Economics and Financial Investment

Last Name ________________ First Name __________________ Stud #______________ IBMS ___
PRACTISE QUIZ CHAPTER 26 (McConnell 19th – MC)
1. Real gross domestic product:
A. Is a measure of inflation.
B. Will increase if there is an increase in the price level.
C. Will increase if there is an increase in the level of output.
D. Can change from one year to the next even if there is no change in output.

2. If 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.

3. 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.

4. In economics, the word “shocks” refers to:
A. Situations where firms’ expectations are unmet.
B. Any changes in the demand for goods and services.
C. Any changes in the supply of goods and services.
D. A decrease in real GDP.

5. Higher oil prices are most likely to lead to:
A. A negative demand shock.
B. A positive demand shock.
C. A negative supply shock.
D. A positive supply shock.

6. The business cycle depicts:
A. Fluctuations in the general price level.
B. The phases a business goes through from when it first opens to when it finally closes.
C. The evolution of technology over time.
D. Short-run fluctuations in output and employment.

7. Which of the following statements is most accurate about advanced economies?
A. Economies experience a positive growth trend over the short run, but experience significant variability in the long run.
B. Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
C. Economies experience positive and stable growth over both the long run and short run.
D. Economies experience little long-run growth in output, but can experience significant growth in the short run.

8. Before the period of modern economic growth:
A. Only civilizations such as the Roman Empire experienced economic growth.
B. Rates of population growth virtually matched rates of output growth.
C. Most economies realized high rates of growth in output per person.
D. Output and population growth were stagnant.

9. What is the difference between financial investment and economic investment?
A. There is no difference between the two.
B. Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods.
C. Economic investment is adjusted for inflation; financial investment is not.
D. Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

10. If an economy wants to increase its current level of investment, it must:
A. Sacrifice future consumption.
B. Print more money.
C. Offer more stocks and bonds to financial investors.
D. Sacrifice current consumption.