Macroeconomics Exam#3

Which of the following causes the value of the multiplier of autonomous investment to increase? A.) An increase in the MPC. B.) An increase in the MPS. C.) An increase in investment. D.) An increase in income.

A.) An increase in the MPC.

Fill in the blanks. When interest rates rise, there is a __________ the demand for investment curve and a ______________ the autonomous investment function A.) a move along; shift B.) shift; move along C.) move along; move along D.) shift; shift

A.) a move along; shift

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are A.) cyclically unemployed B.) structurally unemployed C.) frictionally unemployed D.) seasonally unemployed

A.) cyclically unemployed

Efficiency wages cause unemployment because A.) firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. B.) firms pay wages that are above the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. C.) firms pay wages that are below the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. D.) firms pay wages that are below the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.

A.) firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.

When aggregate expenditure is less than aggregate income, the value of inventories will: A.) rise B.) fall C.) remain the same D.) not be affected

A.) rise

What is the name of the organization that defines business cycle peaks and troughs in the United States? A.) the National Bureau of Economic Research B.) the Bureau of Labor Statistics C.) the Federal Reserve D.) the National Peak and Trough Committee

A.) the National Bureau of Economic Research

The formula for equilibrium income in the two-sector economy has two components: A.) the multiplier and the value of autonomous expenditures B.) aggregate expenditure and aggregate income. C.) an income multiplier and an autonomous expenditures multiplier. D.) A private expenditure function and a public expenditure function.

A.) the multiplier and the value of autonomous expenditures

Refer to the figure below. Use the information in the figure to determine the value of the marginal propensity to consume, (MPC). A.) 0.2 B.) 0.75 C.) 5 D.) There is insufficient information.

B.) 0.75

When unplanned investment is positive, we expect the following in the short run: A.) An increase in output and employment B.) A decrease in output and employment C.) An increase in optimism and investment D.) Strong aggregate demand.

B.) A decrease in output and employment

Which ethnic group in the United States has the lowest unemployment rate today? A.) Whites B.) Asians C.) Hispanics D.) African Americans.

B.) Asians

Who benefits from the effects of unanticipated inflation? A.) Lenders B.) Borrowers C.) Both D.) Neither

B.) Borrowers

When do inventories change? A.) When business firms decide to change their production plans B.) When output produced is different from output sold. C.) When actual investment is equal to planned investment D.) When actual prices differ from expected prices.

B.) When output produced is different from output sold.

Fill in the blank. Net investment equals gross investment ____________ depreciation. A.) plus B.) minus C.) multiplied by D.) divided by

B.) minus

If firms pay what are called "efficiency wages," they pay wages that A.) are lower than average to ensure maximum profit. B.) motivate workers to increase their productivity. C.) are mandated by the government. D.) will eventually lower the unemployment rate.

B.) motivate workers to increase their productivity.

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as A.) not in the working-age population. B.) not in the labor force. C.) employed. D.) unemployed.

B.) not in the labor force.

If the value of the autonomous investment multiplier equals 4, then: A.) one dollar of additional income results in four dollars of additional investment. B.) one dollar of additional investment results in four dollars of additional income. C.) for each four dollars of additional income, an additional dollar of investment is generated. D.) for each four dollars of additional investment, an additional dollar of income is generated.

B.) one dollar of additional investment results in four dollars of additional income.

Capital accumulation requires: A.) positive gross investment B.) positive net investment C.) positive depreciation D.) more leakages than injections

B.) positive net investment

The period between a business cycle peak and a business cycle trough is called A.) recalculation. B.) recession. C.) expansion. D.) diffusion.

B.) recession.

The multiplier of autonomous planned investment shows: A.) the change in investment resulting from a change in income. B.) the additional income resulting from an additional amount of investment spending. C.) the amount by which aggregate expenditure will rise when autonomous planned investment rises. D.) the magnitude of a change in aggregate demand caused by a change in autonomous planned investment.

B.) the additional income resulting from an additional amount of investment spending.

The opportunity cost of investment is: A.) the rate of return. B.) the interest rate. C.) saving. D.) consumption.

B.) the interest rate.

