Macroeconomics Online course

Suppose that real GDP for 2015 was $10,000 billion and real GDP for 2016 was $9,500 billion. What is the rate of growth of real GDP between 2015 and 2016?

-5%

Refer to Table 12-3. Given the consumption schedule in the table above, the marginal propensity to save is

0.1

Refer to Table 9-8. Suppose that the data in the table above reflect the price levels in the economy. What is the inflation rate in between 2015 and 2016?

2%

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

23.3 years to 17.5 years.

Refer to Table 9-19. Looking at the table above, what is the rate of growth of the average price level from 2014 to 2015?

5%

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

80%

Which of the following is an example of a worker experiencing frictional unemployment?

A worker quits his job at the Post Office to find more interesting work.

Refer to Figure 13-1. Ceteris paribus, a decrease in personal income taxes would be represented by a movement from

AD1 to AD2

Refer to Figure 13-1. Ceteris paribus, an increase in households' expectations of their future income would be represented by a movement from

AD1 to AD2

If firms find that consumers are purchasing less than expected, which of the following would you expect?

Aggregate expenditure will likely be greater than GDP.

Refer to Figure 13-3. Suppose the economy is at point A. If the economy experiences a supply shock, where will the eventual short-run equilibrium be?

B

Which of the following describes the accuracy of the Consumer Price Index?

Changes in the CPI overstate the true rate of inflation.

Which of the following causes the unemployment rate to understate the true extent of joblessness?

Discouraged workers are not counted as unemployed.

Liquidity

________ is the ease with which a financial security can be exchanged for money.

Which of the following policies would reduce structural unemployment?

a job retraining program

The ________ shows the relationship between the price level and quantity of real GDP demanded.

aggregate demand curve

The response of investment spending to an increase in the government budget deficit is called

crowding out

A decrease in the real interest rate will

increase consumption and investment

In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?

increase in quality bias

The costs to firms of changing prices are called

menu cost

The real interest rate equals the nominal interest rate ________ the inflation rate.

minus

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.

risen, fallen

Technological change will

shift the per-worker production function up

When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called

substitutional bias

________ of unemployment during ________ make it easier for workers to ________ wages.

High levels; a recession; accept lower

If full-employment GDP is equal to $4.2 trillion, what does the long-run aggregate supply curve look like?

It is a vertical line at $4.2 trillion of GDP.

If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income will

decrease consumption by $7,500.

The difference between GDP and net taxes is

disposable income

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

equals; intersect at a point on

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

labor force participation rate

Knowledge capital is

nonrival and nonexcludable

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

short term

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on

the producer price index

Which of the following models focuses on how productivity shocks explain fluctuations in real GDP?

the real business cycle model

According to the text, economists consider full employment to occur when

the unemployment rate consists of only frictional and structural unemployment.

Refer to Table 9-15. Looking at the table above, real average hourly earnings in 2014 were

$10

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?

$66,565

In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the growth rate in potential GDP in year 2?

10%

Monthly expenditures for a family of 4 in 2015 averaged $1,400. In 2016, the cost of the same purchases was $1,500. If 2015 is the base year, what was the CPI in 2016?

107

Refer to Table 9-4. Assume the market basket for the consumer price index has two products — meat and potatoes — with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals

141

Foreign direct investment can give a low-income country access to funds and technology it would not otherwise have, but foreign portfolio investment does not expand that access.

Individuals engage in foreign portfolio investment, but only firms can engage in foreign direct investment.

hich of the following countries actually experienced negative economic growth from 1960 to 2011?

Niger

If the slope of the per-worker production function is 1/4 in a given range, how will a $10,000 increase in capital per hour worked affect real GDP per hour worked in the same given range?

Real GDP per hour worked will increase by $2,500.

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.

Since 1950

The average lengths of expansions have become longer as compared to before 1950.

Which of the following describes actual trends in the U.S. labor force participation rate?

The labor force participation rate of adult women has risen since 1950.

When prices are rising, which of the following will be true?

The real interest rate will be lower than the nominal interest rate.

Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $23 million, what unplanned changes in inventories occurred?

