Econ test two
Suppose during the course of a year an economy produces $11 trillion of consumer goods, $3 trillion of investment goods, $6 trillion in government services, and has $3 trillion of exports and $1 trillion of imports. For this economy, GDP would be: a. $18 trillion b. $22 trilion c.$23 trillion d. $24 trillion
$22 trillion
Suppose that your income increases from $10,000 to $15,000 and your consumption increase from $9,000 to $12,000. Your APC as $15,000 is: a. 0.4 b. 0.6 c. 0.8 d. 0.9
0.8
The APC is: a. 1 - MPS b. consumption divided by disposable income c. the slope of the propensity-to-consume line d. the proportion of additional disposable income used for consumption
1 - MPS
A social good is best described as: a. a good or service not adequately provided by a free market usually provided by the government b. a good or service not adequately provided by the government and usually provided by a free market c. a good or service that is subjected to the exclusion principle d. a private good or service
A good or service not adequately provided by a free market usually provided by the government
Structural unemployment consists of people who are unemployed due to: a. business recessions b. business depressions c. temporary job changes d. a mismatch between the skills of workers and the skills required by the job market
A mismatch between the skills of workers and the skills required by the job market
Which of the following is not necessarily true? a. C/DI + S/DI = 1 b. APC + APS = 1 c. APC = MPC d. APC + APS = MPC + MPS
APC = MPC
An increase in consumption means that, at each level of the economy's income: a. APC has decreased, and APS has increased b. APC has increased, and APS has decreased c. APC and APS have increased d. APC and APS have decreased
APC has increased, and APS has decreased
A recessionary gap exists if: a. actual real GDP is less than potential real GDP b. actual real GDP exceeds potential GDP c. actual real GDP equals potential real GDP d. the actual equilibrium price level is greater than zero
Actual real GDP is less than potential real GDP
An inflationary gap occurs if: a. actual real output is less than potential real output b. actual real output is greater than potential real output c. unemployment is greater than the natural rate d. unemployment is equal to the natural rate
Actual real output is greater than potential real output
Double counting would occur in GNP statisticians: a. used market prices without a correction for inflation b. included sales taxes in the market prices of goods and services c. added government expenditures on roads, and consumer expenditures on gasoline d. all of the above
All of the above
In the expenditure approach to measuring the GDP the following are categories of spending: a. gross private domestic investment b. personal consumption expenditure c. government expenditure d. all of the above e. none of the above
All of the above
Disposable income includes: a. corporate taxes b. undistributed corporate profits c. depreciation d. allowance given to children by parents
Allowance given to children by parents
In terms of the bathtub theorem, an injection is: a. a leakage from the economy's circular flow of income b. an expenditure that raises the economy's income c. a form saving d. any variable that reduces the economy's income
An expenditure that raises the economy's income
As aggregate income increases, consumption: a. and saving both increase b. and saving both decrease c. decrease and saving increase d. increase and saving decrease
And saving both increase
GDP measures only the value of FINAL goods and services to: a. avoid double counting b. avoid measuring value added c. include nonproductive transactions d. exclude productive transactions
Avoid double counting
The notion that equilibrium occurs when injections are equal to leakage is termed the: a. water paradox b. paradox of thrift c. bathtub theorem d. saving theorem
Bathtub theorem
During a period of high inflation: a. borrowers are better off because they can pay off their loans with currency that is worth less b. borrowers are worse off because they have to pay off their loans with currency that is worth more c. lenders are worse off because they cannot find anyone who wants a loan d. none of the above
Borrowers are better off because they can pay off their loans with currency that is worth less
Cyclical unemployment consists of people who are unemployed due to: a. discrimination b. business recessions c. temporary changes in jobs d. a mismatch between the location of workers and the location of jobs
Business recessions
Household spending on gods and services is: a. taxes b. saving c. exports d. consumption
Consumption
Dissaving occurs if: a. consumption is greater than disposable income b. the APC is negative c. the APC is positive d. the MPC is negative
Consumption is greater than disposable income
Which of the following is not a type of unemployment? a. seasonal b. structural c. cost-push d. cyclical
Cost-push
