978-1259723223 Test Bank TBChap026 Part 5

187.

Refer to the graphs. Suppose a firm is currently producing 500 computers per week and charging

a price of $1,000. What happens to the firm’s inventory of computers if there is a negative

demand shock and prices are

inflexible?

188.

Refer to the graphs. Suppose a firm is currently producing 500 computers per week and charging

a price of $1,000. What happens to the firm’s inventory of computers if there is a negative

demand shock and prices are

flexible?

189.

Business cycle fluctuations typically arise because

26–83

written consent of McGraw-Hill Education.

D. prices tend to be flexible in the short run.

190.

Which of the following statements is true?

191.

If prices of goods and services quickly adjusted to demand shocks, then

192.

If prices of goods and services were free to quickly adjust, then

193.

If prices of goods and services were inflexible, then

194.

Inventories held by firms

26–85

written consent of McGraw-Hill Education.

Test Bank: II

Topic: Uncertainty, Expectations, and Shocks

195.

Inventories rise when

196.

Suppose that inventories are rising. We can expect that, in the future,

197.

Suppose that inventories are falling. We can expect that, in the future,

26–86

written consent of McGraw-Hill Education.

AACSB: Knowledge Application

A c c es s i b i l i ty : 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: II

Topic: Uncertainty, Expectations, and Shocks

198.

Suppose that prices are sticky in the short-run. Which of the following best describes the

economy’s response to a negative demand shock?

199.

Suppose that prices are sticky in the short-run. Which of the following best describes the

economy’s response to a positive demand shock?

26–87

written consent of McGraw-Hill Education.

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: II

Topic: Uncertainty, Expectations, and Shocks

200.

The Great Recession of 2007–09 was triggered by a

201.

The Great Recession of 2007–09 illustrated the situation where a negative demand shock

occurred and

202.

Between 2007 and 2009, the unemployment rate in the U.S.

26–88

written consent of McGraw-Hill Education.

C.

rose slightly from 5.5 percent to 7.4 percent.

D.

remained stagnant at about 7 percent.

203.

Which of the following markets is most likely to exhibit extremely flexible prices?

204.

For which of the following goods is the price least likely to be flexible?

205.

Which of the following statements about price stickiness or flexibility is true?

206.

Which of the following is not a factor that increases short-run price stickiness?

207.

Price wars among firms

26–90

written consent of McGraw-Hill Education.

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: II

Topic: How Sticky Are Prices?

208.

Which of the following statements about price wars is true?

209.

In macroeconomic models, prices are assumed to be completely inflexible in

210.

Firms that choose to use a fixed-price policy

26–91

written consent of McGraw-Hill Education.

policy.

C.

find that their inventories do not respond to demand shocks.

D.

will not hold inventories.

211.

Economists need different models of the economy because

212.

The so-called Great Recession in the U.S.