SECTION 3 ECONOMICS FINAL REVIEW
Automatic stabilizers in the United States are: A. changes in government transfer payments and tax revenues that vary automatically and inversely to business cycle changes. B. controlled by the Federal Reserve System to help control the business cycle. C. able to completely eliminate all the lag problems associated with fiscal policy. D. none of the above.
A
The faster the rate of technological progress: A. the greater the rate of economic growth. B. the slower the rate of economic growth. C. the greater the rate of population growth. D. the slower the rate of growth of the money supply.
A
The federal government funds deficit spending by: A. issuing bonds. B. redeeming bonds. C. increasing taxes. D. providing and selling government services.
A
The government's fiscal policy is its plan to regulate aggregate demand by manipulating: A. taxation and spending. B. the treasury. C. the money supply. D. the energy department.
A
The largest single expenditure component of GDP is: A. consumption. B. investment. C. government purchases. D. net exports.
A
The primary reason that money is demanded is for: A. transaction purposes. B. asset purposes. C. precautionary reasons. D. investment purposes.
A
Which of the following statements are true regarding profit-maximizing firms? A. They will attempt to maximize the difference between total revenues and total costs. B. They will use more of a resource as long as the marginal resource cost (MRC) is greater than the marginal revenue product (MRP). C. They will only produce where MRP is positive and MRC is negative. D. none of the above.
A
Approximately ____ of national income goes to wages and salaries for labor services. A. 90 percent B. 75 percent C. 60 percent D. 45 percent E. 25 percent
B
Improvements in the productivity of labor will tend to: A. increase the supply of labor. B. increase wages. C. decrease the supply of labor. D. decrease wages. E. do both a. and b.
B
The cost incurred when individuals reduce their money holdings because of inflation is termed as the: A. nominal cost. B. shoe-leather cost. C. menu cost. D. implied cost.
B
The index of leading economic indicators usually turns downward: A. prior to economic expansions. B. prior to economic contractions. C. prior to a contraction, but then turns upward before the contraction begins. D. a full 24 months before a recession begins.
B
The investment component of GDP includes: A. funds in individual retirement accounts. B. construction of a new steel mill. C. the sale of shares of Coca-Cola stock. D. the purchase of a refrigerator by a household.
B
The labor ____ curve(s) will shift if there is a change in productivity or a change in the demand for the final product. A. supply and demand B. demand C. None of the other answers are correct. Changes in productivity and the demand for final products do not affect the labor market. D. supply
B
The most volatile GDP category under the expenditure approach is: A. wages and salaries. B. investment. C. consumption. D. government purchases. E. net exports.
B
The term full employment implies an unemployment rate of: A. zero B. approximately 5% C. approximately 10% D. 100%
B
The total dollar value of purchases in the economy is far larger than GDP primarily because: A. GDP ignores taxes. B. GDP excludes the value of intermediate goods exchanged. C. GDP excludes the output from foreigners working in America. D. GDP ignores production in the home
B
Under a progressive tax system: A. only the rich are taxed. B. higher marginal taxes are imposed on higher incomes. C. lower taxes are imposed on everyone. D. everyone pays the same percent of their income for tax. E. progressives are taxed less than conservatives.
B
Wages are approximately ____ higher in union jobs than in comparable nonunion jobs. A. 5 percent B. 15 percent C. 25 percent D. 30 percent E. 50 percent
B
Which of the following is false? A. An increase in labor productivity will shift the demand curve for labor to the right. B. An increase in wage will lead to an increase in the supply of labor. C. A decrease in the nonwage income of workers would shift the labor supply curve to the right. D. If job conditions deteriorate, it would lead to a reduction, or leftward shift, in the labor supply curve. E. If the demand for labor increased faster than the supply, the real wages of workers would rise.
B
Which of the following would not be counted as a final good for inclusion in GDP? A. a piece of glass bought by a consumer to fix a broken window B. a sheet of glass purchased by General Motors for the side window of a new car C. a sheet of glass produced this year and ending up in the inventory of a retail hardware store D. All of the above are counted. E. Neither b. nor c. are counted.
B
Since 1980, the proportion of income received by the top 5 percent of Americans has: A. decreased minimally. B. increased minimally. C. increased substantially. D. decreased substantially.
C
The market supply curve for labor: A. shows the relationship between the wage rate and the number of employees firms are willing to hire. B. shows the relationship between the price of output and the number of employees firms are willing to hire. C. shows the relationship between the wage rate and the quantity of labor that workers are willing to supply. D. shows the relationship between the price of output and the quantity of labor that workers are willing to supply.
C
The most important automatic stabilizer (The one with the biggest impact on the economy) is: A. open market operations. B. the unemployment compensation system. C. the tax system. D. the welfare system.
C
The official poverty rate for the United States for a family of four is approximately: A. $12,000. B. $16,000. C. $20,000. D. $24,000. E. $30,000.
C
When labor is a firm's only variable input in its production process, a profit-maximizing firm will continue to employ additional workers as long as: A. the marginal product of labor > 0. B. the marginal revenue product of labor < the marginal resource cost. C. the marginal revenue product of labor > the marginal resource cost. D. none of the above.
C
When the economy is in a recession, ____ rises and poverty ____. A. employment; increases B. unemployment; decreases C. unemployment; increases D. employment; decreases
C
When the money supply decreases, other things being equal, A. real interest rates fall and investment spending rises. B. real interest rates fall and investment spending falls. C. real interest rates rise and investment spending falls. D. real interest rates rise and investment spending rises.
