Chap023
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Chap023

Course Number: ECON 301, Spring 2013

College/University: DeVry Fremont

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Chapter 23 - An Introduction to Macroeconomics Chapter 23 An Introduction to Macroeconomics Multiple Choice Questions 1. Macroeconomics is mostly focused on: A. the individual markets within an economy. B. only the largest industries in the economy. C. the economy as a whole. D. why specific businesses fail. 2. The two topics of primary concern in macroeconomics are: A. short-run fluctuations in output and...

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23 Chapter - An Introduction to Macroeconomics Chapter 23 An Introduction to Macroeconomics Multiple Choice Questions 1. Macroeconomics is mostly focused on: A. the individual markets within an economy. B. only the largest industries in the economy. C. the economy as a whole. D. why specific businesses fail. 2. The two topics of primary concern in macroeconomics are: A. short-run fluctuations in output and employment, and long-run economic growth. B. unemployment, and wage rates in labor markets. C. monopoly power of corporations, and small business profitability. D. oil prices and housing markets. 3. The business cycle depicts: 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. 4. The term "recession" describes a situation where: 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. 5. Which of the following is most closely related to recessions? A. positive long-run economic growth B. rapid growth in the price level C. falling rates of unemployment D. negative growth in output 23-1 Chapter 23 - An Introduction to Macroeconomics 6. Which of the following statements is most accurate about advanced economies? A. Economies experience a positive growth trend over the short run, but experience significant variability in the long run. B. Economies experience a positive growth trend over the long run, but experience significant variability in the short run. C. Economies experience positive and stable growth over both the long run and short run. D. Economies experience little long-run growth in output, but can experience significant growth in the short run. 7. Real GDP measures the: A. total dollar value of all goods and services produced within the borders of a country using current prices. B. value of final goods and services produced within the borders of a country, corrected for price changes. C. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. D. value of all goods and services produced in the world, using current prices. 8. If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? A. nominal and real GDP would both rise. B. nominal and real GDP would both be unchanged. C. real GDP would rise, but nominal GDP would be unchanged. D. nominal GDP would rise, but real GDP would be unchanged. 9. Real GDP is preferred to nominal GDP as a measure of economic performance because: A. nominal GDP uses current prices and thus may over- or understate true changes in output. B. nominal GDP only includes goods and excludes services. C. nominal GDP is not adjusted for population changes. D. real GDP accounts for changes in the quality of goods and services produced. 23-2 Chapter 23 - An Introduction to Macroeconomics 10. 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 pepperoni pizzas: A. increased both nominal and real GDP from last year. B. increased nominal GDP from last year, but real GDP was unaffected. C. increased real GDP from last year, but nominal GDP was unaffected. D. did not change either nominal or real GDP from last year. 11. 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 pepperoni pizzas this year: A. increased nominal GDP by $20,000, but left real GDP unchanged. B. increased nominal GDP by $120,000, and increased real GDP by $100,000. C. left nominal GDP unchanged, but increased real GDP by $20,000. D. increased nominal GDP by $120,000, but left real GDP unchanged. 12. Why are high rates of unemployment of concern to economists? A. Higher rates of unemployment generally lead to higher inflation rates. B. Environmental destruction is more prevalent when unemployment rates are high. C. There is lost output that could have been produced if the unemployed had been working. D. All of the above are reasons why economists are concerned about high unemployment rates. 13. Unemployment describes the condition where: A. equipment and machinery are going unused. B. a person cannot get a job, but is willing to work and is actively seeking work. C. a person does not have a job, regardless of whether or not they want one. D. any resource sits idle. 23-3 Chapter 23 - An Introduction to Macroeconomics 14. Higher rates of unemployment are linked with: A. greater political stability because the employed tend to be more politically active. B. higher crime rates as the unemployed seek to replace lost income. C. lower rates of heart disease as the unemployed have eliminated job stress. D. improvements in overall health as the unemployed have more leisure time to be physically active. 15. Inflation is defined as: A. an increase in the overall level of prices. B. the rate of growth in nominal GDP. C. a situation where all prices in the economy rise simultaneously. D. the growth phase of the business cycle. 16. Why are economists concerned about inflation? A. Inflation generally causes unemployment rates to rise. B. Real GDP is necessarily falling when there is inflation. C. Inflation lowers the standard of living for people whose income does not increase as fast as the price level. D. Inflation increases the value of peoples' saving and encourages overspending on goods and services. 17. The three statistics that are the main focus for those measuring macroeconomic health are: 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. 18. Modern economic growth refers to countries that have experienced an increase in: A. real GDP over time. B. nominal GDP over time. C. real output spread evenly across all sectors of the economy. D. real output per person. 23-4 Chapter 23 - An Introduction to Macroeconomics 19. Before the period of modern economic growth: A. only civilizations such as the Roman Empire experienced economic growth. B. rates of population growth virtually matched rates of output growth. C. most economies realized high rates of growth in output per person. D. output and population growth were stagnant. 20. In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation? A. purchasing power parity B. the quantity of resources available to the economy C. population size D. different currency values 21. Which of the following countries would economists say definitively is achieving modern economic growth? A. Zimbabwe experiences as 5.6 percent increase in nominal GDP. B. South Africa experiences a 4.2 percent increase in real GDP. C. Ghana experiences a 3.6 percent increase in nominal GDP per person. D. Nigeria experiences a 2.7 percent increase in real GDP per person. 22. Which of the following is used to measure directly the average standard of living across countries? A. real GDP B. nominal GDP C. purchasing power parity D. GDP per person 23. Savings are generated whenever: A. prices are rising. B. current spending exceeds current income. C. current income exceeds current spending. D. real GDP exceeds nominal GDP. 23-5 Chapter 23 - An Introduction to Macroeconomics 24. When economists refer to "investment," they are describing a situation where: A. people are buying shares of corporate stock. B. resources are devoted to increasing future output. C. money is saved in a bank account. D. financial assets are purchased in the hope of a monetary gain. 25. Which of the following would an economist consider to be investment? A. Boeing building a new factory B. Oprah buying a $10 million home from a fellow celebrity C. A stockbroker buying 10,000 shares of Starbucks stock D. All of the above 26. For an economy to increase investment, it must: A. increase saving. B. increase present consumption. C. buy more stocks and bonds. D. increase nominal GDP. 27. If an economy wants to increase its current level of investment, it must: A. sacrifice future consumption. B. print more money. C. offer more stocks and bonds to financial investors. D. sacrifice current consumption. 28. Increased present saving: A. comes at the expense of reduced current investment. B. comes at the expense of reduced current consumption. C. can only occur if the government increases the amount of money in circulation. D. is only possible if the economy is experiencing positive growth in real GDP. 23-6 Chapter 23 - An Introduction to Macroeconomics 29. Banks and other financial institutions: A. are the primary investors in equipment, factories, and other capital goods. B. lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity. C. promote economic growth by helping to direct household saving to businesses that want to invest. D. often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods. 30. Shocks to the economy occur: 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. 31. Shocks to the economy occur when: A. stock prices rise by more than 10 percent per year. B. government takes a more active role in the economy. C. prices are flexible. D. actual economic events do not match what people expected. 32. Demand shocks: A. refer to unexpected changes in the desires of households and businesses to buy goods and services. B. refer to unexpected changes in the ability of firms to produce and sell goods and services. C. always have a negative impact on the economy. D. cause fewer short-run fluctuations than supply shocks. 23-7 Chapter 23 - An Introduction to Macroeconomics 33. Which of the following is an example of a demand shock? A. Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico. B. Consumers become worried about job loss and buy fewer goods and services than expected. C. Floods in the Midwest destroy crops. D. The Federal government unexpectedly requires automobile producers to raise fuel efficiency standards. 34. Supply shocks: A. occur more frequently than demand shocks. B. usually result from fiscal and monetary policy changes. C. occur when sellers face unexpected changes in the availability and/or prices of key inputs. D. have been responsible for most of the recessions in the United States since World War II. 35. Which of the following is an example of a supply shock? A. A surge in consumer optimism prompts increased buying of goods and services. B. A surprise tax rebate from the government gives people more money to spend. C. A dramatic increase in energy prices increases production costs for firms in the economy. D. Government increases spending on education. 36. When demand shocks lead to recessions, it is mainly due to: A. price inflexibility. B. the inability of government policy to affect demand. C. unexpected changes in the supply of goods and services. D. government regulations that prevent firms from adjusting output in response to the shocks. 37. Suppose that Techno TV produces LCD televisions. At a price of $2,000 per television, Techno determines that its optimal output is 3000 television sets per week. If prices are sticky and fears of a recession reduce demand for LCD televisions, we would expect Techno to: A. reduce output in the long run. B. reduce output in the short run. C. raise prices in the short run to compensate for lost revenue. D. lower prices in the short run to offset the reduced demand. 23-8 Chapter 23 - An Introduction to Macroeconomics 38. The figure above depicts a situation where: A. prices are sticky, but output is flexible. B. prices are flexible, but output is constant. C. prices and output are both flexible. D. prices are sticky, and output is constant. 39. Refer to the figure above. Assuming this market is representative of the economy as a whole, this economy: A. is highly susceptible to recessions and high unemployment. B. faces regularly fluctuating output levels in response to demand shocks. C. is capable of always producing at its optimal capacity. D. can only lessen the impacts of business cycles through active government policy. 40. Refer to the figure above. Assuming this market is representative of the economy as a whole, a positive demand shock will: A. increase both the price level and the quantity of output produced. B. increase output, but leave prices unchanged. C. lower the price level, but leave output unchanged. D. raise the price level, but leave output unchanged. 23-9 Chapter 23 - An Introduction to Macroeconomics 41. Refer to the figure above. Assuming this market is representative of the economy as a whole, a negative demand shock will: A. cause inflation. B. increase unemployment. C. lower prices, but leave output unaffected. D. reduce both prices and output. 42. The figure above depicts a situation where: A. prices are sticky, but output is flexible. B. prices are flexible, but output is constant. C. prices and output are both flexible. D. prices are sticky, and output is constant. 43. Refer to the figure above. Assuming this market is representative of the economy as a whole, this economy: A. is highly susceptible to inflation. B. faces fluctuating output levels whenever there is a demand shock. C. is capable of always producing at its optimal capacity. D. is largely immune to business cycles. 23-10 Chapter 23 - An Introduction to Macroeconomics 44. Refer to the figure above. Assuming this market is representative of the economy as a whole, a positive demand shock will: A. increase both the price level and the quantity of output produced. B. increase output, but leave prices unchanged. C. lower the price level, but leave output unchanged. D. raise the price level, but leave output unchanged. 45. Refer to the figure above. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely: A. cause inflation. B. increase unemployment. C. lower prices, but leave output unaffected. D. reduce both prices and output. 46. Refer to the above figures. Which figure(s) represent a situation where prices are flexible? A. A only. B. B only. C. Both A and B. D. Neither A nor B. 23-11 Chapter 23 - An Introduction to Macroeconomics 47. Refer to the above figures. Which figure(s) represent a situation where prices are sticky? A. A only. B. B only. C. Both A and B. D. Neither A nor B. 48. Refer to the above figures. Which figure(s) represent a situation where negative demand shocks can result in a recession? A. A only. B. B only. C. Both A and B. D. Neither A nor B. 49. Refer to the above figures. Which of the following events would most likely result in higher unemployment? A. A shift from D2 to D1 in Figure A. B. A shift from D2 to D3 in Figure A. C. A shift from D2 to D1 in Figure B. D. A shift from D2 to D3 in Figure B. 50. Refer to the above figures. Which of the following events would most likely result in inflation? A. A shift from D2 to D1 in Figure A. B. A shift from D2 to D3 in Figure A. C. A shift from D2 to D1 in Figure B. D. A shift from D2 to D3 in Figure B. 51. Refer to the above figures. Which figure(s) represent a situation where firms are likely to hold inventories to accommodate unexpected changes in demand? A. A only. B. B only. C. Both A and B. D. Neither A nor B. 23-12 Chapter 23 - An Introduction to Macroeconomics 52. Which of the following results from firms holding inventories? A. The economy is much more susceptible to business cycle fluctuations. B. Demand shocks occur with greater frequency. C. Demand shocks occur less frequently. D. Firms can maintain production levels and adjust inventories in response to demand shocks. 53. Kara's Kittens typically produces and sells at its optimal (lowest per-unit cost) level of 30 scratching posts per week. Kara's also maintains an inventory of 20 scratching posts. If prices are sticky and there is a positive demand shock this week resulting in demand for 40 scratching posts, we would expect Kara's to: A. sell the additional scratching posts out of its inventory and rebuild the inventory later when a negative demand shock occurs. B. permanently expand production to 40 scratching posts per week. C. raise prices on scratching posts. D. introduce a new line of scratching posts. 54. In situations of sticky prices and negative demand shocks we would expect firms to: A. deplete inventories before increasing production. B. reduce production before building up inventories. C. build up inventories before reducing production. D. lower prices before reducing production or building up inventories. 55. Which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices? 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. 23-13 Chapter 23 - An Introduction to Macroeconomics 56. For which of the following goods or services are prices most sticky? A. Taxi fares B. Haircuts C. Coin-operated laundry machines D. Airlines tickets 57. For which of the following goods or services are prices least sticky? A. Taxi fares B. Haircuts C. Microwave ovens D. Airlines tickets 58. The average number of months between price changes for gasoline is: A. 0.2 B. 0.6 C. 1.0 D. 1.8 59. Prices for airline tickets change on average about once per month. This would suggest that airline ticket prices are: A. stuck. B. determined in a highly competitive market. C. relatively sticky. D. relatively flexible. 60. Prices tend to be sticky because: A. firms are worried that frequent price changes would annoy consumers. B. most firms have agreements with each other to fix prices at profit-maximizing levels. C. government controls most prices. D. foreign competition discourages domestic firms from price changes. 23-14 Chapter 23 - An Introduction to Macroeconomics 61. Which of the following best explains why prices tend to be inflexible even when demand changes? 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. 62. Prices are particularly sticky: A. when there are widespread macroeconomic and monetary disturbances in the economy. B. in the long run. C. when markets are highly competitive. D. when the economy is at full employment and positive demand shocks are occurring. 63. Which of the following statements best describes price flexibility in the economy? 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. 23-15 Chapter 23 - An Introduction to Macroeconomics 64. Refer to the above figures. As the economy moves from the very short run to the longer run, we would expect: A. the representation of the economy to move from Figure A to Figure B. B. the representation of the economy to move from Figure B to Figure A. C. demand shocks to be eliminated. D. the economy to gravitate to P1. 65. Refer to the above figures. In terms of representing the economy: A. Neither Figure A nor Figure B consistently represent either the very short run or longer run. B. Demand shocks affect levels of output and employment in Figure A; demand shocks have no effect in Figure B. C. Figure A represents the very short run, where output is fixed, and Figure B represents the longer run. D. Figure B represents the very short run, where prices are sticky, and Figure A represents the longer run. 66. Refer to the above figures. If government policy can be used to affect the level of demand in the economy, these figures suggest that government policy: A. can affect the level of output in the very short run, when prices are stuck. B. can affect the level of output in the longer run, when prices are flexible. C. cannot affect output in either the very short run or longer run. D. can be used to simultaneously affect the levels of output and prices. 67. The overall behavior of the economy: A. is remarkably stable over time. B. differs over time as prices become increasingly flexible in the months and years following a shock. C. differs over time as prices become increasingly sticky in the months and years following a shock. D. is easily controlled and stabilized by government policy. 23-16 Chapter 23 - An Introduction to Macroeconomics 68. (Consider This) What is the difference between financial investment and economic investment? A. There is no difference between the two. B. Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods. C. Economic investment is adjusted for inflation; financial investment is not. D. Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods. 69. (Consider This) Which of the following is an example of economic investment? A. Volvo buys an old factory building from General Motors. B. Nike buys a new machine that increases shoe production. C. Bill Gates buys shares of stock in IBM. D. Warren Buffet buys U.S. savings bonds. 70. (Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would: A. consider this to be an economic investment. B. not consider this to be an economic investment because Toyota is less efficient than Chrysler. C. not consider this to be an economic investment because no new capital is created through the purchase. D. not consider this to be an economic investment because there is no way to know how it will affect stock holdings in the two companies. 