Chapter 6

(Last Word) Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation?

Why are economists concerned about inflation?

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

A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession.

Prices are particularly sticky:

Banks and other financial institutions:

Unemployment describes the condition where:

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

Prices tend to be sticky because:

Prices tend to be sticky partially because sellers know that consumers prefer stable prices.

Which of the following is an example of a demand shock?

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

Inflation is defined as:

(Consider This) The U.S. recession that occurred in 2008 and 2009 represented a case where:

The term "recession" describes a situation where:

Real GDP measures the:

For which of the following goods and services are prices most sticky?

Economists believe that expectations have little impact on macroeconomic outcomes.

Last Word) According to the Austrian School, the best explanation for what caused the Great Recession was that:

Milk prices tend to be stickier than gasoline prices

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

Which of the following statements is most accurate about advanced economies?

The business cycle reflects both short-run fluctuations in output and long-run economic growth.

Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would:

Economists and policymakers are generally more concerned about nominal GDP than real GDP.

Prices for airline tickets change on average about once per month. This would suggest that airline ticket prices are:

Increasing investment in the present means forgoing future consumption.

Before the period of modern economic growth:

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

Which of the following is most closely related to recessions?

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

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.

Economists refer to purchases of stocks and bonds as "investment."

The overall behavior of the economy:

Savings are generated whenever:

Demand shocks:

"Supply shocks" occur any time there is a change in the supply of goods and services.

For which of the following goods are services are prices least sticky?

The two topics of primary concern in macroeconomics are:

Which of the following is used to measure directly the average standard of living across countries?

Which of the following would an economist consider to be investment?

Which of the following results from firms holding inventories?

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

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.

In the very short run, firms tend to respond to demand shocks by changing their prices.

(Consider This) The U.S. recession that occurred in 2008 and 2009 represented a case where:

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.

A demand shock occurs when large numbers of consumers unexpectedly reduce their purchases of goods and services.

Shocks occur when actual events do not match expectations.

Why are high rates of unemployment of concern to economists?

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:

Banks and other financial institutions provide the link between savers and economic investors in the macroeconomy.

Modern economic growth refers to countries that have experienced an increase in:

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

Consider This) What is the difference between financial investment and economic investment?

Any person without a job is considered to be unemployed.

increased present saving:

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

Suppose that Techno TV produces LCD televisions. At a price of $2,000 per television, Techno determines that its optimal output is 3,000 television sets per week. If prices are sticky and fears of a recession reduce demand for LCD televisions, we would expect Techno to:

Refer to the figure. Assuming this market is representative of the economy as a whole, a positive demand shock will:

Refer to the figures. If government policy can be used to affect the level of demand in the economy, these figures suggest that government policy:

Negative demand shocks have a more significant impact on output and employment when prices are flexible.

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: Question 8 options:

From 1995 until the start of the recession in 2007, the U.S. economy grew at the same rate as the economy of Japan.

Nominal GDP measures a nation's output in current year prices.

China's GDP per person in 2011 was about one-third of U.S. GDP per person in the same year.

The business cycle depicts:

(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment. Question 23 options:

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

In situations of sticky prices and negative demand shocks, we would expect firms to:

For an economy to increase investment, it must:

Shocks to the economy occur:

Modern economic growth refers to any situation where a nation's output increases.

Consider This) Which of the following is an example of economic investment?

Consider This) The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses. Question 37 options:

Real GDP is preferred to nominal GDP as a measure of economic performance because:

When demand shocks lead to recessions, it is mainly due to::

Demand shocks cause problems in the macroeconomy primarily because prices are sticky.

In order to achieve modern economic growth, a nation's output must grow faster than its population.

Last Word) Advocates for a structural solution to the Great Recession argued that:

Real GDP measures the change in the price level over time.