Demand shocks:
  • Inflation lowers the standard of living for people whose income does not increase as fast as the price level.
  • occur when sellers face unexpected changes in the availability and/or prices of key inputs.
  • Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
  • refer to unexpected changes in the desires of households and businesses to buy goods and services.
For which of the following goods are services are prices most sticky?
  • Coin-operated laundry machines
  • real output per person.
  • Nike buys a new machine that increases shoe production.
  • Boeing building a new factory
The two topics of primary concern in macroeconomics are:
  • Firms can maintain production levels and adjust inventories in response to demand shocks.
  • Nike buys a new machine that increases shoe production.
  • short-run fluctuations in output and employment, and long-run economic growth
  • Inflation lowers the standard of living for people whose income does not increase as fast as the price level.
Supply shocks:
  • refer to unexpected changes in the desires of households and businesses to buy goods and services.
  • when expectations are unmet.
  • Firms can maintain production levels and adjust inventories in response to demand shocks.
  • occur when sellers face unexpected changes in the availability and/or prices of key inputs.
In situations of sticky prices and negative demand shocks we would expect firms to:
  • build up inventories before reducing production.
  • nominal GDP would rise, but real GDP would be unchanged.
  • the quantity of resources available to the economy
  • Nike buys a new machine that increases shoe production.
The term "recession" describes a situation where:
  • Boeing building a new factory
  • output and living standards decline
  • current income exceeds current spending
  • price inflexibility.
For an economy to increase investment, it must:
  • price inflexibility.
  • real output per person.
  • increase saving.
  • Inflation lowers the standard of living for people whose income does not increase as fast as the price level.
Which of the following would an economist consider to be investment?
  • Nike buys a new machine that increases shoe production.
  • Firms can maintain production levels and adjust inventories in response to demand shocks.
  • Coin-operated laundry machines
  • Boeing building a new factory
Which of the following statements is most accurate about advanced economies?
  • Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.
  • Firms can maintain production levels and adjust inventories in response to demand shocks.
  • Nike buys a new machine that increases shoe production.
  • Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?
  • nominal GDP would rise, but real GDP would be unchanged.
  • the quantity of resources available to the economy
  • build up inventories before reducing production.
  • Nike buys a new machine that increases shoe production.
Which of the following best explains why prices tend to be inflexible even when demand changes?
  • Nike buys a new machine that increases shoe production.
  • Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.
  • Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
  • Firms can maintain production levels and adjust inventories in response to demand shocks.
Why are economists concerned about inflation?
  • Inflation lowers the standard of living for people whose income does not increase as fast as the price level.
  • Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
  • short-run fluctuations in output and employment, and long-run economic growth
  • Higher rates of unemployment are linked to higher crime rates and other social problems., A larger fraction of the nation's labor resource is going unutilized., There is lost output that could have been produced if the unemployed had been working.
Which of the following results from firms holding inventories?
  • Nike buys a new machine that increases shoe production.
  • Firms can maintain production levels and adjust inventories in response to demand shocks.
  • Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
  • Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.
Shocks occur:
  • Coin-operated laundry machines
  • when expectations are unmet.
  • occur when sellers face unexpected changes in the availability and/or prices of key inputs.
  • Boeing building a new factory
When demand shocks lead to recessions, it is mainly due to:
  • Boeing building a new factory
  • price inflexibility.
  • output and living standards decline
  • real output per person.
Modern economic growth refers to countries that have experienced an increase in:
  • real output per person.
  • increase saving.
  • Coin-operated laundry machines
  • price inflexibility.
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