71. (Consider This) In 2008 and 2009, the United States experienced what has come to be known as the: A. Great Depression B. Great Recession C. Great Expansion D. Great Stagnation 23-17 Chapter 23 - An Introduction to Macroeconomics 72. (Consider This) The U.S. recession which occurred in 2008 and 2009 represented a case where: A. government policy intervention effectively offset the negative demand shock and minimized the effects on output and employment. B. prices were somewhat flexible, so the impact of the demand shock was felt about the same in terms of price and output changes. C. prices were relatively flexible, minimizing the impact on total output and employment. D. prices were relatively sticky and most of the impact was on total output. 73. (Last Word) Many economists believe that the widespread use of computerized inventory control systems: A. has reduced severity in the business cycle. B. will magnify recessions by triggering automatic reductions in output any time inventories begin to accumulate. C. has eliminated price stickiness. D. will eventually prevent recessions from occurring. 74. (Last Word) Computerized inventory tracking has been credited with reducing the number and severity of recessions because these tracking systems: A. require firms to change prices much more quickly than before. B. effectively eliminate negative demand shocks. C. allow firms to react more quickly and subtly to negative demand shocks, and avoid the large output reductions that frequently result in higher unemployment. D. have eliminated the need for government macroeconomic policy. 75. (Last Word) Which of the following statements is true about computerized inventory tracking systems and the severity of recessions? A. While these systems are credited with reducing business cycle severity prior to the recession of 2007-2009, some economists believe that they contributed to the suddenness and severity of the 2007-2009 recession. B. These systems are credited with reducing business cycle severity prior to the recession of 2007-2009, and for greatly reducing the severity of the 2007-2009 recession. C. These systems are generally held responsible for magnifying recessions over the past 25 years by rapidly signaling to firms the need to cut production. D. These systems are generally thought to change the timing of recessions, but not to affect the overall severity of declines in output and employment. 23-18 Chapter 23 - An Introduction to Macroeconomics True / False Questions 76. The business cycle is primarily concerned with changes in the level of overall prices over time. True False 77. A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession. True False 78. The business cycle reflects both short-run fluctuations in output and long-run economic growth. True False 79. Economists and policymakers are generally more concerned about nominal GDP than real GDP. True False 80. Nominal GDP measures a nation's output in current year prices. True False 81. Any person without a job is considered to be unemployed. True False 82. Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness. True False 23-19 Chapter 23 - An Introduction to Macroeconomics 83. Inflation reduces the purchasing power of a person's income and savings. True False 84. In 2007, unemployment rates in the United States exceeded the rates in Germany, India, and Poland. True False 85. In 2008-2009, the U.S. economy lost 8 million jobs and saw the unemployment rate rise from 4.6 percent to as high as 10.1 percent. True False 86. Real GDP measures the change in the price level over time. True False 87. Modern economic growth refers to any situation where a nation's output increases. True False 88. In order to achieve modern economic growth, a nation's output must grow faster than its population. True False 89. A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth. True False 90. Output per person has grown steadily since the beginning of the Roman Empire. True False 23-20 Chapter 23 - An Introduction to Macroeconomics 91. China's GDP per person in 2009 was less than one-tenth of U.S. GDP per person in the same year. True False 92. Economists refer to purchases of stocks and bonds as "investment." True False 93. The amount of investment in an economy is ultimately limited by the amount of savings in that economy. True False 94. Increasing investment in the present means forgoing future consumption. True False 95. A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption. True False 96. Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy. True False 97. Economists believe that expectations have little impact on macroeconomic outcomes. True False 98. Shocks occur when actual events do not match expectations. True False 23-21 Chapter 23 - An Introduction to Macroeconomics 99. A demand shock occurs when large numbers of consumers unexpectedly reduce their purchases of goods and services. True False 100. At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock. True False 101. Demand shocks may be positive or negative. True False 102. "Supply shocks" occur any time there is a change in the supply of goods and services. True False 103. Economists believe that most short-run fluctuations in output are the result of supply shocks. True False 104. Demand shocks cause problems in the macroeconomy primarily because prices are sticky. True False 105. In the very short run, demand shocks will tend to change the level of output but have little effect on prices. True False 106. In the very short run, firms tend to respond to demand shocks by changing their prices. True False 23-22 Chapter 23 - An Introduction to Macroeconomics 107. Negative demand shocks have a more significant impact on output and employment when prices are flexible. True False 108. In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce. True False 109. Milk prices tend to be stickier than gasoline prices. True False 110. Prices tend to be stickier in the shorter run than in the longer run. True False 111. Prices tend to be sticky partially because sellers know that consumers prefer stable prices. True False 112. Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market. True False 113. The "sticky price" model is the only one used by macroeconomists. True False 114. (Consider This) The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses. True False 23-23 Chapter 23 - An Introduction to Macroeconomics 115. (Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment. True False 116. (Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment. True False 23-24 Chapter 23 - An Introduction to Macroeconomics Chapter 23 An Introduction to Macroeconomics Answer Key Multiple Choice Questions 1. Macroeconomics is mostly focused on: A. the individual markets within an economy. B. only the largest industries in the economy. C. the economy as a whole. D. why specific businesses fail. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 2. The two topics of primary concern in macroeconomics are: A. short-run fluctuations in output and employment, and long-run economic growth. B. unemployment, and wage rates in labor markets. C. monopoly power of corporations, and small business profitability. D. oil prices and housing markets. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 23-25 Chapter 23 - An Introduction to Macroeconomics 3. The business cycle depicts: 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. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 4. The term "recession" describes a situation where: 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. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 5. Which of the following is most closely related to recessions? A. positive long-run economic growth B. rapid growth in the price level C. falling rates of unemployment D. negative growth in output AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 23-26 Chapter 23 - An Introduction to Macroeconomics 6. Which of the following statements is most accurate about advanced economies? A. Economies experience a positive growth trend over the short run, but experience significant variability in the long run. B. Economies experience a positive growth trend over the long run, but experience significant variability in the short run. C. Economies experience positive and stable growth over both the long run and short run. D. Economies experience little long-run growth in output, but can experience significant growth in the short run. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 7. Real GDP measures the: A. total dollar value of all goods and services produced within the borders of a country using current prices. B. value of final goods and services produced within the borders of a country, corrected for price changes. C. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. D. value of all goods and services produced in the world, using current prices. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 23-27 Chapter 23 - An Introduction to Macroeconomics 8. If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? A. nominal and real GDP would both rise. B. nominal and real GDP would both be unchanged. C. real GDP would rise, but nominal GDP would be unchanged. D. nominal GDP would rise, but real GDP would be unchanged. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 9. Real GDP is preferred to nominal GDP as a measure of economic performance because: A. nominal GDP uses current prices and thus may over- or understate true changes in output. B. nominal GDP only includes goods and excludes services. C. nominal GDP is not adjusted for population changes. D. real GDP accounts for changes in the quality of goods and services produced. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 10. 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 pepperoni pizzas: A. increased both nominal and real GDP from last year. B. increased nominal GDP from last year, but real GDP was unaffected. C. increased real GDP from last year, but nominal GDP was unaffected. D. did not change either nominal or real GDP from last year. AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Status: New Topic: Performance and policy 23-28 Chapter 23 - An Introduction to Macroeconomics 11. 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 pepperoni pizzas this year: A. increased nominal GDP by $20,000, but left real GDP unchanged. B. increased nominal GDP by $120,000, and increased real GDP by $100,000. C. left nominal GDP unchanged, but increased real GDP by $20,000. D. increased nominal GDP by $120,000, but left real GDP unchanged. AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Status: New Topic: Performance and policy 12. Why are high rates of unemployment of concern to economists? A. Higher rates of unemployment generally lead to higher inflation rates. B. Environmental destruction is more prevalent when unemployment rates are high. C. There is lost output that could have been produced if the unemployed had been working. D. All of the above are reasons why economists are concerned about high unemployment rates. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Status: New Topic: Performance and policy 13. Unemployment describes the condition where: A. equipment and machinery are going unused. B. a person cannot get a job, but is willing to work and is actively seeking work. C. a person does not have a job, regardless of whether or not they want one. D. any resource sits idle. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 23-29 Chapter 23 - An Introduction to Macroeconomics 14. Higher rates of unemployment are linked with: A. greater political stability because the employed tend to be more politically active. B. higher crime rates as the unemployed seek to replace lost income. C. lower rates of heart disease as the unemployed have eliminated job stress. D. improvements in overall health as the unemployed have more leisure time to be physically active. AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 15. Inflation is defined as: A. an increase in the overall level of prices. B. the rate of growth in nominal GDP. C. a situation where all prices in the economy rise simultaneously. D. the growth phase of the business cycle. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 16. Why are economists concerned about inflation? A. Inflation generally causes unemployment rates to rise. B. Real GDP is necessarily falling when there is inflation. C. Inflation lowers the standard of living for people whose income does not increase as fast as the price level. D. Inflation increases the value of peoples' saving and encourages overspending on goods and services. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 23-30 Chapter 23 - An Introduction to Macroeconomics 17. The three statistics that are the main focus for those measuring macroeconomic health are: 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. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 18. Modern economic growth refers to countries that have experienced an increase in: A. real GDP over time. B. nominal GDP over time. C. real output spread evenly across all sectors of the economy. D. real output per person. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 19. Before the period of modern economic growth: A. only civilizations such as the Roman Empire experienced economic growth. B. rates of population growth virtually matched rates of output growth. C. most economies realized high rates of growth in output per person. D. output and population growth were stagnant. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 23-31 Chapter 23 - An Introduction to Macroeconomics 20. In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation? A. purchasing power parity B. the quantity of resources available to the economy C. population size D. different currency values AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 21. Which of the following countries would economists say definitively is achieving modern economic growth? A. Zimbabwe experiences as 5.6 percent increase in nominal GDP. B. South Africa experiences a 4.2 percent increase in real GDP. C. Ghana experiences a 3.6 percent increase in nominal GDP per person. D. Nigeria experiences a 2.7 percent increase in real GDP per person. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Status: New Topic: Miracle of modern economic growth 22. Which of the following is used to measure directly the average standard of living across countries? A. real GDP B. nominal GDP C. purchasing power parity D. GDP per person AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 23-32 Chapter 23 - An Introduction to Macroeconomics 23. Savings are generated whenever: A. prices are rising. B. current spending exceeds current income. C. current income exceeds current spending. D. real GDP exceeds nominal GDP. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 24. When economists refer to "investment," they are describing a situation where: A. people are buying shares of corporate stock. B. resources are devoted to increasing future output. C. money is saved in a bank account. D. financial assets are purchased in the hope of a monetary gain. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 25. Which of the following would an economist consider to be investment? A. Boeing building a new factory B. Oprah buying a $10 million home from a fellow celebrity C. A stockbroker buying 10,000 shares of Starbucks stock D. All of the above AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 23-33 Chapter 23 - An Introduction to Macroeconomics 26. For an economy to increase investment, it must: A. increase saving. B. increase present consumption. C. buy more stocks and bonds. D. increase nominal GDP. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 27. If an economy wants to increase its current level of investment, it must: A. sacrifice future consumption. B. print more money. C. offer more stocks and bonds to financial investors. D. sacrifice current consumption. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 28. Increased present saving: A. comes at the expense of reduced current investment. B. comes at the expense of reduced current consumption. C. can only occur if the government increases the amount of money in circulation. D. is only possible if the economy is experiencing positive growth in real GDP. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in rising promoting living standards. Status: New Topic: Miracle of modern economic growth 23-34 Chapter 23 - An Introduction to Macroeconomics 29. Banks and other financial institutions: A. are the primary investors in equipment, factories, and other capital goods. B. lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity. C. promote economic growth by helping to direct household saving to businesses that want to invest. D. often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Status: New Topic: Miracle of modern economic growth 30. Shocks to the economy occur: 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. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 31. Shocks to the economy occur when: A. stock prices rise by more than 10 percent per year. B. government takes a more active role in the economy. C. prices are flexible. D. actual economic events do not match what people expected. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-35 Chapter 23 - An Introduction to Macroeconomics 32. Demand shocks: A. refer to unexpected changes in the desires of households and businesses to buy goods and services. B. refer to unexpected changes in the ability of firms to produce and sell goods and services. C. always have a negative impact on the economy. D. cause fewer short-run fluctuations than supply shocks. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 33. Which of the following is an example of a demand shock? A. Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico. B. Consumers become worried about job loss and buy fewer goods and services than expected. C. Floods in the Midwest destroy crops. D. The Federal government unexpectedly requires automobile producers to raise fuel efficiency standards. AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 34. Supply shocks: A. occur more frequently than demand shocks. B. usually result from fiscal and monetary policy changes. C. occur when sellers face unexpected changes in the availability and/or prices of key inputs. D. have been responsible for most of the recessions in the United States since World War II. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-36 Chapter 23 - An Introduction to Macroeconomics 35. Which of the following is an example of a supply shock? A. A surge in consumer optimism prompts increased buying of goods and services. B. A surprise tax rebate from the government gives people more money to spend. C. A dramatic increase in energy prices increases production costs for firms in the economy. D. Government increases spending on education. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 36. When demand shocks lead to recessions, it is mainly due to: A. price inflexibility. B. the inability of government policy to affect demand. C. unexpected changes in the supply of goods and services. D. government regulations that prevent firms from adjusting output in response to the shocks. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 37. Suppose that Techno TV produces LCD televisions. At a price of $2,000 per television, Techno determines that its optimal output is 3000 television sets per week. If prices are sticky and fears of a recession reduce demand for LCD televisions, we would expect Techno to: A. reduce output in the long run. B. reduce output in the short run. C. raise prices in the short run to compensate for lost revenue. D. lower prices in the short run to offset the reduced demand. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-37 Chapter 23 - An Introduction to Macroeconomics 38. The figure above depicts a situation where: A. prices are sticky, but output is flexible. B. prices are flexible, but output is constant. C. prices and output are both flexible. D. prices are sticky, and output is constant. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 23-38 Chapter 23 - An Introduction to Macroeconomics 39. Refer to the figure above. Assuming this market is representative of the economy as a whole, this economy: A. is highly susceptible to recessions and high unemployment. B. faces regularly fluctuating output levels in response to demand shocks. C. is capable of always producing at its optimal capacity. D. can only lessen the impacts of business cycles through active government policy. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 40. Refer to the figure above. Assuming this market is representative of the economy as a whole, a positive demand shock will: A. increase both the price level and the quantity of output produced. B. increase output, but leave prices unchanged. C. lower the price level, but leave output unchanged. D. raise the price level, but leave output unchanged. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 41. Refer to the figure above. Assuming this market is representative of the economy as a whole, a negative demand shock will: A. cause inflation. B. increase unemployment. C. lower prices, but leave output unaffected. D. reduce both prices and output. