Question 1

An unexpected negative demand shock would lead to a decrease in real GDP when prices are
inﬂexible.

Accepted Answer

A) True 
 B)False

Question 2

(Last Word)  Behavioral economics incorporates culture and the studies of

Accepted Answer

A)   sociology and economics.
B)   psychology and economics.
C)   mathematics and economics.
D)   ﬁnance and economics.
E)   None of these choices are correct.F) C) and E)
G) B) and D)

Question 3

Prices for airline tickets change hourly. This would suggest that airline ticket prices are

Accepted Answer

A)   stuck.
B)   determined in a monopolistic market.
C)   relatively sticky.
D)   extremely ﬂexible.E) A) and B)
F) A) and C)

Question 4

Which of the following statements best describes how ﬁrms respond to demand shocks under conditions of inﬂexible prices?

Accepted Answer

A)   Firms respond to shorter-term demand shocks by adjusting production levels; more persistent changes in demand result in changes in inventories.
B)   Firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels.
C)   Firms are reluctant to adjust inventory levels because the costs are higher than changing the quantity of output produced.
D)   Firms are quick to let go of workers when negative demand shocks occur.E) B) and C)
F) All of the above

Question 5

The "sticky price" model is the only one used by macroeconomists.

Accepted Answer

A) True 
 B)False  False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Inﬂation reduces the purchasing power of a person's income and savings.

Accepted Answer

A) True 
 B)False

Question 8

Prices tend to be stickier in the shorter run than in the longer run.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements best describes price ﬂexibility in the economy?

Accepted Answer

A)   Prices tend to be sticky in the short run and stuck in the long run.
B)   Prices tend to be just as sticky in the short run as in the long run.
C)   Prices tend to be sticky in the short run but become more ﬂexible over time.
D)   Prices tend to be ﬂexible in the short run but become more sticky over time.E) C) and D)
F) A) and B)

Question 10

If expectations were always met, then ﬁrms would never contribute to any of the short-run
ﬂuctuations in employment and output that are observed in real-world economies.

Accepted Answer

A) True 
 B)False

Question 11

Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each. This year Harry's produced 11,000 large 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 pizzas

Accepted Answer

A)   increased nominal GDP from last year, but real GDP was unaffected.
B)   increased both nominal and real GDP from last year.
C)   increased real GDP from last year, but nominal GDP was unaffected.
D)   did not change either nominal or real GDP from last year.E) C) and D)
F) B) and D)

Question 12

Sticky prices could be the result of ﬁrms being afraid of price wars.

Accepted Answer

A) True 
 B)False

Question 13

On average, salaries and wages make up about 70% of all costs of the ﬁrm.

Accepted Answer

A) True 
 B)False

Question 14

One principle of economic growth is the notion that, to raise living standards over time, an economy must

Accepted Answer

A)   have full employment of its labor force.
B)   devote some portion of its current output to increasing its future output.
C)   maintain low inﬂation over the years.
D)   have a small population so that its GDP per person will be high.E) B) and D)
F) C) and D)

Question 15

Demand shocks may be positive or negative.

Accepted Answer

A) True 
 B)False  True

Question 16

Citizens living in the richest nations today have material standards of living that are on average
more than 50 times higher than people living in the poorest countries.

Accepted Answer

A) True 
 B)False  True

Question 17

If the prices of goods and services were ﬂexible, then the economy could always produce at its
optimal capacity.

Accepted Answer

A) True 
 B)False

Question 18

(Consider This) The term "economic investment" refers to money spent purchasing newly created
capital goods such as factories, tools, and warehouses.

Accepted Answer

A) True 
 B)False

Question 19

If prices of goods and services were inﬂexible, then

Accepted Answer

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.E) B) and C)
F) A) and D)

Question 20

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. How will the ﬁrm respond to a negative demand shock if prices are ﬂexible?

Accepted Answer

A)   The ﬁrm will continue to produce 500 computers per week and charge a price of $600.
B)   The ﬁrm will continue to produce 500 computers per week and charge a price of $1,200.
C)   The ﬁrm will cut production to 300 computers per week and charge a price of $1,000.
D)   The ﬁrm will cut production to 300 computers per week and charge a price of $600.E) A) and D)
F) A) and B)

Exam 6: An Introduction to Macroeconomics

An unexpected negative demand shock would lead to a decrease in real GDP when prices are inﬂexible.

Correct AnswerverifiedShow Answer

(Last Word) Behavioral economics incorporates culture and the studies of

Correct AnswerverifiedShow Answer

Prices for airline tickets change hourly. This would suggest that airline ticket prices are

Correct AnswerverifiedShow Answer

Which of the following statements best describes how ﬁrms respond to demand shocks under conditions of inﬂexible prices?

Correct AnswerverifiedShow Answer

The "sticky price" model is the only one used by macroeconomists.

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

Inﬂation reduces the purchasing power of a person's income and savings.

Correct AnswerverifiedShow Answer

Prices tend to be stickier in the shorter run than in the longer run.

Correct AnswerverifiedShow Answer

Which of the following statements best describes price ﬂexibility in the economy?

Correct AnswerverifiedShow Answer

If expectations were always met, then ﬁrms would never contribute to any of the short-run ﬂuctuations in employment and output that are observed in real-world economies.

Correct AnswerverifiedShow Answer

Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each. This year Harry's produced 11,000 large 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 pizzas

Correct AnswerverifiedShow Answer

Sticky prices could be the result of ﬁrms being afraid of price wars.

Correct AnswerverifiedShow Answer

On average, salaries and wages make up about 70% of all costs of the ﬁrm.

Correct AnswerverifiedShow Answer

One principle of economic growth is the notion that, to raise living standards over time, an economy must

Correct AnswerverifiedShow Answer

Demand shocks may be positive or negative.

Correct AnswerverifiedTrue

Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries.

Correct AnswerverifiedTrue

If the prices of goods and services were ﬂexible, then the economy could always produce at its optimal capacity.

Correct AnswerverifiedShow Answer

(Consider This) The term "economic investment" refers to money spent purchasing newly created capital goods such as factories, tools, and warehouses.

Correct AnswerverifiedShow Answer

If prices of goods and services were inﬂexible, then

Correct AnswerverifiedShow Answer

Refer to the graphs. Suppose a ﬁrm is currently producing 500 computers per week and charging a price of $1,000. How will the ﬁrm respond to a negative demand shock if prices are ﬂexible?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified