Econ Final Test Review (AS/AD, Business Cycle, GDP)
Which would be included in GDP a) A man buys a newly constructed house b) A man buys a used book for $5 at a garage sale c) a man receives a tax refund of $500 d) A man buys $5000 worth of stock in Microsoft
A
Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by:
A and B
Which of the following is an example of economic investment? a) Bill Gates buys shares of IBM b) Warren Buffet buys US savings bonds c) Nike buys a new machine that increases shoe production d) Volvo buys an old factory building from GM
C
The largest component of national income is
compensation of employees
GDP can be calculated by summing:
consumption, investment, government purchases, and net exports
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:
increase aggregate demand
Nominal GDP is a) the amount of production that occurs when the economy is operating at full employment b) the sum of all monetary transactions involving final g/s that occur in the economy in a year c) money GDP adjusted for inflation d) the sum of all monetary transactions that occur in the economy in a year.
B
Which of the following activities is excluded from GDP, causing GDP to understate a nation's well being? a) the child care services provided by stay at home parents b) the construction of new houses c) gov't expenditures on military equipment d) the services of used car dealers
A
In the diagram, the economy's long run aggregate supply curve is shown by line
1
In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.
2, 1
If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift: a) rightward by $50 billion at each price level b) leftward by $50 billion at each price level c) leftward by $40 billion at each price level d) rightward by $10 billion at each price level
A
If the economy adds to its inventory of goods during some year: a) this amount should be included that year's GDP b) this amount should be ignored in calculating that year's GDP c) gross investment will exceed net investment by the amount of the inventory increase. d) this amount should be subtracted in calculating that years GDP
A
In the diagram, a shift from AS3 to AS2 might be caused by an increase in: a) productivity b) business taxes and gov't regulation c) the prices of domestic resources d) the prices of imported resources
A
Macroeconomics is mostly focused on a) The Economy as a whole b) why specific businesses fail c) the individual markets within an economy d) only the largest industries in the economy
A
Net exports are a) exports less imports b) imports less exports c) that portion of consumption and investment goods sent to other countries d) exports plus imports
A
Other things equal, if the national incomes of the major trading partners of the US were to rise, the U.S. a) aggregate demand curve would shift to the right b) aggregate demand curve would shift to the left c) aggregate supply would shift to the right d) aggregate supply curve would shift to the left
A
Refer to the diagram. A shift of the aggregate demand curve from AD1 to AD0 might be caused by a) increase in investment spending b) decrease in net export spending c) decrease in agregate supply d) decrease in the amount of output supplied
A
The largest component of total expenditures in the US is a) consumption b) gov't purchases c) gross investment d) net exports
A
When local police and fire departments buy new cars for their operations, these are counted as part of: a) G b) I c) X d) C
A
Which of the diagrams for the U.S. economy best portrays the effect of an increase in resource productivity
A
Expectations of a future economic downturn destroy consumer confidence?
AD curve decreases
Real interest rates in the US increase due to actions of the federal reserve?
AD decreases
Recessions in the USA's major trading partners lower their demand for US exports?
AD decreases
There is a major cut in US defense spending?
AD decreases
Business confidence increases which leads to increases on capital spending?
AD increases
Gov't spending is dramatically increased as a stimulus program is passed by Congress?
AD increases
Lower real interest rates stimulate consumer spending and investment?
AD increases
The US gov't passes a tax cut this year that will lead to a $500 check given to every American family next year?
AD increases
A man grows fruits and vegetables for home consumption. This activity is a) excluded from GDP because an intermediate good is involved. b) Productive but is excluded from GDP because no market transaction occurs. c) excluded from GDP in order to avoid double counting. d) Included in GDP because it reflects production
B
GDP is the: a) monetary value of all g/s, final and immediate, produced in a specific year b) monetary value of all final g/s produced within the borders of a nation in a particular year. c) monetary value of all economic resources used in producing a year's output d) national income minus all non-income charges against output
B
Gov't purchases include gov't spending on a) public capital goods only b) gov't consumption good and public capital goods c) gov't consumption goods only d) gov't consumption goods, public capital goods, and transfer payments
B
In the diagram, a shift from AS1 to AS2 might be caused by: a) stricter gov't regulations b) a decrease in the prices of domestic resources c) an increase in business taxes d) an increase in the prices of imported resources
B
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? a) peak b) expansion c) recession d) trough
B
Net exports is a positive number when: a) a nations exports g/s to other nations b) a nations exports of g/s exceed its imports c) a nations exports of g/s fall short of its imports d) a nations export of g/s are increasing
B
Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Cost-push inflation is depicted by
B
The aggregate supply curve a) gets steeper as the economy moves from the top of the curve to the bottom of the curve b) shows the various amounts of real output that businesses will produce at each price level c) is downsloping because real purchasing power increases as the price level falls. d) is explained by the interest rate, real balances and foreign purchases effects.
B
The most important determinant of consumption and saving is the a) level of bank credit b) level of income c) price level d) interest rate
B
The value of corporate stocks and bonds traded in a given year is: a) included in the calculation of gross private domestic investment b) excluded from the calculation of GDP because they make no contribution to current production of g/s. c) included in the calculation of net private domestic investment. d) included in the calculation of GDP because they make a contribution to the current production of g/s.