Real GDP measures: a. current output at current prices b. current output at base year prices c. base year output at current prices d. none of the above
Current output at base year prices
In terms of the 'bathtub' theorem a withdrawal of leakage: A. Expands the economy's income B. Has a neutral effect on the economy's income C. Reduces the economy's income D. Is a form of investment
Reduces the economy's income
During recession, government tax receipts(revenue): A. Is unaffected B. Overflow C. Underestimated D. Decrease E. Increase
Decrease
The expression "too much money chasing too few good" best describes the condition called: a. cost-push inflation b. wage-push inflation c. demand-pull inflation d. market-power inflation
Demand-pull inflation
The GDP gap is the: a. difference between nominal GDP and real GDP b. difference between potential GDP and actual GDP c. ration of nominal GDP to real GDP d. ratio of potential GDP to actual GDP
Difference between potential GDP and actual GDP
The relationship between income and consumption is expected to be: a. direct b. inverse c. independent d. none of the above
Direct
GDP measures all goods un units of: a. pounds b. feet c. tons d. dollars
Dollars
Gross national product is earned from: a. foreign production b. domestic production c. foreign production less net domestic factor income d. domestic production plus net foreign factor income
Domestic production plus net foreign factor income
In the bathtub theorem, injections are: a. leakages from total income b. withdrawals that are dependent on income c. expenditures that are dependent on income d. expenditures that are not dependent on income
Expenditures that are dependent on income
People who are in the process of changing jobs are accounted for by which one of the following unemployment categories? a. frictional unemployment b. involuntary unemployment c. structural unemployment d. cyclical unemployment
Frictional unemployment
Suppose the total market value of all final goods and services produced in a particular country in 2006 is $500 billion and the total market value of final goods and services sold is $450 billion. We can conclude that: a. GDP in 2006 is $450 billion b. NDP in 2006 is $950 billion c. GDP in 2006 is $500 billion d. Inventories in 2006 fell by $50
GDP in 2006 is $450 billion
Which of the following factors is NOT a component of aggregate demand? A. Consumption B. Investment C. Income D. Net export
Income
Value added is equal to the sum of all: a. wages paid to labor b. income generated from production c. intermediate transactions involved in the production of a good d. intermediate transactions involved in the production of a good, less profit
Income generated from production
A rise in the general price level of goods and services is: A. Depreciation B. Deflation C. Inflation D. Expectations
Inflation
The MEI expresses a relationship between: a. consumption and investment b. interest rates and consumption c. investment and savings d. interest rates and investment
Interest rates an investment
An example of an injection in the bathtub theorem is a. taxes b. saving c. imports d. investment
Investment
Spending by business firms on physical capital is: a. taxes b. saving c. exports d. investment
Investment
The most important factor determining a family's consumption expenditures is likely to be the: a. neighborhood in which it lives b. level of its disposable income c. average age of its members d. size of the family
Level of its disposable income
The expected annual rate of return on an additional unit of a capital good is the: a. APS b. APC c. MEI d. MPC
MEI
Aggregate output is the: a. money value of a nation's total production b. sum of money income earned by the suppliers of labor, land, capital and entrepreneurship c. income earned by owners of foreign factors of production less income earned by domestic factors of production d. total value of goods and services purchased by the business sector
Money value of a nation's total production
A measure of the economy's output in current dollars is: a. deflation b. real GDP c. nominal GDP d. constant GDP
Nominal GDP
Which of the following states that a 3% increase in real GNP will yield a 1% point decrease in the unemployment rate? a. phillips curve b. GDP gap c. Okun's law d. Stephen's law
Okun's law
The GDP for one year differs from the GDP of another because: a. price changes b. physical output changes c. people are not patriotic d. only a and b
Only a and b
In the short run, the aggregate supply curve is: A. horizontal B. Negatively Sloped C. Positively Sloped D. Vertical
Positively sloped
Tom Atoe grows tomatoes for home consumption. This activity is: a. excluded from GDP in order to avoid double counting b. excluded from GDP because an intermediate good is involved c. productive but is excluded from GDP because no market transaction occurs d. included in GDP because it reflects production
Productive but is excluded from GDP because no market transaction occurs