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 23-39 Chapter 23 - An Introduction to Macroeconomics 42. The figure above depicts a situation where: A. prices are sticky, but output is flexible. B. prices are flexible, but output is constant. C. prices and output are both flexible. D. prices are sticky, and output is constant. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 23-40 Chapter 23 - An Introduction to Macroeconomics 43. Refer to the figure above. Assuming this market is representative of the economy as a whole, this economy: A. is highly susceptible to inflation. B. faces fluctuating output levels whenever there is a demand shock. C. is capable of always producing at its optimal capacity. D. is largely immune to business cycles. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 44. Refer to the figure above. Assuming this market is representative of the economy as a whole, a positive demand shock will: A. increase both the price level and the quantity of output produced. B. increase output, but leave prices unchanged. C. lower the price level, but leave output unchanged. D. raise the price level, but leave output unchanged. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 45. Refer to the figure above. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely: A. cause inflation. B. increase unemployment. C. lower prices, but leave output unaffected. D. reduce both prices and output. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 23-41 Chapter 23 - An Introduction to Macroeconomics 46. Refer to the above figures. Which figure(s) represent a situation where prices are flexible? A. A only. B. B only. C. Both A and B. D. Neither A nor B. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 47. Refer to the above figures. Which figure(s) represent a situation where prices are sticky? A. A only. B. B only. C. Both A and B. D. Neither A nor B. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 23-42 Chapter 23 - An Introduction to Macroeconomics 48. Refer to the above figures. Which figure(s) represent a situation where negative demand shocks can result in a recession? A. A only. B. B only. C. Both A and B. D. Neither A nor B. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 49. Refer to the above figures. Which of the following events would most likely result in higher unemployment? A. A shift from D2 to D1 in Figure A. B. A shift from D2 to D3 in Figure A. C. A shift from D2 to D1 in Figure B. D. A shift from D2 to D3 in Figure B. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 50. Refer to the above figures. Which of the following events would most likely result in inflation? A. A shift from D2 to D1 in Figure A. B. A shift from D2 to D3 in Figure A. C. A shift from D2 to D1 in Figure B. D. A shift from D2 to D3 in Figure B. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 23-43 Chapter 23 - An Introduction to Macroeconomics 51. Refer to the above figures. Which figure(s) represent a situation where firms are likely to hold inventories to accommodate unexpected changes in demand? A. A only. B. B only. C. Both A and B. D. Neither A nor B. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks Type: Graph 52. Which of the following results from firms holding inventories? A. The economy is much more susceptible to business cycle fluctuations. B. Demand shocks occur with greater frequency. C. Demand shocks occur less frequently. D. Firms can maintain production levels and adjust inventories in response to demand shocks. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-44 Chapter 23 - An Introduction to Macroeconomics 53. Kara's Kittens typically produces and sells at its optimal (lowest per-unit cost) level of 30 scratching posts per week. Kara's also maintains an inventory of 20 scratching posts. If prices are sticky and there is a positive demand shock this week resulting in demand for 40 scratching posts, we would expect Kara's to: A. sell the additional scratching posts out of its inventory and rebuild the inventory later when a negative demand shock occurs. B. permanently expand production to 40 scratching posts per week. C. raise prices on scratching posts. D. introduce a new line of scratching posts. AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 54. In situations of sticky prices and negative demand shocks we would expect firms to: A. deplete inventories before increasing production. B. reduce production before building up inventories. C. build up inventories before reducing production. D. lower prices before reducing production or building up inventories. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-45 Chapter 23 - An Introduction to Macroeconomics 55. Which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices? 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. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 56. For which of the following goods or services are prices most sticky? A. Taxi fares B. Haircuts C. Coin-operated laundry machines D. Airlines tickets AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 57. For which of the following goods or services are prices least sticky? A. Taxi fares B. Haircuts C. Microwave ovens D. Airlines tickets AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 23-46 Chapter 23 - An Introduction to Macroeconomics 58. The average number of months between price changes for gasoline is: A. 0.2 B. 0.6 C. 1.0 D. 1.8 AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 59. Prices for airline tickets change on average about once per month. This would suggest that airline ticket prices are: A. stuck. B. determined in a highly competitive market. C. relatively sticky. D. relatively flexible. AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Status: New Topic: How sticky are prices? 60. Prices tend to be sticky because: A. firms are worried that frequent price changes would annoy consumers. B. most firms have agreements with each other to fix prices at profit-maximizing levels. C. government controls most prices. D. foreign competition discourages domestic firms from price changes. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 23-47 Chapter 23 - An Introduction to Macroeconomics 61. Which of the following best explains why prices tend to be inflexible even when demand changes? 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. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 62. Prices are particularly sticky: A. when there are widespread macroeconomic and monetary disturbances in the economy. B. in the long run. C. when markets are highly competitive. D. when the economy is at full employment and positive demand shocks are occurring. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Status: New Topic: How sticky are prices? 63. Which of the following statements best describes price flexibility in the economy? 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. AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 23-48 Chapter 23 - An Introduction to Macroeconomics 64. Refer to the above figures. As the economy moves from the very short run to the longer run, we would expect: A. the representation of the economy to move from Figure A to Figure B. B. the representation of the economy to move from Figure B to Figure A. C. demand shocks to be eliminated. D. the economy to gravitate to P1. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Categorizing macroeconomic models using price stickiness Type: Graph 23-49 Chapter 23 - An Introduction to Macroeconomics 65. Refer to the above figures. In terms of representing the economy: A. Neither Figure A nor Figure B consistently represent either the very short run or longer run. B. Demand shocks affect levels of output and employment in Figure A; demand shocks have no effect in Figure B. C. Figure A represents the very short run, where output is fixed, and Figure B represents the longer run. D. Figure B represents the very short run, where prices are sticky, and Figure A represents the longer run. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Categorizing macroeconomic models using price stickiness Type: Graph 66. Refer to the above figures. If government policy can be used to affect the level of demand in the economy, these figures suggest that government policy: A. can affect the level of output in the very short run, when prices are stuck. B. can affect the level of output in the longer run, when prices are flexible. C. cannot affect output in either the very short run or longer run. D. can be used to simultaneously affect the levels of output and prices. AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Categorizing macroeconomic models using price stickiness Type: Graph 23-50 Chapter 23 - An Introduction to Macroeconomics 67. The overall behavior of the economy: A. is remarkably stable over time. B. differs over time as prices become increasingly flexible in the months and years following a shock. C. differs over time as prices become increasingly sticky in the months and years following a shock. D. is easily controlled and stabilized by government policy. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Status: New Topic: Categorizing macroeconomic models using price stickiness 68. (Consider This) What is the difference between financial investment and economic investment? A. There is no difference between the two. B. Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods. C. Economic investment is adjusted for inflation; financial investment is not. D. Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods. AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 69. (Consider This) Which of the following is an example of economic investment? A. Volvo buys an old factory building from General Motors. B. Nike buys a new machine that increases shoe production. C. Bill Gates buys shares of stock in IBM. D. Warren Buffet buys U.S. savings bonds. AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 23-51 Chapter 23 - An Introduction to Macroeconomics 70. (Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would: A. consider this to be an economic investment. B. not consider this to be an economic investment because Toyota is less efficient than Chrysler. C. not consider this to be an economic investment because no new capital is created through the purchase. D. not consider this to be an economic investment because there is no way to know how it will affect stock holdings in the two companies. AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 71. (Consider This) In 2008 and 2009, the United States experienced what has come to be known as the: A. Great Depression B. Great Recession C. Great Expansion D. Great Stagnation AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Status: New Topic: Uncertainty, expectations, and shocks 23-52 Chapter 23 - An Introduction to Macroeconomics 72. (Consider This) The U.S. recession which occurred in 2008 and 2009 represented a case where: A. government policy intervention effectively offset the negative demand shock and minimized the effects on output and employment. B. prices were somewhat flexible, so the impact of the demand shock was felt about the same in terms of price and output changes. C. prices were relatively flexible, minimizing the impact on total output and employment. D. prices were relatively sticky and most of the impact was on total output. