Unit 2
Based on the expenditure approach and the information shown here, which of the following is the calculated gross domestic product (GDP)?Individual purchases: $32 billionGovernment purchases: $200 billionBusiness investments: $150 billionImports: $50 billionExports: $75 billion $382 billion $532 billion $407 billion $357 billion
$407 billion
According to the expenditure approach and the information shown here, which of the following is the calculated GDP?Individual purchases: $150 billionGovernment purchases: $200 billionBusiness investments: $300 billionImports: $150 billionExports: $100 billion $900 billion $850 billion $750 billion $600 billion
$600 billion
A late-season frost kills most of Florida's orange crop and significantly reduces the availability of oranges. Which of the following graphs best describes this change?
2 blue lines curving up from left to right and arrows pointing the line on the LEFT
Cecilia usually bought several pairs of designer shoes each year, but she lost her job this year. Which graph below shows what happens to her demand for designer shoes?
2 lines, curving down from left to right, arrows pointing to the line on the left
Which of these corresponds to a shift in the supply curve? A shift that occurs when the price for a certain good changes and influences the quantity supplied A movement that occurs because of factors such as firms having more or less access to resources The amount of goods and services that are available at different prices at a certain point in time The amount of goods and services that may be purchased at a certain time and at a specific income level
A movement that occurs because of factors such as firms having more or less access to resources
As the price level falls, people feel as if they have more money, so they spend more. This influences which of the following, in economic terms? The exchange rate effect Aggregate demand Aggregate supply The interest rate effect
Aggregate demand
Which statement is NOT a reason why the aggregate demand curve slopes downward? As the price level falls, consumption increases. As the price level falls, consumption and investment increase. As the price level falls, consumption and investment decrease. As the domestic exchange rate falls, foreigners purchase more domestic goods and services.
As the price level falls, consumption and investment decrease.
Which of the following is true about a market at equilibrium price? The market does not clear. At the prevailing price, there is no market basis for the price to change. There tend to be shortages because the price is so low. Demand is low because the price is so high.
At the prevailing price, there is no market basis for the price to change.
Select the statement below that is true for both supply and demand. Considers the economy from the producer's point of view Usually depicted as an upward sloping curve Considers the economy from the consumer's point of view Considers price and quantity combinations, with everything else held constant
Considers price and quantity combinations, with everything else held constant
Which combination of fiscal policies would be the most contractionary? Cutting spending and increasing taxes Increasing spending and cutting taxes Increasing both spending and taxes Decreasing both spending and taxes
Cutting spending and increasing taxes
Which of the following is NOT one of the three ways that money can be spent that contribute to gross domestic product (GDP)? Individual purchases Government purchases Business investments Government savings
Government savings
Which statement about expansionary fiscal policy is true? It generally has a negative effect on gross domestic product (GDP). It could include lowering the interest rates. It could include decreasing the reserve requirement. If it is based on a tax cut, it will trigger the multiplier effect.
If it is based on a tax cut, it will trigger the multiplier effect.
If the marginal propensity to consume (MPC) is 0.75 and the government increases spending by $20 billion, which of the following will be the effect of this change on the economy? It will increase the economy by $26.6 billion. It will increase the economy by $15 billion. It will increase the economy by $80 billion. It will increase the economy by $20 billion.
It will increase the economy by $26.6 billion.
Which of the following corresponds with the trough in this graph? graph is squiggling
LRAS line is off centered to the right of the intersection
Which of the following graphs represents a peak in the economy?
LRAS line is on the left side going straight up and down
Which of these graphs indicates an economic situation that is NOT sustainable?
LRAS line is on the left side going straight up and down
Which statement below is true of BOTH aggregate supply and aggregate demand? They are both upward sloping curves. They both show the amount of purchasing done by consumers, businesses, and the government. They both show the amount that the economy can produce at different price levels. Price level and GDP are on the two axes of the graphs.
Price level and GDP are on the two axes of the graphs.
Which of the following is NOT a way that the government finances fiscal policy? Printing of money Tax revenue Rollover of debt Sale of treasury securities
Printing of money
If the short-run aggregate supply curve intersects with the aggregate demand curve at a point that is greater than the long-run aggregate supply (LRAS) curve, which statement will be true? This situation will most likely coincide with high unemployment. Producers are using inventory faster than it can be replaced. The government will probably implement expansionary macroeconomic policies. The economy may be in equilibrium.
Producers are using inventory faster than it can be replaced.