In general terms, the economic role of the government includes the broad functions of the: a. Provision of private goods and the regulation of social goods b. Promotion and regulation of the private sector and the provision of private goods c. promotion and regulation of the private sector and the provision of social goods d. promotion and regulation of the public sector and the provision of quasi-public goods
Promotion and regulation of the private sector and the provision of social goods
Government expenditure depends to a large extent on: a. the stock of capital b. public needs c. credit conditions d. the structure of taxes
Public needs
In order to know if differences in GDP is a result of changes in prices or output GDP is expressed in the way of: A. Dollars and cents B. Nominal C. Real D. only b and c E. only a and c
Real
A measure of the economy's output in constant dollars is: a. intermediate GDP b. current GDP c. nominal GDP d. real GDP
Real GDP
The consumption function expresses the: a. purposes of consumption b. relation between consumption and prices c. relation between consumption and saving d. difference between consumption and taxes
Relation between consumption and saving
That part of a person's income which is not consumed is his or her: a. saving b. profit c. excess d. surplus
Saving
Macroeconomics deals with the action of: a. individuals only b. societies only c. atmosphere only d. both a and b
Societies only
Economist use the term "Aggregate expenditure" to mean: A. Spending for all final foods and services B. The sum of planned spending for all products and factor services C. Household spending for all consumption goods D. Business Spending for all investment goods E. Spending for all products except exports
Spending for all final goods and services
The simple circular flow diagram shows that economic aggregates can be calculated either by the ______ flows in the product market or by the ______ flowing to households in the resource market. A. Spending; Income B. Income; Spending C. Output; Spending D. Spending; Output
Spending; Income
Frictional unemployment consists of people who are unemployed due to: a. discrimination b. business recessions c. business depressions d. temporary changes in jobs
Temporary changes in jobs
Aggregate supply is: a. the amount of real aggregate output that will be made available at various national income amounts b. the amount of real aggregate output that will be purchased at various national income levels c. the amount of real aggregate output that will be purchased at various national income levels d. the amount of real aggregate output that will be made available at various average price levels
The amount of real aggregate output that will be made available at various average price levels
The lower the market rate of interest, other things being equal: a. the higher the MEI b. the lower the rate of investment c. the lower the MEI d. the higher the rate of investment
The higher the rate of investment
A business cycle is: A. The periodic fluctuation of economic activity B. The engine of economic growth C. A period lasting about 50 years D. Identical to the consumption life cycle
The periodic fluctuation of economic activity
The MPS is: a. 1 - MPS b. saving divided by consumption c. the slope of the propensity-to-consume line d. the proportion of additional disposable income used for saving
The proportion of additional disposable income used for saving
As price level rises: a. the purchasing power of cash holding rises b. the purchasing power of cash holdings falls c. the purchasing power of cash holding remain constant d. all of the above
The purchasing power of cash holdings falls
The best reason economists take only final goods and services into account when calculating GDP is: a. this is the way things have always been done b. they want to avoid the problem of final counting c. they want to avoid the problem of double counting d. this is the only way things can be done
They want to avoid the problem of double counting
A recessionary gap occurs if: a. actual real output is greater than potential real output b. actual real output is equal to potential real output c. unemployment is less than the natural rated d. unemployment is greater than the natural rate
Unemployment is greater than the natural rate
The aggregate supply curve is: a. downward-sloping b. upward-sloping c. vertical d. horizontal
Upward-sloping
Aggregate expenditure is the sum of desire or planned spending that: a. occurs only when the economy is in equilibrium b. occurs only when the economy is at full employment c. will be undertaken by the household sector after taxes d. will be undertaken at each aggregate-income level by all sectors of the economy
Will be undertaken at each aggregate-income level by all sectors of the economy
The economic role of government can be considered to: a. promotion and regulation of the private sector b. provision of social goods and services c. accumulation debts d. a and b above
a and b above