private practice macroecon quiz

For an economy to increase investment, it must...

• Buy more stocks and bonds.

• Increase nominal GDP.

• Increase saving.

• Increase present consumption.

When economist refer to "investment," they are describing a situation where...

• Money is saved in a bank account

• People are buying shares of corporate stock

• Financial assets are purchased in the hope of a monetary gain

• Resources are devoted to increasing future output

Why is inflation a concern for economists?

• It increases the value of savings and encourages overspending.

• It generally causes unemployment rates to rise.

• It lowers the standard of living for people whose income does not increase as fast as the price level.

• real GDP is necessarily falling when there is inflation

Shocks to the economy occur...

• whenever government implements fiscal or monetary policy

• b/c most economic behavior is unpredictable

• whenever the price level changes

• when expectations are unmet

If an economy wants to increase its current level of investment, it must

• offer more stocks and bonds to financial investors

• Sacrifice future consumption

• Sacrfice current consumption

• print more money

Which metric is used to compare the average standard of living across countries?

• Nominal GDP.

• Real GDP.

• Purchasing power parity.

• GDP per person.

What is the primary focus of macroeconomics?

• The economy as a whole.

• Only the largest industries in the economy.

• Why specific businesses fail.

• The individual markets within an economy.

What role do banks and other financial institutions play?

• They primarily invest in equipment, factories, and other capital goods

• Promote economic growth by helping to direct household saving to businesses that want to invest

• often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods

• lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity

What does Real GDP measure?

• Total dollar value of all goods and services produced within the borders of a country using current prices.

• Value of all goods and services consumed within the borders of a country, corrected for price changes.

• Value of final goods and services produced within the borders of a country, adjusted for price changes.

• Value of all goods and services produced in the world, using current prices.

How is inflation defined?

• The rate of growth in nominal GDP.

• The growth phase of the business cycle.

• A situation where all prices in the economy rise simultaneously.

• A general increase in the price level.