macro exams 1 and 2

Refer to Table 1. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals

6400

If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from A. 23.3 years to 17.5 years. B. 28.0 years to 21.0 years. C. 11.2 years to 10.8 years. D. 23.3 years to 20.6 years.

A. 23.3 years to 17.5 years.

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita? A. 4.7% B. 10.5% C. 15% D. 21%

A. 4.7%

J is above GDP line Refer to Figure 4. According to the figure, at what point is aggregate expenditure greater than GDP? A. J B. K C. L D. none of the above

A. J

If the Federal Reserve decided to include virtual money like Bitcoins in its measure of the money supply, what would be the effect on M1 or M2? A. M1 would rise. B. M1 would fall. C. M2 would fall but M1 would remain constant. D. M2 would rise but M1 would remain constant.

A. M1 would rise.

upward shift of production function. 3 times. Refer to Figure 1. The movement from E to B to D in the figure above illustrates A. an improvement in technology. B. a decline in capital per worker. C. diminishing returns to capital. D. diminishing returns to labor.

A. an improvement in technology.

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP? A. an increase in wealth B. an increase in interest rates C. a decrease in business confidence D. an increase in the value of the dollar relative to other currencies

A. an increase in wealth

The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price, and the CPI does not reflect this and ______ the cost of the market basket. A. change; overestimates B. change; underestimates C. do not change; overestimates D. do not change; underestimates

A. change; overestimates

Suppose that in 2018, real GDP grew in Estonia by 3% and the population increased by 5%. Therefore, in 2018, Estonia experienced A. economic growth, but not an increase in living standards. B. economic growth and an increase in living standards. C. no economic growth, but an increase in living standards. D. no economic growth and no increase in living standards.

A. economic growth, but not an increase in living standards.

The Bureau of Labor Statistics would categorize a person as _______ if they were temporarily away from their job because they were ill. A. employed B. unemployed C. a discouraged worker D. out of the labor force

A. employed

Suppose that households became mistrustful of the banking system and decide to decrease their checking account balances and increase their holdings of currency. Using the money demand and money supply model and assuming everything else is held constant, the equilibrium interest rate should A. increase. B. decrease. C. not change. D. increase, then decrease.

A. increase.

Suppose the required reserve ratio is 20 percent. If banks are conservative and choose not to loan all of their excess reserves, the real-world deposit multiplier is A. less than 5. B. equal to 5. C. greater than 5. D. equal to 20.

A. less than 5.

17.) Refer to Figure 3. Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP1 to GDP2, and this amount is $400 billion. If the MPC is 0.75, then what is the distance between N and L or by how much did government spending change? A. $10 billion B. $100 billion C. $200 billion D. $300 billion

B. $100 billion

Total population = 20,000 Working-age population = 15,000 Employment = 1,000 Unemployment = 100 The unemployment rate for this simple economy equals A. (100/1,000)×100. B. (100/1,100)×100. C. (100/15,000)×100. D. (100/20,000)×100.

B. (100/1,100)×100

Which of the following would you expect to increase the equilibrium interest rate? A. an increase in the percentage of income after net taxes that households save B. an increase in the budget deficit C. a decrease in the profitability of investment projects firms are considering D. the government begins running a budget surplus

B. an increase in the budget deficit

Refer to Figure 2. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely A. increase the money supply and decrease the interest rate. B. increase taxes. C. increase government spending. D. raise interest rates.

B. increase taxes. (to stay at equilibrium)

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would A. increase the measured unemployment rate. B. increase the measured labor force participation rate. C. decrease the number of persons in the labor force. D. decrease the number of persons in the working-age population.

B. increase the measured labor force participation rate.

After an unexpected ________ in the price of oil, the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels. A. increase; increases B. increase; decreases C. decrease; increases D. decrease; decreases

B. increase; decreases

A government budget surplus from reduced government spending (no change in net taxes) will ______ the level of investment in the economy and ______ the level of total saving (private plus public) in the economy. A. increase; decrease B. increase; increase C. decrease; increase D. decrease; decrease

B. increase; increase

People hold money as opposed to financial assets because money A. earns interest. B. is perfectly liquid. C. earns no interest. D. earns a higher return than other financial assets.

