ECO2013-Andrew Tucker-Final Exam

Price index=

(price / price of the base year) *100

NDP=

GDP- capital consumption allowance

A business cycle is: a.) the periodic fluctuation of economic activity b.) the engine of economic growth c.) a period lasting about 50 years d.) identical to the consumption life cycle

a.) the periodic fluctuation of economic activity

A business cycle is: a.) the periodic fluctuation of economic activity. b.) the engine of economic growth. c.) a period lasting about 50 years. d.) identical to the consumption life cycle.

a.) the periodic fluctuation of economic activity.

_____ is the change in consumption associated with a change in income. a.) The average propensity to consume b.) The marginal propensity to consume c.) The average propensity to save d.) The marginal propensity to save

b.) The marginal propensity to consume

The twin perils of the modern macroeconomy are said to be: a.) government and the trade deficit. b.) unemployment and the trade surplus. c.) inflation and unemployment. d.) inflation and the trade deficit.

c.) inflation and unemployment.

Business cycles:

Alternating increases and decreases in economic activity that are typically punctuated by periods of downturn, recession, recovery, and boom.

GDP=

C+Ig+G+(X-M) personal (C)onsumption+ (g)ross private domestic (I)nvestment+ (G)overnment purchases of goods & services+ net exports (total exports- total imports)

Which of the following did classical economists believe would happen if the product markets accrued surpluses? A.) Prices would rise. B.) Interest rates would rise. C.) Wage rates would fall. D.) The government would fix things.

C.) Wage rates would fall.

Nominal GDP (billions of $) 2012: $7,280 2013: 2014: $8,000 Real GDP (billions of $) 2012: $7,280 2013: $7,425 2014: GDP deflator 2012: 2013: 103.6 2014: 106.1 According to the table, the GDP deflator for 2012 is: A) 0. B) 1. C) 72.8. D) 100.

D) 100.

NI=

NDP+ Net FOREIGN income abroad

PI=

NI - (ind. bus. tax + SS tax + corp tax + undistributed corp profits) + transfer payments NI - (Industry business taxes + Social Security taxes + Corporate taxes + undistributed corporate profits) + transfer payments

Refers to GDP in actual market price as they exist each year. It reflects current prices. It is a value of goods and services produced in a given year valued at that year's price. It is GDP that hasn't been adjusted for changes in the price level.

Nominal (constant) GDP

Real GDP=

Nominal GDP/ price index (decimal)

DI=

PI - personal taxes

Refers to the GDP in actual prices of a previous year, or the average of actual prices in some previous years. It is the value of the final goods & services corrected for inflation/deflation for price level changes. It measures actual production.

Real (adjusted) GDP

Nominal GDP=

Real GDP * price index (decimal)

National income accounts Expenditures for consumer goods and services: $2,850 Exports: $300 Government purchases of goods and services: $810 Social security taxes: $295 Net investment: $510 Indirect business taxes: $445 Imports: $450 Gross investment: $700 Corporate income taxes: $190 Personal income taxes: $875 Corporate retained earnings: $210 Government transfer payments to households $780 Net foreign factor income $0 On the basis of Table 5.2, national income is: a.) $4,020 billion b.) $3,785 billion c.) $2,475 billion d.) $3,595 billion

a.) $4,020 billion (NI= NDP + Net foreign income abroad) ($4,020 + 0 = $4,020)

(2013: Real GDP in $billions= $5,865 & GDP deflator= 86.1) According to the table, nominal GDP for 2013 is approximately: a.) $5,050 billion. b.) $5,250 billion. c.) $5,450 billion. d.) $5,650 billion.

a.) $5,050 billion. (5,865*.861= 5,050)

Income:.......Consumption: $0 ............. $250 $500...........$700 $1,000........$1,150 $1,500........$1,600 $2,000........$2,050 $2,500........$2,500 The table shows data on consumption at various levels of income. The value of the marginal propensity to save is: a.) 0.1 b.) 0.25 c.) 0.75 d.) 0.9

a.) 0.1

If the current year's consumer price index is 214 and last year's was 209, then the rate of inflation is: a.) 2.4%. b.) 5%. c.) 3%. d.) 2.8%.

