exam 2
Which of the following is a final good or service? A.A haircut purchased by a father for his 12 year-old son. B. Fertilizer purchased by a farm supplier. C. Diesel fuel bought for a delivery truck. D. Chevrolet windows purchased by a General Motors assembly plant.
A.A haircut purchased by a father for his 12 year-old son.
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? A.Expansion. B. Recession. C. Peak. D. Trough.
A.Expansion.
High rates of unemployment: A.Indicate that society is not using a large portion of the talent and skills of its people B. Are associated with higher price levels C. Always correspond to a decrease in nominal GDP D. Do not affect an economy's output of goods and services
A.Indicate that society is not using a large portion of the talent and skills of its people
Inflation is defined as: A.an increase in the overall level of prices. B. the rate of growth in nominal GDP. C. a situation where all prices in the economy rise simultaneously. D. the growth phase of the business cycle.
A.an increase in the overall level of prices.
According to the Bureau of Labor Statistics, to be officially unemployed a person must: A.be in the labor force. B. be 21 years of age or older. C. have lost a job. D. be waiting to be called back from a layoff.
A.be in the labor force.
A nation's gross domestic product (GDP): A.can be found by summing C + Ig + G + Xn. B. is the dollar value of the total output produced by its citizens, regardless of where they are living. C. can be found by summing C + S + G + Xn. D. is always some amount less than its NDP.
A.can be found by summing C + Ig + G + Xn.
Economic growth is best defined as an increase in: A.either real GDP or real GDP per capita. B. nominal GDP. C. total consumption expenditures. D. wealth in the economy.
A.either real GDP or real GDP per capita.
Government purchases include government spending on: A.government consumption goods and public capital goods. B. government consumption goods only. C. public capital goods only. D. government consumption goods, public capital goods, and transfer payments.
A.government consumption goods and public capital goods.
n the short run, how will an increase in aggregate demand most likely affect real GDP and the overall price level? A. REAL GDP decrease PRICE LEVEL decrease B. REAL GDP increase PRICE LEVEL decrease C. REAL GDP increase PRICE LEVEL increase D. REAL GDP decrease PRICE LEVEL increase
C. REAL GDP increase PRICE LEVEL increase
Over a five year period nominal GDP increased from $10 trillion to $15 trillion, while the GDP price index increased from 100 to 125. Approximately how much is GDP in year five, stated in terms of year-one dollars? (what is real GDP year 1 as base year) A. $12 trillion B. $14 trillion C. $16 trillion D. $19 trillion
A. $12 trillion
Which of the following is classified as investment in national income (GDP) accounting? A. building a new factory B. buying a 10 year old home C. depositing money in a bank D. purchasing corporate stocks and bonds
A. building a new factory
Which of the following is the most important source of US economic growth in the long run? A. higher levels of labor productivity B. higher levels of government spending C. increase in exports and a decrease in imports D. increased consumer spending in the economy
A. higher levels of labor productivity
Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni 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 pepperoni pizzas this year: A.increased nominal GDP by $20,000 but left real GDP unchanged. B. increased nominal GDP by $120,000 and increased real GDP by $100,000. C. left nominal GDP unchanged but increased real GDP by $20,000. D. increased nominal GDP by $120,000 but left real GDP unchanged.
A.increased nominal GDP by $20,000 but left real GDP unchanged.
A nation's gross domestic product (GDP): A.is the dollar value of all final output produced within the borders of the nation during a specific period of time. B. is the dollar value of all final output produced by its citizens, regardless of where they are living. C. can be found by summing C + In + S + Xn. D. is always some amount less than C + Ig + G + Xn.
A.is the dollar value of all final output produced within the borders of the nation during a specific period of time.
Real GDP is preferred to nominal GDP as a measure of economic performance because: A.nominal GDP uses current prices and thus may over- or understate true changes in output. B. nominal GDP only includes goods and excludes services. C. nominal GDP is not adjusted for population changes. D. real GDP accounts for changes in the quality of goods and services produced.
A.nominal GDP uses current prices and thus may over- or understate true changes in output.
If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium: A.output would necessarily rise. B. output would necessarily fall. C. price level would necessarily fall. D. price level would necessarily rise.
A.output would necessarily rise.