C
Which of the following are examples of job amenities? A. pleasant working conditions B. a workplace gymnasium C. all of the others are correct D. health insurance benefits E. a child-care center at work
C
Which of the following is the best example of an investment in human capital? A. an increase in the number of hours worked per week by workers in a job employing low-skilled labor B. the purchase of company stock by a worker C. a summer internship at a law firm filled by someone attending law school D. payments into a retirement pension plan by a skilled laborer E. the purchase of a vehicle by an employee in order to commute to work
C
Which of the following measures is associated with an expansionary fiscal policy? A. lowering transfer payments B. lowering government purchases C. lowering taxes D. decreasing investments
C
A worker's contribution to the firm's revenue is measured directly by the worker's: A. contribution to total output. B. marginal product multiplied by his/her wage. C. value of marginal product. D. marginal product minus his/her wage.
C
If the demand for softballs increases, one could expect the demand for leather to increase. This is due to the: A. principle of diminishing marginal product. B. reduction in the cost of producing softballs. C. demand for an input being a derived demand. D. change in the opportunity cost of producing a softball.
C
Which of the following describes the historical record of the business cycles in the United States? A. The economy experiences an expansion about once every 20 years. B. Severe depressions have occurred frequently throughout history. C. Recessions have occurred every 25 years and are followed by two years of expansion. D. Periods of contraction seem to have gotten shorter over time.
D
A decrease in net taxes (taxes minus transfer payments) would do which of the following in the short run? A. reduce unemployment B. reduce the price level C. decrease any budget deficit or increase any budget surplus D. All of the other answers are correct. E. reduce consumption purchases
A
A full-time college student who is enrolled in school full-time and not seeking employment is considered: A. out of the labor force. B. unemployable, and not counted in official statistics. C. employed in leisure. D. underemployed. E. in the labor force.
A
An individual who voluntarily leaves one job and spends a period of time seeking another is considered: A. frictionally unemployed. B. cyclically unemployed. C. structurally unemployed. D. seasonally unemployed.
A
Approximately ____ of national income is compensation received by owners of land, capital, and entrepreneurial skills. A. 25 percent B. 40 percent C. 50 percent D. 10 percent E. 75 percent
A
As more capital per worker is added, a per worker production function generally becomes: A. flatter because capital is subject to diminishing marginal returns. B. flatter because labor is subject to diminishing marginal returns. C. flatter because capital is subject to increasing marginal returns. D. steeper because capital is subject to diminishing marginal returns. E. steeper because labor is subject to increasing marginal returns.
A
Assume that the government is considering plans to increase aggregate demand in order to reduce unemployment. Which of the following would be effective? A. Increase government purchases of goods and services. B. Decrease taxes. C. Increase transfer payments. D. Any of the above.
A
Budget surpluses exist when: A. government tax revenues exceed its spending. B. government spending equals its tax revenues. C. government spending exceeds its tax revenues. D. expansionary fiscal policies increase real GDP and the price level.
A
Ceteris paribus, when nominal GDP falls: A. interest rates will tend to fall. B. interest rates will tend to rise. C. the Fed must increase the money supply to keep interest rates from rising. D. the Fed must increase the money supply to keep interest rates from falling. E. both a. and d. are true.
A
Collective bargaining refers to negotiations between: A. representatives of employers and unions. B. consumers and producers. C. employers and consumers. D. unions and government regulators.
A
Consumption is the purchase of goods and services by: A. households. B.government. C. business firms. D. foreign buyers. E. all of the above
A
Cyclical unemployment arises when: A. business activity in the macroeconomy declines. B. the business cycle enters an expansionary phase. C. labor unions strike for higher wages. D. the agriculture sector completes the cycle of planting, cultivating, and harvesting the nation's food supply. E. workers change as a natural part of their life cycle, such as being unemployed while changing from being unskilled to skilled workers.
A
Deflation exists whenever: A. the overall price level falls. B. the overall price level rises. C. the economy experiences a contraction. D. the price of a good decreases. E. either a. or d. occurs.
A
Estimates of the size of the underground economy range from: A. 4 to 20 percent. B. 2 to 5 percent. C. 7 to 10 percent. D. 45 to 60 percent.
A
Expansionary fiscal policy, other things being equal, will tend to: A. decrease unemployment rates. B. decrease investment. C. increase net exports. D. decrease government deficits E. do both a. and c.
A
GDP is: A. the value of all final goods and services produced domestically within a given period of time. B. the value of all final good and services produced anywhere in the world by a nation's firms within a given period of time. C. the value of all final goods and services produced by a government within a given period of time. D. the sum of all currency and coins in circulation.
A
Given a fixed nominal interest rate on a loan, unanticipated inflation: A. decreases the burden of paying off the loan. B. increases the burden of paying off the loan. C. does not alter the burden of paying off the loan. D. benefits savers.
A
If an increase occurs in the demand for the output of industry A, we would expect all of the following to happen except: A. a decrease in prices of inputs used in the production of A. B. an increase in the output of industry A. C. an increase in the demand for inputs used in the production of A. D. an increase in the profits of industry A.
A
If the Fed buys a U.S. government bond from a member of the public, A. the banking system has more reserves and the money supply tends to grow. B. the banking system has less reserves and the money supply tends to grow. C. the banking system has more reserves and the money supply tends to fall. D.the banking system has less reserves and the money supply tends to fall.
