Question 1

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except

Accepted Answer

While oil and gasoline prices can provide information about the economy, they are not considered major statistics for macroeconomists. The other options listed (real GDP, inflation statistics, and unemployment data) are key statistics used to assess the health of an economy.

Question 2

Real gross domestic product is a measure of the

Accepted Answer

Real gross domestic product (GDP) is a measure of the value of all final goods and services produced within a country in a given period of time, usually one year, adjusted for inflation. This means that it takes into account changes in prices over time, allowing for a more accurate representation of the economy's growth or contraction. Real GDP is a better indicator of economic performance than nominal GDP (which uses current prices) because it accounts for changes in the price level, which can be influenced by factors such as inflation or deflation. Option A is incorrect because it refers to the consumer price index, which measures the average price level of goods and services purchased by households. Option B is incorrect because it refers to nominal GDP, which does not adjust for inflation. Option D is incorrect because it is a vague and unclear statement that does not accurately describe GDP.

Question 3

Prices tend to be more ﬂexible when there are only two or three rival ﬁrms rather than a large
number of sellers in the market.

Accepted Answer

Prices tend to be more flexible in markets with a large number of sellers due to increased competition, as opposed to markets with only a few firms where prices can be more rigid and controlled.

Question 4

High rates of unemployment are undesirable because they

Accepted Answer

High rates of unemployment are associated with higher levels of crime and illness. This is because unemployed individuals may become frustrated and turn to criminal activities, and they may not be able to afford necessary healthcare resulting in higher illness rates. The other choices are incorrect as they do not necessarily hold true in all situations.

Question 5

(Consider This) If Ford Motor Company purchases factory equipment previously used by General
Motors, this would be considered an economic investment.

Accepted Answer

The answer of (Consider This) If Ford Motor Company purchases...

Question 6

The period when output and living standards decline is referred to as

Accepted Answer

A recession is a period of declining economic activity, characterized by a contraction in gross domestic product (GDP), employment, and trade. During a recession, output and living standards usually decline, while unemployment and business failures increase.

Question 7

Real gross domestic product

Accepted Answer

Real gross domestic product (GDP) measures the value of all goods and services produced in an economy adjusted for inflation. It is therefore unaffected by changes in the price level, but will increase if the level of output increases. Real GDP can change from one year to the next even if there is no change in output if there is a change in the price level.

Question 8

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?

Accepted Answer

Nominal GDP is calculated by multiplying the quantity of goods and services produced by their respective prices. Since the price level has doubled, the prices of all goods and services have doubled. Therefore, when multiplied by the quantity of goods and services produced, nominal GDP also doubles.

Question 9

Economists and policymakers are committed to encouraging a high and growing level of real GDP because

Accepted Answer

A high and growing level of real GDP indicates an expanding economy, which typically means more jobs, higher incomes, and thus greater consumption opportunities for the population.

Question 10

Nominal gross domestic product

Accepted Answer

Nominal gross domestic product can change when there is a change in either output or the price level. It is calculated by multiplying the quantity of goods and services produced by their respective prices, thus changes in output or price level can affect nominal GDP.

Question 11

The "sticky price" model is the only one used by macroeconomists.

Accepted Answer

There are various models used by macroeconomists, including the real business cycle model, the new Keynesian model, and the dynamic stochastic general equilibrium model, in addition to the sticky price model.

Question 12

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?

Accepted Answer

Real GDP is a measure of output adjusted for changes in price levels. In this scenario, the output remains unchanged, so the real GDP would also remain unchanged since there are no changes in the quantity of goods and services produced. Doubling the price level only means that each unit of output is worth twice as much as before, but the total quantity of output remains the same.

Question 13

Nominal gross domestic product

Accepted Answer

Nominal gross domestic product is a measure of the value of final output produced within a nation in one year, using current prices. It does not take into account changes in prices, so it is not adjusted for inflation. Therefore, nominal GDP can increase even if there is no increase in the level of output, due to inflation.

Question 14

Suppose a small economy produces only MP3 players. In year one, 10,000 MP3 players are produced and sold at a price of $100 each. In year two, 12,000 MP3 players are produced and sold
At a price of $80 each. Which of the following statements is true?

Accepted Answer

Nominal GDP is calculated using current market prices, so it will decrease from year one to year two due to the decrease in price per unit. However, real GDP is adjusted for inflation and is calculated using a constant price level, so it will increase from year one to year two as the economy produces more MP3 players. Therefore, the correct answer is D - real GDP increases while nominal GDP decreases.

Question 15

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be
considered an economic investment.

Accepted Answer

The answer of (Consider This) If a farmer purchases 10...

Question 16

Macroeconomics is primarily concerned with studying two broad topics:

Accepted Answer

Macroeconomics is concerned with understanding broad economic trends and issues that affect the economy as a whole. This includes studying long-run economic growth, which involves understanding the factors that contribute to long-term increases in the economy's output and standards of living. It also involves studying short-run business cycles, which are fluctuations in economic activity that occur over periods of months or years. These cycles are characterized by periods of economic expansion and contraction, and macroeconomists seek to understand why these cycles occur and how they can be managed. The other choices listed (B, C, and D) are not broad topics that are typically studied in macroeconomics.

Question 17

Short-run ﬂuctuations in output and employment are referred to as

Accepted Answer

Short-run fluctuations in output and employment are referred to as business cycles. Economic growth refers to long-term increases in output and productivity. Inventory cycles refer to fluctuations in the stock of unsold goods. Recession and inflation are specific phases of the business cycle.

Question 18

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000
Each. As a result,

Accepted Answer

Nominal GDP is calculated by multiplying the current year's output by the current year's prices. In year one, the nominal GDP is 100,000 TVs * $1,200 = $120,000,000. In year two, it is 100,000 TVs * $1,000 = $100,000,000, showing a decrease in nominal GDP. Real GDP, however, measures the output at constant prices, so if year one is the base year, real GDP remains the same in both years since the quantity of TVs produced and sold did not change.

Question 19

High rates of unemployment

Accepted Answer

High rates of unemployment indicate that there are people who are willing and able to work but are unable to find employment. This means that valuable skills and talents are not being utilized, which is a waste of human potential and can have negative social and economic consequences.

Question 20

(Consider This) The term "economic investment" refers to money spent purchasing newly created
capital goods such as factories, tools, and warehouses.

Accepted Answer

Economic investment refers to spending money on capital goods that will increase productivity and output in the future. It includes purchases of factories, equipment, and other infrastructure that contribute to economic growth.

Quiz 6: An Introduction to Macroeconomics

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except

Real gross domestic product is a measure of the

Prices tend to be more ﬂexible when there are only two or three rival ﬁrms rather than a large number of sellers in the market.

High rates of unemployment are undesirable because they

(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.

The period when output and living standards decline is referred to as

Real gross domestic product

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?

Economists and policymakers are committed to encouraging a high and growing level of real GDP because

Nominal gross domestic product

The "sticky price" model is the only one used by macroeconomists.

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?

Nominal gross domestic product

Suppose a small economy produces only MP3 players. In year one, 10,000 MP3 players are produced and sold at a price of $100 each. In year two, 12,000 MP3 players are produced and sold At a price of $80 each. Which of the following statements is true?

(Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.

Macroeconomics is primarily concerned with studying two broad topics:

Short-run ﬂuctuations in output and employment are referred to as

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000 Each. As a result,

High rates of unemployment

(Consider This) The term "economic investment" refers to money spent purchasing newly created capital goods such as factories, tools, and warehouses.