B. is perfectly liquid.

Which of the following is more likely to be effective in increasing the growth rate of real GDP? A. temporary cuts in income taxes B. permanent cuts in business taxes C. a one-time personal income tax rebate D. All cuts in taxes are equally likely to increase the growth rate of real GDP

B. permanent cuts in business taxes

When the Federal Reserve decreases the money supply, at the previous equilibrium interest rate households and firms will now want to A. buy Treasury bills. B. sell Treasury bills. C. neither buy nor sell Treasury bills. D. hold less money.

B. sell Treasury bills.

If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy? A. unit of account B. store of value C. certificate of gold

B. store of value

The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect A. it is more likely that an incumbent president will be re-elected. B. that stock prices are more likely to fall. C. that jobs are less difficult to find. D. that investors will be more optimistic about the economy.

B. that stock prices are more likely to fall.

An increase in the price level causes A. the money demand curve to shift to the left. B. the money demand curve to shift to the right. C. a movement up along the money demand curve. D. a movement down along the money demand curve.

B. the money demand curve to shift to the right.

At macroeconomic equilibrium A. total investment equals total inventories. B. total spending equals total production. C. total consumption equals total production. D. total taxes equal total transfers.

B. total spending equals total production.

If the required reserve ratio is 10 percent, an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit) in the banking system as a whole of up to A. $100. B. $1,000. C. $10,000. D. $100,000.

C. $10,000.

movement back to equilibrium point b. Refer to Figure 1. Suppose the economy is in short-run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium. Using the basic AD-AS model in the figure above, this would be depicted as a movement from A. DtoC. B. AtoE. C. CtoB. D. BtoA.

C. C to B.

The economy has gone into a recession. You have majored in computer science and, because of the recession, have difficulty in finding a job. According to the information in the chapter, should you go back to school and get a second major? A. Yes, the recession will ensure that you will never find a job as a programmer. B. Yes, the recession will lower income in my field permanently. C. No, the recession will most likely be short-lived and I can get a job after it is over. D. No, the recession will have no impact on my ability to get a job or my future income.

C. No, the recession will most likely be short-lived and I can get a job after it is over.

How will an increase in the government budget surplus as a result of lower government spending (with no change in net taxes) affect private saving in the economy? A. Private saving will increase by the amount of increase in the budget surplus. B. Private saving will decrease by the amount of increase in the budget surplus. C. Private saving will decrease by less than the amount of increase in the budget surplus. D. Private saving will be unaffected by the increase in the budget surplus.

C. Private saving will decrease by less than the amount of increase in the budget surplus.

Refer to Figure 2. The loanable funds market is in equilibrium, as shown in the figure above. An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium? A. The real interest rate is 5 percent, and the quantity of loanable funds is $150 million. B. The real interest rate is 5 percent, and the quantity of loanable funds is $90 million. C. The real interest rate is 3 percent, and the quantity of loanable funds is $150 million. D. The real interest rate is 3 percent, and the quantity of loanable funds is $90 million.

C. The real interest rate is 3 percent, and the quantity of loanable funds is $150 million.

All of the following are components of aggregate expenditure except A. consumption spending. B. net export spending. C. actual investment spending. D. government spending.

C. actual investment spending.

Which of the following will raise consumer expenditures? A. an increase in interest rates B. a general decline in housing prices C. an increase in expected future income D. an increase in the price level

C. an increase in expected future income

From an initial long-run equilibrium, if aggregate demand grows more slowly than long-run and short-run aggregate supply, then Congress and the president would most likely A. increase the required reserve ratio and decrease government spending. B. decrease government spending. C. decrease taxes. D. lower interest rates.