a.) 2.4%. (5/209= .0239)

An economy has a population of 226,500. Of them, 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is _______ (Round the percentage to one decimal place). a.) 6.5% b.) 21% c.) 5.5% d.) 21.1%

a.) 6.5% 12,500 / 191,500 ("unemployed" / "entire labor force")

_____ is a reduction in the rate of inflation. a.) Disinflation b.) Deflation c.) Hyperinflation d.) The price level

a.) Disinflation

What event was a major influence on the development of macroeconomics? a.) the Great Depression b.) the Employment Act of 1946 c.) the establishment of the Federal Reserve System in the United States d.) the U.S. entry into World War II

a.) the Great Depression

Which of the following statements about the multiplier is CORRECT? a.) The spending multiplier can work to increase or to decrease equilibrium GDP. b.) The spending multiplier exists only during economic expansions. c.) The size of the spending multiplier is dictated by the amount of government spending. d.) The value of the spending multiplier is the inverse of the marginal propensity to consume.

a.) The spending multiplier can work to increase or to decrease equilibrium GDP.

Gross domestic product is a measure of: a.) an economy's total output b.) household production c.) the total weight of all goods produced d.) production of owners of labor and capital only

a.) an economy's total output

The largest component of GDP is: a.) consumption expenditure. b.) gross private domestic investment. c.) government spending. d.) net exports.

a.) consumption expenditure.

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% in the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%: a.) creditors gain at debtors' expense. b.) people on a fixed income see the purchasing power of their incomes rising. c.) debtors gain at creditors' expense. d.) there's a redistribution of income from creditors to debtors.

a.) creditors gain at debtors' expense.

Simon Kuznets: a.) devised the gross national product as a way of measuring a nation's economic output. b.) set up the National Bureau of Economic Research. c.) was Secretary of Treasury during World War II. d.) invented the hair net.

a.) devised the gross national product as a way of measuring a nation's economic output.

The long-run aggregate supply curve uses the classical assumptions that all variables are __________ in the long run and that long-run equilibrium occurs at ___________________. a.) flexible; full employment b.) flexible; less than full employment c.) fixed; less than full employment d.) fixed; full employment

a.) flexible; full employment

The four types of spending in GDP are personal consumer spending, ___________ private domestic investment, government spending, and _______. a.) gross; net exports b.) gross; net imports c.) net; net exports d.) net; net imports

a.) gross; net exports

A falling aggregate price level ____ demand for a country's exports and therefore ____ output demanded. a.) increases; increases b.) increases; reduces c.) reduces; increases d.) reduces; reduces

a.) increases; increases

If actual unemployment is at its natural rate: a.) inflation is very low. b.) there is deflation. c.) the unemployment rate is zero. d.) interest rates are rising.

a.) inflation is very low.

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded. a.) left; decrease b.) left; increase c.) right; increase d.) right; decrease

a.) left; decrease

If the pound sterling appreciates against the U.S. dollar, England buys ______ U.S. goods, causing the U.S. aggregate demand curve to shift to the ______. a.) more; right b.) more; left c.) fewer; left d.) fewer; right

a.) more; right

Expenditures by individuals for durable goods, nondurable goods, and services is known as: a.) personal consumption expenditure b.) total spending c.) personal calculated expenditure d.) personal computed expenditure

a.) personal consumption expenditure

_____ unemployment is caused by changes in consumer demands or technology. a.) structural b.) frictional c.) seasonal d.) cyclical

a.) structural

National income accounts Expenditures for consumer goods and services: $2,850 Exports: $300 Government purchases of goods and services: $810 Social security taxes: $295 Net investment: $510 Indirect business taxes: $445 Imports: $450 Gross investment: $700 Corporate income taxes: $190 Personal income taxes: $875 Corporate retained earnings: $210 Government transfer payments to households $780 Net foreign factor income $0 On the basis of Table 5.2, disposable income is: a.) $3,490 billion b.) $2,785 billion c.) $4,480 billion d.) $3,680 billion

b.) $2,785 billion (PI- personal income taxes) ($3660 - $875 = $2,785)