A
If the demand for the output produced by a firm's laborers increased, it would A. increase the firm's demand for labor. B. decrease the firm's demand for labor. C. decrease the quantity of labor demanded by the firm. D. increase the quantity of labor demanded by the firm.
A
If the price of a good decreases, then, in the market for the type of labor that is used to produce it: A. employment will decrease. B. the supply of labor will increase. C. the marginal revenue product of labor will decrease. D. the supply of labor will decrease. E. both a. and d. will result.
A
In the typical CPI shopping basket, which of the categories below represents the largest percentage of consumer spending? A. housing B. food & beverages C. transportation D. medical care E. recreation
A
Intermediate products: A. produced domestically are not directly reflected in a nation's GDP. B. produced domestically are reflected directly in a nation's GDP. C. are imported retail products. D. are goods that are purchased by the ultimate user.
A
Kathryn chooses to go to college full-time rather than to work. Kathryn: A. is not part of the labor force. B. is part of the labor force and what economists call a discouraged worker. C. is part of the labor force, but not actively seeking work. D. is considered employed. E. may be characterized by both b. and c.
A
Lower wages will A. increase the quantity of labor demanded. B. decrease the demand for labor. C. decrease the quantity of labor demanded. D. increase the demand for labor.
A
Someone earning $150,000 per year will pay the same amount of ____________ as someone earning $150,000,000 per year: A. Social Security tax. B. federal excise tax. C. Sales tax. D. personal income tax.
A
The natural rate of unemployment: A. is the sum of both frictional and structural unemployment when they are at a maximum. B. includes only frictional unemployment. C. includes only structural unemployment. D. includes only cyclical unemployment.
A
The period of declining growth in real GDP, between the peak of the business cycle and the trough, is called the: A. contractionary phase. B. boom. C. expansionary phase. D.static phase.
A
The relationship between the wage rate and the quantity of labor that workers wish to supply is called: A. the market supply curve for labor. B. the market demand curve for labor. C. the market demand curve for output. D. an individual supply curve for labor. E. an individual demand curve for labor.
A
The unemployment rate may underestimate the true extent of unemployment if: A. many part-time employees would like to work full-time, but are unable to get the additional work. B. employees increase the number of hours they work overtime. C. there are a large number of people working in the underground economy. D. any of the above may cause the underestimation.
A
What is the measure of the income received by owners of resources used in making final goods and services? A. factor payments B. product payments C. indirect earnings D. direct earnings
A
When a firm evaluates the contribution of a worker to its ____, it must calculate the worker's contribution to revenue, minus the worker's ____. A. profits; wage B. output; wage C. profits; marginal productivity D. output; marginal productivity
A
Which of the following is NOT part of U.S. GDP? A. the value of a Toyota manufactured in Japan and sold in the United States B. the value of a Ford Mustang produced in the United States and sold in Canada C. the salary of the governor of Minnesota D. the value of a Rhode Island attorney's services E. the value of a Chevrolet produced in the United States last year but not sold until this year
A
Which of the following is not a function of the Federal Reserve System? A. limiting the national debt B. setting the required reserve ratio for the deposit holdings of depository institutions C. buying and selling government bonds to control the size and growth rate of the money supply D. controlling inflation
A
Which of the following observations concerning leading economic indicators is true? A. They provide warnings of likely downturns. B. They provide accurate information on the depth of a downturn. C. They provide accurate information on the duration of a downturn. D. Both b. and c. are true.
A
Which of the following observations concerning phases of a business cycle is NOT correct? A. Maximum amount of unemployment occurs exactly at the trough. B. Expansion phase is measured from the trough to the peak. C. Trough is the point in time when output stops declining. D. The contraction phase is also called the recession.
A
(NOTE: MRC = Marginal Resource Cost; MRP = Marginal Revenue Product) The profit-maximizing firm should lay off workers when: A. the Marginal Product of labor begins to diminish. B. MRC > MRP. C. MRC = MRP. D. MRC < MRP.
B
A country will roughly double its GDP in twenty years if its annual growth rate is: A. 2.5 percent. B. 3.5 percent. C. 7.5 percent. D. 12 percent. E. 20 percent.
B
Contractionary fiscal policy consists of: A. decreased government purchases, decreased taxes, decreased transfer payments. B. decreased government purchases, increased taxes, decreased transfer payments. C. increased government purchases, decreased taxes, increased transfer payments. D. increased government purchases, increased taxes, increased transfer payments.
B
Fred has lost his factory job, replaced by welding robots, and soon plans to go to technical school to learn computer repair because he cannot find a similar job to the one he lost. The type of unemployment facing Fred is:. A. frictional. B. structural. C. cyclical. D. natural. E. seasonal.
B
Frictional unemployment occurs when: A. there is friction between an employer and employee. B. a worker decides to quit to seek a different job. C. a large corporation transfers a worker to another city. D. college students go back to school at the end of the summer. E.workers are fired because they don't work well as a team.
B
Given a constant rate of growth of real GDP, what would cause a fall in real GDP per capita? A. a rate of population growth that is less than the rate of growth of real GDP B. a rate of population growth that is greater than the rate of growth of real GDP C. an increase in the size of the labor force D. a decrease in the capital stock E. none of the above
B
Given a fixed nominal interest rate on a loan, unanticipated deflation: A. decreases the burden of paying off the loan. B. increases the burden of paying off the loan. C. does not alter the burden of paying off the loan. D. has an indeterminate effect on the burden of paying off the loan.
