Question 1

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 level 
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 level

Question 2

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 GDP 
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 GDP

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 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 4

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 5

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 recession 
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 recession

Question 6

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 treaties 
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 treaties

Question 7

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% 
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%

Question 8

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 estate 
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 estate

Question 9

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

Question 10

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 countries 
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 countries

Question 11

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

Accepted Answer

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

Question 12

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 shock 
A)  Negative demand shock 
B)  Positive demand shock 
C)  Negative supply shock 
D)  Positive supply shock

Question 13

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 over 
A)  Remained roughly constant 
B)  Increased steadily 
C)  Declined substantially 
D)  Increased many times over

Question 14

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. 
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 15

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

Accepted Answer

A) True 
 B)False

Question 16

Who are the main economic investors in a market economy?

Accepted Answer

A)  Savers 
B)  Government 
C)  Businesses 
D)  Households 
A)  Savers 
B)  Government 
C)  Businesses 
D)  Households

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 stagnant 
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 stagnant

Question 18

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 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 19

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 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 20

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 phenomenon 
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 phenomenon

Exam 6: An Introduction to Macroeconomics

High rates of unemployment are undesirable because they:

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?

Inventories rise when:

Nominal gross domestic product:

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:

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

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

Which of the following statements is true?

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

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

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

An increase in worker productivity will lead to a:

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

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

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

Who are the main economic investors in a market economy?

In earlier centuries, the Roman and Chinese economies:

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

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

Rapid and sustained economic growth of nations:

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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