National income accounts Expenditures for consumer goods and services: $2,850 Exports: $300 Government purchases of goods and services: $810 Social security taxes: $295 Net investment: $510 Indirect business taxes: $445 Imports: $450 Gross investment: $700 Corporate income taxes: $190 Personal income taxes: $875 Corporate retained earnings: $210 Government transfer payments to households $780 Net foreign factor income $0 On the basis of Table 5.2, GDP is: a.) $2,090 billion b.) $4,210 billion c.) $4,400 billion d.) $4,020 billion

b.) $4,210 billion (GDP = C + Ig + G+ (Xn)) $2850 + $700 + $810 + ($300 - $450) = $4,210

If consumption increases from $500 billion to $575 billion and income increases from $600 billion to $700 billion, the marginal propensity to save is: a.) 0.2 b.) 0.25 c.) 0.75 d.) There is not enough information to answer this question

b.) 0.25 the change in consumption= $75 billion the change in income = $100 billion so we can assume the remaining $25 billion is kept as savings so it is the "change in savings" so, $25 billion / $100 billion = 0.25

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume? a.) 0.4 b.) 0.6 c.) 1.2 d.) 2.5

b.) 0.6

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume? a.) 0.4 b.) 0.6 c.) 1.2 d.) 2.5

b.) 0.6 $3,000 - $1,200 = $1,800 (consumption) $1,800 / $3,000 = 0.6

The slope of the saving schedule is: a.) the marginal propensity to consume. b.) 1 minus the marginal propensity to consume. c.) the average propensity to consume. d.) the average propensity to save.

b.) 1 minus the marginal propensity to consume.

Population: 500 Number employed: 300 Number unemployed: 50 According to the table, what is the unemployment rate of this economy? a.) 10% b.) 14.3% c.) 16.67% d.) 25%

b.) 14.3% (number of unemployed / labor force)

Nominal GDP (billions of $) 2012: $2,291 2013: 2014: $8,511 Real GDP (in billions of $) 2012: $4,500 2013: $5,865 2014: GDP deflator 2012: 2013: 86.1 2014: 112.7 According to the table, the GDP deflator for 2012 is approximately: a.) 40.9 b.) 50.9 c.) 60.9 d.) 70.9

b.) 50.9

Which of the following illustrates the paradox of thrift? a.) Consumer uncertainty causes people to save less; consumption rises; equilibrium income and production drop; savings drop because income is lower. b.) Consumer uncertainty causes people to save more; consumption drops; equilibrium income and production drop; savings drop because income is lower. c.) The government encourages saving by raising interest rates; higher interest rates reduce investment spending, which lower equilibrium income and production drop; savings drop because income is lower. d.) As businesses save more, interest rates fall, thus reducing household savings.

b.) Consumer uncertainty causes people to save more; consumption drops; equilibrium income and production drop; savings drop because income is lower.

Which of the following equations defines the expenditures approach to calculating GDP? a.) GDP = C + S b.) GDP = C + I + G + (X - M) c.) GDP = C + I + G + S d.) GDP = C + I + G

b.) GDP = C + I + G + (X - M)

When Mr. Wilson worked full time, he paid a cleaning service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP? a.) GDP is unaffected by this change. b.) GDP falls as a result of this change. c.) GDP at first rises but then falls. d.) GDP rises as a result of this change.

b.) GDP falls as a result of this change.

(Figure: Determining SRAS Shifts) If there are advances in technology, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will become _____. a.) SRAS1; P0 b.) SRAS1; P1 c.) SRAS2; P1 d.) SRAS2; P2

b.) SRAS1; P1

Which one of the following is not correct regarding business cycles? a.) They occur periodically. b.) They are fairly uniform in length. c.) They have peaks and troughs. d.) They show that macroeconomic activity alternates between increases and decreases.

b.) They are fairly uniform in length.

