Macroeconomics Chapter 26, 28, 30

If spending decreased by $400, and the GDP decreased $1,000 as a result, the MPC must be:

.60

If spending increased by $100, and the GDP increased $400 as a result, the MPC must be:

.75

In a given year the nominal growth rate is 5% with inflation and population growth rates of 1.2% and 3.8% respectively, then real growth rate of GDP per capita is:

0.0%

If spending increased by $250, and the GDP decreased $1,000 as a result, the MPC must be:

0.75

Suppose that a nation has a GDP of 1.0 trillion dollars in 2000. If a country grows at an average rate of 3.0 % per year over a fifteen year period, then its compounded GDP at the end of the 15 year period should be:

1.56 Tr.

If you are told that in a given year the real growth rate is 7% with inflation and population growth rates of 2% and 1.2% respectively, then nominal growth rate of GDP per capita is:

10.2%

The US had a nominal GDP of 10.3 trillion dollars in 2000. If the US great at an average rate of 3.0 % per year then its compounded GDP at the end of 2015 would have been:

16.0 Tr.

According to the rule of 70, a country will double its real GDP per capita in 35 years if it grows at an average of ________ per year.

2.0%.

Using the growth accounting equation, if the growth rate of out is 5%, the growth of labor is 3% and the growth of capital is 2% then if α=0.75 then growth of technology can be estimated to be:

2.75%

In a given year the nominal growth rate is 7% with inflation and population growth rates of 2% and 1.2% respectively, then real growth rate of GDP per capita is:

3.8%

Using the growth accounting equation, if the growth rate of technology is 3%, the growth of labor is 2% and the growth of capital is 1% then if α=0.75 then growth of output can be estimated to be:

4.25%.

If a country grows at an average rate of 3.5 % per year over a ten year period, then its compounded growth rate over that period is roughly:

41.0%.

One of the major insights by economist John Maynard Keynes about inventories and demand was that if planned inventories:

> actual inventories then demand was lower than anticipated.

If we consider the equation PAE = A + bY the part of the equation that relates to autonomous sources of spending is:

A

An example of physical capital is:

A tractor.

In a booming economy, discretionary fiscal policy:

A. can be added to the automatic contractionary effects of policies already in place.

One way the government can encourage economic growth is to:

All of these actions will encourage economic growth.

The productivity of workers can depend upon which of the following?

All of these are determinants of productivity.

Governments invest in infrastructure to:

All of these are reasons why the government provides infrastructure.

If a country devotes its resources to acquiring more physical capital it will:

All of these are true.

Industrial policies are:

All of these are true.

The basic idea behind the convergence theory is:

All of these are true.

The convergence theory suggests:

All of these are true.

The multiplier effect suggests that:

All of these are true.

For a country to acquire more physical capital it:

All these are true.

Natural Resources

All these are true.

Some people attribute the rapid growth of the East Asian economies in the 1980s and 1990s to the:

All these are true.

Increased government spending on unemployment insurance during a recession is an example of:

Automatic Stabilizer

Natural resources can be:

Both of these are true.

If the government increases the income tax rate they likely intend for:

C to decrease, shifting aggregate demand to the left.

Which of the following would not be considered physical capital?

Fertile soil

Government decisions about the level of taxation and public spending are called:

Fiscal Policy

Accounting that relates how growth in inputs of production are related to growth in output is called:

Growth Accounting

Which of the following conveys the correct relationship between production and inventories?

If planned inventories > actual inventories then increase production.

Democrats often argue in favor of what to push the economy toward economic recovery, as they did during the recession that began in 2008?

Increase government spending

An example of monetary policy would be government:

Increasing money supply

When we compare PAE and actual output (Y) the macroeconomic variable we generally use to directly assess their equivalence is:

Inventories

Which of the following is not true about The American Recovery and Reinvestment Act of 2009:

It privatized social security system.

In general economic environments that correspond to lower levels of planned aggregate expenditure for a given level of Y have PAE curves that are:

Lower on the expenditure diagram.

The effect of government spending or tax cuts on national income is measured by the:

Multiplier

An example of physical capital is:

Neither a construction workers strength or a scientist's knowledge of cellular biology.

When referring to GDP, which is not a common alternative designation economists use?

Net National Income

An example of physical capital is a:

Plow

According to the rule of 70, if a country grows at an average rate of 2 percent per year, what would happen after 35 years?

The country's real GDP per capita would double.

The spending multiplier tells us the:

The spending multiplier tells us the:

The shortest term security sold by the US is the:

Treasury Bill

The longest term security sold by the US is the:

Treasury bonds.

If the MPC is 0.75, and the government cuts spending by $100b, the overall effect on GDP will be:

a decrease of $400b.

If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be:

a decrease of 2,000b

Diamonds are considered:

a nonrenewable resource.

