Unit 2 Exam

During the Great Recession of 2007-2009, both real interest rates and investment spending declined. This suggests that: the investment demand curve shifted inward. firms were optimistic about future sales. the investment demand curve was positively sloped during this period. purchases of capital from abroad increased, and these were not reflected in investment spending figures for that period.

A

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the information suggests that the production capacity in economy: C is growing more rapidly than that in economy B. B is growing more rapidly than that in either economy A or C. A is growing less rapidly than that in economy B. A is growing more rapidly than that in either economy B or C.

A

Government purchases include government spending on: government consumption goods and public capital goods. government consumption goods only. public capital goods only. government consumption goods, public capital goods, and transfer payments.

A

Gross domestic product (GDP) measures and reports output: in dollar amounts and percentage growth. in percentage terms. as an index number. in quantities of physical units (for example, pounds, gallons, and bushels).

A

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round, income will eventually decline by: $400 billion. $200 billion. $300 billion. $500 billion.

A

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is: frictionally unemployed. cyclically unemployed. not a member of the labor force. structurally unemployed.

A

Picture 3:Refer to the table. Between years 2 and 3: Alta's real GDP grew more rapidly than Zorn's real GDP. population growth reduced Alta's real GDP growth to zero. population fell in Alta. real GDP fell in Zorn.

A

The GDP tends to: understate economic welfare because it does not take into account increases in leisure. understate economic welfare because it includes expenditures undertaken to offset or correct pollution. overstate economic welfare because it does not reflect improvements in product quality. overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives.

A

The production of durable goods varies more than the production of nondurable goods because: durables purchases are postponable. producers of durables are highly competitive. durables purchases are nonpostponable. the producers of nondurables have monopoly power.

A

Use the list below to answer the following question: 1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Which set of items in the list would shift an economy's production possibilities curve outward? 1, 2, 5, and 6 only. 2, 4, 5, and 6 only. 2, 5, and 6 only. 1, 3, and 4 only.

A

Which of the following is an intermediate good? The purchase of baseball uniforms by a professional baseball team. The purchase of a pizza by a college student. The purchase of jogging shoes by a professor. The purchase of gasoline for a ski trip to Colorado.

A

Which of the following would most likely move the economy into a recession in the short term? The central bank printing less money than was anticipated. Innovations in management that enhance worker productivity. Invention of a new product that most consumers want to buy. Congress passing a reduction in personal income tax rates.

A

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2011): 8th and 6th, respectively. 9th and 10th, respectively. 1st and 1st, respectively. 5th and 7th, respectively.

B

If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately: 8 years. 14 years. 22 years. 20 years.

B

If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is: $20 billion. $320 billion. $360 billion. $660 billion.

B

If net foreign factor income is zero and there are no statistical discrepancies, the sum of national income and the consumption of fixed capital equals: disposable income. gross domestic product. personal income. net domestic product.

B

If the growth trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about: 20 years. 23 years. 17 years. 15 years.

B

In 1998, living standards in the United States were nearly ______ times higher than those in Africa. 14 20 8 3

B

Picture 5:Answer the question on the basis of the following information about a hypothetical economy: Refer to the given information. The unemployment rate is: 18.8 percent. 12.5 percent. 25 percent. 16.7 percent.

B

Picture 8: Refer to the given data. At the $200 level of disposable income: the average propensity to save is .20. dissaving is $5. the marginal propensity to save is 2½ percent. the average propensity to consume is .80.

B

Proponents of economic growth say that pollution: declines as a country moves from agriculture to industry. occurs, not because of growth, but because common resources are treated as free goods. is an inevitable by-product of growth. is detrimental to economic growth.

B

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately: 80 percent. 44 percent. 37 percent. 160 percent.

B

The investment demand curve will shift to the right as a result of: an increase in business taxes. technological progress. an increase in the excess production capacity available in industry. an increase in the acquisition and maintenance cost of capital goods.

B

The multiplier is defined as: 1 - MPS. change in GDP/initial change in spending. change in GDP × initial change in spending. change in GDP - initial change in spending.

