Econ L6 quiz review

The main way that economists measure overall output and production in a country is through:

Gross Domestic Product (GDP)

Which of the following is not one of the three main areas of macroeconomics mentioned in this lesson?

Taxes

Which of the following would be included in the investment category of GDP?

a calculator used by an accounting firm

An intermediate good is a good that:

a good used in the production of a final good or service.

Which of the following policies would reduce structural unemployment?

a job retraining program

Transfer payment is

a payment by the government in which no good or service is received in return

Your university gives you an education each year in exchange for money in the future through student loans. This illustrates which function of money?

a standard of deferred payment.

Economies where goods and services are traded directly for other goods and services are called ________ economies.

barter

Suppose the economy is in long-run equilibrium and there is an increase in the price of oil . As a result, real GDP will ________ in the short run, and ________ in the long run.

decrease; increase to its initial level

When each additional input leads to progressively smaller increases in output, we say we are facing

diminishing returns

When firms benefit from the results of research and development they didn't pay for, we say firms

free ride

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as:

labor productivity

Not enforcing property rights in an economy will

lower the level of investment.

A good measure of the standard of living is

real GDP per capita

The balance of payments includes all of the following accounts except

the national debt account.

If the economy is experiencing deflation,

the nominal interest rate will be lower than the real interest rate.

The unemployment rate is

the percentage of the labor force that is unemployed

Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if

there is technological change.

True or False: The establishment survey is a survey that samples 60,000 households, chosen to represent the US population.

False

the interest rate.

When the interest rate increases, the opportunity cost of consuming increases. Why is that? Well, what is your other option besides consumption? Saving that amount. For example, let's say you have $100 that you can either buy two concert tickets with or you can put it in a savings account. If you decided to buy the two concert tickets, you've given up the opportunity to earn the interest from the savings account. If that interest rate goes up, you're losing out on more money if you decide to consume. Therefore, when the interest rate goes up, you consume less. Another way to think about it is if the interest rate rises, you have a larger incentive to save, which means you end up consuming less.

Artificial Intelligence (AI) will increase the productivity of both capital and labor. At the same time, it will decrease the need for as much labor, meaning labor in the economy will decrease. This will result in __________ level of output per hour worked.

a higher

To calculate nominal GDP you need to use:

current year prices and current year production values

If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would

decrease

Assume that the economy is in an expansion above potential GDP. If policymakers implement a contractionary fiscal policy but underestimate the size of the multiplier, the new equilibrium level of GDP is likely to

decrease and go below potential GDP.

An increase in capital outflows from the United States will cause a

decrease in the balance on the financial account.

You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?

an investment tax credit

Holding all else constant, if the economy's marginal propensity to save (MPS) decreases, the consumption function will:

become steeper

Someone who is willing to work but has given up looking for a job because they believe there is no job available for them is classified as:

both not in the labor force and A discouraged worker

According to the basic AD-AS model, a decrease in government expenditures will ________ the price level and _________ level of real GDP.

decrease; decrease

If property rights are not enforced in a country

entrepreneurs are unlikely to risk their own funds investing in such an economy.

Net exports is calculated as:

exports minus imports

True or False: Because the unemployment rate does not include people working part-time when they want to work full-time, the unemployment rate overstates the true extent of joblessness in an economy.

false

True or false: Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

false

Fiscal policy is defined as changes in:

federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

Because firms can free ride on the research and development of other firms

firms choose a level of research and development where the marginal cost of research is below the economy's marginal return of research.

All of the following policies are ways for a country to promote long-run economic growth except

imposing stricter regulations to limit foreign direct investment.

In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?

increase in quality bias

Technological advances generally result in

increase life expectancy

If the per-worker production function shifts down,

it now takes more capital per hour worked to get the same amount of real GDP per hour worked.

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

labor productivity

Poorly timed discretionary policy can do more harm than good. Getting the timing right with fiscal policy is generally

more difficult than with monetary policy.

Net foreign investment minus net foreign portfolio investment is equal to

net foreign direct investment.

Net foreign investment is equal to

net foreign portfolio investment plus net foreign direct investment.

According to endogenous growth theory,

physical capital is rivalrous

The Federal Reserve was established in 1913 to

stop bank panics by acting as a lender of last resort.

When a foreign investor buys a bond issued in the United States

the balance on the financial account increases.

