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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
26-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
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?
26-3
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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?
26-4
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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?
26-6
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
26-7
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
26-8
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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?
26-9
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
26-10
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
26-12
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
26-13
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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?
26-14
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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
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
26-17
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written consent of McGraw-Hill Education.
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
26-18
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