Which of the following will NOT shift the aggregate supply curve to the left? a.) an increase in the minimum wage b.) a decrease in corporate taxes c.) an increase in the price of crude oil d.) an increase in the legislated amount of paid vacation

b.) a decrease in corporate taxes

After the acceptance of Keynesian analysis, government: a.) played a role in setting the interest rate only. b.) actions toward macroeconomic policy grew significantly. c.) reduced its role in the operation of the economy. d.) turned to communism as the only solution to the Great Depression.

b.) actions toward macroeconomic policy grew significantly.

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD2 to AD1(to the left)? a.) a tax cut b.) an increase in interest rates c.) an increase in government purchases d.) an improvement of consumer expectations about the future

b.) an increase in interest rates

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____. a.) disposable income; saving b.) disposable income; consumption c.) saving; consumption d.) saving; investment

b.) disposable income; consumption

U.S. business cycles since 1950 have shown: a.) expansions to be just as lengthy as recessions. b.) expansions to be longer than recessions. c.) expansions to be shorter than recessions. d.) stable unemployment rates.

b.) expansions to be longer than recessions.

The U.S. gross domestic product is equal to the total market value of all: a.) intermediate goods and services produced by resources in the United States. b.) final goods and services produced by resources in the United States. c.) final goods and services produced by U.S. citizens in the United States. d.) intermediate goods and services produced by U.S. citizens in the United States.

b.) final goods and services produced by resources in the United States.

In the simple Keynesian model, if desired investment is greater than desired saving: a.) the multiplier effect will move the economy to a lower income level. b.) income and output will rise. c.) interest rates will fall. d.) actual savings will fall as the economy moves to a lower output level.

b.) income and output will rise.

In the Keynesian model, the principal determinant of saving is: a.) interest rates. b.) income. c.) tax rates. d.) investment.

b.) income.

A rising aggregate price level _______ an economy's interest rates and therefore _____ output demanded. a.) increases; increases b.) increases; reduces c.) reduces; increases d.) reduces; reduces

b.) increases; reduces

The value of the cars that the Ford Motor Company produces in a German plant: a.) is a part of U.S. GDP. b.) is a part of U.S. GNP. c.) is a part of German GNP. d.) is not a part of German GDP.

b.) is a part of U.S. GNP.

If AE = $7,600 and Y = $8,000, businesses will produce: a.) more, raising both employment and income. b.) less, lowering both employment and income. c.) more, raising employment and lowering income. d.) less, lowering employment and raising income.

b.) less, lowering both employment and income.

The short-run aggregate supply curve is positively sloped because: a.) a short-run increase in GDP usually is accompanied by an increased rise in the price level. b.) many input prices are slow to change in the short run. c.) all variables are fixed in the short run. d.) a short-run increase in GDP usually is accompanied by a slower rise in the price level.

b.) many input prices are slow to change in the short run.

Tom is living with his parents. He looks at the help wanted ads but has not replied to any in the past four weeks. Tom is: a.) unemployed b.) not in the labor force c.) temporarily in the labor force d.) near-employed

b.) not in the labor force

Which is a determinant of aggregate supply? a.) interest rates b.) productivity c.) prices of substitutes d.) household expectations

b.) productivity

High taxes and/or heavy regulation: a.) can cause firms to boost production so they can cover the added costs. b.) raise costs of production so that the aggregate supply curve shifts to the left. c.) are not likely to affect firms' behavior, since they are more concerned about profit than taxes or regulation . d.) are likely to shift aggregate supply to the right.

b.) raise costs of production so that the aggregate supply curve shifts to the left.