When the United States sends money to the Philippines to help typhoon survivors, the transaction is recorded in

the current account.

Where the aggregate demand curve and the short-run aggregate supply curve intersect You Answered

the economy must be in short-run macroeconomic equilibrium.

If the current account is in deficit and the capital account is zero, then

the financial account must be in surplus.

The economic growth models and theories predict that

the level of real GDP per capita in lower-income countries will grow faster than in rich countries.

If stricter immigration laws are imposed and many foreign workers in a country are forced to go back to their home countries

the long-run aggregate supply curve will shift to the left.

A sequence of data observations collected over time, usually plotted on a graph with time on the horizontal axis, is commonly known as:

time-series data

True or false: Fiscal policy has a greater impact in a closed economy than it does in an open economy.

true

If the economy witnesses an unplanned decrease in inventories, we would expect to see production ___________ and employment ____________, moving the economy towards macroeconomic equilibrium.

increase; increase

The nominal interest rate equals the real interest rate __________ the inflation rate.

plus

What is the normal GDP 2016

10975

What is nominal GDP for 2017

1355.2.5

Someone who is working part-time but wants to be working full-time is classified as

Employed

Expected future income

When you expect your future income to increase, you have less of an incentive to save. Therefore, consumption increases.

Which of the following is an example of a worker experiencing cyclical unemployment?

an employee who got laid off bc of the recession

When net capital flows are negative

capital inflows are less than capital outflows.

The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.

capital; real GDP; all else

Historical societies used precious metals such as gold or silver as money. This would be an example of a

commodity money

Automatic stabilizers refer to

government spending and taxes that automatically increase or decrease along with the business cycle.

Which of the following policies is designed specifically to directly promote technological change in an economy?

government subsidization of research and development

The purchase of a new house would be counted under which component of GDP?

investment

Which of the following is a reason why GDP is not the perfect measure of production?

it does not include household production

M1 is _________ M2.

more liquid than

If foreign holdings of U.S. dollars increase, holding all else constant

the balance on the U.S. financial account will increase.

Which of the following is not one of the three main reasons for the inverse relationship between AE and price level?

the price level effect

Economists consider full employment to occur when

the unemployment rate consists only of frictional and structural unemployment.

If the federal government's expenditures are less than its tax revenues, then

a budget surplus results.

Assuming the base year is 2016, the rate of economic growth between the two years as defined by the percent change real GDP is _____%.

11.62

2016 is the base year what is the GDP deflator for 2017

110.63

2016 as the base year real GDP for 2017 is

12250

If the unemployment rate is 8% and the labor force is 157,516, what is the total number of people unemployed? Please round to the nearest whole number.

12601

Current disposable income

By definition, disposable income is income minus taxes. When current disposable income increases, households buy more and consumption increases.

Which of the following can be done using the Federal Reserve Economic Database (FRED)?

All of these are correct View economic data graphically Access the source of where the economic data originated

Which of the following transactions would be included in Germany's current account?

An American citizen purchases a new Volkswagen made in Germany.

If production and prices steadily increase year over year, which of the following must be true?

Answer All of these are correct. Nominal GDP is higher than real GDP in years after the base year. You Answered Real GDP will always increase year over year. Real GDP is higher than nominal GDP in years before the base year. Nominal GDP will always increase year over year.

household wealth

Assets - Liabilities, When household wealth increases, households have less of an incentive to save their income, making it possible for them to buy more and, therefore, consumption increases

Someone who is working part-time but wants to be working full-time is classified as:

Employed

An unemployment insurance program has which of the following effects?

It increases the amount of time spent searching for a job.

Which of the follow component of GDP can be negative

Net exports

If the price level in the United States is changing at a slower rate than the price level in other countries, what will be the effect on net exports for the United States?

Net exports will rise as U.S. exports increase.

Which of the following would be an example of a microeconomic issue? Select all that apply.

Netflix decides to lower their subscription price.

Knowledge capital is

Non-rival and non-excludable (public good)

A t-shirt produced in Vietnam in 2016 but sold in the United States in 2019 would be included in

The United States' 2019 GDP

Jenna is the mayor of Lewistown, PA and is a very smart economist. She gathers a ton of data regarding unemployment. Based on the data she collects, she decides to hold a job fair and invite local unemployed individuals and local businesses with job openings to attend. Based on this event, Jenna must believe what type of unemployment exists in Lewistown, PA?

frictional unemployment

On the long-run aggregate supply curve, a decrease in the price level

has no effect on the quantity of real GDP supplied.