What does the expression Y − (C + T) represent? Public savings Investments Gross domestic product (GDP) Government savings
Public savings
Which of the following is an example of expansionary fiscal policy? Reducing taxes Increasing the interest rates Decreasing the reserve requirement Tax revenues exceeding government expenditures
Reducing taxes
Economically speaking, which of the kinds of change below would be caused when an executive at a petroleum company develops a new way to extract petroleum from the ground? Movement along the supply curve Shift in the demand curve Shift in the supply curve No change in supply or demand
Shift in the supply curve
Which of the following is the most significant tool the government can use to reduce the severity of business cycles? Public goods Debt reduction Spending Social Security
Spending
Which of the following is NOT an automatic stabilizer The TANF program Social Security The countercyclical approach Unemployment insurance
The countercyclical approach
The people of a certain Mediterranean village always eat salad with balsamic vinegar and olive oil as dressing. If the olive crop fails one year because of a terrible storm, what will happen to the demand for balsamic vinegar? The demand for balsamic vinegar will decrease because it is a substitute for olive oil. The demand for balsamic vinegar will decrease because it is a complement to olive oil. The demand for balsamic vinegar will increase because vinegar and olive oil are substitutes. The demand for balsamic vinegar will increase because it is a complement to olive oil.
The demand for balsamic vinegar will decrease because it is a complement to olive oil.
If the marginal propensity to consume (MPC) is 0.5 and the government increases spending by $250 billion, which of the following will be the effect of this change on the economy? The economy will increase by $125 billion. The economy will increase by $500 billion. The economy will increase by $250 billion. The economy will increase by $350 billion.
The economy will increase by $350 billion.
Select the TRUE statement regarding aggregate supply in the short and long run. In the long run, there is a close relationship between price level and RGDP. The relationship between price level and RGDP is negative in the short run. In the long run, there are no limits on production. The long-run aggregate supply (LRAS) curve can move over time.
The long-run aggregate supply (LRAS) curve can move over time.
Select the event below that will NOT cause a shift in demand. The number of people who consume butter increases. The unemployment rate increases, so people can purchase less. The market price for four tires increases to $300. The fad for beanbag animals comes to an end.
The market price for four tires increases to $300.
Which of the following will cause movement along the demand curve? The number of consumers who eat beef decreases. The market price of a pound of beef increases from $5 to $7. The price of salt goes down, so the price of black pepper goes up. The price of Brand A orange juice decreases, so the price of Brand B orange juice decreases.
The market price of a pound of beef increases from $5 to $7.
Which of the following is an example of the law of demand? The amount of lumber that a certain region can produce is stable. The price of alpaca wool is increasing, so farmers offer more of it. The price of gas is decreasing, so people buy more of it. The price of gas is decreasing, so vendors offer less of it.
The price of gas is decreasing, so people buy more of it.
If the price of gasoline is too low and vendors sell out quickly, which of the following will happen? Consumers will purchase more gasoline. Producers will lower the price of gasoline. The price of gasoline will rise to eliminate the shortage. Consumers will purchase less gasoline.
The price of gasoline will rise to eliminate the shortage.
A music group with growing popularity goes on tour and sells out a certain venue within hours with tickets at $25 apiece? Which statement best describes what will most likely happen, from an economic standpoint? The group will add more performance dates with tickets at a lower cost. Nothing changes because the market is already clearing. The group will cancel the concert and give everyone a refund. The price of tickets for future concert dates will rise until it hits equilibrium.
The price of tickets for future concert dates will rise until it hits equilibrium.
If a certain brand of furry boots is suddenly all the rage and the market price increases to $500 a pair, but very few people buy them because they are too expensive. Which of the following will happen next? The price will fall until it reaches equilibrium. The price will stay the same. The price will continue to rise indefinitely. The price will rise until it reaches equilibrium.
The price will fall until it reaches equilibrium.
Which of the following would NOT cause a shift in the supply curve for cheese? A celebrity chef develops a new technique for making cheese that makes it easier to increase output. The results of a medical study show that eating too much cheese can lead to premature aging. Thousands of dairy cattle come down with a mysterious illness and need to be quarantined. The price of feed for dairy cattle goes up significantly.
The results of a medical study show that eating too much cheese can lead to premature aging.
Which statement below is true regarding aggregate supply? It is not used that often in macroeconomics. There is a short-run version and a long-run version of aggregate supply. It is downward sloping because of the interest rate effect. It is influenced by the wealth effect.
There is a short-run version and a long-run version of aggregate supply.
Select the statement that is true of long-run aggregate supply curves. There is a positive relationship between price level and real gross domestic product (RGDP). There is a variable quantity of real gross domestic product (RGDP). Changes in price level affect output. There is no relationship between price level and real gross domestic product (RGDP).
There is no relationship between price level and real gross domestic product (RGDP).
Which of the following is NOT a form of treasury security? Yield Bills Notes Bonds
Yield
The regular price for a set of four tires is $250, but Erin finds a store that has the tires she needs on sale for $175? Which graph correctly illustrates this scenario?
blue line is slanting down to the right
Roberto suspected that traditional 4-year higher education in the United States was influenced by the recession. Most states cut the amount they contribute to public universities, making it much more expensive for them to operate in the traditional format. This caused many universities to invest in nontraditional, technology-based educational models. Which graph below best depicts the change Roberto is seeing in the traditional 4-year higher education market in the United States?
pointing at blue line slanting to right
When the government withdraws a certain amount of money from the economy, GDP decreases by more than that amount. This is because of __________. taxation the multiplier effect high rates of inflation the Phillips curve
the multiplier effect
