Download Pre-Test Chapter 23 1. Short-run fluctuations in output and

Pre-Test Chapter 23
1. Short-run fluctuations in output and employment are referred to as
A. business cycles
B. economic growth
C. inventory cycles
D. recessions
2. The situation where output and living standards decline is referred to as
A. a business cycle
B. economic decline
C. an inventory downturn
D. a recession
3. Real gross domestic product
A. is a measure of the overall level of prices
B. measures the value of final goods and services produced within the borders of a given
country during a given time period using current prices
C. measures the value of final goods and services produced within the borders of a given
country during a given time period corrected for changing prices
D. can change from one year to the next even if there is no change in output
4. Nominal gross domestic product
A. is a measure of the overall level of prices
B. measures the value of final goods and services produced within the borders of a given
country during a given time period using current prices
C. measures the value of final goods and services produced within the borders of a given
country during a given time period corrected for changing prices
D. only changes when the level of output changes
5. 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?
A. real GDP doubles
B. real GDP is halved
C. real GDP doesn't change
D. There is not enough information to determine what happens to real GDP
6. High rates of unemployment:
A. Indicate that society is not using a large portion of the talent and skills of its people
B. Are associated with higher price levels
C. Always correspond to a decrease in nominal GDP
D. Do not effect an economy's output of goods and services
Pre-Test Chapter 23
7. An increase in the overall level of prices is called:
A. Growth
B. Expansion
C. Inflation
D. Nominal GDP growth
8. Suppose a family's income increases by 5% at the same time that inflation is 6%. Then
A. the family's standard of living will increase
B. the family's standard of living will not change
C. the family's standard of living is not affected by inflation
D. the family's standard of living will fall
9. For many decades prior to the Industrial Revolution, the standards of living in England
and China:
A. Remained roughly constant
B. Increased steadily
C. Declined substantially
D. Increased many times over
10. Suppose that real GDP increases by 5% while the population of a country increases by
7%. Then
A. Output per person necessarily increases
B. Output per person necessarily decreases
C. Output per person necessarily remains unchanged
D. There is not enough information to determine what happens to output per person
11. There is a trade-off between:
A. Saving and investment
B. Current production and future consumption
C. Current consumption and future consumption
D. Consumption and spending
12. Which of the following statements is true?
A. Financial investment refers to the creation and expansion of business enterprises
B. Economic investment refers to the creation and expansion of business enterprises
C. Economic investment refers to the purchase of assets such as stocks, bonds, and real
estate
D. Both economic investment and financial investment refer to the purchase of assets such
as stocks, bonds, and real estate
Pre-Test Chapter 23
13. Which of the following is the best example of financial investment?
A. Ford Motor Co. builds a new manufacturing plant
B. A student pursues an MBA degree
C. A retiree purchases Google stock
D. A young couple purchases a new home
14. Which of the following is the principal source of savings in an economy?
A. Banks
B. Government
C. Businesses
D. Households
15. Situations in which firms expect one thing to happen but then something else happens are
called:
A. Recessions
B. Shocks
C. Business cycles
D. Fluctuations
16. Sharply rising oil prices are most likely to lead to a:
A. Negative demand shock
B. Positive demand shock
C. Negative supply shock
D. Positive supply shock
17. An increase in worker productivity will lead to a:
A. Negative demand shock
B. Positive demand shock
C. Negative supply shock
D. Positive supply shock
18. If prices are inflexible, then a negative demand shock will lead to:
A. A short-run increase in real GDP
B. A short-run decrease in real GDP
C. A short-run decrease in prices
D. No change in real GDP in the short run
19. The term "shock":
A. Always refers to an unexpectedly bad event
B. Always refers to an increase in inflation
C. Does not tell us whether what has happened is unexpectedly bad or unexpectedly good
D. Always refers to a decrease in real GDP and an increase in unemployment
Pre-Test Chapter 23
20. What impact will a negative demand shock have on the main measures of economic
performance?
A. Real GDP will increase, inflation will increase, and unemployment will decrease
B. Real GDP will decrease, inflation will decrease, and unemployment will increase
C. Real GDP will decrease, inflation will increase, and unemployment will increase
D. Real GDP will increase, inflation will decrease, and unemployment will decrease
21. 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?
A. The firm will continue to produce 500 computers per week and charge a price of $600
B. The firm will continue to produce 500 computers per week and charge a price of $1200
C. The firm will cut production to 300 computers per week and charge a price of $1000
D. The firm will cut production to 300 computers per week and charge a price of $600
22. 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?
A. The firm's inventories will not change
B. The firm's inventories will increase by 200 computers per week
C. The firm's inventories will decrease by 150 computers per week
D. The firm's inventories will increase by 350 computers per week
23. 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?
A. The firm's inventories will not change
B. The firm's inventories will increase by 200 computers per week
C. The firm's inventories will decrease by 150 computers per week
D. The firm's inventories will increase by 350 computers per week
24. If prices of goods and services are inflexible, then:
A. A negative demand shock would lead to increased real GDP in the short run
B. A positive demand shock would lead to increased real GDP in the short run
C. A negative demand shock would have no short-run effect on real GDP
D. There would be no short-run demand shocks
Pre-Test Chapter 23
Answers:
1. A
2. D
3. C
4. B
5. C
6. A
7. C
8. D
9. A
10. B
11. C
12. B
13. C
14. D
15. B
16. C
17. D
18. B
19. C
20. B
21. A
22. B
23. A
24. B