Question 1

Increasing investment in the present means forgoing future consumption.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  taxi fares
B)  haircuts
C)  microwave ovens
D)  airline ticketsE) A) and C)
F) All of the above

Question 3

Increased present saving

Accepted Answer

A)  comes at the expense of reduced current investment.
B)  comes at the expense of reduced current consumption.
C)  can only occur if the government increases the amount of money in circulation.
D)  is only possible if the economy is experiencing positive growth in real GDP.E) A) and B)
F) A) and C)

Question 4

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

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

In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

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 levels in the economy.
D)  excessive access to home-mortgage loans.E) C) and D)
F) A) and D)

Question 9

(Last Word)  According to the Austrian School, the best explanation for what caused the Great Recession was that

Accepted Answer

A)  tax rates that were too high discouraged spending.
B)  government spending that was too low created insufficient public capital.
C)  interest rates that were too low induced excessive borrowing.
D)  interest rates that were too high discouraged firm borrowing and investment.E) C) and D)
F) B) and C)

Question 10

If an economy wants to increase its current level of investment, it must

Accepted Answer

A)  sacrifice future consumption.
B)  print more money.
C)  offer more stocks and bonds to financial investors.
D)  sacrifice current consumption.E) C) and D)
F) A) and B)

Question 11

A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession.

Accepted Answer

A) True 
 B)False

Question 12

Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

If a family's income increases by 5 percent at the same time that inflation is 3.5 percent, then the

Accepted Answer

A)  family will need to spend more in order to maintain its standard of living.
B)  family will need to spend less in order to maintain its standard of living.
C)  family's standard of living is not affected by inflation.
D)  family will need to spend the same amount in order to maintain its standard of living.E) A) and C)
F) A) and B)

Question 15

Higher rates of unemployment are linked with

Accepted Answer

A)  greater political stability because the employed tend to be more politically active.
B)  higher crime rates, as the unemployed seek to replace lost income.
C)  lower rates of heart disease, as the unemployed have eliminated job stress.
D)  improvements in overall health, as the unemployed have more leisure time to be physically active.E) C) and D)
F) A) and C)

Question 16

Nominal GDP measures a nation's output in current year prices.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Which of the following best explains why prices tend to be inflexible even when demand changes?

Accepted Answer

A)  Government regulations limit the number of times a firm can change prices in a year.
B)  In most industries the profit-maximizing price does not change even when demand changes.
C)  Production costs do not tend to change when a firm varies its level of output.
D)  Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.E) B) and D)
F) B) and C)

Question 19

Economists refer to purchases of stocks and bonds as "investment."

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 26: An Introduction to Macroeconomics

Higher rates of unemployment are linked with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Nominal gross domestic product

Correct AnswerverifiedShow Answer

(Last Word) According to the Austrian School, the best explanation for what caused the Great Recession was that

Correct AnswerverifiedShow Answer

If an economy wants to increase its current level of investment, it must

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries.

Correct AnswerverifiedShow Answer

In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.

Correct AnswerverifiedShow Answer

A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession.

Correct AnswerverifiedShow Answer

Which of the following best explains why prices tend to be inflexible even when demand changes?

Correct AnswerverifiedShow Answer

Nominal GDP measures a nation's output in current year prices.

Correct AnswerverifiedShow Answer

If a family's income increases by 5 percent at the same time that inflation is 3.5 percent, then the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inventories rise when

Correct AnswerverifiedShow Answer

Economists refer to purchases of stocks and bonds as "investment."

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Increased present saving

Correct AnswerverifiedShow Answer

Increasing investment in the present means forgoing future consumption.

Correct AnswerverifiedShow Answer

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