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26-92
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
213.
Explanations about what caused the Great Recession differ sharply among economists. The
so-called Minsky Explanation involves the following factors, except
214.
Explanations about what caused the Great Recession differ sharply among economists. The
so-called Austrian Explanation involves the following factors, except
215.
Economists were sharply divided over how to best fight the Great Recession. The majority
of economists favored the "Stimulus Solution," which involves
216.
Economists were sharply divided over how to best fight the Great Recession. A vocal
minority of economists favored the "Structural Solution," arguing that the economy needs to
undergo some structural adjustments and
that government should, therefore,
True / False Questions
217.
Business cycles refer to short-term fluctuations in prices.
26-94
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Performance and Policy
218.
Real GDP can change due to changes in the price level.
219.
If nominal GDP is rising faster than real GDP, then inflation must be occurring.
220.
Real GDP is calculated using current prices of outputs.
221.
If nominal GDP increases from one year to the next, then we know that the economy's
output has grown.
26-95
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
FALSE
222.
Inflation refers to an increase in the overall level of prices.
223.
Economic growth defined as rising GDP per person has occurred since the Roman Empire
(approximately 2,000 years ago).
224.
The period known as the Industrial Revolution began in the United States in the late 1800s.
26-96
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: II
Topic: The Miracle of Modern Economic Growth
225.
Citizens living in the richest nations today have material standards of living that are on
average more than 50 times higher than people living in the poorest countries.
226.
In 2014, China’s GDP per person was almost as high as that of the United States.
227.
Savings are generated when current consumption is less than current output.
26-97
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: Saving, Investment, and Choosing between Present and Future Consumption
228.
Buying 100 shares of Google stock would be an example of economic investment.
229.
Economists use the word investment to refer to the purchase of assets such as stocks, bonds,
and real estate.
230.
Investment is ultimately limited by the amount of savings in the economy.
231.
The opportunity cost of investment is a reduction in future consumption.
232.
Businesses are the main economic investors, while households are the main savers.
233.
Economists believe that most short-run fluctuations are the result of supply shocks.
234.
When prices are inflexible, the economy will respond to demand shocks through short-run
changes in output and unemployment.
26-99
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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: II
Topic: Uncertainty, Expectations, and Shocks
235.
If expectations were always met, then firms would never contribute to any of the short-run
fluctuations in employment and output that are observed in real-world economies.
236.
If the prices of goods and services were flexible, then the economy could always produce at
its optimal capacity.
237.
An unexpected negative demand shock would lead to a decrease in inventories.
26-100
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
238.
An unexpected negative demand shock would lead to a decrease in real GDP.
239.
Sticky prices could be the result of firms being afraid of price wars.
240.
One major reason for sticky prices could be that firms selling final goods and services do
not want to annoy customers with frequently changing prices.
241.
Price stickiness tends to moderate over time.
242.
Economists use different models of the economy because the economy behaves differently
depending on how much time has passed after a demand shock.
243.
Economists are in general agreement as to what caused the Great Recession and how to
properly deal with it.