The three statistics that are the main focus for those measuring macroeconomic health are: A.real GDP, inflation, and unemployment. B. real GDP, nominal GDP, and inflation. C. nominal GDP, unemployment, and inflation. D. real GDP, nominal GDP, and unemployment.
A.real GDP, inflation, and unemployment.
If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, it real GDP per capita will: A.remain constant. B. fall by 6 percent. C. rise by 6 percent. D. fall by 12 percent.
A.remain constant.
If intermediate goods and services were included in GDP: A.the GDP would be overstated. B. the GDP would then have to be deflated for changes in the price level. C. nominal GDP would exceed real GDP. D. the GDP would be understated.
A.the GDP would be overstated.
The Industrial Revolution and modern economic growth resulted in: A.the average human lifespan more than doubling. B. a major population shift from urban to rural areas. C. increased production by local craftsmen. D. all of these.
A.the average human lifespan more than doubling.
In the short run, how will an increase in C, I, G causing an increase in aggregate demand likely affect real GDP? A. Decrease it B Increase it C. Not change it D. Cause snow to fall in Florida
B Increase it
1. The consumer price index in an economy is 180 one year and 189 the next year. The rate of inflation in the economy that year is: A. 1% B. 5% C. 8% D. 18%
B. 5%
In the short run, aggregate demand will tend to increase if there is an increase in: A. tax rates B. consumer wealth C. the prices of resources D. excess production capacity
B. consumer wealth
In the United States, the rate of unemployment is highest for: A. white teenagers. B.African-American teenagers. C. married women. D. unmarried women.
B.African-American teenagers.
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.
B.Economies experience a positive growth trend over the long run but experience significant variability in the short run.
Which of the following statements is most accurate about modern economic growth? A. Economic historians mark modern economic growth as beginning around A.D. 1500. B.Modern economic growth is characterized by sustained and ongoing increases in living standards. C. Modern economic growth has virtually eliminated business cycle fluctuations. D. Modern economic growth has been distributed more or less equally across nations.
B.Modern economic growth is characterized by sustained and ongoing increases in living standards.
Which of the following is not economic investment? A. The purchase of a new drill press by the Ajax Manufacturing Company. B.The purchase of 100 shares of AT&T by a retired business executive. C. Construction of a suburban housing project. D. The piling up of inventories on a grocer's shelf.
B.The purchase of 100 shares of AT&T by a retired business executive.
Which of the following do national income accountants consider to be investment? A. The purchase of an automobile for private, nonbusiness use. B.The purchase of a new house. C. The purchase of corporate bonds. D. The purchase of gold coins.
B.The purchase of a new house.
Unemployment describes the condition where: A. equipment and machinery are going unused. B.a person cannot get a job but is willing to work and is actively seeking work. C. a person does not have a job, regardless of whether or not he or she wants one. D. any resource sits idle.
B.a person cannot get a job but is willing to work and is actively seeking work.
Transfer payments are: A. excluded when calculating GDP because they only reflect inflation. B.excluded when calculating GDP because they do not reflect current production. C. included when calculating GDP because they are a category of investment spending. D. included when calculating GDP because they increase the spending of recipients.
B.excluded when calculating GDP because they do not reflect current production.
Other things equal, a decrease in the real interest rate will: A. expand investment and shift the AD curve to the left. B.expand investment and shift the AD curve to the right. C. reduce investment and shift the AD curve to the left. D. reduce investment and shift the AD curve to the right.
B.expand investment and shift the AD curve to the right.
Higher rates of unemployment are linked with: A. greater political stability because the employed tend to be more politically active. B.higher crime rates as the unemployed seek to replace lost income. C. lower rates of heart disease as the unemployed have eliminated job stress. D. improvements in overall health as the unemployed have more leisure time to be physically active.
B.higher crime rates as the unemployed seek to replace lost income.
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to: A. affect neither aggregate supply nor aggregate demand. B.increase aggregate demand. C. reduce aggregate demand. D. reduce aggregate supply.
B.increase aggregate demand.
Other things equal, a reduction in personal and business taxes can be expected to: A. increase aggregate demand and decrease aggregate supply. B.increase both aggregate demand and aggregate supply. C. decrease both aggregate demand and aggregate supply. D. decrease aggregate demand and increase aggregate supply.