Which phase of the business cycle occurs immediately before a trough? a.) peak b.) recession c.) boom d.) recovery

b.) recession

Which phase of the business cycle typically follows immediately after the trough? a.) recession b.) recovery c.) peak d.) contraction

b.) recovery

GDP can be found either by adding up all of the __________ or all of the __________ in the economy. a.) spending; taxes b.) spending; income c.) investment; income d.) net interest payments; taxes

b.) spending; income

Which organization determines the beginning and end dates of a recession? a.) the Council of Economic Advisers b.) the National Bureau of Economic Research c.) the U.S. Treasury Department d.) the Federal Reserve Board of Governors

b.) the National Bureau of Economic Research

Which of the following tends to make aggregate demand decrease by more than the amount that consumer spending decreases? a.) crowding-out b.) the multiplier effect c.) the wealth effect d.) the interest rate effect

b.) the multiplier effect

______ is a measure of the changes in the average prices received by domestic producers for their output. a.) the consumer price index b.) the producer price index c.) personal consumption expenditure d.) the GDP deflator

b.) the producer price index

Zach has been laid off from his job as an aircraft worker and is afraid that he will not be recalled. He has been actively looking for a job but has had no luck for the past six weeks. According the the Bureau of Labor Statistics, Zach is: a.) employed b.) unemployed c.) a discouraged worker d.) not in the labor force

b.) unemployed He is actively looking for a job and it does not tell us that he has given up on this quest.

Which one of the following statements concerning GDP is not correct? a. It can be found by adding up all of the spending in the economy. b. It can be found by adding up all of the income in the economy. c. It incorporates environmental benefits or harm. d. It overstates sustainable output because it does not subtract depreciation.

c. It incorporates environmental benefits or harm.

Which of the following purchases would NOT be included in GDP? a. a $30 oil change from a car mechanic b. a $50 carpet stain removal from a cleaning service company c. a $20 lamp from a garage sale d. a $10 lunch from a cafeteria

c. a $20 lamp from a garage sale

GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2 According to the table, GDP for 2010 was: a.) $15,603.1 billion. b.) $16,843.8 billion. c.) $14,592.3 billion. d.) $13,562.1 billion.

c.) $14,592.3 billion.

If $1,000 additional spending occurs (from investment, say) and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of ______ in income or output. a.) $800 b.) $1,000 c.) $5,000 d.) $8,000

c.) $5,000

If $1,000 of additional spending occurs (from investment, say) and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output. a.) $800 b.) $1,000 c.) $5,000 d.) $8,000

c.) $5,000 (1 / (1 - 0.8)) * $1,000 = $5,000

The U.S. median household income in 2013 was about: a.) $20,000. b.) $35,000. c.) $55,000. d.) $85,000.

c.) $55,000.

(2014: Nominal GDP= $8511 billion, & GDP deflator= 112.7) According to the table, real GDP for 2014 is approximately: a.) $6,552 billion. b.) $7,052 billion. c.) $7,552 billion. d.) $8,052 billion.

c.) $7,552 billion. (8511/1.127= 7,552)

Nominal GDP (billions of $) 2012: $7,280 2013: 2014: $8,000 Real GDP (billions of $) 2012: $7,280 2013: $7,425 2014: GDP deflator 2012: 2013: 103.6 2014: 106.1 According to the table, nominal GDP for 2013 is approximately: a.) $7,292 billion b.) $7,492 billion c.) $7,692 billion d.) $7892 billion

c.) $7,692 billion (real GDP * GDP deflator in decimal form)

If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase? a.) $11,000 b.) $1,000 c.) $900 d.) $100

c.) $900

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is: a.) 80 b.) 110 c.) 125 d.) 150

c.) 125 (nominal GDP / real GDP)* 100

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is: a.) 80. b.) 110. c.) 125. d.) 150.

c.) 125. (20,000/16,000= 1.25)

Population: 500 Number employed: 300 Number unemployed: 50 According to the table, what is the labor force of this economy? a.) 50 b.) 300 c.) 350 d.) 500

c.) 350

If the marginal propensity to save is 0.2, how much is the spending multiplier? a.) 0.8 b.) 1.25 c.) 5 d.) 8

c.) 5

Which one of the following statements about NIPA is not correct? a.) It helps economists compare U.S. income and output to that of other nations. b.) It tracks the economy's progress over the course of the business cycle. c.) It is put together by the National Bureau of Economic Research. d.) It began in the 1930s

c.) It is put together by the National Bureau of Economic Research.