In this lesson, we used the terms ____________________ when talking about knowledge capital and physical capital.

ideas and objects

Kasha is the mayor of Bellefonte PA and is a very smart economist. She gathers a ton of data regarding unemployment. Based on the data she collects, she decides to put money towards a new program where those individuals who are unemployed can take classes at a local community college. Based on this event, Kasha must believe what type of unemployment exists in Bellefonte PA?

structural unemployment

Which of the following is unemployment that arises a mismatch between the skills that are needed in the labor force and the skills an individual has?

structural unemployment

If the unemployment rate is 5.4% and the labor force is 156,506, what is the total number of people employed? Please round to the nearest whole number.

148055

The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

Frictional unemployment

If the short-run aggregate supply increases by less than the long-run aggregate supply, then, at the short-run equilibrium

GDP will be below potential GDP.

In a small European country, it is estimated that purchasing an additional $2 million of physical capital for a factory (increasing from $8 million to $10 million) will result in an increase in real GDP from $2 million to $3 million. What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise by another $2 million (increasing from $10 million to $12 million)? Assume no technological change and no change in the number of hours worked.

GDP would increase further, but by less than $1 million.

Artificial Intelligence (AI) will increase the productivity of both capital and labor. At the same time, it will decrease the need for as much labor, meaning labor in the economy will decrease. This will _____________ level of capital per hour worked.

Increase

Currently, out of the listed options, the largest category of revenues for the U.S. is:

Individual Income Taxes

The GDP deflator:

Is one measure of the price level

Which of the following is true about the consumer price index?

It assumes that consumers purchase the same amount of each product in the market basket each month.

Canada runs a current account surplus with the United States. Which of the following must be true about Canada's balance of payments with the United States?

It must run a financial account deficit.

Consumption is the __________ component of GDP in the United States.

Largest

Empirical evidence from 1960 to 2014 shows that convergence in economic growth is occurring in which of the following cases?

Low-income industrial countries are catching up to high-income industrial countries.

In 1977, Congress amended the Federal Reserve Act and created what is known as the dual mandate. Which of the following two goals are associated with the dual mandate?

Maximum employment and stable prices

_____________ is action by the Central Bank of a country to manage the interest rate in an economy. ____________ is actions taken by Congress and the President to change government purchases and taxes.

Monetary policy; fiscal policy

Holding all else constant, when the price level decreases, what happens to the aggregate demand curve?

Nothing. it results in a movement along

The three main areas of macroeconomics that we will be discussing in this class are:

Output and Production; Employment; Prices

The inflation rate for a given year is measured by taking the:

Percentage change in the price level from the previous year.

If production steadily increases year over year, which of the following must be true?

Real GDP will always increase year over year

Artificial Intelligence (AI) will increase the productivity of both capital and labor. At the same time, it will decrease the need for as much labor, meaning labor in the economy will decrease. This will _____________ the per worker production function.

Shift up

Which type of unemployment is most often associated with long-term unemployment?

Structural unemployment

Using the notation from this lesson and assuming we are in a closed economy, public saving is equal to which of the following?

T - G - TR

Assume that the real interest rate rises. Which of the follow scenarios do you believe is most likely?

The economy experiences a lower level of consumers' purchasing durable goods.

You earned $30,000 in 2009, and your salary rose to $80,000 in 2018. If the CPI rose from 82 to 202 between 2009 and 2018, which of the following is true?

The purchasing power of your salary increased between 2009 and 2018

Which of the following is a true statement about the spending multiplier?

The spending multiplier rises as the MPC rises

True or False: The Bureau of Labor Statistics (BLS) is the government agency that releases data about the labor market including the unemployment and labor force participation rate.

True

True or false: Macroeconomics is the study of the economy as a whole which includes topics such as unemployment, inflation, and overall production.

True

A decrease in United States net foreign direct investment would occur if

U.S. citizens have decreased their building or purchasing of facilities in foreign countries.

Suppose the economy is at full employment and firms expect the price level to fall in the future. Which of the following will happen in the short run?

Unemployment will decline

The price level.

