Macroeconomic final test 2

Which of the following statements best characterizes the Classical view of business cycles

Fluctuations in business activity occur in regular and predictable patterns

Macroeconomics emerged as a separate field largely in response to

John M. Keynes explanation of depression

Aggregate accounting emerged from the work of two economists for which they recieved the Nobel Prize. The two economists are

Simon Kuznets and Richard Stone

The top if the business cycle is called

a peak

Keynesian economists believe

government can implement policy proposals that can positively impact the economy

If per capita output increases by 2 percent and population grows by 3 percent,output

grows by 5 percent

During the business cycle, an economic expansion occurs

in between the trough and peak

Increasing output beyond its potential tends to

increase inflation

As the marginal propensity to expand rises the multiplier

increases

The likely reason that the CPI receives more attention in the media than the GDP deflator is because the CPI

is more relevant to consumers

Before the Great Depression the popular view of government was

laissez-faire, and after the Depression , the popular view of government was activist

The US produces and sells millions of types of products. To add them up to a single aggregate, each good is weighed by its

market price

The difference between gross domestic product(GDP) and gross national product (GNP) is that GDP

measures the economic activity that occurs within a country while GNP measures the economic activity of all the people and businesses of a country

What is a leading economic indicator

number of new buildings permits for private housing

Structural employment is caused by

people losing jobs when their skills become obsolete due to technological innovations

Comparisons of GDP levels across countries are least accurate where

prices differ across countries and non-market activities are a large part of total economic activity

If the CPI in year equals 2 110 and the CPI in year 3 equals 121, it can be concluded that consumer prices

rose from year 2 to year 3 by 10%

In the early 2000s, the United States went through what many economist describe as a jobless recovery , which is a situation in which real output grows but the unemployment rate does not fall. Normally an increase in real output affects

structural employment

According to estimates in the text, which of the following factors made the most important contribution to US growth between 1928 and today

technology

The marginal propensity to expand equals the ratio of

the change in aggregate expenditure to change in income

Real gross domestic product is best defined as

the market value of all final goods and services produced in an economy, stated in the prices of a given year

The multiplier model makes it possible to estimate how a change in aggregate expenditures affects

equilibrium output

If the labor force is 90 million and the number of people who are looking for jobs but cannot find them is 9 million, the unemployment rate is

10 percent

Real output is

GDP after the effects of inflation has been removed

What is the value of intermediate good excluded from

GDP and GNP

A recession is often considered to be

an economic downturn that persists for more than two consecutive quarters of the year

The secular trend growth rate is the

average rate of growth in real output over many years

After the Great Depression, economic downturns

became shorter

The multiplier process works because when expenditures don't equal production

businesses adjust production

According to the Classical growth model, the most important source of economic growth was

capital accumulation

The largest expenditure component of GDP is

consumption

A change in business inventories is

counted in GDP as an investment

what type of employment is considered to be most controllable through macroeconomic policy

cyclical employment

When people stop looking for work, because they can't find a job, but still want a job, they're called

discouraged workers

How do most economist agree policy should be used during a depression

economic policy should be used to improve economic conditions

An increase in nominal GDP implies an increase in

either the price level or output or both

The largest component of aggregate income is

employees compensation

The labor force participation rate equals

the number of people in the labor force as a percentage of the total population at least sixteen years old

Per capita real output is best defined as the market value of all final goods and services produced in an economy in

the prices of a given year divided by the population

Using the expenditure approach, gross domestic product equals

the sum of consumption, investment, government purchases and net exports

The business cycle

the term used to describe fluctuations in output around its long term trend

For the purposes of calculating GDP, gross private domestic investment includes

the value of new residential construction

The idea behind Say's Law is that people work because

they want to buy things

Equilibrium income is that level of income

toward which the economy gravitates in the short-run