Econ ch 4 questions Flashcards
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Macroeconomics is primarily concerned with studying two broad topics: A. Long-run economic growth and short-run business cycles B. The price of oil and gas abroad and prices of energy in the domestic market C. The stock market and the housing market D. Household incomes and firms' profits
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A
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Short-run fluctuations in output and employment are referred to as: A. Economic growth B. Business cycles C. Inventory cycles D. Recession and inflation
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B
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The period when output and living standards decline is referred to as: A. Inflation B. Economic decline C. An inventory downturn D. A recession
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D
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The Great Recession occurred in: A. 1970-74 B. 1985-87 C. 1992-94 D. 2007-09
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D
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The major statistics that provide macroeconomists a picture of the health of an economy include the following, except: A. Real gross domestic product B. Inflation statistics C. Prices of oil and gasoline D. Unemployment data
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A
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Real gross domestic product is a measure of the: 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 nation
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C
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Real gross domestic product: A. Is a measure of inflation B. Will increase if there is an increase in the price level C. Will increase if there is an increase in the level of output D. Can change from one year to the next even if there is no change in output
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C
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Nominal gross domestic product: A. Is a measure of the overall level of prices B. Measures the value of final output produced within a nation in one year, using current prices C. Measures the value of final output produced within a nation in one year, adjusted for changing prices D. Only changes when the level of output changes
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B
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Nominal gross domestic product: 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
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D
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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? A. Real GDP doubles B. Real GDP is halved C. Real GDP doesn't change D. There is not enough information to determine what happens to real GDP
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C
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Economists and policy makers are committed to encouraging a high and growing level of real GDP because: A. This implies a lower price level B. This means a higher level of unemployment C. This implies an increase in investment D. This means greater consumption opportunities
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D
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High rates of unemployment: A. Indicate that society is not using a large portion of the talent and skills of its people B. Are associated with higher price levels C. Always correspond to a decrease in nominal GDP D. Do not affect an economy's output of goods and services
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A
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An increase in the overall level of prices in an economy is called: A. Growth B. Expansion C. Inflation D. Nominal GDP growth
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C
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Inflation is troublesome to consumers because of the following effects, except: 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. The standard of living would fall if a household has a fixed nominal income
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C
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Which of the following is most likely to be an indication of higher unemployment? A. An increase in real GDP B. An increase in nominal GDP C. A decrease in real GDP D. A decrease in nominal GDP
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...
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Suppose a family's income increases by 5% at the same time that inflation is 6%. Then the family's living standard: A. Will increase by 5% B. Will not change C. Will increase by 1% D. Will decrease
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D
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Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then: A. Output per person necessarily increases B. Output per person necessarily decreases C. Output per person necessarily remains unchanged D. There is not enough information to determine what happens to output per person
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...
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Purchasing power parity refers to: A. Converting each country's GDP into U.S. dollars B. Dividing each country's GDP by the size of its population C. Adjusting GDP figures for the fact that prices are much lower in some countries than in others D. Adjusting different GDP figures for inflation over time
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...
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At the core of understanding economic growth is the idea that to raise living standards over time, an economy must: A. Produce and consume goods and services B. Save and invest C. Export and import D. Employ resources and earn incomes
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B
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Investment happens when: 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 outpu
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D
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Saving in the economy: A. Occurs when current spending is less than current incomes B. Is generally not a determinant of future output C. And investment are essentially the same concept D. Occurs when current consumption is more than current output
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A
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There is a trade-off between: A. Saving and investment B. Current production and future consumption C. Current consumption and future consumption D. Consumption and spending
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C
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A higher rate of investment now will generate: A. More saving now B. More current consumption C. More future production D. More future inflation
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A
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Which of the following is the best example of financial investment? 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 home
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A
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Which of the following is the best example of investment as defined by economists? 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 account
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...
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Which of the following groups is the principal source of savings in an economy? A. Banks B. Government C. Businesses D. Households
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D
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Decisions about saving and investment are: 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 future
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B
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Increased optimism about the future will lead to: 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 consumption
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...
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Situations in which firms expect one thing to happen but then something else happens are called: A. Recessions B. Shocks C. Business cycles D. Fluctuations
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B
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Sharply rising oil prices are most likely to lead to a: A. Negative demand shock B. Positive demand shock C. Negative supply shock D. Positive supply shock
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...
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If consumers become pessimistic, the economy is likely to experience a: A. Negative demand shock B. Positive demand shock C. Negative supply shock D. Positive supply shock
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...
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An increase in worker productivity will lead to a: A. Negative demand shock B. Positive demand shock C. Negative supply shock D. Positive supply shock
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D
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Economists believe that most short-run fluctuations: 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 unemployment
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A
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f prices are "sticky" in the short run, then: A. The economy will respond to demand shocks primarily through changes in output and employment B. The economy will respond to demand shocks primarily through changes in prices and inflation C. Prices will adjust to equalize the quantities demanded and supplied of goods and services D. Unemployment will not change in response to a demand shock
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A
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If prices are inflexible, then a negative demand shock will lead to: A. A short-run increase in real GDP B. A short-run decrease in real GDP C. A short-run decrease in prices D. No change in real GDP in the short run
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B
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Because prices are sticky, positive demand shock will lead to: A. No change in unemployment B. An increase in unemployment C. A decrease in unemployment D. An unpredictable change in unemployment
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C
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Business cycle fluctuations typically arise because: A. The actual supply of goods and services ends up being more or less than what consumers were expecting B. The actual demand for goods and services ends up being more or less than the expected supply of goods and services C. The actual demand for goods and services ends up being more or less than what firms were expecting D. Prices tend to be flexible in the short run
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B
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If prices of goods and services are free to quickly adjust, then: A. A negative demand shock would lead to increased unemployment in the short run B. A positive demand shock would lead to increased unemployment in the short run C. A negative demand shock would have no short-run effect on unemployment D. There would be no short-run demand shocks
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A
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If prices of goods and services are inflexible, then: A. A negative demand shock would lead to increased real GDP in the short run B. A positive demand shock would lead to increased real GDP in the short run C. A negative demand shock would have no short-run effect on real GDP D. There would be no short-run demand shocks
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...
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Inventories held by firms: 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 shocks
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...
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Inventories rise when: 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
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B
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Suppose that prices are sticky in the short-run. Which of the following best describes the economy's response to a negative demand shock? 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.
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A
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The Great Recession of 2007-09 was triggered by a: A. Steep rise in bond values B. Steep decline in housing prices C. Sharp increase in oil prices D. Sharp decline in the value of the U.S. dollar
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B
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Between 2007 and 2009, the unemployment rate in the U.S.: A. Fell from 6% to 4.5% B. Rose from 4.7% to 10% C. Rose slightly from 5.5% to 7% D. Remained stagnant at about 7%
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B
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Which of the following is NOT a factor that increases short-run price stickiness? A. Consumers tend to prefer stable prices B. Stable prices make it easier for consumers to plan their spending C. A firm can lower its price without fear that rival firms will also lower their prices D. Firms try to avoid price wars
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D
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Price wars among firms: A. Tend to reduce short-run price stickiness because firms know they can lower their own prices without rival firms lowering their prices B. Occur when one firm lowers its price and rival firms react by lowering their prices C. Occur when firms use advertising to take customers away from rival firms D. Have no impact on the degree of short-run price stickiness
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B
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In macroeconomic models, prices are assumed to be completely inflexible in: 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 permanent
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...
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Firms that choose to use a fixed-price policy: 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 inventories
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...