B.increase both aggregate demand and aggregate supply.
Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni 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 pepperoni pizzas: A. increased both nominal and real GDP from last year. B.increased nominal GDP from last year, but real GDP was unaffected. C. increased real GDP from last year, but nominal GDP was unaffected. D. did not change either nominal or real GDP from last year.
B.increased nominal GDP from last year, but real GDP was unaffected.
National income accountants can avoid multiple counting by: A. including transfer payments in their calculations. B.only counting final goods. C. counting both intermediate and final goods. D. only counting intermediate goods.
B.only counting final goods.
The term "recession" describes a situation where: A. inflation rates exceed normal levels. B.output and living standards decline. C. an economy's ability to produce is destroyed. D. government takes a less active role in economic matters.
B.output and living standards decline.
For a nation's real GDP per capita to rise during a year: A. consumption spending must increase. B.real GDP must increase more rapidly than population. C. population must increase more rapidly than real GDP. D. investment spending must increase.
B.real GDP must increase more rapidly than population.
An increase in input productivity will: A. shift the aggregate supply curve leftward. B.reduce the equilibrium price level, assuming downward flexible prices. C. reduce the equilibrium real output. D. reduce aggregate demand.
B.reduce the equilibrium price level, assuming downward flexible prices.
Official unemployment statistics: A. understate unemployment because individuals receiving unemployment compensation are counted as employed. B.understate unemployment because discouraged workers are not counted as unemployed. C. include cyclical and structural unemployment but not frictional unemployment. D. overstate unemployment because workers who are involuntarily working part-time are counted as being employed.
B.understate unemployment because discouraged workers are not counted as unemployed.
Real GDP measures the: A. total dollar value of all goods and services produced within the borders of a country using current prices. B.value of final goods and services produced within the borders of a country, corrected for price changes. C. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. D. value of all goods and services produced in the world, using current prices.
B.value of final goods and services produced within the borders of a country, corrected for price changes.
Which of the following best explains why a $7 billion tax cut can lead to a $9 billion increase in consumer spending in the short run? A. Tax cuts reduce government spending, which encourages consumer spening. B. tax cuts reduce interest rates, which stimulates consumer spending and borrowing. C. tax cuts increase disposable income, which leads to higher national income and additional consumer spending D. tax cuts increase government transfer payments, which leads to higher national income and additional spending.
C. tax cuts increase disposable income, which leads to higher national income and additional consumer spending
The natural rate of unemployment is: A. higher than the full-employment rate of unemployment. B. lower than the full-employment rate of unemployment. C. that rate of unemployment occurring when the economy is at its potential output. D. found by dividing total unemployment by the size of the labor force.
C. that rate of unemployment occurring when the economy is at its potential output.
Macroeconomics is mostly focused on: A. the individual markets within an economy. B. only the largest industries in the economy. C. the economy as a whole. D. why specific businesses fail.
C. the economy as a whole.
In which of the following sets of circumstances can we confidently expect inflation? A. Aggregate supply and aggregate demand both increase. B. Aggregate supply and aggregate demand both decrease. C.Aggregate supply decreases and aggregate demand increases. D. Aggregate supply increases and aggregate demand decreases.
C.Aggregate supply decreases and aggregate demand increases.
Which of the following would most likely reduce aggregate demand? A. A reduced amount of excess capacity. B. Increased government spending on military equipment. C.An appreciation of the U.S. dollar. D. Increased consumer optimism regarding future economic conditions.
C.An appreciation of the U.S. dollar.
Which of the following best measures improvements in the standard of living of a nation? A. Growth of nominal GDP. B. Growth of real GDP. C.Growth of real GDP per capita. D. Growth of national income.
C.Growth of real GDP per capita.
Why are economists concerned about inflation? A. Inflation generally causes unemployment rates to rise. B. Real GDP is necessarily falling when there is inflation. C.Inflation lowers the standard of living for people whose income does not increase as fast as the price level. D. Inflation increases the value of peoples' saving and encourages overspending on goods and services.
C.Inflation lowers the standard of living for people whose income does not increase as fast as the price level.