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Status: New Topic: Uncertainty, expectations, and shocks 73. (Last Word) Many economists believe that the widespread use of computerized inventory control systems: A. has reduced severity in the business cycle. B. will magnify recessions by triggering automatic reductions in output any time inventories begin to accumulate. C. has eliminated price stickiness. D. will eventually prevent recessions from occurring. AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-53 Chapter 23 - An Introduction to Macroeconomics 74. (Last Word) Computerized inventory tracking has been credited with reducing the number and severity of recessions because these tracking systems: A. require firms to change prices much more quickly than before. B. effectively eliminate negative demand shocks. C. allow firms to react more quickly and subtly to negative demand shocks, and avoid the large output reductions that frequently result in higher unemployment. D. have eliminated the need for government macroeconomic policy. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 75. (Last Word) Which of the following statements is true about computerized inventory tracking systems and the severity of recessions? A. While these systems are credited with reducing business cycle severity prior to the recession of 2007-2009, some economists believe that they contributed to the suddenness and severity of the 2007-2009 recession. B. These systems are credited with reducing business cycle severity prior to the recession of 2007-2009, and for greatly reducing the severity of the 2007-2009 recession. C. These systems are generally held responsible for magnifying recessions over the past 25 years by rapidly signaling to firms the need to cut production. D. These systems are generally thought to change the timing of recessions, but not to affect the overall severity of declines in output and employment. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks True / False Questions 23-54 Chapter 23 - An Introduction to Macroeconomics 76. The business cycle is primarily concerned with changes in the level of overall prices over time. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 77. A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 78. The business cycle reflects both short-run fluctuations in output and long-run economic growth. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-01 Interpret how macroeconomics studies both long-run economic growth and short-run fluctuations in output and unemployment. Topic: Performance and policy 79. Economists and policymakers are generally more concerned about nominal GDP than real GDP. FALSE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 23-55 Chapter 23 - An Introduction to Macroeconomics 80. Nominal GDP measures a nation's output in current year prices. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 81. Any person without a job is considered to be unemployed. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 82. Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness. TRUE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 83. Inflation reduces the purchasing power of a person's income and savings. TRUE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 23-56 Chapter 23 - An Introduction to Macroeconomics 84. In 2007, unemployment rates in the United States exceeded the rates in Germany, India, and Poland. FALSE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 85. In 2008-2009, the U.S. economy lost 8 million jobs and saw the unemployment rate rise from 4.6 percent to as high as 10.1 percent. TRUE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Status: New Topic: Performance and policy 86. Real GDP measures the change in the price level over time. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-02 Explain why economists focus on GDP; inflation; and unemployment when assessing the health of an entire economy. Topic: Performance and policy 87. Modern economic growth refers to any situation where a nation's output increases. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 23-57 Chapter 23 - An Introduction to Macroeconomics 88. In order to achieve modern economic growth, a nation's output must grow faster than its population. TRUE AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 89. A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth. TRUE AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 90. Output per person has grown steadily since the beginning of the Roman Empire. FALSE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Topic: Miracle of modern economic growth 91. China's GDP per person in 2009 was less than one-tenth of U.S. GDP per person in the same year. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-03 Discuss why sustained increases in living standards are a historically recent phenomenon. Status: New Topic: Miracle of modern economic growth 23-58 Chapter 23 - An Introduction to Macroeconomics 92. Economists refer to purchases of stocks and bonds as "investment." FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 93. The amount of investment in an economy is ultimately limited by the amount of savings in that economy. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 94. Increasing investment in the present means forgoing future consumption. FALSE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 95. A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 23-59 Chapter 23 - An Introduction to Macroeconomics 96. Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 97. Economists believe that expectations have little impact on macroeconomic outcomes. FALSE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 98. Shocks occur when actual events do not match expectations. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 99. A demand shock occurs when large numbers of consumers unexpectedly reduce their purchases of goods and services. TRUE AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-60 Chapter 23 - An Introduction to Macroeconomics 100. At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock. FALSE AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 101. Demand shocks may be positive or negative. TRUE AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 102. "Supply shocks" occur any time there is a change in the supply of goods and services. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 103. Economists believe that most short-run fluctuations in output are the result of supply shocks. FALSE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-61 Chapter 23 - An Introduction to Macroeconomics 104. Demand shocks cause problems in the macroeconomy primarily because prices are sticky. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 105. In the very short run, demand shocks will tend to change the level of output but have little effect on prices. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 106. In the very short run, firms tend to respond to demand shocks by changing their prices. FALSE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 107. Negative demand shocks have a more significant impact on output and employment when prices are flexible. FALSE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 23-62 Chapter 23 - An Introduction to Macroeconomics 108. In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: Uncertainty, expectations, and shocks 109. Milk prices tend to be stickier than gasoline prices. TRUE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 110. Prices tend to be stickier in the shorter run than in the longer run. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 111. Prices tend to be sticky partially because sellers know that consumers prefer stable prices. TRUE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 23-63 Chapter 23 - An Introduction to Macroeconomics 112. Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market. FALSE AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 113. The "sticky price" model is the only one used by macroeconomists. FALSE AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-05 Describe why economists believe that "shocks" and "sticky prices" are responsible for short-run fluctuations in output and employment. Topic: How sticky are prices? 114. (Consider This) The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 115. (Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment. FALSE AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 23-64 Chapter 23 - An Introduction to Macroeconomics 116. (Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment. FALSE AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 23-04 Identify why saving and investment are key factors in promoting rising living standards. Topic: Miracle of modern economic growth 23-65

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Maryland - PSYC - 100
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UNAM MX - PHILOSOPHY - 2012-2
innocent but also altogether innocuous—so much so that we wonder greatly about what kind of daimonmust have bewitched the Athenians to such a degree that they were able to see more in him than in any other good-natured,garrulous, droll character
St. Vincent - BA - 340
Chapter 2: The Court System and Dispute ResolutionBA-340A. The Court System Court a tribunal established by government to hear and decide matters properly brought to it1. The Types of Courts Jurisdiction the power of a court to hear and determine a g
DeVry Fremont - ECON - 301
Chapter 24 - Measuring Domestic Output and National IncomeChapter 24Measuring Domestic Output and National IncomeMultiple Choice Questions1. The National Income and Product Accounts (NIPA) help economists and policymakers to:A. determine which firms
DeVry Fremont - ECON - 301
Chapter 25 - Economic GrowthChapter 25Economic GrowthMultiple Choice Questions1. Economic growth is best defined as an increase in:A. either real GDP or real GDP per capita.B. nominal GDP.C. total consumption expenditures.D. wealth in the economy.
