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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
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
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: 26-04 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
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
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: 26-05 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
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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.