Which of the following best illustrates the wealth effect? a.) Jacob saved $25,000, which he put in the stock market. The market suddenly did very well, and though Jacob is not yet aware of it, his stock portfolio value rose to $36,000. b.) Simon felt he needed at least $800,000 to retire comfortably. He increased his saving to build up his wealth. c.) The Jones family has $50,000 in a bank. Price at the stores rose dramatically, so the purchasing power represented by that $50,000 diminished. d.) Margaret had her savings in treasury bonds. She thought that stocks might offer her a better opportunity to increase her wealth, so she sold her bonds to buy stocks.

c.) The Jones family has $50,000 in a bank. Price at the stores rose dramatically, so the purchasing power represented by that $50,000 diminished.

Which of the following persons is considered to be unemployed? a.) Ahmed, who is on vacation b.) Sarah, who is on strike duty c.) Tiffany, who is going on interviews, hoping to get her first job d.) Carmen, who works three days a week at her father's business but is not paid

c.) Tiffany, who is going on interviews, hoping to get her first job

Simultaneous recession and deflation can be explained by: a.) an increase in aggregate supply. b.) a rise in aggregate demand. c.) a drop in aggregate demand. d.) a decrease in aggregate supply.

c.) a drop in aggregate demand.

The curve that shows how much GDP is demanded at various price levels is called: a.) the aggregate expenditures schedule b.) the consumption line c.) aggregate demand d.) aggregate supply

c.) aggregate demand

According to John Maynard Keynes, what determines employment and income? a.) aggregate supply b.) government spending alone c.) aggregate expenditures d.) wages, prices, and interest rates

c.) aggregate expenditures

The collapse of home values that began in 2008 led to _____ in Americans' saving rates, shifting aggregate demand to the _____. a.) a decrease; left b.) a decrease; right c.) an increase; left d.) an increase; left

c.) an increase; left

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the: a.) production possibilities frontier. b.) supply and demand model. c.) circular flow diagram. d.) classical model.

c.) circular flow diagram.

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing: a.) inflation. b.) disinflation. c.) deflation. d.) hyperinflation.

c.) deflation.

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as: a.) the invisible unemployed. b.) temporary workers. c.) discouraged workers. d.) the disgruntled unemployed.

c.) discouraged workers.

Core inflation is found by removing _________ from the consumer price index. a.) housing b.) medical care c.) food and energy d.) producer prices

c.) food and energy

The GDP deflator is an index that includes prices of all but: a.) consumer goods. b.) investment goods. c.) imports. d.) government goods and services.

c.) imports.

The shift in aggregate demand depicted (to the left) may be due to a(n): a.) increase in consumer confidence. b.) decrease in interest rates. c.) increase in income taxes. d.) increase in exports.

c.) increase in income taxes.

Which of the following is NOT included in gross private domestic investment? a.) construction of residential housing b.) new equipment purchased by businesses c.) purchases of common stock by investors d.) an increase in business inventories

c.) purchases of common stock by investors

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded. a.) left; decrease b.) left; increase c.) right; increase d.) right; decrease

c.) right; increase

Increased consumer confidence will shift the aggregate demand curve to the ______ and ______ output demanded. a.) left; decrease b.) left; increase c.) right; increase d.) right; increase

c.) right; increase

If oil prices decrease, the short-run aggregate supply curve shifts _____ and output supplied will be _____. a.) left; increased b.) left; reduced c.) right; increased d.) right; reduced

c.) right; increased

At point A: a.) saving is $20. b.) consumption is zero. c.) saving is zero. d.) consumption exceeds income by $20.

c.) saving is zero.

Firms decide how much to invest by comparing the rate of return on their projects with: a.) their total profit. b.)the productivity of the workers assigned to the projects. c.) the interest rate. d.) before-tax rate of return.

c.) the interest rate.

