Question 1

Which of the following is not an effect of inﬂation that is troublesome to consumers?

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)   Their standard of living will fall if their household has a ﬁxed nominal income.E) A) and D)
F) C) and D)

Question 2

Before the period of modern economic growth,

Accepted Answer

A)   only civilizations such as the Roman Empire experienced economic growth.
B)   rates of population growth virtually matched rates of output growth.
C)   most economies realized high rates of growth in output per person.
D)   output and population growth were stagnant.E) None of the above
F) A) and C)

Question 3

Which of the following is most closely related to recessions?

Accepted Answer

A)   positive long-run economic growth
B)   rapid growth in the price level
C)   falling rates of unemployment
D)   negative real growth in outputE) B) and C)
F) A) and C)

Question 4

Refer to the ﬁgures. Which ﬁgure(s)  represent(s)  a situation where prices are ﬂexible?

Accepted Answer

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

Question 5

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.E) A) and D)
F) C) and D)

Question 6

Compare and contrast the characteristics of economic growth in ancient or preindustrial times with
modern economic growth today.

Accepted Answer

In ancient or preindustrial times, stand...

Question 7

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 8

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.E) All of the above
F) C) and D)

Question 9

When demand shocks lead to recessions, it is mainly due to

Accepted Answer

A)   price inﬂexibility.
B)   the inability of government policy to affect demand.
C)   unexpected changes in the supply of goods and services.
D)   government regulations that prevent ﬁrms from adjusting output in response to the shocks.E) All of the above
F) None of the above

Question 10

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.E) None of the above
F) A) and B)

Question 11

Why are high rates of unemployment of concern to economists?

Accepted Answer

A)   Higher rates of unemployment generally lead to higher inﬂation rates.
B)   Environmental destruction is more prevalent when unemployment rates are high.
C)   There is lost output that could have been produced if the unemployed had been working.
D)   All of these options are reasons why economists are concerned about high unemployment rates.E) B) and C)
F) None of the above

Question 12

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000
Each. As a result,

Accepted Answer

A)   nominal GDP stays constant, while real GDP decreases.
B)   nominal GDP decreases, while real GDP stays constant.
C)   nominal GDP and real GDP both decrease.
D)   nominal GDP decreases, and real GDP decreases even more.E) C) and D)
F) B) and C)

Question 13

(Consider This) Which took the major brunt of the decline in total demand in the Great Recession,
real output or prices?

Accepted Answer

Real output took the brunt of the declin...

Question 14

Refer to the ﬁgures. Which of the following events would most likely result in higher unemployment?

Accepted Answer

A)   a shift from D2 to D1 in Figure A
B)   a shift from D2 to D3 in Figure A
C)   a shift from D2 to D1 in Figure B
D)   a shift from D2 to D3 in Figure BE) A) and C)
F) C) and D)

Question 15

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.E) A) and B)
F) None of the above

Question 16

How does inﬂation affect people's standard of living and savings?

Accepted Answer

Consider all the goods and services that...

Question 17

Describe the difference between real GDP and nominal GDP.

Accepted Answer

Nominal GDP is GDP measured in terms of ...

Question 18

Supply shocks occur any time there is a change in the supply of goods and services.

Accepted Answer

A) True 
 B)False

Question 19

Evaluate the statement that "unexpected declines in demand, with inﬂexible prices, generate a rise
in unemployment and a fall in output. "

Accepted Answer

This is a true statement. When prices ar...

Question 20

(Consider This)  Suppose that Toyota buys a factory previously 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.E) B) and D)
F) B) and C)

Exam 6: An Introduction to Macroeconomics

Evaluate the statement that "unexpected declines in demand, with inﬂexible prices, generate a rise in unemployment and a fall in output. "

Correct Answer
verified
This is a true statement. When prices ar...
View Answer

Compare and contrast the characteristics of economic growth in ancient or preindustrial times with modern economic growth today.

Correct Answer
verified
In ancient or preindustrial times, stand...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

Describe the difference between real GDP and nominal GDP.

Correct Answer
verified
Nominal GDP is GDP measured in terms of ...
View Answer

(Consider This) Which took the major brunt of the decline in total demand in the Great Recession, real output or prices?

Correct Answer
verified
Real output took the brunt of the declin...
View Answer

How does inﬂation affect people's standard of living and savings?

Correct Answer
verified
Consider all the goods and services that...
View Answer

Prices tend to be sticky because

Correct Answer
verified

Which of the following is most closely related to recessions?

Correct Answer
verified

Supply shocks occur any time there is a change in the supply of goods and services.

Correct Answer
verified

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

Correct Answer
verified

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where prices are ﬂexible?

Correct Answer
verified

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

Correct Answer
verified

Refer to the ﬁgures. Which of the following events would most likely result in higher unemployment?

Correct Answer
verified

Correct Answer
verified

Why are high rates of unemployment of concern to economists?

Correct Answer
verified

When demand shocks lead to recessions, it is mainly due to

Correct Answer
verified

Before the period of modern economic growth,

Correct Answer
verified

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000 Each. As a result,

Correct Answer
verified

Which of the following is not an effect of inﬂation that is troublesome to consumers?

Correct Answer
verified

Exam 6: An Introduction to Macroeconomics

Evaluate the statement that "unexpected declines in demand, with inﬂexible prices, generate a rise in unemployment and a fall in output. "

Correct AnswerverifiedThis is a true statement. When prices ar...View AnswerShow Answer

Compare and contrast the characteristics of economic growth in ancient or preindustrial times with modern economic growth today.

Correct AnswerverifiedIn ancient or preindustrial times, stand...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Describe the difference between real GDP and nominal GDP.

Correct AnswerverifiedNominal GDP is GDP measured in terms of ...View AnswerShow Answer

(Consider This) Which took the major brunt of the decline in total demand in the Great Recession, real output or prices?

Correct AnswerverifiedReal output took the brunt of the declin...View AnswerShow Answer

How does inﬂation affect people's standard of living and savings?

Correct AnswerverifiedConsider all the goods and services that...View AnswerShow Answer

Prices tend to be sticky because

Correct AnswerverifiedShow Answer

Which of the following is most closely related to recessions?

Correct AnswerverifiedShow Answer

Supply shocks occur any time there is a change in the supply of goods and services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the ﬁgures. Which ﬁgure(s) represent(s) a situation where prices are ﬂexible?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the ﬁgures. Which of the following events would most likely result in higher unemployment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why are high rates of unemployment of concern to economists?

Correct AnswerverifiedShow Answer

When demand shocks lead to recessions, it is mainly due to

Correct AnswerverifiedShow Answer

Before the period of modern economic growth,

Correct AnswerverifiedShow Answer

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000 Each. As a result,

Correct AnswerverifiedShow Answer

Which of the following is not an effect of inﬂation that is troublesome to consumers?

Correct AnswerverifiedShow Answer

Correct Answer
verified
This is a true statement. When prices ar...
View Answer

Correct Answer
verified
In ancient or preindustrial times, stand...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Nominal GDP is GDP measured in terms of ...
View Answer

Correct Answer
verified
Real output took the brunt of the declin...
View Answer

Correct Answer
verified
Consider all the goods and services that...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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