B

Which of the following best defines disposable income? All income earned by resource suppliers for their current contributions to production. Income received by households less personal taxes. The market value of the annual output net of consumption of fixed capital. The before-tax income received by households.

B

Which of the following is correct? APC + MPS = 1. APC + APS = 1. APS + MPC = 1. APS + MPS = 1.

B

All of the following are economic implications of the 1995-2012 rise in the average rate of productivity growth except: a greater rate of economic growth. a lower natural rate of unemployment. an end to the business cycle. larger outward shifts of the economy's production possibilities curve.

C

Given the annual rate of inflation, the "rule of 70" allows one to: determine whether the inflation is demand-pull or cost-push. calculate the accompanying rate of unemployment. calculate the number of years required for the price level to double. determine when the value of a real asset will approach zero.

C

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal: less investment will be forthcoming when r rises. more investment will be forthcoming when i exceeds r. r will fall as more investment is undertaken. r will exceed i at all possible levels of investment.

C

In the United States, business cycles have occurred against a backdrop of a long-run trend of: stagnant productivity growth. rising inflation. rising real GDP. declining unemployment.

C

Picture 1: Answer the question on the basis of the following data. All figures are in billions of dollars. Refer to the data. NI is: $362. $447. $402. $372.

C

Picture 2: Answer the question on the basis of the following national income data. All figures are in billions of dollars. Refer to the data. U.S. imports are: $26. $24. $14. $16.

C

Picture 4: Refer to the diagram. The most likely cause of a shift from AB to CD would be a(n): increase in the price level. recession. increase in productivity. decrease in the size of the labor force.

C

Picture 6: Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Refer to the given data. The amount of output being forgone by the economy is: $18 billion. $15 billion. $24 billion. $12 billion.

C

Picture 7: Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the: MPS is smaller in B than in A. APC at any given income level is greater in B than in A. MPC is greater in A than in B. MPC is greater in B than in A.

C

Picture 9: The given figure suggests that: consumption would be $60 billion even if income were zero. saving is zero at the $120 billion income level. as income increases, consumption decreases as a percentage of income. as income increases, consumption decreases absolutely.

C

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is: $300,000. $100,000. $200,000. zero dollars.

C

The National Income and Product Accounts (NIPA) help economists and policymakers to: measure what is occurring in each specific labor market. accomplish all of these. follow the long-run course of the economy to determine whether it has grown or stagnated. determine which firms are likely to succeed or fail.

C

The consumption schedule directly relates: consumption to saving. disposable income to domestic income. consumption to the level of disposable income. saving to the level of disposable income.

C

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called: cyclical unemployment. frictional unemployment. structural unemployment. compositional unemployment.

C

A lender need not be penalized by inflation if the: inflation is unanticipated by both borrower and lender. long-term rate of inflation is less than the short-term rate of inflation. short-term rate of inflation is less than the long-term rate of inflation. lender correctly anticipates inflation and increases the nominal interest rate accordingly.

D

Between 1950 and 2012, U.S. real GDP grew at an average annual rate of about: 5.1 percent. 2.0 percent. 8.6 percent. 3.1 percent.

D

Investment spending in the United States tends to be unstable because: capital goods are durable. expected profits are highly variable. innovation occurs at an irregular pace. all of these contribute to the instability.

D

Net exports are: imports less exports. exports plus imports. that portion of consumption and investment goods sent to other countries. exports less imports.

D

Over the past several decades, the percentage of women in the paid U.S. workforce has: increased in spite of declining wages for women. decreased because relatively more women are staying home to raise their children. increased for unmarried women but decreased for married women. increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

D

Picture 10: Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table. The marginal propensity to save is: .1. .25. .5. .2.

D

Real GDP per capita: cannot grow more slowly than real GDP. necessarily grows more rapidly than real GDP. cannot grow more rapidly than real GDP. can grow either more slowly or more rapidly than real GDP.

D

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would: increase. be unchanged. increase in the short run but eventually decline. decline.

D

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because: the MPC in the United States is greater than 1. the real-world MPS is larger than the MPS in the examples. the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.

D

The multiplier applies to: investment but not to net exports or government spending. increases in spending but not to decreases in spending. spending by the private sector but not by the public sector. investment, net exports, and government spending.

D