Chapter 6

The term "recession" describes a situation where

output and living standards decline

The horizontal axis is labeled quantity. Point Q 1 is marked on the horizontal axis. The vertical axis is labeled price. 3 points P 1, P 2, and P 3 are marked on the vertical axis from bottom to top. The graph shows three parallel falling lines labeled D 1, D 2, and D 3 in order from bottom to top. A vertical line begins at Q 1 and crosses D 1, D 2, and D 3 at a point. Three horizontal dashed lines extend from P 1, P 2, and P 3 to the point of intersection of D 1 and Q 1, D 2 and Q 1, and D 3 and Q 1 respectively.

prices are flexible, but output is constant.

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

prices of oil and gasoline.

(Consider This) The U.S. recession that occurred in 2008 and 2009 represented a case where

prices were relatively sticky and most of the impact was on total output.

question 9 on homework

raise the price level but leave output unchanged.

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

resources are devoted to increasing future output.

In 2017, output (GDP) per person in the U.S. was about

$60,000.

Which of the following is the best example of investment as defined by economists?

A restaurant owner buys a freezer to store ingredients for the restaurant meals.

Which of the following would an economist consider to be investment?

Boeing builds a new factory

Consider This) What is the difference between financial investment and economic investment?

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

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

GDP per person

if the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Nominal GDP would rise, but real GDP would be unchanged.

If prices of goods and services were inflexible, then

a positive demand shock would lead to increased real GDP in the short run.

Decisions about saving and investment are

complicated by the fact that the future is uncertain.

During recessions, business must

cut per-unit production costs to reduce the selling price, and also reduce output levels to bring quantities supplied in line with the reduced quantity demanded.

Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each. This year Harry's produced 11,000 large pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information, we can conclude that Harry's production of large pizzas

increased both nominal and real GDP from last year.

High rates of unemployment

indicate that society is not using a large portion of the talent and skills of its people.

Rapid and sustained economic growth of nations

is a relatively modern phenomenon.

hich of the following best represents the effect of an increase in investment?

movement from point b to point d

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,

nominal GDP decreases, while real GDP stays constant.

Price wars among firms

occur when one firm lowers its price and rival firms react by lowering their prices.

Under modern economic growth, the annual average increase in output per person is

often not large, perhaps 2 percent per year.

Demand shocks

refer to unexpected changes in the desires of households and businesses to buy goods and services.

The Great Recession was triggered by a

steep decline in housing prices.