MacroEcon Midterm Set 1

Macroeconomics is mostly focused on:

The two topics of primary concern in macroeconomics are:

The business cycle depicts:

The term "recession" describes a situation where:

Which of the following is most closely related to recessions?

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

Real GDP measures the:

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

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

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:

Why are high rates of unemployment of concern to economists?

Unemployment describes the condition where:

Higher rates of unemployment are linked with:

Inflation is defined as:

Why are economists concerned about inflation?

The three statistics that are the main focus for those measuring macroeconomic health are:

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

Before the period of modern economic growth:

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

Which of the following countries would economists say definitively is achieving modern economic growth?

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

Savings are generated whenever:

When economists refer to "investment," they are describing a situation where:

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

For an economy to increase investment, it must:

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

Increased present saving:

Banks and other financial institutions:

Shocks to the economy occur:

Shocks to the economy occur when:

Demand shocks:

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

Supply shocks:

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

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

Which of the following results from firms holding inventories?

What is the difference between financial investment and economic investment?

Which of the following is an example of economic investment?

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

In 2008 and 2009, the United States experienced what has come to be known as the:

The U.S. recession which occurred in 2008 and 2009 represented a case where:

Many economists believe that the widespread use of computerized inventory control systems:

Computerized inventory tracking has been credited with reducing the number and severity of recessions because these tracking systems:

The business cycle is primarily concerned with changes in the level of overall prices over time.

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

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

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

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

Any person without a job is considered to be unemployed.

Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness.

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

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.

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

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

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

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

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

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

Increasing investment in the present means forgoing future consumption.

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.

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

Economists believe that expectations have little impact on macroeconomic outcomes.

Shocks occur when actual events do not match expectations.

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

At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock.

Demand shocks may be positive or negative.

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

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

In the very short run, demand shocks will tend to change the level of output but have little effect on prices.

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

In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.

Milk prices tend to be stickier than gasoline prices.

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

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

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.

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

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

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

If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.