B
If a nation's imports exceed its exports: A. net exports will be positive. B. GDP will be less than the sum of consumption, investment, and government purchases. C. GDP will be greater than the sum of consumption, investment, and government purchases. D. none of the above apply.
B
If government policy makers were worried about the inflationary potential of the economy, which of the following would be a correct fiscal policy change? A. Decrease consumption taxes. B. Decrease government purchases of goods and services. C. Increase transfer payments. D. None of the other answers is correct. E. Increase the budget deficit.
B
If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change? A. Increase consumption taxes. B. Increase government purchases of goods and services. C. decrease the budget deficit. D. Reduce transfer payments.
B
If labor is the only variable input, an additional worker increases output from 72 to 78 units, and the product price is $6, the marginal revenue product from an additional worker: A. is $6. B. is $36. C. is $78 D. is $432. E. is 36 units.
B
If the demand for labor and supply of labor both increased, but demand increased slower than the supply of labor A. wages would rise. B. there would be an increase in the amount of laborers employed, but wages would decrease. C. wages would fall, but quantity would not change. D. there would be a decrease in the amount of laborers employed. E. there would be an increase in the amount of laborers employed, but wages would not change.
B
If the price index is now 120, it means: A. prices are 120 percent higher than in the base year. B. prices are 20 percent higher than in the base year. C. prices are 1.2 percent higher than in the base year D. nominal GDP will be less than real GDP. E. that both b. and d. are true.
B
In a fully employed economy, invention and discovery: A. are automatic. B. are achieved through sacrifices in current consumption. C. have negative opportunity costs. D. All of the above are correct.
B
Net exports are defined as: A. exports plus imports. B. exports minus imports. C. imports minus exports. D. exports plus imports minus tariffs. E. exports minus tariffs.
B
Since the 1980s the proportion of income received by the top (richest) 5 percent of Americans has ____, and the measured income of Americans in the lowest (poorest) fifth has ____. A. risen; risen B. risen; fallen C. fallen; risen D. fallen; fallen
B
The GDP deflator represents a somewhat ____ measure of prices that the CPI and the GDP deflator tends to be ____ volatile than the CPI. A. broader; more B. broader; less C. narrower; more D. narrower; less
B
The demand for labor is a derived demand. Employers hire workers until the: A. last worker hired adds nothing to total output. B. wage rate equals the marginal revenue product of labor. C. wage rate equals the average product of labor. D. marginal product of labor is zero. E. average product of labor is zero.
B
The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce: A. structural unemployment. B. frictional unemployment. C. seasonal unemployment. D. cyclical unemployment.
B
The goods and services that are used in the production of other goods and services are called: A. gross domestic goods. B. intermediate goods. C. final goods. D. ultimate goods. E. preliminary goods.
B
The price of any productive resource is ____ related to ____ the final good or service: A. inversely; demand for B. directly; demand for C. directly; supply of D. not; supply of
B
The primary benefit of the automatic stabilizers is: A. they provide public assistance through legislative decision making. B. they require no new legislative action, so there is no legislative lag before these tools respond to fluctuations in the business cycle. C. they require legislative action, so there is a lag in response to these tools to fluctuations in the business cycle, and there is time to identify the spillover effects. D. none of the above.
B
The prosperity of a nation today is typically measured by its: A. total output or gross national product B. output per capita C. gold reserves. D. proportionate share of international trade.
B
The relationship between the wage rate and the quantity of labor that employers wish to hire is called: A. the market supply curve for labor. B. the market demand curve for labor. C. an individual demand curve for labor. D. an individual supply curve for labor. E. the market demand curve for output.
B
Typically, the budget deficit is financed by: A. printing money. B. issuing debt. C. raising taxes. D. both a. and c.
B
When the economy goes into a ____, the amount of taxes collected by the government ____ automatically. A. None of the other answers is correct. B. recession; falls C. boom; falls D. recession; rises
B
When the economy goes into a ____, the amount of unemployment compensation and welfare payments ____ automatically. A. recession; decrease B. recession; increase C. boom; increase D. All of the above.
B
Which of the following changes would tend to increase measured income inequality? A. An increasing proportion of retired people in the population. B. An increase in the number of divorced people. C. An increasing proportion of high income earning women marry high income earning men. D. Young workers begin making up a larger proportion of the labor force. E. All of the above changes would tend to increase measured income inequality.
B
Which of the following groups of people would be included in the official unemployment rate? A. part-time workers B. workers temporarily laid off from jobs to which they expect to return C. discouraged workers D. all of the above
B
Which of the following is a problem with using real GDP as a measure of economic well-being? A. does not account for inflation B. does not account for production within the household C. does not account for production by foreign firms producing inside the U.S. D. all of the above
B
Which of the following is most frequently used when the Fed is attempting to adjust the money supply? A. Changing reserve requirements B. Open market operations C. Changing the discount rate D. Moral suasion E. all of the above
B
Which of the following is true? A. A depression is a recession that is mild and relatively brief. B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C. The timing of business fluctuations is regular and therefore easily predictable. D. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.
B
Which of the following products are not included in current U.S. GDP? A. a Washington apple B. a Ford Mustang produced last year and sold this year C. a physical examination at a California health clinic D. All of the above are included in current U.S. GDP.
