Chapter 6 example #49264

Shocks to the economy occur:

Which of the following statements best describes price flexibility in the economy? Prices tend to be sticky in the short run and stuck in the long run. Prices tend to be just as sticky in the short run as in the long run. Prices tend to be sticky in the short run but become more flexible over time. Prices tend to be flexible in the short run but become more sticky over time.

Which of the following results from firms holding inventories? The economy is much more susceptible to business cycle fluctuations. Demand shocks occur with greater frequency. Demand shocks occur less frequently. Firms can maintain production levels and adjust inventories in response to demand shocks.

The business cycle depicts: fluctuations in the general price level. the phases a business goes through from when it first opens to when it finally closes. the evolution of technology over time. short-run fluctuations in output and employment.

Which of the following is an example of a supply shock? A surge in consumer optimism prompts increased buying of goods and services. A surprise tax rebate from the government gives people more money to spend. A dramatic increase in energy prices increases production costs for firms in the economy. Government increases spending on education.

Which of the following countries would economists say definitively is achieving modern economic growth? Zimbabwe experiences a 5.6 percent increase in nominal GDP. South Africa experiences a 4.2 percent increase in real GDP. Ghana experiences a 3.6 percent increase in nominal GDP per person. Nigeria experiences a 2.7 percent increase in real GDP per person.

The term "recession" describes a situation where: inflation rates exceed normal levels. output and living standards decline. an economy's ability to produce is destroyed. government takes a less active role in economic matters.

When demand shocks lead to recessions, it is mainly due to: price inflexibility. the inability of government policy to affect demand. unexpected changes in the supply of goods and services. government regulations that prevent firms from adjusting output in response to the shocks.

Prices for airline tickets change on average about once per month. This would suggest that airline ticket prices are: stuck. determined in a highly competitive market. relatively sticky. relatively flexible.

Which of the following statements is most accurate about advanced economies? Economies experience a positive growth trend over the short run but experience significant variability in the long run. Economies experience a positive growth trend over the long run but experience significant variability in the short run. Economies experience positive and stable growth over both the long run and short run. Economies experience little long-run growth in output but can experience significant growth in the short run.

Modern economic growth refers to countries that have experienced an increase in: real GDP over time. nominal GDP over time. real output spread evenly across all sectors of the economy. real output per person.

Consider This) Which of the following is an example of economic investment? Volvo buys an old factory building from General Motors. Nike buys a new machine that increases shoe production. Bill Gates buys shares of stock in IBM. Warren Buffet buys U.S. savings bonds.

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: increased both nominal and real GDP from last year. increased nominal GDP from last year, but real GDP was unaffected. increased real GDP from last year, but nominal GDP was unaffected. did not change either nominal or real GDP from last year.

Higher rates of unemployment are linked with: greater political stability because the employed tend to be more politically active. higher crime rates as the unemployed seek to replace lost income. lower rates of heart disease as the unemployed have eliminated job stress. improvements in overall health as the unemployed have more leisure time to be physically active.

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: increased nominal GDP by $20,000 but left real GDP unchanged. increased nominal GDP by $120,000 and increased real GDP by $100,000. left nominal GDP unchanged but increased real GDP by $20,000. increased nominal GDP by $120,000 but left real GDP unchanged.

The two topics of primary concern in macroeconomics are: short-run fluctuations in output and employment and long-run economic growth. unemployment and wage rates in labor markets. monopoly power of corporations and small business profitability. oil prices and housing markets.

Last Word) Which of the following explanations argues that the Great Recession resulted from asset-price bubbles caused by euphoria and debt-fueled speculation? Minsky explanation. Austrian explanation. Stimulus explanation. Structural explanation.

(Last Word) Advocates for a structural solution to the Great Recession argued that: government should cut taxes across the board to stimulate demand for goods and services. firms should be allowed to go bankrupt, allowing the economy to correct for resource misallocations. firms in financial distress should be taken over by the government and run for the public good. massive public works projects should be implemented to produce public capital, keep people employed, and help workers maintain job skills.

For which of the following goods are services are prices least sticky? Taxi fares. Haircuts. Microwave ovens. Airline tickets.

Inflation is defined as: an increase in the overall level of prices. the rate of growth in nominal GDP. a situation where all prices in the economy rise simultaneously. the growth phase of the business cycle.

Prices tend to be sticky because: firms are worried that frequent price changes would annoy consumers. most firms have agreements with each other to fix prices at profit-maximizing levels. government controls most prices. foreign competition discourages domestic firms from price changes.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? Nominal and real GDP would both rise. Nominal and real GDP would both be unchanged. Real GDP would rise, but nominal GDP would be unchanged. Nominal GDP would rise, but real GDP would be unchanged.

The average number of months between price changes for gasoline is: 0.2. 0.6. 1.0. 1.8.

When economists refer to "investment," they are describing a situation where: people are buying shares of corporate stock. resources are devoted to increasing future output. money is saved in a bank account. financial assets are purchased in the hope of a monetary gain.

Supply shocks: occur more frequently than demand shocks. usually result from fiscal and monetary policy changes. occur when sellers face unexpected changes in the availability and/or prices of key inputs. have been responsible for most of the recessions in the United States since World War II.

Unemployment describes the condition where: equipment and machinery are going unused. a person cannot get a job but is willing to work and is actively seeking work. a person does not have a job, regardless of whether or not he or she wants one. any resource sits idle.

For which of the following goods and services are prices most sticky? Taxi fares. Beer. Coin-operated laundry machines. Airline tickets.

Shocks to the economy occur when: stock prices rise by more than 10 percent per year. government takes a more active role in the economy. prices are flexible. actual economic events do not match what people expected.

Real GDP is preferred to nominal GDP as a measure of economic performance because: nominal GDP uses current prices and thus may over- or understate true changes in output. nominal GDP only includes goods and excludes services. nominal GDP is not adjusted for population changes. real GDP accounts for changes in the quality of goods and services produced.

Which of the following best explains why prices tend to be inflexible even when demand changes? Government regulations limit the number of times a firm can change prices in a year. In most industries the profit-maximizing price does not change even when demand changes. Production costs do not tend to change when a firm varies its level of output. Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals

(Consider This) What is the difference between financial investment and economic investment? There is no difference between the two. Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods. Economic investment is adjusted for inflation; financial investment is not. Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.