Question 1

The Great Recession occurred in:

Accepted Answer

A)   1970-74
B)   1985-87
C)   1992-94
D)   2007-09E) None of the above
F) All of the above

Question 2

What impact will a negative supply shock have on the main measures of economic performance?

Accepted Answer

A)   Real GDP will increase, inflation will increase, and unemployment will decrease
B)   Real GDP will decrease, inflation will decrease, and unemployment will increase
C)   Real GDP will decrease, inflation will increase, and unemployment will increase
D)   Real GDP will increase, inflation will decrease, and unemployment will decreaseE) A) and D)
F) None of the above

Question 3

In macroeconomic models, prices are assumed to be completely inflexible in:

Accepted Answer

A)   The very short run only
B)   The short run and remains so over time
C)   The very long run
D)   Situations when the changes in demand look to be permanentE) B) and C)
F) A) and D)

Question 4

Which of the following is the best example of financial investment?

Accepted Answer

A)   Ford Motor Co. builds a new manufacturing plant
B)   A student pursues an MBA degree
C)   A retiree purchases Google stock
D)   A young couple purchases a new homeE) A) and D)
F) A) and C)

Question 5

If prices of goods and services quickly adjust to demand shocks, then:

Accepted Answer

A)   Firms would find it difficult to produce at their optimal output rates
B)   Output rates would quickly adjust to changes in demand
C)   Firms would find it easier to produce at their optimal output rates
D)   The economy would experience severe short-run fluctuationE) B) and C)
F) All of the above

Question 6

What impact will a negative demand shock have on the main measures of economic performance?

Accepted Answer

A)   Real GDP will increase, inflation will increase, and unemployment will decrease
B)   Real GDP will decrease, inflation will decrease, and unemployment will increase
C)   Real GDP will decrease, inflation will increase, and unemployment will increase
D)   Real GDP will increase, inflation will decrease, and unemployment will decreaseE) B) and C)
F) A) and D)

Question 7

Which of the following is the best example of investment as defined by economists?

Accepted Answer

A)   A restaurant owner buys a freezer to store ingredients for the restaurant meals
B)   A college professor buys a truck to drive around in
C)   A business manager purchases stock on the New York Stock Exchange
D)   A worker deposits money into a long-term retirement accountE) B) and D)
F) C) and D)

Question 8

Which of the following statements is true?

Accepted Answer

A)   Short-run economic fluctuations are made worse because prices are flexible
B)   Short-run economic fluctuations would be less severe if prices were inflexible
C)   If prices were fully inflexible, there would be no short-run economic fluctuations
D)   If prices were fully flexible, there would be no short-run economic fluctuationsE) B) and D)
F) B) and C)

Question 9

Increased optimism about the future will lead to:

Accepted Answer

A)   Less current investment and less future consumption
B)   More current investment and more future consumption
C)   More current investment and less future consumption
D)   Less current investment and more future consumptionE) A) and B)
F) A) and C)

Question 10

The so-called Great Recession in the U.S.:

Accepted Answer

A)   Is another name for the Great Depression
B)   Was the worst economic downturn since the Great Depression
C)   Was triggered by oil-supply shocks
D)   Was caused by a sharp increase in the value of the U.S. dollarE) A) and B)
F) A) and C)

Question 11

Real gross domestic product is a measure of the:

Accepted Answer

A)   Average price level in the economy
B)   Value of final output produced within a country in one year, using current prices
C)   Value of final output produced within a country in one year, adjusted for changing prices
D)   Total value of available resources in a nationE) All of the above
F) A) and D)

Question 12

Decisions about saving and investment are:

Accepted Answer

A)   Generally made under conditions of complete certainty about the future
B)   Complicated by the fact that the future is uncertain
C)   Unaffected by expectations of the future
D)   Independent of expectations about the futureE) All of the above
F) A) and B)

Question 13

Economists use the word investment to refer to the purchase of assets such as stocks, bonds, and real estate.

Accepted Answer

A) True 
 B)False

Question 14

The Great Recession of 2007-09 illustrated the situation where a negative demand shock occurred and:

Accepted Answer

A)   Prices adjusted but the output level was inflexible
B)   The economy's overall price level was very flexible
C)   The economy's overall price level was "sticky"
D)   Prices and production were both "sticky" or inflexibleE) C) and D)
F) A) and C)

Question 15

Savings are transferred from savers to borrowers through the following intermediaries, except:

Accepted Answer

A)   Mutual funds
B)   Pension funds
C)   Real estate brokers
D)   Insurance companiesE) C) and D)
F) A) and B)

Question 16

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

Accepted Answer

A)   Real GDP will likely increase
B)   Real GDP will likely decrease
C)   We can't predict what will happen to real GDP
D)   Firms will raise prices of their goods and servicesE) A) and B)
F) A) and C)

Question 17

The opportunity cost of investment is a reduction in future consumption.

Accepted Answer

A) True 
 B)False

Question 18

Because prices are sticky, positive demand shock will lead to:

Accepted Answer

A)   No change in unemployment
B)   An increase in unemployment
C)   A decrease in unemployment
D)   An unpredictable change in unemploymentE) C) and D)
F) A) and B)

Question 19

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 shockE) None of the above
F) A) and B)

Question 20

If nominal GDP increases from one year to the next, then we know that the economy's output has grown.

Accepted Answer

A) True 
 B)False

Exam 6: An Introduction to Macroeconomics

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

Correct AnswerverifiedShow Answer

In macroeconomic models, prices are assumed to be completely inflexible in:

Correct AnswerverifiedShow Answer

Which of the following is the best example of investment as defined by economists?

Correct AnswerverifiedShow Answer

The so-called Great Recession in the U.S.:

Correct AnswerverifiedShow Answer

Decisions about saving and investment are:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

What impact will a negative demand shock have on the main measures of economic performance?

Correct AnswerverifiedShow Answer

Economists use the word investment to refer to the purchase of assets such as stocks, bonds, and real estate.

Correct AnswerverifiedShow Answer

Increased optimism about the future will lead to:

Correct AnswerverifiedShow Answer

If nominal GDP increases from one year to the next, then we know that the economy's output has grown.

Correct AnswerverifiedShow Answer

What impact will a negative supply shock have on the main measures of economic performance?

Correct AnswerverifiedShow Answer

Savings are transferred from savers to borrowers through the following intermediaries, except:

Correct AnswerverifiedShow Answer

Because prices are sticky, positive demand shock will lead to:

Correct AnswerverifiedShow Answer

The Great Recession of 2007-09 illustrated the situation where a negative demand shock occurred and:

Correct AnswerverifiedShow Answer

Real gross domestic product is a measure of the:

Correct AnswerverifiedShow Answer

Which of the following is the best example of financial investment?

Correct AnswerverifiedShow Answer

The Great Recession occurred in:

Correct AnswerverifiedShow Answer

The opportunity cost of investment is a reduction in future consumption.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If prices of goods and services quickly adjust to demand shocks, then:

Correct AnswerverifiedShow Answer

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