26–41
82.
Any person without a job is considered to be unemployed.
83.
Higher unemployment rates are linked with higher crime rates and higher rates of physical
and mental illness.
84.
Inflation reduces the purchasing power of a person’s income and savings.
85.
From 1995 until the start of the recession in 2007, the U.S. economy grew at the same rate as
the economy of Japan.
26–42
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written consent of McGraw-Hill Education.
FALSE
86.
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.
87.
Real GDP measures the change in the price level over time.
88.
Modern economic growth refers to any situation where a nation’s output increases.
26–43
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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
Top ic: The Miracle of Modern Economic Growth
89.
In order to achieve modern economic growth, a nation’s output must grow faster than its
population.
90.
A nation that realizes a 3 percent increase in its output per person is experiencing modern
economic growth.
91.
Output per person has grown steadily since the beginning of the Roman Empire.
26–44
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written consent of McGraw-Hill Education.
historically recent phenomenon.
Test Bank: I
Top ic: The Miracle of Modern Economic Growth
92.
China‘s GDP per person in 2014 was about one-third of U.S. GDP per person in the same
year.
93.
Economists refer to purchases of stocks and bonds as “investment.”
94.
The amount of investment in an economy is ultimately limited by the amount of savings in
that economy.
26–45
95.
Increasing investment in the present means forgoing future consumption.
96.
A nation that wants to invest in more newly created capital in the present must be willing to
forgo present consumption.
97.
Banks and other financial institutions provide the link between savers and economic
investors in the macroeconomy.
98.
Economists believe that expectations have little impact on macroeconomic outcomes.
26–46
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written consent of McGraw-Hill Education.
FALSE
99.
Shocks occur when actual events do not match expectations.
100.
A demand shock occurs when large numbers of consumers unexpectedly reduce their
purchases of goods and services.
101.
At the end of the summer driving season, the demand for gasoline typically declines. This is
an example of a negative demand shock.
26–47
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written consent of McGraw-Hill Education.
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
Top ic: Uncertainty, Expectations, and Shocks
102.
Demand shocks may be positive or negative.
103.
Supply shocks occur any time there is a change in the supply of goods and services.
104.
Economists believe that most short-run fluctuations in output are the result of supply shocks.
26–48
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written consent of McGraw-Hill Education.
Test Bank: I
Top ic: Uncertainty, Expectations, and Shocks
105.
Demand shocks cause problems in the macroeconomy primarily because prices are sticky.
106.
In the very short run, demand shocks will tend to change the level of output but have little
effect on prices.
107.
In the very short run, firms tend to respond to demand shocks by changing their prices.
108.
Negative demand shocks have a more significant impact on output and employment when
prices are flexible.
109.
In the short run, firms are more likely to respond to demand shocks by altering inventory
levels than by changing how much they produce.
110.
Milk prices tend to be stickier than gasoline prices.
111.
Prices tend to be stickier in the shorter run than in the longer run.
26–50
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written consent of McGraw-Hill Education.
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: 26-05 Characterize the degree to which various prices in the economy
are sticky.
Test Bank: I
Top ic: How Sticky Are Prices?
112.
Prices tend to be sticky partially because sellers know that consumers prefer stable prices.
113.
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.
114.
The “sticky price” model is the only one used by macroeconomists.
26–51
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written consent of McGraw-Hill Education.
Learning Objective: 26-05 Characterize the degree to which various prices in the economy
are sticky.
Test Bank: I
Top ic: How Sticky Are Prices?
115.
(Consider This) The term “economic investment” refers only to money spent purchasing
newly created capital goods such as factories, tools, and warehouses.
116.
(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this
would be considered an economic investment.
117.
(Consider This) If Ford Motor Company purchases factory equipment previously used by
General Motors, this would be considered an economic investment.
26–52
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written consent of McGraw-Hill Education.
Test Bank: I
Top ic: Saving, Investment, and Choosing between Present and Future Consumption
Multiple Choice Questions
118.
Macroeconomics is primarily concerned with studying two broad topics:
119.
Short-run fluctuations in output and employment are referred to as
120.
The period when output and living standards decline is referred to as
26–53
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written consent of McGraw-Hill Education.
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: II
Topic: Performance and Policy
121.
The Great Recession occurred in
122.
The major statistics that provide macroeconomists a picture of the health of an economy
include the following, except
123.
Real gross domestic product is a measure of the
26–54
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written consent of McGraw-Hill Education.
B.
value of final output produced within a country in one year, using current prices.
C. value of final output produced within a country in one year, adjusted for changing prices.
D. total value of available resources in a nation.
124.
Real gross domestic product
125.
Nominal gross domestic product
26–55
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written consent of McGraw-Hill Education.
Topic: Performance and Policy
126.
Nominal gross domestic product
127.
Suppose that an economy’s output does not change from one year to the next, but the price
level doubles. What happens to real GDP?
128.
Suppose that an economy’s output does not change from one year to the next, but the price
level doubles. What happens to nominal GDP?
26–56
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written consent of McGraw-Hill Education.
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: II
Topic: Performance and Policy
129.
Suppose a small economy produces only HDTV sets. In year one, 100,000 sets are
produced and sold at a price of $1,200 each. In year two, 100,000 sets are produced and sold at
a price of $1,000 each. As a result,
130.
Suppose a small economy produces only MP3 players. In year one, 10,000 MP3 players are
produce and sold at a price of $100 each. In year two, 12,000 MP3 players are produced and
sold at a price of $80 each. Which
of the following statements is true?
131.
Economists and policymakers are committed to encouraging a high and growing level of
real GDP because
132.
High rates of unemployment
133.
High rates of unemployment are undesirable because they
26–58
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written consent of McGraw-Hill Education.
Learning Objective: 26-01 Explain why economists focus on GDP, inflation, and
unemployment when assessing the health of an entire economy.
Test Bank: II
Topic: Performance and Policy
134.
An increase in the overall level of prices in an economy is called
135.
Which of the following is not an effect of inflation that is troublesome to consumers?
136.
Which of the following is most likely to indicate higher unemployment?
26–59
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written consent of McGraw-Hill Education.
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: II
Topic: Performance and Policy
137.
Suppose a family’s income increases by 5 percent at the same time that inflation is 6
percent. Then the family’s living standard
138.
If a family’s income increases by 5 percent at the same time that inflation is 3.5 percent,
then the
139.
Which of the following is not an important question that macroeconomic models help
clarify?
140.
Rapid and sustained economic growth of nations
141.
The Industrial Revolution began in