C. decrease taxes.

The U.S. work week has declined from 60 hours in 1890 to fewer than 40 hours today. The impact of the decline in working hours A. increases U.S. GDP and increases the well-being of a typical working person in the U.S. B. increases U.S. GDP and decreases the well-being of a typical working person in the U.S. C. decreases U.S. GDP and increases the well-being of a typical working person in the U.S. D. decreases U.S. GDP and decreases the well-being of a typical working person in the U.S.

C. decreases U.S. GDP and increases the well-being of a typical working person in the U.S.

its movement along curve Refer to Figure 1. The movement from A to B to C illustrates A. an improvement in technology. B. a decline in capital per worker. C. diminishing returns to capital. D. diminishing returns to labor.

C. diminishing returns to capital.

Which of the following are goals of monetary policy? A. maximizing the value of the dollar relative to other currencies, economic growth, and high employment B. price stability, maximizing the value of the dollar relative to other currencies, and high employment C. price stability, economic growth, and high employment D. price stability, economic growth, and maximizing the value of the dollar relative to other currencies

C. price stability, economic growth, and high employment

Suppose the Fed decreases the money supply. In response households and firms will ________ short-term assets and this will drive ________ interest rates. A. buy; up B. buy; down C. sell; up D. sell; down

C. sell; up

A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money? A. medium of exchange B. unit of account C. store of value D. standard of deferred payment

C. store of value

The broadest measure of the price level that includes all final goods and services is A. the producer price index B. the consumer price index. C. the GDP deflator. D. the wholesale price index.

C. the GDP deflator.

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then A. actual inventory investment will be less than planned inventory investment. B. actual inventory investment will be greater than planned inventory investment. C. the economy is in a recession. D. the economy is at full employment.

C. the economy is in a recession.

What is an economic model? A. It is a description of an economic issue that includes all possible related information. B. It is a description of an economic issue based on official government information. C. It is a detailed version of some aspect of economic life used to analyze an economic issue. D. It is a simplified version of some aspect of economic life used to analyze an economic issue.

D. It is a simplified version of some aspect of economic life used to analyze an economic issue.

If GDP per capita rises by 2% between 2017 and 2018, which of the following is necessarily true? A. Real GDP has risen by more than 2%. B. The population has decreased. C. The population has increased, but by less than 2%. D. None of the above is necessarily true.

D. None of the above is necessarily true.

Which of the following would be classified as fiscal policy? A. The federal government passes tax cuts to encourage firms to reduce air pollution. B. The Federal Reserve cuts interest rates to stimulate the economy. C. A state government cuts taxes to help the economy of the state. D. The federal government cuts taxes to stimulate the economy.

D. The federal government cuts taxes to stimulate the economy.

The nominal GDP of the U.S. in 2016 was approximately $18.6 trillion. This means that A. the value of output in 2016 was around $18.6 trillion. B. total income in 2016 was around $18.6 trillion. C. total spending in 2016 was around $18.6 trillion. D. all of the above are true.

D. all of the above are true

Investment, as defined by economists, would not include which of the following? Ford A. buys a new robotic machine (from a plant in Ohio) to assemble cars. B. adds 1,000 new cars to inventories. C. builds another assembly plant in the United States. D. buys U.S. government bonds.

D. buys U.S. government bonds.

A policy that offers parents a tax reduction based on how much they are saving for their children's college education should ________ the equilibrium level of loanable funds and _____ the rate of long-term growth. A. decrease; increase B. increase; decrease C. decrease; decrease D. increase; increase

D. increase; increase

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be _____ and real GDP to be ________. A. higher; higher B. higher; lower C. lower; higher D. lower; lower

D. lower; lower

The purchase by a foreign government of an airplane produced in the United States is included in U.S. A. consumption expenditures. B. investment expenditures. C. government purchases. D. net exports.

D. net exports.

Suppose in 2018, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2018? A. the value of the house in 2018 B. the value of the house in 2003 C. the value of the house in 2018 minus depreciation D. the value of the services of the real estate agent

D. the value of the services of the real estate agent