B
Which of the following refers to extremely high rates of inflation for sustained periods of time? A. deflation B. hyperinflation C. bust D. depression E. expansion
B
Which of the following would be an example or result of expansionary fiscal policy in action? A. a decrease in transfer payments B. a budget deficit C. an increase in taxation D. a budget surplus E. a decrease in government purchases
B
Which of the following would cause the demand for carpenters to increase? A. a decrease in immigration B. an increase in the demand for housing C. an increase in the price of lumber D. a decrease in the productivity of carpenters
B
With regard to the income quintile (20% of the population) listings below, which one indicates the greatest degree of income inequality? A. a. B. b. C. c. D. d. E.None of these show income inequality.
B
A contractionary fiscal policy may be implemented in order to: A. increase a budget deficit. B. reduce a budget surplus. C. create or expand a budget surplus. D. increase government purchases.
C
A country's currency unit changes in purchasing power: A. only when there is inflation. B. only when there is deflation. C. when there is either inflation or deflation. D. in none of the above cases.
C
A federal program aimed at retraining the unemployed workers of the declining coal and steel industries is designed to reduce which type of unemployment? A. seasonal B. cyclical C. structural D. frictional
C
A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as: A. frictionally unemployed. B. underemployed. C. cyclically unemployed. D. structurally unemployed. E. a discouraged worker.
C
An example of in-kind income is: A. a welfare payment. B.a cash grant. C. subsidized housing. D. an unemployment check.
C
An expansionary monetary policy is likely to increase real output more than just temporarily: A. when actual output is beyond the economy's long-run capacity. B. when the economy is at full employment. C. when the economy is operating at less than full capacity. D. at virtually any output level.
C
An unanticipated period of deflation will: A. redistribute income from workers to employers. B. redistribute income from lenders to borrowers. C. redistribute income from borrowers to lenders. D. do none of the above.
C
Ceteris paribus, if the cost of feeding and housing a poor family were to increase, it would increase a family's level of ____ poverty. A. inherited B. relative C. absolute D. geographical
C
Consumption is the largest single component of GDP. In recent years it represents approximately ____ percent of GDP. A. 54 B. 60 C. 70 D. 80
C
During a recession, total public assistance payments and unemployment compensation payments automatically increase while income taxes automatically decrease. Which of the following best describes the effect of these changes on aggregate demand? A. Aggregate demand will be less than it would be without these automatic stabilizers. B. Aggregate demand will be the same as it was before the recession. C. Aggregate demand will be more than it would be without these automatic stabilizers. D. Aggregate demand will be greater than it was before the recession.
C
During an inflationary period, those most likely to suffer reduced wealth are those who are holding their wealth in: A. gold. B. real estate. C. currency. D. stocks.
C
Economists use the term "business cycle" to refer to: A. the growth of small businesses into major corporations. B. qualitative changes in products resulting from improved technology. C. fluctuations in economic activity, measured by GDP or unemployment. D. periods of increase or decrease in the rate of inflation. E. the circular flow of money to producers of raw materials from producers of goods and from consumers to producers of goods.
C
Economists usually use the term "recession" to refer to: A. any slowdown in the growth of real GDP. B. zero real GDP growth. C. two or more consecutive months of declining real GDP. D. a significant reduction in output and employment lasting more than a few months.
C
Federal funds market rate is: A. the rate at which central bank provides funds to commercial banks. B. the rate charged by banks on loans to the public. C. the rate charged on loans provided to meet reserve requirement. D. lower than the discount rate.
C
Final goods or services used to compute GDP refer to: A. the sum of all wages paid to laborers. B. the factors of production used to produce output. C. goods and services purchased by the ultimate users. D. the value of outstanding shares of stock of manufacturing firms. E. the sum of all exports plus imports.
C
GDP does not directly include: A. the value of final goods and services produced, but not sold, during a period. B. the value of services rendered during a period. C. the value of intermediate goods sold during a period. D. any of the above. E. either a. or c.
C
If the demand for software engineers ____ more slowly than does supply, wages of software engineers will ____. A. increases; remain constant B. increases, rise C. increases; fall D. decreases; fall E. none of the above
C
If the economy is operating at the natural rate of unemployment, which of the following is essentially eliminated? A. frictional unemployment B. structural unemployment C. cyclical unemployment D. all of the above
C
If the economy is operating with full employment, which of the following is essentially eliminated? A. frictional unemployment B. structural unemployment C. cyclical unemployment D. all of the above
C
If the government sought to end a recession, which of the following would be an appropriate policy? A. Decrease transfer payments. B. Decrease government purchases. C. Decrease taxes and increase transfer payments. D. Increase taxes and decrease transfer payments. E. Increase taxes.
C
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: A. 8 percent. B. 20 percent. C. 25 percent. D. 32 percent. E. 40 percent.
C
If there are discouraged workers: A. they are included in the official count of the unemployed. B. the unemployment rate will tend to overstate the true level of unemployment. C. the unemployment rate will tend to understate the true level of unemployment. D. they are considered part of the labor force. E. both a. and d. are correct.
C
In recent years, economists have come to believe that full employment in the U.S. economy occurs at an unemployment rate between: A. 1.0 and 2.0 percent. B. 2.5 and 3.5 percent. C. 4.5 and 5.5 percent. D. 6.5 and 7.5 percent. E. 9 and 10.0 percent.
C
Real gross domestic product is the total value of all: A. goods and services adjusted for inflation. B. goods and services without an adjustment for inflation. C. final goods and services adjusted for inflation. D. final goods and services without adjustment for inflation. E. intermediate goods and services without adjustment for inflation.