Cost-push inflation is a situation in which: a.) the short-run aggregate supply curve shifts rightward. b.) the aggregate demand curve shifts rightward. c.) the short-run aggregate supply curve shifts leftward. d.) the aggregate demand curve shifts leftward.

c.) the short-run aggregate supply curve shifts leftward.

Macroeconomics studies: a. the most important factors in determining economic growth. b. the causes of employment and unemployment. c. economic activity from a broad perspective. d. All of the above.

d. All of the above.

Median household income in the United States was about $55,000 in 2013. This indicates that in 2013: a. GDP divided by the number households equaled $55,000. b. About half of all households had an income equal to $55,000. c. All households with an income below $55,000 were officially poor. d. Half of all households had an income above $55,000, and half of all households had an income below $55,000.

d. Half of all households had an income above $55,000, and half of all households had an income below $55,000.

Suppose full employment real GDP is $13 trillion, current real GDP is $13.2 trillion, and the marginal propensity to consume is 0.5. The inflationary gap is: a.) $0.2 trillion. b.) $0.05 trillion. c.) -$0.2 trillion. d.) $0.1 trillion.

d.) $0.1 trillion.

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals: a.) $160. b.) $180. c.) $150. d.) $140.

d.) $140.

National income accounts Expenditures for consumer goods and services: $2,850 Exports: $300 Government purchases of goods and services: $810 Social security taxes: $295 Net investment: $510 Indirect business taxes: $445 Imports: $450 Gross investment: $700 Corporate income taxes: $190 Personal income taxes: $875 Corporate retained earnings: $210 Government transfer payments to households $780 Net foreign factor income $0 On the basis of Table 5.2, personal income is: a.) $2,807 billion b.) $2,985 billion c.) $2,120 billion d.) $3,660 billion

d.) $3,660 billion PI= NI - (ind. bus tax + ss tax + corp taxes + retained earnings) + transfer payments $4,020 - ($445 + $295 + $190 + $210) + $780 = $3,660

National income accounts Expenditures for consumer goods and services: $2,850 Exports: $300 Government purchases of goods and services: $810 Social security taxes: $295 Net investment: $510 Indirect business taxes: $445 Imports: $450 Gross investment: $700 Corporate income taxes: $190 Personal income taxes: $875 Corporate retained earnings: $210 Government transfer payments to households $780 Net foreign factor income $0 On the basis of Table 5.2, net domestic product is: a.) $4,400 billion b.) $2,090 billion c.) $4,210 billion d.) $4,020 billion

d.) $4,020 billion (NDP = GDP - depreciation or capital consumption allowance) **depreciation = Gross investment - Net investment **$700 - 510 = 190 $4,210 - 190 = $4,020

Which of the following items would be included in the GDP accounts? a.) personal time spent learning how to use accounting software b.) personally rotating the tires on your neighbor's car c.) caring for your aged grandmother at home d.) $50 consultation on the phone with a psychic adviser

d.) $50 consultation on the phone with a psychic adviser

If your salary was $50,000 last year and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be, assuming the CPI has risen from 110 to 114? a.) $49,114 b.) $50,114 c.) $50,300 d.) $51,818

d.) $51,818 (4/110= .0363), (.0363*50,000= 1,818) (1,818+50,000= 51,818)

Income: Consumption: a) $0 a) $250 b) $500 b) $700 c) $1,000 c) $1,150 d) $1,500 d) $1,600 e) $2,000 e) 2,050 f) $2,500 f) $2,500 The table shows data on consumption at various levels of income. The value of the marginal propensity to consume is: a.) 0.25 b.) 0.75 c.) 0.8 d.) 0.9

d.) 0.9

Suppose the market basket of goods and services cost $3,500 in 1996 but today costs $4,250. Using 1996 as the base year, the consumer price index for today is: a.) 79.6 b.) 120.0 c.) 82.4 d.) 121.4

d.) 121.4 (price / base year's price * 100)

Population: 500 Number employed: 300 Number unemployed: 50 According to the table, if 50 discouraged workers suddenly decide to start actively seeking employment again, what will be the unemployment rate of this economy? a.) 10% b.) 14.3% c.) 16.67% d.) 25%

d.) 25%

If the marginal propensity to consume is 0.85, how much is the spending multiplier? a.) 0.15 b.) 1.17 c.) 5.1 d.) 6.67

d.) 6.67 (1/(1 - 0.85))

The 45-degree line in the Keynesian model represents: a.) AE = C. b.) AE = G. c.) AE = I. d.) AE = Y.

d.) AE = Y.