According to the text, economists consider full employment to occur when A.) frictional unemployment equals zero B.) the unemployment rate consists of only frictional and structural unemployment C.) everyone who wants a job has a job D.) the sum of frictional unemployment and structural unemployment equals zero

B.) the unemployment rate consists of only frictional and structural unemployment

Which of the following is true about the consumer price index? A.) It accounts for people switching to goods whose prices have fallen B.) It frequently updates the price changes of new products added to the market basket C.) It assumes that consumers purchase the same amount of each product in the market basket each month. D.) It filters out the part of price increases that occurs because of quality improvements in products.

C.) It assumes that consumers purchase the same amount of each product in the market basket each month.

The consumer price index is the A.) cost of a market basket of goods and services typically consumed in the current period. B.) average of the prices of new final goods and services produced in the economy over a period of time. C.) average of the prices of the goods and services purchased by a typical urban family of four D.) cost of a market basket of goods and services typically consumed in the base year.

C.) average of the prices of the goods and services purchased by a typical urban family of four

Unemployment statistics show that obtaining a college degree: A.) may or may not help in finding employment. B.) is about the same as obtaining a high-school diploma in getting a job. C.) definitely improves your chances of getting a job. D.) helps in getting a job, but surprisingly not more than if you were a high-school dropout.

C.) definitely improves your chances of getting a job.

To say that investment is autonomous means that the least likely factor to affect investment is: A.) the interest rate B.) expectations C.) income D.) the price level

C.) income

Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession A.) decrease; decrease further B.) increase; increase further C.) increase; decrease D.) decrease; increase

C.) increase; decrease

On a graph showing autonomous investment on the vertical axis and aggregate income on the horizontal axis, the resulting investment line: A.) slopes upward. B.) slopes downward. C.) is horizontal. D.) is vertical.

C.) is horizontal.

The stated interest rate on a loan is the A.) real rate B.) expected rate C.) nominal rate D.) actual rate

C.) nominal rate

If your nominal wage rises faster than the price level, your real wage has ________ and the purchasing power of your income has ________. A.) fallen; fallen B.) risen; fallen C.) risen; risen D.) fallen; risen

C.) risen; risen

In equilibrium, planned investment is equal to: A.) income B.) consumption. C.) saving. D.) the multiplier

C.) saving.

Fill in the blank. Aggregate consumption is a(n) _________________ component of aggregate expenditure. A.) volatile B.) unpredictable C.) stable D.) undefined

C.) stable

When we add planned autonomous investment to the aggregate consumption function in the two-sector economy, we obtain: A.) the value of autonomous expenditures. B.) the multiplier. C.) the aggregate expenditure function. D.) an aggregate demand curve.

C.) the aggregate expenditure function.

If consumption is C = 1,000 + 0.8Yd, then consumption equals to disposable income when income is? A.) $800 B.) $1,000 C.) $1,250 D.) $1,250

D.) $1,250

The unemployment rate for this simple economy equals A.) (100/20,000) * 100 B.) (100/1,000) * 100 C.) (100/15,000) * 100 D.) (100/1,100) * 100

D.) (100/1,100) * 100

Which expressions best describes the value of the multiplier in the simple two-sector economy? A.) the MPC B.) 1 - MPC C.) 1 - MPS D.) 1/MPS

D.) 1/MPS

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest? A.) -9.5% B.) -3.5% C.) 1.5% D.) 3.5%

D.) 3.5%

Minimum wage laws cause unemployment because the legal minimum wage is set A.) below the market wage, causing labor demand to be less than labor supply. B.) below the market wage, causing labor demand to be greater than labor supply. C.) above the market wage, causing labor demand to be greater than labor supply. D.) above the market wage, causing labor demand to be less than labor supply. E.) too low.

D.) above the market wage, causing labor demand to be less than labor supply.

During the expansion phase of the business cycle, which of the following eventually increases? A.) production B.) income C.) employment D.) all of the above

D.) all of the above

During the recession phase of the business cycle, A.) income is usually rising. B.) unemployment is usually falling. C.) production is usually rising. D.) interest rates are usually falling.

D.) interest rates are usually falling.

Typically, as an economy begins to emerge from a recessionary phase of the business cycle, A.) investment begins to fall B.) unemployment falls immediately. C.) inflation begins to fall. D.) unemployment continues to rise.

D.) unemployment continues to rise.