C
Scholars argue that government activity should be considered when evaluating the measured income distribution because: A. the lowest-income quintile (poorest 20% of the population) has benefited from state-subsidized higher education more than have middle-income and higher income quintiles. B. the higher-income quintiles have benefited more than the poor from housing subsidies and Medicaid. C. the middle and higher-income quintiles have benefited more than the poor from state-subsidized airports, airlines, operas, and museums. D. the lowest-income quintile has benefited more than middle-income and upper-income quintiles from state-subsidized airports, airlines, operas, and museums.
C
The amount of poverty in the United States ____ in the 1960s and ____ from 2000 to 2010. A. decreased; held relatively steady B. increased; decreased C. decreased; increased D. increased; held relatively steady E. held relatively steady; increased
C
The costs imposed on a firm from changing listed prices are called: A. the nominal costs of inflation. B. the shoe-leather costs of inflation. C. the menu costs of inflation. D. the implied costs of inflation. E. inflation costs.
C
The index of leading economic indicators: A. provide accurate information on the duration of downturns in the economy. B. virtually always predicts downturns in the economy with a lead time of six months. C. can result in a self-fulfilling prophecy if business firms respond to leading economic indicator predictions. D. provide accurate information on the depth of downturns in the economy.
C
The largest single source of revenue for the federal government is the: A. Social Security tax. B. corporate income tax. C. personal income tax. D. federal excise tax.
C
The marginal product of labor measures: A. the total amount of output produced by all workers combined. B. None of the other answers is correct. C. the amount of output an individual worker contributes to a firm's total output. D. the average productivity of workers hired by a firm. E. the quantity of an intermediate product that is combined with labor to produce output.
C
The poverty rate in the United States is defined as the proportion of the population that fails to earn a ____ absolute income standard. Poverty rates in the United States have largely ____ since the year 2000 has A. maximum; risen B. maximum; fallen C. minimum; risen D. minimum; fallen
C
The services rendered by a special agent with the Federal Bureau of Investigation is included in which expenditure category of GDP? A. consumption B. investment C. government purchases D. net exports E. none of the above
C
The total labor force equals: A. the number of employed persons. B. the number of unemployed persons. C. the number of employed plus the number of unemployed persons. D. the number of persons aged sixteen and over in the population.
C
The unemployment rate is calculated as: A. the number of unemployed persons divided by the number of employed persons. B. the number of employed persons divided by the number of unemployed persons. C. the number of unemployed persons divided by the number of employed plus unemployed persons. D. the number of unemployed persons divided by the population.
C
The unemployment rate is the number of people classified as unemployed as a percentage of: A. the entire population. B. the population over the age of sixteen. C. the labor force. D. the number of people over the age of sixteen who are employed.
C
To offset the effect of a steep fall in net exports on the economy, the government might: A. decrease government purchases B. increase taxes C. increase government purchases. D. decrease transfer payments
C
Underemployment occurs when: A. a firm hires fewer than the required number of workers, to save costs. B. a firm hires workers who do not possess the required skills that the job demands. C. a worker is over-qualified and possesses more skills than his job demands. D. a firm hires more than the required number of workers. E. workers can only work part time because they are attending school or raising a family.
C
Which of the following best describes the relationship between economic growth and literacy? A. As the economy grows, literacy declines because it becomes less and less useful in a developed economy. B. Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. C. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. D. There is no correlation between economic growth and literacy.
C
Which of the following countries has the greatest degree of income inequality? A. Canada B. France C. the United States D. Japan
C
Which of the following is not a leading economic indicator? A. Prices of common stock B. Number of new building permits and orders for factory equipment C. Unemployment rate and duration of employment D. Length of the average workweek
C
Which of the following people is structurally unemployed? A. Brendan left his job as a short-order cook in New Jersey to become a short-order cook in Madrid, New Mexico. He was unemployed for six weeks during the transition. B. Mildred quit her job after giving birth to a child. C. Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets. D. Danielle lost her job when the electronics assembly plant was shut down temporarily due to low product sales in a slumping economy. E. John reduces his work hours as a furnace repairman in order to pursue a college education.
C
Which of the following statements is not true with regard to automatic stabilizers? A. The most important automatic stabilizer is the tax system. B. They act as shock absorbers to the economy. C. They require legislative action. D. Automatic stabilizers like government transfer payments change as business cycles conditions change.
C
Which of the following will NOT contribute to higher wage rates for labor? A. increased unionization and decreased nonunionization of employees in the economy B. a rapid increase in the demand for labor C. significantly relaxed immigration standards D. increases in technological advances E. higher education levels of workers
C
Which of the following will NOT result in a leftward shift of the market demand curve for labor? A. a decrease in labor productivity B. a decrease in demand for the firm's product C. an increase in the wage rate D. a decrease in the price of the firm's product
C
A major advantage of automatic stabilizers is that they: A. automatically produce surpluses during recessions and deficits during economic booms. B. simultaneously stabilize the economy and reduce the size of the public debt. C. guarantee that the federal budget will be balanced over the course of the business cycle. D. require no legislative action by Congress to take effect.
D
A major macroeconomic goal of nearly every society is: A. maintaining stability of prices. B. maintaining high levels of employment. C. achieving high rates of economic growth. D. all of the above. E. none of the above.
D
AD will shift to the right, other things being equal, when: A. the government budget deficit increases because taxes rose. B. the government budget deficit increases because government purchases rose. C. the government budget deficit increases because transfer payments fell. D. under any of the above circumstances.
D
According to Okun's law, a 2 percent increase in cyclical unemployment reduces output by almost: A. 1 percent. B. 2 percent. C. 0.5 percent D. 4 percent.