B
Transfer payments are a) excluded when calculating GDP because they only reflect inflation b) excluded when calculating GDP because they do not reflect current production c) included when calculating GDP because they increase the spending of recipients d) included when calculating GDP because they are a category of investment spending
B
Which of the following best defines disposable income? a) the market value of the annual output net of consumption of fixed capital. b) income received by household less personal taxes c) all income earned by resource suppliers for their current contributions to production d) the before tax income received by households
B
Which one of the following would not shift the aggregate demand curve? a) depreciation of the international value of the dollar b) A change in the price level c) an increase in personal income tax rates d) a decline in the interest rate at each possible price level
B
A decline in investment will shift the AD curve to the: a) right by a multiple of the change in investment b) right by the same amount as the change in investment c) left by a multiple of the change in investment d) left by a same amount as the change in investment
C
If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift: a) leftward $20 billion at each price level b) rightward by $40 billion at each price level c) leftward by $40 billion at each price level d) rightward by $20 billion at each price level
C
Money spent on the purchase of a new house is included in the GDP as a part of: a) personal consumption expenditures b) personal savings c) gross domestic private investment d) household expenditures on durable goods
C
National income accountants can avoid multiple counting by a) not counting intermediate goods b) counting both intermediate and final goods c) only counting final goods d) including transfer payments in their calculations
C
Other things equal a decrease in the real investment rate will a) expand investment and shift the AD curve to the left b) reduce investment and shift the AD curve to the left c) expand investment and shift the AD curve to the right d) reduce investment and shift the AD curve to the right
C
Real GDP is preferred to nominal GDP as a measure of economic performance because: a) Nominal GDP is not adjusted for population changes b) real GDP accounts for changes in the quality of g/s produced. c) nominal GDP uses current prices and thus may over or understate true changes in output. d) nominal GDP only includes good and excludes services
C
Recurring upswings and downswings in an economy's real GDP over time are called: a) recessions b) output yo-yos c) business cycles d) total product oscillations
C
Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, a decrease in resources prices is depicted by
C
Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, an increase in investment spending is depicted by
C
The business cycle depicts a) the evolution of tech over time b) fluctuations in the general price level c) short run fluctuations in output and employment d) the phases a business goes through from when it first opens to when it finally closes.
C
The determinants of aggregate demand a) demonstrate why real output and the price level are inversely related b) explain why the aggregate demand curve is downsloping c) explain shifts in the aggregate demand curve d) include input prices and resource productivity
C
Which is included in the expenditures approach to GDP a) the value of stocks and bonds bought by businesspersons b) gov't spending on welfare payments c) spending on meals by consumers at restaurants d) expenditures on used clothing at garage sales
C
In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are: a) counted as consumption spending. b) counted as gov't spending c) counted as investment spending d) not counted
D
In the treatment of U.S. exports and imports, national income accountants a) subtract both exports and imports in calculating GDP b) subtract exports, but add imports, in calculating GDP c) add both exports and imports in calculating GDP d) add exports, but subtract imports, in calculating GDP
D
Real GDP measured a) current output at current prices b) base year output at current exchange rates c) base year output at current prices d) current output at base year prices
D
Suppose Smith pays $100 to Jones. a) We can say with certainty that the GDP has increased by $100. b) We can say with certainty that the GDP has increased, but we cannot determine the amount. c) We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. d) We need more information to determine whether GDP has changed.
D
The aggregate demand curve a) shows the amount of expenditures required to induce the production of each possible level of real output. b) is upsloping because a higher price level is necessary to make production profitable as production costs rise. c) is downsloping because production costs decline as real output increases d) shows the amount of real output that will be purchased at each possible price level
D
The determinants of aggregate supply a) explain why real domestic output and the price level are directly related. b) are consumption, investment, government, and net export spending c) explain the 3 distinct ranges of the aggregate supply curve d) include resource prices and resource productivity
D
The gross domestic product is not a good measure of the standard of living in a nation because it a) includes the cost of health insurance b) excludes payments for pollution control equipment c) Does not account for the cost of police protection d) does not account for the size of the population
D
The phase of the business cycle in which real GDP declines is called: a) the peak b) expansion c) the trough d) a recession
D
Which is used to measure directly the average standard of living across countries? a) real GDP b) purchasing power parity c) nominal GDP d) GDP per person
D
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production? a) the construction of new buildings b) the services of health care workers c) the services of military personnel d) g/s produced in the underground economy
D
Which of the following is a final good or service? a) diesel fuel bought for a delivery truck b) fertilizer purchased by a farm supplier c) Chevrolet windows purchased by a GM assembly plant d) a haircut purchased by a father for his 12 year old son
D
Which of the following is not economic investment? a) The purchase of a new drill press a manufacturing company b) construction of a suburban housing project c) the piling up of inventories on a grocer's shelf d) the purchase of 100 shares of AT&T by a business executive
D
The two ways of looking at GDP are the
Expenditures approach and income approach
A flu epidemic in the US severely damages the productivity of US labor for the next two years?
SRAS decreases
The US gov't passes a major tax increase on US businesses?
SRAS decreases
High oil prices impact production throughout the US economy?
SRAS decreases.
New technology used throughout the US economy increases labor productivity?
SRAS increases
