Question 1

The business cycle is primarily concerned with changes in the level of overall prices over time.

Accepted Answer

A) True 
 B)False

Question 2

At the core of understanding economic growth is the idea that to raise living standards over time, an economy must

Accepted Answer

A)   produce and consume goods and services.
B)   save and invest.
C)   export and import.
D)   employ resources and earn incomes.

Question 3

Refer to the graphs. Which of the following best represents a negative demand shock when prices are inﬂexible?

Accepted Answer

A)   the shift from D2 to D3 in graph B
B)   the shift from D2 to D3 in graph A
C)   the shift from D2 to D1 in graph B
D)   the shift from D2 to D1 in graph A

Question 4

Shocks to the economy occur

Accepted Answer

A)   when expectations are unmet.
B)   whenever the price level changes.
C)   whenever government implements ﬁscal or monetary policy.
D)   because most economic behavior is unpredictable.

Question 5

Why are savings and investment so important for economic growth? How do savings and
investment affect present and future consumption? Explain.

Accepted Answer

Saving and investment are important for ...

Question 6

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 inﬂation.

Question 7

The amount of investment in an economy is ultimately limited by the amount of savings in that
economy.

Accepted Answer

A) True 
 B)False

Question 8

The term "recession" describes a situation where

Accepted Answer

A)   inﬂation rates exceed normal levels.
B)   output and living standards decline.
C)   an economy's ability to produce is destroyed.
D)   government takes a less active role in economic matters.

Question 9

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.

Question 10

Economists believe that most short-run ﬂuctuations in output are the result of supply shocks.

Accepted Answer

A) True 
 B)False

Question 11

The business cycle depicts

Accepted Answer

A)   ﬂuctuations in the general price level.
B)   the phases a business goes through from when it ﬁrst opens to when it ﬁnally closes.
C)   the evolution of technology over time.
D)   short-run ﬂuctuations in output and employment.

Question 12

A nation that realizes a 3 percent increase in its output per person is experiencing modern
economic growth.

Accepted Answer

A) True 
 B)False

Question 13

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 home.

Question 14

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.

Question 15

The three statistics that are the main focus for those measuring macroeconomic health are

Accepted Answer

A)   real GDP, inﬂation, and unemployment.
B)   real GDP, nominal GDP, and inﬂation.
C)   nominal GDP, unemployment, and inﬂation.
D)   real GDP, nominal GDP, and unemployment.

Question 16

Modern economic growth

Accepted Answer

A)   started occurring during the time of the Roman Empire.
B)   has been experienced by all countries around the world.
C)   refers to the phenomenon of a country's total output rising.
D)   makes a country's output per person rise at a compounded rate.

Question 17

(Consider This) If Ford Motor Company purchases factory equipment previously used by General
Motors, this would be considered an economic investment.

Accepted Answer

A) True 
 B)False

Question 18

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 consumption.

Question 19

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?

Accepted Answer

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.

Question 20

(Consider This)  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. dollar.

Exam 6: An Introduction to Macroeconomics

The business cycle depicts

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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?

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Shocks to the economy occur

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The amount of investment in an economy is ultimately limited by the amount of savings in that economy.

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Increased optimism about the future will lead to

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

Correct AnswerverifiedShow Answer

A higher rate of investment now will generate

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Why are savings and investment so important for economic growth? How do savings and investment affect present and future consumption? Explain.

Correct AnswerverifiedSaving and investment are important for ...View AnswerShow Answer

Refer to the graphs. Which of the following best represents a negative demand shock when prices are inﬂexible?

Correct AnswerverifiedShow Answer

The term "recession" describes a situation where

Correct AnswerverifiedShow Answer

The three statistics that are the main focus for those measuring macroeconomic health are

Correct AnswerverifiedShow Answer

At the core of understanding economic growth is the idea that to raise living standards over time, an economy must

Correct AnswerverifiedShow Answer

(Consider This) The so-called Great Recession in the U.S.

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

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(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.

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

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Modern economic growth

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The business cycle is primarily concerned with changes in the level of overall prices over time.

Correct AnswerverifiedShow Answer

Economists believe that most short-run ﬂuctuations in output are the result of supply shocks.

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A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth.

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Saving and investment are important for ...
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