Why are high rates of unemployment of concern to economists? A. Higher rates of unemployment generally lead to higher inflation rates. B. Environmental destruction is more prevalent when unemployment rates are high. C.There is lost output that could have been produced if the unemployed had been working. D. All of these options are reasons why economists are concerned about high unemployment rates.
C.There is lost output that could have been produced if the unemployed had been working.
The phase of the business cycle in which real GDP declines is called: A. the peak. B. an expansion. C.a recession. D. the trough.
C.a recession.
Savings are generated whenever: A. prices are rising. B. current spending exceeds current income. C.current income exceeds current spending. D. real GDP exceeds nominal GDP.
C.current income exceeds current spending.
Other things equal, appreciation of the dollar: A. increases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. B. increases aggregate demand in the United States and may decrease aggregate supply by reducing the prices of imported resources. C.decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. D. decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources.
C.decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.
Real GDP per capita is found by: A. adding real GDP and population. B. subtracting population from real GDP. C.dividing real GDP by population. D. dividing population by real GDP.
C.dividing real GDP by population.
Net exports are: A. that portion of consumption and investment goods sent to other countries. B. exports plus imports. C.exports less imports. D. imports less exports.
C.exports less imports.
Countries that have experienced modern economic growth have also tended to: A. adopt feudalistic institutions. B. restrict women and minorities from holding certain economic and political positions. C.move toward more democratic forms of government. D. have less leisure time for sport and artistic activities.
C.move toward more democratic forms of government.
Tom Atoe grows fruits and vegetables 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.
C.productive but is excluded from GDP because no market transaction occurs.
The phase of the business cycle in which real GDP is at a minimum is called: A. the peak. B. a recession. C.the trough. D. the underside.
C.the trough.
The limit to total production capacity in the economy is set by: A. the amount of money in circulation B. business demand for goods and services. C. the amount of government spending and taxation D. the quantity and quality of its productive resources.
D. the quantity and quality of its productive resources.
An increase in aggregate demand is most likely to be caused by: A. An increase in real interest rates B. A decrease in government spending C. A decrease in expected returns on investment D.A decrease in the tax rates on household income
D.A decrease in the tax rates on household income
The period when output and living standards decline is referred to as: A. Inflation B. Economic decline C. An inventory downturn D.A recession
D.A recession
An increase in expected future income will: A. Increase aggregate demand and aggregate supply B. Decrease aggregate demand and aggregate supply C. Increase aggregate supply D.Increase aggregate demand
D.Increase aggregate demand
Which of the following is most closely related to recessions? A. Positive long-run economic growth. B. Rapid growth in the price level. C. Falling rates of unemployment. D.Negative real growth in output.
D.Negative real growth in output.
If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? A. Nominal and real GDP would both rise. B. Nominal and real GDP would both be unchanged. C. Real GDP would rise, but nominal GDP would be unchanged. D.Nominal GDP would rise, but real GDP would be unchanged.
D.Nominal GDP would rise, but real GDP would be unchanged.
Which of the following transactions would be included in GDP? A. Mary buys a used book for $5 at a garage sale. B. Nick buys $5,000 worth of stock in Microsoft. C. Olivia receives a tax refund of $500. D.Peter buys a newly constructed house.
D.Peter buys a newly constructed house.
Suppose Smith pays $100 to Jones. A. We can say with certainty that the GDP has increased by $100. B. We can say with certainty that the GDP has increased, but we cannot determine the amount. C. We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. D.We need more information to determine whether GDP has changed.
D.We need more information to determine whether GDP has changed.
Real GDP per capita: A. cannot grow more rapidly than real GDP. B. cannot grow more slowly than real GDP. C. necessarily grows more rapidly than real GDP. D.can grow either more slowly or more rapidly than real GDP.
D.can grow either more slowly or more rapidly than real GDP.
A recession is defined as a period in which: A. cost-push inflation is present. B. nominal domestic output falls. C. demand-pull inflation is present. D.real domestic output falls.
D.real domestic output falls.
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.
D.sacrifice current consumption.
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.
D.short-run fluctuations in output and employment.
The unemployment rate of: A. women greatly exceeds that of men. B. whites is roughly equal to that of African Americans. C. managerial and professional workers exceeds that of construction and extraction workers. D.teenagers is much higher than that of adults.
D.teenagers is much higher than that of adults.