Planned investment is the:

amount that firms decide to allocate to new capital resources and inventory accumulation.

Actual investment is the:

amount that firms really allocated to new capital resources and inventory accumulation.

If the MPC is 0.6, and the government spends an additional $50b, the overall effect on GDP will be:

an increase of $125b.

Natural resources:

are production inputs that come from the earth.

If we consider the equation PAE = A + bY the independent part of the equation that depends on income is:

b

If we consider the equation PAE = A + bY the part that corresponds to the MPC when we make simplifying assumptions is:

b

A key result of the equilibrium aggregate expenditure model is that it:

can illustrate how an economy can be at an equilibrium that is below natural rate GDP.

A phenomenon called Moore's law says:

computing capacity has doubled every two years

When fiscal policy makers wish to reduce aggregate demand, they could enact:

contractionary fiscal policy.

Using public policy to promote health can:

contribute to growth.

The convergence theory is based on the idea of:

decreasing marginal returns.

One way fiscal policy affects aggregate demand is:

directly through government spending

During a severe recession, the government decides to lower its tax rates to give consumers relief, and allow them to pay less in taxes. This is an example of:

discretionary fiscal policy.

Increases in productivity per person lead to increases in per capita income, which we call:

economic growth.

Human capital is generally acquired through:

education, training and experience of workers.

The multiplier measures the:

effect of government spending or tax cuts on national income.

Over time in the long run we expect unplanned inventory expenditure to:

equal zero as planned inventories should equal actual inventories.

If the fiscal policy makers aim to increase aggregate demand, they will likely enact:

expansionary fiscal policy

Increased government spending is an example of:

expansionary fiscal policy.

If the government undertakes expansionary fiscal policy, it:

expects aggregate demand to increase.

According to convergence theory, countries that start out poor should initially grow:

faster than ones that start out rich, but will eventually slow to the same growth rate.

One of the major insights by economist John Maynard Keynes about production was that:

firms may not produce all they can at a given price, but what they can sell.

FDI stands for:

foriegn direct investment

The spending multiplier:

grows larger as the marginal propensity to consume increases.

When PAE increases we expect that economy will be at ______ levels of equilibrium GDP.

higher

Countries that start with very little physical capital will get a:

higher return from adding a unit of capital than a country that starts at a higher initial level will.

When Skippy the sailor forgets how to tie a slip knot his:

human capital decreases.

Education and training are ways to build:

human capital.

When output deviates from potential GDP, automatic stabilizers work to push the economy:

in the same direction that correctly timed and formulated discretionary policy would.

We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

increase aggregate demand.

If the MPC were to increase from 0.75 to 0.8, then the spending multiplier would:

increase from 4 to 5.

If the government wished to shift aggregate demand to the right, it might:

increase government spending.

Which of the following is generally not a result of increases in productivity per person?

increase in unemployment.

When we compare PAE and actual output (Y) if PAE is greater than Y we expect that:

inventories to decrease

When PAE < Y the economic response for inventories should be:

inventories will increase.

Increasing productivity per person:

is highly desirable, as it leads to economic growth.

Autonomous expenditure is spending:

is not sensitive to the level of income in the economy.

Altering the demographic of your workforce in a manner that increases the labor force, like raising a legal minimum retirement age, is likely to:

lead to a higher level of income for a country.

Economist John Maynard Keynes is famous for saying, "In the long run, we are all dead." He is referring to the:

length of time it can take the economy to recover to potential GDP without policy intervention.

If the government increases the income tax rate, consumers have:

less to spend and will reduce their consumption.

The amount by which consumption increases when after-tax income increases by $1 is called the:

marginal propensity to consume.

If a nation has a higher level of technology than another nation it means that they will be able to produce:

more outputs with the same inputs.

Autonomous expenditure is spending that is:

not sensitive to the level of income in the economy.

The Keynesian equilibrium is defined to be when:

planned inventories equal to actual inventories, which leads to national income equal to planned aggregate expenditure.

Trees are considered:

renewable resource

Human capital refers to the:

skills, experience, and natural talent that determine the productivity of workers.

Growth accounting is seen a useful way to estimate this inputs contribution to growth:

technology.

The effect of an initial spending change causing a larger change in overall output is:

the multiplier effect

Where does the money for investment in physical capital come from? It largely comes from:

the savings of ordinary households.

We calculate the amount of physical capital in an economy by adding up the value of all:

tools, equipment, and structures.

By 2016, the unemployment rate in the US had fallen from a peak of 10% in 2009 to:

under 5%.

Household savings rates:

vary enormously across countries

Household savings rates:

were roughly 5% in the United States in 2016.

In order to accurately capture the multiplier effect, it is important to know:

what proportion of their additional income people spend.