Exam 2 #9

Table) According to the table, real GDP for 2014 is approximately:

A) $7,540 billion.

Last year the consumer price index (CPI) was 115 and this year's CPI is 125. The rate of inflation is:

A) 8.7%

Evaluate the following statements about real and nominal interest rates and then select the best answer from among A through E. 1) Nominal interest rates are very low interest rates, so low they are nominal. 2) Real interest rates plus the expected inflation rate equals the nominal interest rate. 3) Nominal interest rate plus the expected inflation rate equals the real interest rate. 4) The nominal interest rate is the interest rate actually observed in a financial market. 5) According to the text, the real interest rate is the nominal interest rate adjusted for expected inflation.

A) Statements 2, 4 and 5 are correct, statements 1 and 3 are wrong.

In his essay on population, Malthus argued that any improvement in the standard of living would lead to:

A) an increase in the population that would outstrip the growth in food supply.

M2 is ____ in dollar value than M1; it also contains ____ assets.

A) larger; less liquid

Using the Keynesian model as developed in recent lectures, if "the multiplier" = 4, gross investment, Ig, decreases by $15 billion, exports, X, increase by $5 billion, and government spending, G, drops by $10 billion, then economic activity, Y, will

B) decrease by $80 billion.

In Keynesian multiplier equation just above, if c = .7, t = .2 and w = .06, then if "autonomous spending" increases by $200 billion, nominal GDP:

B) no other answer is correct

Suppose you accept a job in Mexico after college, your income will be part of GNP in

B) the U.S. only.

Human capital refers to:

C) skills, knowledge, and quality of workers.

The central bank of the United States is:

C) the Federal Reserve.

Which of the following is FALSE regarding the Keynesian model?

D) Aggregate spending is always less than aggregate income.

If all of the following events occurred in 2008, which ones would contribute to GDP for 2008?

D) None of these transactions counts towards GDP for 2008.

Suppose three years ago a nation's inflation rate was 8%, two years ago it was 5%, and last year it was 2%. This nation is undergoing:

D) disinflation.

In the Keynesian model, the price level is ___________; in the aggregate demand and supply model, the price level is _______________.

D) fixed; flexible

abor productivity is a major determinant of:

D) living standards.

Mandatory spending comprises nearly ________ of the federal budget.

D) two-thirds

Based on the following values (in $ billions per year), estimate GDP and select the most accurate answer. Consumption spending 500 Gross Investment spending 300 Government Spending 200 Transfers 100 Exports 400 Imports 300 Wages and salaries earned 800 Interest plus rent received by households 200 Profit earned by all enterprises 100

B) 1100

__________ government spending, _____ transfer payments, and ____ taxes are all examples of contractionary fiscal policy.

B) Reducing; reducing; raising

Federal spending that is authorized by permanent laws and does not go through the annual appropriation process is called ________ spending.

B) mandatory

If there is no government and no foreign sector in the economy:

C) GDP = C + I.

The collapse of home values that began in 2008 led to ____ in Americans' saving rates, shifting aggregate demand to the ____.

C) an increase; left

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as:

C) discouraged workers.

The largest source of federal government revenues is:

C) individual income taxes.

(Table) According to the table, the GDP deflator for 2012 is:

D) 100.

Based on the following values (in $ billions per year), estimate GDP and select the most accurate answer. Consumption spending 600 Government Spending 200 Transfers 100 Exports 500 Imports 350 Wages and salaries earned 950 Interest plus rent received by households 200 Profit earned by all enterprises 100

D) 1250

Suppose in 2010 the cost of purchasing a basket of goods was $100. That same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is:

D) 150.

Checking accounts are counted as part of:

D) M1 and M2.