Macro test 2

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is

125

The 45-degree line in the Keynesian model represents

AE=Y

the change in consumption associated with a change in income

The marginal propensity to consume

recovery

after recession has ended

reduction in the rate of inflation

disinflation

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living

fell by about 1%

The long-run aggregate supply curve uses the classical assumptions that all variables are __________ in the long run and that long-run equilibrium occurs at ___________________.

flexible; full employment

Core inflation is found by removing _________ from the consumer price index

food and energy

Which of the following items is NOT included in the GDP deflator

imported mangoes

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded.

left;decreases

Suppose full employment real GDP is $13 trillion, current real GDP is $13.2 trillion, and the marginal propensity to consume is 0.5. The inflationary gap is

$0.1 trillion

If $1,000 of additional spending occurs (from investment, say) and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output.

$5000

If your salary was $50,000 last year and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be, assuming the CPI has risen from 110 to 114?

$51,818

If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase

$900

If the multiplier is 2 and investment spending falls by $5 billion, then equilibrium income

$decrease by 10 billion dollars

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume

0.6

The slope of the saving schedule

1- the propensity to consume

If the current year's consumer price index is 214 and last year's was 209, then the rate of inflation is

2.4%

If the marginal propensity to consume is 0.85, how much is the spending multiplier

6.67

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the

Circular flow diagram

Which of the following illustrates the paradox of thrift

Consumer uncertainty causes people to save more; consumption drops; equilibrium income and production drop; savings drop because income is lower

The largest component of GDP is:

Consumption expenditure

The four types of spending in GDP are personal consumer spending, ___________ private domestic investment, government spending, and _______.

Gross Private domestic investment, net exports

In the Keynesian model, the principal determinant of saving is

Income

Which of the following will NOT shift the aggregate supply curve to the left?

a decrease in corporate taxes

Simultaneous recession and deflation can be explained by:

a drop in aggregate demand

What would cause the price level to decrease and employment to increase?

a shift to the right on the SRAS curve

After the acceptance of Keynesian analysis, government

actions toward macroeconomic policy grew significantly

recession

can happen simply because peak (boom) runs out of steam and business investment begins to decline thereby throwing economy into a tailspin

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% in the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%:

creditors gain at debtors' expense

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing

deflation

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

discouraged workers

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____.

disposable income; consumption

trough

economic activity picks up again businesses and consumers become more enthusiastic about economy

peak

economy is operating at capacity

The U.S. gross domestic product is equal to the total market value of all

final goods and services produced by resources in the United States.

The GDP deflator is an index that includes prices of all but

imports

Which one of the following would NOT lead to higher prices

increases in the supply of food

A rising aggregate price level _______ an economy's interest rates and therefore _____ output demanded.

increases;reduces

The twin perils of the modern macroeconomy are said to be

inflation and unemployment

If actual unemployment is at its natural rate

inflation is very low

The value of the cars that the Ford Motor Company produces in a German plant

is a part of U.S. GNP.

If AE = $7,600 and Y = $8,000, businesses will produce

less, lowering both employment and income

We are most likely to see a recession if interest rates on long-term bonds are:

lower than interest rates on short-term bonds.

The short-run aggregate supply curve is positively sloped because

many input prices are slow to change in the short run.

If the pound sterling appreciates against the U.S. dollar, England buys ______ U.S. goods, causing the U.S. aggregate demand curve to shift to the ______.

more;left

Full employment

occurs if cyclical unemployment is zero

Which is a determinant of aggregate supply?

productivity

Which of the following is NOT included in gross private domestic investment?

purchases of common stock by investors

High taxes and/or heavy regulation

raise costs of production so that the aggregate supply curve shifts to the left.

If oil prices decrease, the short-run aggregate supply curve shifts _____ and output supplied will be _____.

right; increased

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.

right; increases

Which of the following persons is considered to be unemployed

someone interviewing looking and hoping to find their first job

GDP can be found either by adding up all of the __________ or all of the __________ in the economy.

spending; income

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing

structural unemployment

Which organization determines the beginning and end dates of a recession?

the National Bureau of Economic Research

If a government always balances its budget

the effect of an increase in government spending on aggregate expenditures is weakened

Firms decide how much to invest by comparing the rate of return on their projects with

the interest rate

Which of the following tends to make aggregate demand decrease by more than the amount that consumer spending decreases?

the multiplier effect

Bussiness Cycle

the periodic fluctuation of economic activity

Cost-push inflation is a situation in which:

the short-run aggregate supply curve shifts leftward.

Which of the following did classical economists believe would happen if the product markets accrued surpluses

wages rates would fall