Question 1

Refer to the graphs above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. How will the firm respond to a positive demand shock if prices are inflexible?

Accepted Answer

A)   The firm will increase production to 650 computers per week and charge a price of $1000
B)   The firm will continue to produce 500 computers per week and charge a price of $1000
C)   The firm will cut production to 300 computers per week and charge a price of $1000
D)   The firm will cut production to 300 computers per week and charge a price of $600E) B) and C)
F) A) and D)

Question 2

One major reason for sticky prices could be that firms selling final goods and services do not want to annoy customers with frequently changing prices.

Accepted Answer

A) True 
 B)False

Question 3

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 levelE) B) and D)
F) A) and B)

Question 4

Economists need different models of the economy because:

Accepted Answer

A)   The economy behaves differently depending on how much time has passed after a demand shock
B)   We need a different model to analyze a positive demand shock than we need to analyze a negative demand shock
C)   The way economic performance is measured of changes over time
D)   Prices tend to be less flexible over timeE) None of the above
F) B) and C)

Question 5

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 6

Investment happens when:

Accepted Answer

A)   Current income is greater than current spending
B)   Current consumption is greater than current output
C)   Resources are devoted toward increasing current output
D)   Resources are devoted toward increasing future outputE) A) and B)
F) A) and C)

Question 7

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

Accepted Answer

A)   Canada
B)   The U.S.
C)   Japan
D)   ChinaE) All of the above
F) B) and C)

Question 8

Economists use different models of the economy because the economy behaves differently depending on how much time has passed after a demand shock.

Accepted Answer

A) True 
 B)False

Question 9

Economists believe that most short-run fluctuations:

Accepted Answer

A)   Are the result of demand shocks
B)   Are the result of supply shocks
C)   Will not last long because prices will adjust to equalize the quantities demanded and supplied of goods and services
D)   Will always have a negative impact on real GDP, inflation, and unemploymentE) A) and B)
F) None of the above

Question 10

Situations in which firms expect one thing to happen but then something else happens are called:

Accepted Answer

A)   Recessions
B)   Shocks
C)   Business cycles
D)   FluctuationsE) A) and C)
F) A) and B)

Question 11

Suppose that inventories are falling. We could expect that, in the future:

Accepted Answer

A)   Unemployment will likely increase
B)   Unemployment will likely decrease
C)   We can't predict what will happen to unemployment
D)   Real GDP will likely decreaseE) B) and C)
F) A) and D)

Question 12

Refer to the graphs above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. What happens to the firm's inventory of computers if there is a negative demand shock and prices are flexible?

Accepted Answer

A)   The firm's inventories will not change
B)   The firm's inventories will increase by 200 computers per week
C)   The firm's inventories will decrease by 150 computers per week
D)   The firm's inventories will increase by 350 computers per weekE) A) and B)
F) C) and D)

Question 13

Firms that choose to use a fixed-price policy:

Accepted Answer

A)   Will tend to experience larger inventory changes than firms that follow a flexible-price policy
B)   Will tend to experience smaller inventory changes than firms that follow a flexible-price policy
C)   Find that their inventories do not respond to demand shocks
D)   Will not hold inventoriesE) C) and D)
F) None of the above

Question 14

If a family's income increases by 5% at the same time that inflation is 3.5%, 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 livingE) None of the above
F) B) and C)

Question 15

Which of the following markets is most likely to exhibit extremely flexible prices?

Accepted Answer

A)   The oil market
B)   The market for taxi services
C)   The market for newspapers
D)   The market for coin-operated laundryE) C) and D)
F) A) and B)

Question 16

Inventories held by firms:

Accepted Answer

A)   Tend to increase the severity of short-run fluctuations
B)   Tend to reduce the severity of short-run fluctuations
C)   Are held by businesses because they are a costless way of responding to demand shocks
D)   Are the result of positive demand shocksE) A) and D)
F) A) and B)

Question 17

A higher rate of investment now will generate:

Accepted Answer

A)   More saving now
B)   More current consumption
C)   More future production
D)   More future inflationE) None of the above
F) B) and D)

Question 18

Real GDP is calculated using current prices of outputs.

Accepted Answer

A) True 
 B)False

Question 19

One principle of economic growth is the notion that, to raise living standards over time, an economy must:

Accepted Answer

A)   Have full employment of its labor force
B)   Devote some portion of its current output to increasing its future output
C)   Maintain low inflation over the years
D)   Have a small population so that its GDP per person will be highE) A) and B)
F) A) and D)

Question 20

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except:

Accepted Answer

A)   Real gross domestic product
B)   Inflation statistics
C)   Prices of oil and gasoline
D)   Unemployment dataE) C) and D)
F) All of the above

Exam 6: An Introduction to Macroeconomics

Economists use different models of the economy because the economy behaves differently depending on how much time has passed after a demand shock.

Correct AnswerverifiedShow Answer

Economists believe that most short-run fluctuations:

Correct AnswerverifiedShow Answer

One principle of economic growth is the notion that, to raise living standards over time, an economy must:

Correct AnswerverifiedShow Answer

Suppose that inventories are falling. We could expect that, in the future:

Correct AnswerverifiedShow Answer

Nominal gross domestic product:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following markets is most likely to exhibit extremely flexible prices?

Correct AnswerverifiedShow Answer

One major reason for sticky prices could be that firms selling final goods and services do not want to annoy customers with frequently changing prices.

Correct AnswerverifiedShow Answer

Economists need different models of the economy because:

Correct AnswerverifiedShow Answer

A higher rate of investment now will generate:

Correct AnswerverifiedShow Answer

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

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Inventories held by firms:

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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

Refer to the graphs above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. How will the firm respond to a positive demand shock if prices are inflexible?

Correct AnswerverifiedShow Answer

Situations in which firms expect one thing to happen but then something else happens are called:

Correct AnswerverifiedShow Answer

Investment happens when:

Correct AnswerverifiedShow Answer

Real GDP is calculated using current prices of outputs.

Correct AnswerverifiedShow Answer

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except:

Correct AnswerverifiedShow Answer

Refer to the graphs above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. What happens to the firm's inventory of computers if there is a negative demand shock and prices are flexible?

Correct AnswerverifiedShow Answer

Firms that choose to use a fixed-price policy:

Correct AnswerverifiedShow Answer

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