When the prices of all goods and services go up, the real income and wealth of individuals will decline. Think of it this way: If the price level increases, your money can buy fewer goods and services. Therefore, when the price level increases, consumption declines.

An unplanned increase in inventories results from

actual investment is greater than planned

If inventories decline by less than people predict they will decline, this implies that

actual investment spending was equal to than planned investment spending

Which of the following is not one of the three sources of technological change?

additional amounts of existing capital

In the basic AD-AS model, an increase in government expenditures will shift ________ to the _________.

aggregate demand; right

In the basic AD-AS model, short-run expansionary fiscal policy will shift ________ to the _________.

aggregate demand; right

Which of the following is a reason why GDP is not the perfect measure of well-being in a society?

all of these are reasons why GDP is not a perfect measure of economic well-being

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure​ inflation ​ ______ quality increases. This causes the CPI to​ ______ the cost of the market basket.

but not; overstate

Assuming no change to the federal budget deficit, if the government lets tax incentives expire on research and development, we would expect the ________ curve for loanable funds to shift to the ________ and the equilibrium real interest rate will ________.

demand; left; fall

Assuming no change to the federal budget deficit, if firms expect the economy to enter an expansion in the upcoming year, the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________.

demand; right; rise

According to the World Bank, Albania does one of the worst jobs as a country enforcing the rule of law. The consequence of a weak rule of law is

difficulty in attracting investment and low economic growth.

Policies to promote growth by increasing saving and investment work through

increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.

the industrialized group of countries has growth rates that are consistent with the findings of the economic growth model. That is, Korea, and Singapore had ________ incomes in 1960 than the United States and Switzerland, and Korea, and Singapore grew ________ than the United States and Switzerland between 1960 and 2010.

lower; more rapidly

When the price level rises from 105 to 120, the level of real GDP supplied rises from $70 billion to $90 billion. This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.

positive; short-run

Crowding out refers to a decline in ________ as a result of an increase in ________

private expenditures; government purchases

Decreases in the price level will

raise consumption because real wealth increases.

Enforcing property rights in an economy will

raise the level of investment.

During a recessionary period, the unemployment rate __________ and the total output and production __________.

rises; falls

A positive technological change will

shift the per-worker production function up.

Assuming no change to the federal budget deficit, an increase in taxes on consumption will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

supply; right; fall

Which factors explain labor productivity?

technological change and the quantity of capital per hour worked

According to your readings, there are many measurement problems when it comes to the official unemployment rate in the US. One of them causes the measured unemployment rate to overstate the true extent of joblessness. That problem arises because:

the BLS does not verify the responses of people included in the survey.

Which of the following do we not include in calculating GDP?

we do not include any of these kinds of goods when calculating GDP

Which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita?

Countries that are relatively poor are likely to have a lower quality of health care. Countries that are relatively poor are more likely to experience wars and revolutions. Many developing countries do not have a functioning court system that can enforce laws.

True or false: Microeconomics is the study of the economy as a whole which includes topics such as unemployment, inflation, and overall production

False

In early 2020, the world was faced with an outbreak of the Corona Virus which halted labor productivity around the globe, specifically in China. What impact would this have on the per-worker production function for the economy of China?

It shifted down.

Which of the following explains why economists are interested in looking at real GDP instead of nominal GDP when looking at data over time?

Real GDP keeps prices fixed so economists can analyze the increases in production more closely.

If production steadily increases year over year, which of the following must be true?

Real GDP will always increase year over year.

The made up country of Kimberland has a real GDP per-capita of $50,000. Another made up country, Mootopia, has a real GDP per-capita of $60,000. Which of the following can be said with certainty?

The average person in Mootopia can purchase more goods and services than the average person in Kimberland.

Consider two countries, Alpha and Beta. In Alpha, real GDP per capita is $6,000. In Beta, real GDP per capita is $9,000. Based on the economic growth model, what would you predict about the growth rates in real GDP per capita across these two countries?

The growth rate of real GDP per capita will be higher in Alpha than it is in Beta.

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Unemployment will decline.

True or false Expansionary fiscal policy should raise the exchange rate of the dollar.

true

All of the following are true statements about the multiplier EXCEPT

the multiplier is a value between zero and one

True or False: The Bureau of Labor Statistics (BLS) is the government agency that releases data about the labor market including the unemployment and labor force participation rate.

true