D
All decisions of the Federal Reserve are subject to approval by: A. the President of the United States. B. the U.S. Congress. C. the FDIC D. only the Board of Governors of the Federal Reserve.
D
An individual firm in a perfectly competitive labor market faces: A. a horizontal labor supply curve and a vertical labor demand curve. B. a vertical labor supply curve and a horizontal labor demand curve. C. an upward sloping labor supply curve and a horizontal labor demand curve. D. a horizontal labor supply curve and a downward sloping labor demand curve. E. a downward sloping labor demand curve and an upward sloping labor supply curve.
D
Discouraged workers are defined as those: A. whose productivity is low because working in dead-end jobs reduces their morale. B. who are counted as frictionally unemployed, having become dissatisfied with their previous jobs. C.who are counted as structurally unemployed, lacking training for the skilled positions for which they are applying. D. who have given up looking for a job and are not counted as unemployed.
D
GDP is: A. the total value of all consumer expenditures within a given period. B. national income after taxes. C. the total value of all final goods and services plus intermediate goods and services produced domestically within a given period. D. the value of all final goods and services produced domestically within a given period. E. the total value of all final goods and services minus the value of intermediate goods and services produced domestically within a given period.
D
How does a change in income taxes primarily affect aggregate demand? A. An income tax change alters government purchases by an equal amount. B. An income tax change alters saving by an equal amount. C. A tax change alters exports and net exports. D. An income tax change alters disposable income and consumption spending. E. An income tax change alters investment by an equal and opposite amount.
D
If the Fed sells bonds, the short-run impact of this policy will tend to include: A. an increase in the inflation rate. B. a reduction in unemployment. C. an increase in real output. D. an increase in real interest rates.
D
If there is initially a federal budget deficit, and taxes rise, while transfer payments fall: A. Aggregate Demand increases and the budget deficit increases. B. Aggregate Demand increases and the budget deficit decreases. C. Aggregate Demand decreases and the budget deficit increases. D. Aggregate Demand decreases and the budget deficit decreases. E. there is an indeterminate effect on both Aggregate Demand and the budget deficit.
D
In 2008, U.S. Nominal GDP totaled approximately: A. $2.1 trillion B. $2.8 trillion C. $10.1 trillion D. $14.3 trillion E. none of the above
D
Increases in income from other sources than employment can cause the labor ____ curve to shift ____. A. demand; right. B. demand; left. C. supply; right. D.supply; left.
D
Inflation exists whenever: A. the price of a good increases. B. the price of a good decreases. C. the economy experiences a contraction. D. the overall price level is rising. E. the overall price level is falling.
D
Inflation: A. can cause a redistribution of income from creditors to borrowers. B. may discourage investment and economic growth. C. can decrease the value of a nation's currency relative to other nations. D. may result in any of the above.
D
Sergei has developed a new fat substitute that has no calories and produces no side effects. In order for him to be encouraged to bring this innovation to the marketplace he is likely to want which of the following the most? A. time to be able to thoroughly test the fat substitute B. an ample supply of capital to start the manufacturing process C. a trademark D. a patent
D
The expenditure method of measuring GDP is calculated by adding up: A. the final goods and services produced domestically during a given period. B. Consumption + Investment + Government Spending + (Exports-Imports). C. domestic production of final goods and services for consumers, firms, government, and the international sector (through net exports). D. all of the above.
D
The first formal acknowledgement of the primary macroeconomic goals of price stability, high employment, and promoting economic growth in the United States came with passage of the: A. Federal Reserve Act of 1913. B. the Sherman Antitrust Act of 1890. C. the Social Security Act of 1935. D. the Employment Act of 1946. E. the 1964 War on Poverty campaign.
D
The main components of spending, which can cause changes in aggregate demand, are: A. consumption, savings, government purchases, and exports. B. investment, savings, replacement of depreciated equipment, and spending. C. consumption, investment, government purchases, and imports. D. consumption, investment, government purchases, and net exports.
D
The total labor force consists of: A. the entire population. B. the population over the age of sixteen. C. the number of employed persons. D. the number of employed persons plus the number of unemployed persons.
D
The type of unemployment that occurs because of a recession is called: A. frictional unemployment. B. seasonal unemployment. C. the natural rate of unemployment. D. cyclical unemployment.
D
Unemployment rises in ____, and falls in ____. A. peaks; troughs B. booms; recessions C. expansions; contractions D. contractions; expansions
D
When unemployment rises above the natural rate it reflects the existence of ____ unemployment. A. frictional B. structural C. seasonal D. cyclical
D
Which of the following best illustrates the concept of "derived demand"? A. An increase in the wages of autoworkers leads to an increase in the demand for robots in automobile factories. B. An auto firm decides to supply more minivans when there is a decrease in the demand for station wagons. C. An increase in the price of gasoline leads to an increase in the demand for small cars. D. An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for auto workers.
D
Which of the following combinations of changes would have a contractionary effect on aggregate demand? A. A decrease in taxes and an increase in transfer payments. B. An increase in taxes and an increase in transfer payments. C. An increase in government purchases and an increase in transfer payments. D. An increase in taxes and a decrease in government purchases.
D
Which of the following does NOT contribute to increased worker productivity? A. technological advances B. increased capital formation C. improvements in workers' skills D. increased labor supply
D
Which of the following groups are typically harmed by unexpected inflation? A. lenders B. borrowers C. pensioners on fixed incomes D. both a. and c. E. both b. and c.
