Question 1

Real gross domestic product:

Accepted Answer

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 outputE) B) and D)
F) A) and B)

Question 2

Sharply rising oil prices are most likely to lead to a:

Accepted Answer

A)   Negative demand shock
B)   Positive demand shock
C)   Negative supply shock
D)   Positive supply shockE) A) and C)
F) B) and C)

Question 3

Macroeconomics is primarily concerned with studying two broad topics:

Accepted Answer

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' profitsE) B) and C)
F) C) and D)

Question 4

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 incomesE) All of the above
F) A) and D)

Question 5

Price wars among firms:

Accepted Answer

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 stickinessE) A) and B)
F) B) and C)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT a factor that increases short-run price stickiness?

Accepted Answer

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 warsE) A) and B)
F) A) and C)

Question 8

Economists and policy makers are committed to encouraging a high and growing level of real GDP because:

Accepted Answer

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 opportunitiesE) A) and D)
F) C) and D)

Question 9

Suppose a small economy produces only HD TV sets. In year 1, 100,000 sets are produce and sold at a price of $1,200 each. In year 2, 100,000 sets are produced and sold at a price of $1,000 each. As a result:

Accepted Answer

A)   Nominal GDP stays constant, while real GDP decreases
B)   Nominal GDP decreases, while real GDP stays constant
C)   Nominal GDP and real GDP both decrease
D)   Nominal GDP decreases, and real GDP decreases even moreE) None of the above
F) A) and B)

Question 10

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 inflexible?

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) B) and D)
F) B) and C)

Question 11

Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then:

Accepted Answer

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 personE) B) and C)
F) A) and B)

Question 12

Macroeconomic models help clarify important questions such as the following, except:

Accepted Answer

A)   Can governments reduce the severity of their economies' recessions?
B)   Is a policy of manipulating interest rates more effective at mitigating short-run economic fluctuations than a policy of changing the tax rates?
C)   How will OPEC manipulate and maintain the price of crude oil in the world markets?
D)   Is there a trade-off between lower unemployment and lower inflation?E) A) and D)
F) B) and D)

Question 13

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?

Accepted Answer

A)   Nominal GDP doubles
B)   Nominal GDP is halved
C)   Nominal GDP doesn't change
D)   There is not enough information to determine what happens to nominal GDPE) None of the above
F) A) and B)

Question 14

If prices are inflexible, then a negative demand shock will lead to:

Accepted Answer

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 runE) B) and C)
F) None of the above

Question 15

High rates of unemployment:

Accepted Answer

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 servicesE) B) and C)
F) A) and D)

Question 16

Real GDP can change due to changes in the price level.

Accepted Answer

A) True 
 B)False

Question 17

An unexpected negative demand shock would lead to a decrease in real GDP.

Accepted Answer

A) True 
 B)False

Question 18

Business cycle fluctuations typically arise because:

Accepted Answer

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 runE) B) and D)
F) A) and C)

Question 19

Suppose a small economy produces only MP3 players. In year 1, 10,000 MP3 players are produce 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?

Accepted Answer

A)   Real GDP and nominal GDP both increase
B)   Real GDP increases while nominal GDP remains constant
C)   Real GDP decreases while nominal GDP increases
D)   Real GDP increases while nominal GDP decreasesE) C) and D)
F) B) and D)

Question 20

An unexpected negative demand shock would lead to a decrease in inventories.

Accepted Answer

A) True 
 B)False

Exam 6: An Introduction to Macroeconomics

Price wars among firms:

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Real gross domestic product:

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Sharply rising oil prices are most likely to lead to a:

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Which of the following is NOT a factor that increases short-run price stickiness?

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Business cycle fluctuations typically arise because:

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Macroeconomics is primarily concerned with studying two broad topics:

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Suppose a small economy produces only HD TV sets. In year 1, 100,000 sets are produce and sold at a price of $1,200 each. In year 2, 100,000 sets are produced and sold at a price of $1,000 each. As a result:

Correct AnswerverifiedShow Answer

An unexpected negative demand shock would lead to a decrease in real GDP.

Correct AnswerverifiedShow Answer

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?

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 inflexible?

Correct AnswerverifiedShow Answer

Real GDP can change due to changes in the price level.

Correct AnswerverifiedShow Answer

Suppose a small economy produces only MP3 players. In year 1, 10,000 MP3 players are produce 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?

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

If prices are inflexible, then a negative demand shock will lead to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists and policy makers are committed to encouraging a high and growing level of real GDP because:

Correct AnswerverifiedShow Answer

An unexpected negative demand shock would lead to a decrease in inventories.

Correct AnswerverifiedShow Answer

High rates of unemployment:

Correct AnswerverifiedShow Answer

Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then:

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Macroeconomic models help clarify important questions such as the following, except:

Correct AnswerverifiedShow Answer

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