DeVry Fremont - ECON - 301
Chapter 26 - Business Cycles, Unemployment, and InflationChapter 26Business Cycles, Unemployment, and InflationMultiple Choice Questions1. Recurring upswings and downswings in an economy's real GDP over time are called:A. recessions.B. business cycl
DeVry Fremont - ECON - 301
Chapter 27 - Basic Macroeconomic RelationshipsChapter 27Basic Macroeconomic RelationshipsMultiple Choice Questions1. The most important determinant of consumer spending is:A. the level of household borrowing.B. consumer expectations.C. the stock of
DeVry Fremont - ECON - 301
Chapter 28 - The Aggregate Expenditures ModelChapter 28The Aggregate Expenditures ModelMultiple Choice Questions1. John Maynard Keynes created the aggregate expenditures model based primarily on whathistorical event?A. Bank panic of 1907B. Great De
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Chapter 29 - Aggregate Demand and Aggregate Supply (+ Appendix)Chapter 29Aggregate Demand and Aggregate Supply (+ Appendix)Multiple Choice Questions1. The aggregate demand curve:A. is upsloping because a higher price level is necessary to make produc
DeVry Fremont - ECON - 301
Chapter 30 - Fiscal Policy, Deficits, and DebtChapter 30Fiscal Policy, Deficits, and DebtMultiple Choice Questions1. The group of three economists appointed by the President to provide fiscal policyrecommendations is the:A. Council of Economic Advis
DeVry Fremont - ECON - 301
Chapter 31 - Money, Banking, and Financial InstitutionsChapter 31Money, Banking, and Financial InstitutionsMultiple Choice Questions1. To say money is socially defined means that:A. money has been defined in a Constitutional amendment.B. whatever pe
DeVry Fremont - ECON - 301
Chapter 32 - Money CreationChapter 32Money CreationMultiple Choice Questions1. The goldsmith's ability to create money was based on the fact that:A. withdrawals of gold tended to exceed deposits of gold in any given time period.B. consumers and merc
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Chapter 33 - Interest Rates and Monetary PolicyChapter 33Interest Rates and Monetary PolicyMultiple Choice Questions1. The transactions demand for money is most closely related to money functioning as a:A. unit of account.B. medium of exchange.C. s
DeVry Fremont - ECON - 301
Chapter 34 - Financial EconomicsChapter 34Financial EconomicsMultiple Choice Questions1. What are the two most important factors influencing investor preferences?A. The desire for high rates of return and the thrill of uncertainty.B. The desire for
DeVry Fremont - ECON - 301
Chapter 35 - Extending the Analysis of Aggregate SupplyChapter 35Extending the Analysis of Aggregate SupplyMultiple Choice Questions1. In terms of aggregate supply, a period in which nominal wages and other resource pricesare unresponsive to price-le
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Chapter 36 - Current Issues in Macro Theory and PolicyChapter 36Current Issues in Macro Theory and PolicyMultiple Choice Questions1. The equation underlying the mainstream view of macroeconomics is:A. MV = PQ.B. Ca + Ig + Xn + G = GDP.C. S = a - bY
DeVry Fremont - ECON - 301
Chapter 37 - International TradeChapter 37International TradeMultiple Choice Questions1. United States exports of goods and services (on a national income account basis) are about:A. 20 percent of U.S. GDP.B. 4 percent of U.S. GDP.C. 28 percent of
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Chapter 38 - The Balance of Payments, Exchange Rates, and Trade DeficitsChapter 38The Balance of Payments, Exchange Rates, and Trade DeficitsMultiple Choice Questions1. International transactions fall into what two broad categories?A. Manufacturing t
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Chapter 39W - The Economics of Developing CountriesChapter 39WThe Economics of Developing CountriesMultiple Choice Questions1. According to the United Nations, approximately what percentage of the world's income isreceived by the richest one-fifth of
DeVry Fremont - ACCT - 553
381Chapter 1Introduction to Federal Taxation andUnderstanding the Federal Tax LawTRUE-FALSE QUESTIONSCHAPTER 11.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.26.27.The majority of dollars collected by the
DeVry Fremont - ACCT - 553
389Chapter 2Tax Research, Practice, and ProcedureTRUE-FALSE QUESTIONSCHAPTER 2*Questions 2144 have been adapted from the IRS Examinations.1. Committee reports of the House Ways and Means Committee, the Senate Finance Committee, and theconference com
DeVry Fremont - ACCT - 553
411Chapter 3Individual TaxationAn OverviewTRUE-FALSE QUESTIONSCHAPTER 31.2.Taxpayers are allowed to take the larger of their itemized deductions or the standard deduction.If no one person contributes more than half the support of a dependent, the e
DeVry Fremont - ACCT - 553
423Chapter 4Gross IncomeTRUE-FALSE QUESTIONSCHAPTER 41.2.3.4.5.6.7.8.9.10.11.12.13.Dr. Yomo, a cash basis taxpayer, received a check for $250 after banking hours on December 30, 2010,from a patient. Since Dr. Yomo could not deposit the c
DeVry Fremont - ACCT - 553
443Chapter 5Gross IncomeExclusionsTRUE-FALSE QUESTIONSCHAPTER 5*The True-False questions have been adapted from the IRS Examinations.1. Interest on insurance dividends left on deposit with an insurance company and withdrawable upon demandis taxable
DeVry Fremont - ACCT - 553
459Chapter 6Deductions: General Concepts andTrade or Business DeductionsTRUE-FALSE QUESTIONSCHAPTER 61.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.An ordinary expenditure is one which is commonly incurred by o
DeVry Fremont - ACCT - 553
485Chapter 7Deductions: Business/Investment Lossesand Passive Activity LossesTRUE-FALSE QUESTIONSCHAPTER 71.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.Practically all tax shelters were formed as limited partnerships.Portfolio i
DeVry Fremont - ACCT - 553
501Chapter 8Deductions: Itemized DeductionsTRUE-FALSE QUESTIONSCHAPTER 81.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.Itemized deductions only reduce taxable income if the taxpayers itemized deductions exceed the stand
DeVry Fremont - ACCT - 553
519Chapter 9Tax Credits, Prepayments, and Special MethodsTRUE-FALSE QUESTIONSCHAPTER 91.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.A tax credit produces a tax benet only to the extent of the effective tax rate in the
DeVry Fremont - ACCT - 553
537Chapter 10Property Transactions: Determination of Basis andGains and LossesTRUE-FALSE QUESTIONSCHAPTER 10*Some of the true-false questions have been adapted from the IRS Examinations.1. Terry Trumbull purchased a tract of land. In order to have c
DeVry Fremont - ACCT - 553
559Chapter 11Property Transactions: Nonrecognition ofGains and LossesTRUE-FALSE QUESTIONSCHAPTER 11*Some of the true-false questions have been adapted from the IRS Examinations.1. Alfred Ahern sold a truck with an adjusted basis of $6,000 for $1,500
DeVry Fremont - ACCT - 553
585Chapter 12Property Transactions: Treatment of Capitaland Section 1231 AssetsTRUE-FALSE QUESTIONSCHAPTER 12*Some of the true-false questions have been adapted from the IRS Examinations.1. For purposes of determining the holding period for property
DeVry Fremont - ACCT - 553
609Chapter 13Tax AccountingTRUE-FALSE QUESTIONSCHAPTER 131.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.A partnership may adopt any tax year without IRS permission.A corporation ling its rst return must annualize its income if the tax
DeVry Fremont - ACCT - 553
633Chapter 14Deferred Compensation and Education Savings PlansTRUE-FALSE QUESTIONSCHAPTER 141.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.An S corporation is permitted to adopt a Keogh plan or a SEP IRA for its emp
DeVry Fremont - ACCT - 553
647Chapter 15Tax Planning for IndividualsTRUE-FALSE QUESTIONSCHAPTER 151.2.3.4.5.6.7.8.9.10.11.12.13.14.15.The 50 percent limitation on business meals and entertainment is applied before the two percent of adjustedgross income oor for
DeVry Fremont - ACCT - 553
659Chapter 16Partnerships, Corporations, and S CorporationsTRUE-FALSE QUESTIONSCHAPTER 161.2.3.4.5.6.7.8.9.10.11.12.13.In general, a partnership must have the same tax year as that of its partners holding greater than a 50percent interes
DeVry Fremont - ACCT - 553
693Chapter 17Federal Estate Tax, Federal Gift Tax, andGeneration-Skipping Transfer TaxTRUE-FALSE QUESTIONSCHAPTER 171.2.Gift taxes paid on post-1976 gifts are generally allowed as a credit against the tentative estate tax.For 2010 the rst $3,500,0
DeVry Fremont - ACCT - 553
711Chapter 18Income Taxation of Trusts and EstatesTRUE-FALSE QUESTIONSCHAPTER 181.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.The decedents nal income tax return is due four months after the date of death.
