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Chapter 06 - An Introduction to Macroeconomics
56. If prices are "sticky" in the short run, then:
57. If prices are inflexible, then a negative demand shock will lead to:
58. Because prices are sticky, positive demand shock will lead to:
Chapter 06 - An Introduction to Macroeconomics
59. Refer to the graph above. Which of the following best represents a positive demand shock
when prices are flexible?
60. Refer to the graph above. Which of the following best represents negative demand shock
when prices are inflexible?
Chapter 06 - An Introduction to Macroeconomics
61. Refer to the graph above. Suppose a firm is currently producing 500 computers per week
and charging a price of $1000. How will the firm respond to a positive demand shock if prices
are inflexible?
62. Refer to the graph above. Suppose a firm is currently producing 500 computers per week
and charging a price of $1000. How will the firm respond to a negative demand shock if
prices are flexible?
Chapter 06 - An Introduction to Macroeconomics
63. Refer to the graph above. Suppose a firm is currently producing 500 computers per week
and charging a price of $1000. What happens to the firm's inventory of computers if there is a
negative demand shock and prices are inflexible?
64. Refer to the graph above. Suppose a firm is currently producing 500 computers per week
and charging a price of $1000. What happens to the firm's inventory of computers if there is a
negative demand shock and prices are flexible?
Chapter 06 - An Introduction to Macroeconomics
65. Business cycle fluctuations typically arise because:
67. If prices of goods and services quickly adjust to demand shocks, then:
Chapter 06 - An Introduction to Macroeconomics
68. If prices of goods and services are free to quickly adjust, then:
69. If prices of goods and services are inflexible, then:
70. Inventories:
Chapter 06 - An Introduction to Macroeconomics
71. Inventories rise when:
72. Suppose that inventories are rising. We could expect that, in the future
73. Suppose that inventories are falling. We could expect that, in the future
Chapter 06 - An Introduction to Macroeconomics
74. Suppose that prices are sticky in the short-run. Which of the following best describes the
economy's response to a negative demand shock?
75. Suppose that prices are sticky in the short-run. Which of the following best describes the
economy's response to a positive demand shock?
Chapter 06 - An Introduction to Macroeconomics
76. Which of the following markets is most likely to exhibit extremely flexible prices?
77. For which of the following goods is the price least likely to be flexible?
78. Which of the following statements about price stickiness or flexibility is true?
Chapter 06 - An Introduction to Macroeconomics
79. Which of the following is NOT a factor that increases short-run price stickiness?
80. Price wars:
81. Which of the following statements about price wars is true?
Chapter 06 - An Introduction to Macroeconomics
82. In macroeconomic models, prices are assumed to be completely inflexible in:
83. Firms that choose to use a fixed-price policy:
84. Economists need different models of the economy because:
Chapter 06 - An Introduction to Macroeconomics
85. Many economists believe that over several decades before the Great Recession occurred:
86. The so-called Great Recession in the U.S. occurred in:
87. During the Great Recession, the U.S. car companies experienced a demand shock, and as
it turned out:
Chapter 06 - An Introduction to Macroeconomics
88. Before computers, businesses counted their inventory so infrequently that changes in
production needed to respond to changes in demand:
89. Computerized inventory tracking has enabled businesses to do the following, except:
90. Business cycles refer to short term fluctuations in prices.
Chapter 06 - An Introduction to Macroeconomics
91. Real GDP can change due to changes in the price level.
92. If nominal GDP is rising faster than real GDP, then inflation must be occurring.
93. Real GDP is calculated using current prices of outputs.
94. If nominal GDP increases from one year to the next, then we know that the economy's
output has grown.
Chapter 06 - An Introduction to Macroeconomics
95. Inflation refers to an increase in the overall level of prices.
96. The Industrial Revolution began in England in the late 1700's.
97. 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.
98. Savings are generated when current consumption is less than current output.
Chapter 06 - An Introduction to Macroeconomics
99. Buying 100 shares of Google stock would be an example of economic investment.
100. Economists use the word investment to refer to the purchase of assets such as stocks,
bonds, and real estate.
101. Investment is ultimately limited by the amount of savings in the economy.
102. The opportunity cost of investment is a reduction in future consumption.
Chapter 06 - An Introduction to Macroeconomics
103. Businesses are the main economic investors, while households are the main savers.
104. Economists believe that most short-run fluctuations are the result of supply shocks.
105. When prices are inflexible, the economy will respond to demand shocks through short
run changes in output and unemployment.
106. If expectations are 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.
Chapter 06 - An Introduction to Macroeconomics
107. If the prices of goods and services were flexible, then the economy could always produce
at its optimal capacity.
108. An unexpected negative demand shock would lead to a decrease in inventories.
109. An unexpected negative demand shock would lead to a decrease in real GDP.
110. Sticky prices could be the result of firm being afraid of price wars.
Chapter 06 - An Introduction to Macroeconomics
111. Price stickiness tends to moderate over time.
112. Economists use different models of the economy because the economy behaves
differently depending on how much time has passed after a demand shock.
