Macroeconomics Chapter 6 Test Questions – Flashcards
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1. The two topics of primary concern in macroeconomics are:
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. short-run fluctuations in output and employment, and long-run economic growth.
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2. The term "recession" describes a situation where:
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output and living standards decline.
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3. Which of the following statements is most accurate about advanced economies?
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Economies experience a positive growth trend over the long run, but experience significant variability in the short run
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4. Real GDP measures the:.
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value of final goods and services produced within the borders of a country, corrected for price changes.
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5. Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas), but sold them for $12 each. Based on this information we can conclude that Harry's production of large
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increased nominal GDP by $20,000, but left real GDP unchanged.
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6. Why are high rates of unemployment of concern to economists?
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There is lost output that could have been produced if the unemployed had been working.
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7. Higher rates of unemployment are linked with:
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higher crime rates as the unemployed seek to replace lost income.
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8. Inflation is defined as:
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an increase in the overall level of prices.
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9. The three statistics that are the main focus for those measuring macroeconomic health are:
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real GDP, inflation, and unemployment.
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10. Which of the following countries would economists say definitively is achieving modern economic growth?
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Nigeria experiences a 2.7 percent increase in real GDP per person.
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11. Real gross domestic product
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will increase if there is an increase in the level of output
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12. 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?
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real GDP doesn't change
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13. Suppose a small economy produces only MP3 players. In year 1, 10,000 MP3 players are produced and sold at a price of $100 each. In year 2, 12,000 MP3 players are produced and sold at a price of $80 each. Which of the following statements is true?
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Real GDP increases while nominal GDP decreases
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14. Economists and policy makers are committed to encouraging a large and growing real GDP because
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more output means greater consumption opportunities
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15. High rates of unemployment:
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Indicate that society is not using a large portion of the talent and skills of its people
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16. Inflation is troublesome to consumers because of the following effects, except:
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Workers' wages may be rising faster than the overall prices
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17. Which of the following is most likely to be an indication of higher unemployment?
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A decrease in real GDP
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18. Suppose a family's income increases by 5% at the same time that inflation is 6%. Then
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the family's standard of living will fall
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19. Rapid and sustained economic growth of nations:
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Is a modern phenomenon
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20. The Industrial Revolution began in:
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England in the late 1700's
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21. Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then
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Output per person necessarily decreases
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22. Under modern economic growth, the annual average increase in output per person is
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Often not large, perhaps 2% per year
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23. Which of the following is not an adjustment made when comparing standards of living across countries?
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Adjusting for different unemployment rates across countries
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24. In 2009, output per person in the U.S was about
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$46,000 per year
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25. Which of the following statements is true?
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Economic investment refers to the creation and expansion of business enterprises
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26. Which of the following is the best example of financial investment?
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A retiree purchases Google stock
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27. Which of the following is the best example of economic investment?
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Apple builds a new plant to manufacture iPads
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28. Which of the following is the best example of investment as defined by economists?
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A restaurant owner buys a freezer to store ingredients for the restaurant meals
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29. Which of the following best represents the effect of an increase in investment?
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Moving from point b to point d
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30. Which of the following is the principal source of savings in an economy?
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Households
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31. Savings are transferred from savers to borrowers through the following intermediaries, except:
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Real estate brokers
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32. Decisions about savings and investment are:
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Complicated by the fact that the future is uncertain
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33. Increased optimism about the future will lead to:
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More current investment and more future consumption
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34. Sharply rising oil prices are most likely to lead to a:
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Negative supply shock
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35. An increase in worker productivity will lead to a:
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Positive supply shock
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36. Which of the following is an example of a supply shock?
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A dramatic increase in energy prices increases production costs for firms in the economy.
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37. Which of the following is an example of a demand shock?
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Consumers become worried about job loss and buy fewer goods and services than expected.
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38. Shocks to the economy occur when: .
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actual economic events do not match what people expected.
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39. (Consider This) What is the difference between financial investment and economic investment?
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Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.
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40. (Consider This) Which of the following is an example of economic investment?
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Nike buys a new machine that increases shoe production.
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41. (Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would:
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not consider this to be an economic investment because no new capital is created through the purchase.
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42. (Last Word) Computerized inventory tracking has been credited with reducing the number and severity of recessions because these tracking systems:
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allow firms to react more quickly and subtly to negative demand shocks, and avoid the large output reductions that frequently result in higher unemployment.