There was an unplanned decrease in inventories equal to $2 million

The equilibrium wage in a local labor market is $10 per hour. If a minimum wage of $15 per hour is imposed, which of the following will occur?

There will be an increase in unemployment.

Which of the following has the highest GDP per capita in 2014

U.S

Until recently, many developing countries

Until recently, many developing countries

Because of the slope(s) of the ________, we can say that a decrease in the price level leads to a higher level of real GDP demanded.

aggregate demand curve

If the per-worker production function shifts up,

an economy can increase its real GDP per hour worked without changing the level of capital per hour worked.

Which of the following will increase aggregate expenditure in the United States?

an increase in government purchases

Suppose that in 2016, all prices in the economy double and that all wages and salaries also double. In 2016 you

are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same

The consumer price index is the

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

Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan contract period, then

borrowers gain 1% of the loan value.

If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then

changes in the CPI overstate the true rate of inflation.

Which of the following leads to an increase in real GDP?

decrease in interest rates

If technological change increases the profitability of new investment for firms, then the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________.

demand; right; rise

Suppose that in 2016, real GDP grew in Estonia by 3% and the population increased by 5%. Therefore, in 2016, Estonia experienced

economic growth, but not an increase in living standards.

The labor force equals the number of people

employed plus unemployed

Efficiency wages cause unemployment because

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

If planned aggregate expenditure is greater than total production,

firms will experience an unplanned increase in inventories.

Because knowledge capital is nonexcludable and nonrival, firms have an incentive to ________ the research and development of other firms.

free ride on

The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

frictional unemployment

Which of the following would decrease the unemployment rate?

government aid to retrain unemployed workersIf the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

Which of the following policies is designed specifically to directly promote technological change in an economy?

government subsidization of research and development

Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

greater than 7%

Potential GDP in the United States

grows as the economy grows.

When the price level in the United States falls relative to the price level of other countries, ________ will fall, ________ will rise, and ________ will rise.

imports; exports; net exports

If inflation increases unexpectedly, then

lenders receive a lower real interest rate than they expected.

A decrease in the real interest rate will

most likely increase consumer's purchases of durable goods.

The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of loanable funds demanded.

negative; greater; greater

Jack just received a promotion at work and now works 50 hours per week instead of 35. As a result, Group of answer choices

neither the unemployment rate nor the labor force participation rate changed.

The base period for CPI calculations is generally 1982-84. In 2005, 50% of households accessed the Internet through a broadband connection that would not have existed in the 1980s. This potential for bias in the CPI is referred to as ________ bias and results in ________.

new product; the CPI overestimating the true change in the cost of living

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

not in the labor force

Full employment is not considered to be zero unemployment, because

people do not find jobs instantaneously.

On the 45-degree line diagram, for points that lie above the 45-degree line,

planned aggregate expenditure is greater than GDP.

Full-employment GDP is also known as

potential GDP

On the 45-degree line diagram, the 45-degree line shows points where

real aggregate expenditure equals real GDP.

The producer price index measures the prices that firms

receive for the goods and services they use at all stages of production.

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

remain constant

Stagflation occurs when inflation ________ and GDP ________.

rises, falls

A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds.

savers; borrower

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

short-run , real GDP

An increase in ________ shifts the production function ________, and makes it possible to produce a higher level of GDP with ________ capital per hour worked.

technology; up; the same amount of

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

that stock prices are more likely to fall.

A negative supply shock in the short run causes

the aggregate supply curve to shift to the left

A copyright grants the creator of a book, film, or piece of software exclusive legal rights to use the creation for how long?

the creator's lifetime plus 70 years for the creator's heirs

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

the financial crisis

If the economy receives an influx of new workers from immigration,

the long-run aggregate supply curve will shift to the right.

When the labor market is at full employment

there is no cyclical unemployment in the economy.

If inflation is positive and is perfectly anticipated,

those that hold paper money lose.

Why might firms pay wages that are above the equilibrium wage in a market?

to increase the productivity of their workers

Typically, as an economy begins to emerge from a recessionary phase of the business cycle,

unemployment continues to rise

During the month of May, 10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result,

unemployment rate fell

If the minimum wage is set above the market wage,

unemployment will rise

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

unions are successful in pushing up wages

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

vertical