D
Which of the following groups would not tend to lose from unexpected inflation? A. Retirees on fixed pensions. B. Creditors. C. Those whose incomes are tied to long-term contracts D. Those whose wages have cost of living adjustment clauses in their contracts. E. All of the above would tend to lose from unexpected inflation
D
Which of the following individuals would be considered unemployed? A. a lawyer temporarily working as an assistant in a law firm B. a computer technician who has not worked for 10 months and gave up looking 4 months ago C. a full time student who feels that he is taking too many classes to work D. none of the above
D
Which of the following is likely to improve a person's income? A. being highly motivated to succeed B. being born into a wealthy family C. investing in human capital D. All of the others are correct. E. increased productivity
D
Which of the following is not part of an argument that unions lead to increased productivity? A. reduction in worker turnover B. improved morale C. employees with more motivation D. benefits from featherbedding E. more effective communication in areas of discontent
D
Which of the following represents in-kind income? A. food stamps B. Medicaid coverage C. a school lunch program D. All of the others are correct. E. a public housing subsidy
D
Which of the following will contribute to higher wage rates for labor? A. increased marginal productivity of labor B. a decrease in the supply of labor C. increased productivity D. all of the others are correct E. increases in capital formation
D
Why are creditors harmed by unexpected inflation? A. Creditors receive lower nominal rates of interest when prices rise. B. Creditors are paid back with more valuable dollars. C. Creditors receive higher nominal rates of interest when prices rise. D. Creditors are paid back money with less spending power than when it was originally loaned out. E. Creditors aren't harmed by unexpected inflation.
D
Why do economists prefer using the term economic fluctuation rather than business cycle? A. political correctness B. number of parameters involved C. excessive volatility of the cycles D. lack of regularity of a cycle
D
You are a member of Congress when the economy is in a recession. If your goal is to achieve a fully employed labor force, which of the following fiscal policy scenarios should you follow? A. Decrease government purchases, increase taxes, and/or cut transfer payments. B. Raise government purchases, raise taxes by more than the increase in government purchases, and decrease transfer payments. C. Eliminate a federal budget deficit or add to a federal budget surplus. D. Raise government purchases, reduce taxes, and/or increase transfer payments.
D
During an expansionary economy, public assistance payments and unemployment compensation payments automatically decrease while income taxes automatically increase. Which of the following best describes the effect of these changes on aggregate demand? A. Aggregate demand will be less than it would be without these automatic stabilizers. B. Aggregate demand will be the same as it was before the expansion. C. Aggregate demand will be less than it was before the expansion. D. Aggregate demand will be greater than it was before the expansion. E. Both a. and d. accurately describe their effect.
E
Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as: A. investments in social capital. B. the marginal product of labor. C. marginal revenue product. D. overhead expenditures. E. investments in human capital.
E
If there is initially a federal budget deficit, and taxes fall while transfer payments rise: A. AD increases and the budget deficit decreases. B. AD decreases and the budget deficit decreases. C. there is an indeterminate effect on both AD and the budget deficit. D. AD decreases and the budget deficit increases. E. AD increases and the budget deficit increases.
E
If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response? A. decrease taxes B. decrease transfer payments C. increase government purchases D. all of the above E. both A and C above
E
In the expansion phase of the business cycle A. output is rising. B. unemployment is falling. C. consumer and business confidence is high. D. investment is rising. E. all of the above are true
E
Measures of well-being include: A. life expectancy. B. infant mortality rates. C. literacy rates. D. pollution levels. E. all of the above.
E
Offering employees an efficiency wage may: A. reduce turnover. B. attract the most productive workers. C. lead to a reduction in training costs. D. boost employee morale. E. result in any of the above.
E
Other things being equal, a ____ supply of workers tends to ____ real wages. A. larger; not change B. larger; increase C. smaller; decrease D. smaller; not change E. larger; decrease
E
Transfer payments are included in which category under the expenditure approach to GDP accounting? A. consumption B. government purchases C. investment D. net exports E. Transfer payments are not directly included in GDP calculations.
E
Which of the following factors that affect our well-being does GDP fail to adequately account for? A. changes in the quality of goods B. externalities C. leisure D. nonmarket transactions E. all of the above
E
Which of the following individuals are considered officially unemployed? A. a discouraged worker B. an individual who quits his job to raise a child C. an individual who is not looking for a job because he works in the underground economy D. an inmate in a prison who is making license plates for the state E. None of the above
E
Which of the following is false? A. People looking for full-time work who grudgingly settle for a part-time job are counted as employed, even though they are only "partly" employed. B. Some people working in the underground economy could be counted in labor statistics as unemployed, while others may be counted as not in the labor force. C. Unemployment rates can be quite different across different segments of the population, as well as varying substantially over time. D. The duration of unemployment tends to be greater when the amount of unemployment is high, and smaller when the amount of unemployment is low. E. None of the above are false; all are true.
E
Which of the following is true? A. At the natural rate of unemployment, the economy is considered to be at full employment. B. At full employment, the economy is producing at its potential output. C. If unemployment is greater than its natural rate, the economy is producing at less than its potential output. D. If we are at less than full employment, some cyclical unemployment exists. E. All of the above are true.
E
Which of the following would tend to raise real wages? A. An increase in the demand for labor and no change in the supply of labor. B. A decrease in the demand for labor and no change in the supply of labor. C. An increase in the demand for labor that is greater than an increase in the supply of labor. D. An increase in the demand for labor that is smaller than an increase in the supply of labor. E. Either a. or c.
E
