjusting for different unemployment rates across countries

Exam 6: An Introduction to Macroeconomics

There is a trade-off between:

The amount of investment is ultimately limited by the amount of:

Saving in the economy:

Sticky prices could be the result of firms being afraid of price wars.

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

Price stickiness tends to moderate over time.

Inflation is troublesome to consumers because of the following effects, except:

If prices of goods and services are inflexible, then:

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

The Great Recession of 2007-09 was triggered by a:

Which among the following countries had the highest GDP per person in 2011?

If nominal GDP is rising faster than real GDP, then inflation must be occurring.

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

Which of the following best represents the effect of an increase in investment?

The term "shock":

In economics, the word "shocks" refers to:

If prices are "sticky" in the short run, then:

When prices are inflexible, the economy will respond to demand shocks through short run changes in output and unemployment.

Purchasing power parity refers to:

Which of the following is not an adjustment made when comparing standards of living across countries?

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

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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