DeVry Fremont - ACCT - 304
Chapter 01 - Environment and Theoretical Structure of Financial AccountingCHAPTER 1ENVIRONMENT AND THEORETICAL STRUCTURE OF FINANCIAL ACCOUNTINGOverviewThe primary function of financial accounting is to provide useful financial information to users ex
DeVry Fremont - ACCT - 304
Chapter 02 - Review of the Accounting ProcessCHAPTER 2REVIEW OF THE ACCOUNTING PROCESSOverviewChapter 1 explained that the primary means of conveying financial information to investors, creditors, and other external users is through financial statemen
DeVry Fremont - ACCT - 304
Chapter 03 - The Balance Sheet and Financial DisclosuresCHAPTER 3THE BALANCE SHEET AND FINANCIAL DISCLOSURESOverviewChapter 1 stressed the importance of the financial statements in helping investors and creditorspredict future cash flows. The balance
DeVry Fremont - ACCT - 304
Chapter 04 - The Income Statement and Statement of Cash FlowsCHAPTER 4THE INCOME STATEMENT AND STATEMENT OF CASH FLOWSOverviewThe purpose of the income statement is to summarize the profit-generating activities thatoccurred during a particular report
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Chapter 05 - Income Measurement and Profitability AnalysisCHAPTER 5INCOME MEASUREMENT AND PROFITABILITY ANALYSISOverviewThe timing of revenue recognition is critical to income measurement. Revenue affects income,and, under the matching principle, exp
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Chapter 06 - Time Value of Money ConceptsCHAPTER 6TIME VALUE OF MONEY CONCEPTSOverviewTime value of money concepts, specifically future value and present value, are essential in a variety of accounting situations. These concepts and the related comput
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Chapter 07 - Cash and ReceivablesCHAPTER 7CASH AND RECEIVABLESOverviewWe begin our study of assets by looking at cash and receivables-the two assets typically listed first in a balance sheet. Internal control and classification on the balance sheet ar
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Chapter 08 - Inventories: MeasurementCHAPTER 8INVENTORIES: MEASUREMENTOverviewThe next two chapters continue our study of assets by investigating the measurement and reporting issues involving inventories and the related expense-cost of goods sold. In
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Chapter 09 - Inventories: Additional IssuesCHAPTER 9INVENTORIES: ADDITIONAL ISSUESOverviewWe covered most of the principal measurement and reporting issues involving the assetinventory and the corresponding expense cost of goods sold in the previous
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Chapter 10 - Property, Plant, and Equipment and Intangible Assets: Acquisition and DispositionCHAPTER 10PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS: ACQUISITION ANDDISPOSITIONOverviewThis chapter and the one that follows address the measurem
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Chapter 11 - Property, Plant, and Equipment and Intangible Assets: Utilization and ImpairmentCHAPTER 11PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS: UTILIZATION ANDIMPAIRMENTOverviewThis chapter completes our discussion of accounting for prop
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Chapter 12 - InvestmentsCHAPTER 12INVESTMENTSOverviewIn this chapter we cover various approaches used to account for investments that companiesmake in the debt and equity of other companies. An investing company has the option to account forthese in
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Chapter 13 - Current Liabilities and ContingenciesCHAPTER 13CURRENT LIABILITIES AND CONTINGENCIESOverviewWith the discussion of investments in the previous chapter we concluded our six-chapter coverageof assets that began in Chapter 7 with cash and r
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Chapter 14 - Bonds and Long-Term NotesCHAPTER 14BONDS AND LONG-TERM NOTESOverviewThis chapter continues the presentation of liabilities. Specifically, the discussion focuses on theaccounting treatment of long-term liabilities. Long-term notes and bon
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Chapter 15 - LeasesCHAPTER 15LEASESOverviewIn the previous chapter, we saw how companies account for their long-term debt. The focus ofthat discussion was bonds and notes. In this chapter we continue our discussion of debt, but we nowturn our attent
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Chapter 16 - Accounting for Income TaxesCHAPTER 16ACCOUNTING FOR INCOME TAXESOverviewIn this chapter we explore the financial accounting and reporting standards for the effects ofincome taxes. The discussion defines and illustrates temporary differen
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Chapter 17 - Pensions and Other Postretirement Benefit PlansCHAPTER 17PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANSOverviewEmployee compensation comes in many forms. Salaries and wages, of course, provide directand current payment for services prov
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Chapter 18 - Shareholders EquityCHAPTER 18SHAREHOLDERS EQUITYOverviewWe turn our attention in this chapter from liabilities, which represent the creditors interests inthe assets of a corporation, to the shareholders residual interest in those assets.
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Chapter 19 - Share-Based Compensation and Earnings Per ShareCHAPTER 19SHARE-BASED COMPENSATION AND EARNINGS PER SHAREOverviewWeve discussed a variety of employee compensation plans in prior chapters, including pensionand other postretirement benefits
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Chapter 20 - Accounting Changes and ErrorsCHAPTER 20ACCOUNTING CHANGES AND ERRORSOverviewChapter 4 provided an overview of accounting changes and error correction. Later, wediscussed changes encountered in connection with specific assets and liabilit
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Chapter 21 - Statement of Cash Flows RevisitedCHAPTER 21STATEMENT OF CASH FLOWS REVISITEDOverviewThe objective of financial reporting is to provide investors and creditors with usefulinformation, primarily in the form of financial statements. The bal
Ithaca College - PHYSICS - 218
Phys 2213, Fall 2012: FinalMaterial covered:The final is cumulative and covers all material throughout the course - all lectures,all problem sets, all labs, and all handouts (including Dielectrics.pdf andElectricEnergyDensity.pdf). Approximately 1/3 o
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Prelim Topics UPDATED (Fall 2012)1. Static Electricity (as in lab)a. Charging of objects, polarization, motion of charges from one object toanother, etc.2. Coulomb's Lawa. Electrostatic force and applications (trajectory of charged particles)b. Elec
Ithaca College - PHYSICS - 218
Phys 2213, Fall 2012: Prelim 2Material covered:Prelim 2 covers all topics which did not appear on Prelim 1, up through the part ofLecture 18 (October 25) covering computing forces from magnetic fields (but notincluding how to compute magnetic fields).