978-1259723223 Test Bank TBChap026 Part 1

Chapter 26 An Introduction to Macroeconomics Answer Key

Multiple Choice Questions

1.

Macroeconomics is mostly focused on

2.

The two topics of primary concern in macroeconomics are

3.

The business cycle depicts

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Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-01 Explain why economists focus on GDP, inflation, and

unemployment when assessing the health of an entire economy.

Test Bank: I

To pi c: Performance and Policy

4.

The term “recession” describes a situation where

5.

Which of the following is most closely related to recessions?

6.

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

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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: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-01 Explain why economists focus on GDP, inflation, and

unemployment when assessing the health of an entire economy.

Test Bank: I

To pi c: Performance and Policy

7.

Real GDP measures the

8.

If the prices of all goods and services rose, but the quantity produced remained unchanged,

what would happen to nominal and real GDP?

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written consent of McGraw-Hill Education.

D i f f i c u l t y : 02 Medium

Learning Objective: 26-01 Explain why economists focus on GDP, inflation, and

unemployment when assessing the health of an entire economy.

Test Bank: I

To pi c: Performance and Policy

9.

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

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

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

12.

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

Harry‘s produced 11,000 large pizzas (identical to last year’s pizzas) but sold them for $12 each.

Based on this information, we

can conclude that Harry‘s production of large pizzas

13.

Why are high rates of unemployment of concern to economists?

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written consent of McGraw-Hill Education.

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-01 Explain why economists focus on GDP, inflation, and

unemployment when assessing the health of an entire economy.

Test Bank: I

To pi c: Performance and Policy

14.

Unemployment describes the condition where

15.

Higher rates of unemployment are linked with

16.

Inflation is defined as

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C.

a situation where all prices in the economy rise simultaneously.

D.

the growth phase of the business cycle.

AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-01 Explain why economists focus on GDP, inflation, and

unemployment when assessing the health of an entire economy.

Test Bank: I

To pi c: Performance and Policy

17.

Why are economists concerned about inflation?

18.

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

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To pi c: Performance and Policy

19.

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

20.

Before the period of modern economic growth,

21.

In making international comparisons of living standards using GDP, which of the following

is not adjusted for in the calculation?

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written consent of McGraw-Hill Education.

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-02 Discuss why sustained increases in living standards are a

historically recent phenomenon.

Test Bank: I

To pi c: The Miracle of Modern Economic Growth

22.

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

economic growth?

23.

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

countries?

24.

Savings are generated whenever

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written consent of McGraw-Hill Education.

B.

current spending exceeds current income.

C. current income exceeds current spending.

D. real GDP exceeds nominal GDP.

AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Remember

Di f f i c u l t y : 01 Easy

Learning Objective: 26-03 Identify why saving and investment are key factors in

promoting rising living standards.

Test Bank: I

To pi c: Saving, Investment, and Choosing between Present and Future Consumption

25.

When economists refer to “investment,” they are describing a situation where

26.

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

27.

For an economy to increase investment, it must

28.

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

29.

Increased present saving

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Learning Objective: 26-03 Identify why saving and investment are key factors in

promoting rising living standards.

Test Bank: I

To pi c: Saving, Investment, and Choosing between Present and Future Consumption

30.

Banks and other financial institutions

31.

Shocks to the economy occur

32.

Shocks to the economy occur when

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C.

prices are flexible.

D. actual economic events do not match what people expected.

AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices

are responsible for short-run fluctuations in output and employment.

Test Bank: I

To pi c: Uncertainty, Expectations, and Shocks

33.

Demand shocks

34.

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

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written consent of McGraw-Hill Education.

To pi c: Uncertainty, Expectations, and Shocks

35.

Supply shocks

36.

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

37.

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

26–15

written consent of McGraw-Hill Education.

D i f f i c u l t y : 02 Medium

Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices

are responsible for short-run fluctuations in output and employment.

Test Bank: I

To pi c: Uncertainty, Expectations, and Shocks

38.

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

39.

The figure depicts a situation where

40.

Refer to the figure. Assuming this market is representative of the economy as a whole, this

economy

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D. can only lessen the impacts of business cycles through active government policy.

AACSB: Knowledge Application

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices

are responsible for short-run fluctuations in output and employment.

Test Bank: I

To pi c: Uncertainty, Expectations, and Shocks

Type: Graph

41.

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

demand shock will

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Test Bank: I

To pi c: Uncertainty, Expectations, and Shocks

Type: Graph

42.

Refer to the figure. Assuming this market is representative of the economy as a whole, a negative

demand shock will

43.

The figure depicts a situation where

44.

Refer to the figure. Assuming this market is representative of the economy as a whole, this

economy