Which of the following may be an explanation for the shift in aggregate demand from A to B? a.) Prices fall and increase real wealth. b.) Consumer confidence drops and consumption spending falls. c.) Goods and services become less competitive and exports fall. d.) Interest rates fall and boost investment.

d.) Interest rates fall and boost investment.

Which one of the following is not an aspect of business cycles? a.) They vary in length and intensity. b.) The National Bureau of Economic Research (NBER) officially dates the "turning points" in the business cycle. c.) They chart the way aggregate economic activity fluctuates between increases and decreases. d.) They show how the macroeconomy winds up exactly where it started from, again and again throughout the past century

d.) They show how the macroeconomy winds up exactly where it started from, again and again throughout the past century

What would cause the price level to decrease and employment to increase? a.) a shift to the left of the AD curve b.) a shift to the right of the AD curve c.) a shift to the left of the SRAS curve d.) a shift to the right of the SRAS curve

d.) a shift to the right of the SRAS curve

If the multiplier is 2 and investment spending falls by $5 billion, then equilibrium income: a.) increases by $10 billion. b.) increases by $2.5 billion. c.) decreases by $5 billion. d.) decreases by $10 billion.

d.) decreases by $10 billion. (2* (-$5 billion)= - $10 billion)

The two approaches used by government in estimating GDP are: a.) statistical and nonstatistical b.) survey and nonsurvey c.) income and earnings d.) expenditure and income

d.) expenditure and income

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living: a.) rose by about 1%. b.) rose by about 2%. c.) fell by about 3%. d.) fell by about 1%.

d.) fell by about 1%.

Which of the following items is NOT included in the GDP deflator? a.) bubble gum b.) turbines c.) fire engines d.) imported mangoes

d.) imported mangoes

Which one of the following would NOT lead to higher prices? a.) strong consumer demand b.) higher gas prices c.) an increase in the supply of money d.) increases in the supply of food

d.) increases in the supply of food

We are most likely to see a recession if interest rates on long-term bonds are: a.) higher than interest rates on short-term bonds. b.) the same as interest rates on short-term bonds. c.) rising. d.) lower than interest rates on short-term bonds.

d.) lower than interest rates on short-term bonds.

Jordan lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is: a.) employed b.) unemployed c.) a discouraged worker d.) not in the labor force

d.) not in the labor force

Full employment: a.) is an unemployment rate of zero. b.) consists of frictional and cyclical unemployment. c.) consists of structural and cyclical unemployment. d.) occurs if cyclical unemployment is zero.

d.) occurs if cyclical unemployment is zero.

The high point of the business cycle is called the: a.) trough b.) expansion c.) recession d.) peak

d.) peak

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing: a.) frictional unemployment. b.) cyclical unemployment. c.) full unemployment. d.) structural unemployment.

d.) structural unemployment.

If a government always balances its budget: a.) the economy can never slide into a recession. b.) raising taxes has no net effect on total spending. c.) economic growth is spurred by showing businesses that budgets can be balanced. d.) the effect of an increase in government spending on aggregate expenditures is weakened.

d.) the effect of an increase in government spending on aggregate expenditures is weakened.

10. What is the low point of a business cycle? a.) recession b.) depression c.) contraction d.) trough

d.) trough

An economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, and the monetary authorities are concerned that inflation may increase. This economy is probably in the _____________ stage of the business cycle. a.) expansion b.) recovery c.) contraction d.) trough

d.) trough

Business cycles are: a.) always the same duration b.) are always the same magnitude c.) are always the same duration and magnitude d.) vary in duration and magnitude

d.) vary in duration and magnitude

The price index during the base year

is always 100%