econ test

If the Fed decreases the quantity of money in circulation, interest rates _____, investment spending _____, and the aggregate demand curve shifts to the _____.

increase; decreases; left

Suppose that the administration in charge of the government proposes closing military bases to reduce defense spending. Assume that everything else stays the same. The components of aggregate demand (AD) are consumption (C), investment (I), government purchases (G), and net exports (NX). Which component of AD is primarily affected? What likely happens to the AD curve? What likely happens to the level of unemployment?

government purchases (G) AD shifts to the left (it decreases). unemployment increases

Suppose that immigration laws are relaxed and many workers from other nations enter the U.S. labor force. The _____ labor will _____.

supply of; increase

Which of the factors would decrease the rate of frictional unemployment?

the advent of the Internet, which makes finding available jobs easier

(17,19) A reason that does NOT explain why frictional unemployment exists is:

the minimum wage.

(14,15) Which definition best describes real GDP?

the production of goods and services valued at constant prices

(17,19) If a worker becomes unemployed because of an increase in the minimum wage, that worker is:

structurally unemployed.

(14,15, 16, 17, 19) Which of the choices is most directly related to cyclical unemployment?

recessions

(16,17)Which of the choices is most directly related to cyclical unemployment?

recessions

Which of the choices is most directly related to cyclical unemployment?

recessions

How do economists in Canada determine when a recession begins and when it ends?

Two consecutive quarters of contraction of GDP indicate a recession, and two consecutive quarters of growth indicate a recovery.

What happens to unemployment as a result of the union's demands?

Unemployment increases

(16,17) If the rate of unemployment is 10% and the labor force is 130 million, the number of unemployed workers is _____million.

13

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:

5%.

Scenario: The Employment RateA group of 10 people includes 3 retirees, 2 part-time workers, 2 discouraged workers, 1 unemployed worker, and 2 full-time workers.The labor force participation rate is _____%.

50

Which statement describes an advantage to the recipient of foreign investment?

Foreign companies often bring new technology to the recipient country, which increases productivity.

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending?

$2 trillion

(14,15,16,17,19) What is the value added for Mother Nature?

$2,750

Boeing buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model at $10 million. The value added by Boeing is equal to:

$3.5 million.

(24,30,31) Suppose that the federal administration plans to fight a deep, ongoing recession with a nationwide plan of increasing infrastructure. Congress approves it and adjusts the budget accordingly to put the plan in motion immediately. Aggregate demand spending components include consumption (C), investment (I), government (G), and exports (X) minus imports (M). Analyze what the aggregate demand and aggregate supply model predicts about the infrastructure plan to answer three questions. Does the level of G increase (+), decrease (-), or stay constant (0)? What likely happens to the aggregate demand (AD) curve? What likely happens to the level of unemployment?

+ The curve shifts to the right (an increase in AD). unemployment decreases

Suppose only two countries existed. Country A imported $200 million worth of goods and services from country B. Country B imported $100 million worth of goods and services from country A. Net exports for country _____ equal _____.

A; -$100 million

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

True

For measuring GDP as spending on domestically produced final goods and services, spending on inputs like steel for manufacturing a car is counted in GDP, but spending on a new factory in which the cars are produced is not counted in GDP.

False

(24, 30, 31) Which statement is a major consequence of high government budget deficits?

If the government finances the deficit by borrowing money, it can crowd out business investment.

Suppose that roughly 8 million people in the United States were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the official unemployment rate this month, all other things unchanged?

It will fall because 2 million people are not in the labor force this month and are not counted as unemployed.

Macroeconomics: The Big Picture — End of Chapter Problem Who in the economy is hurt during a recession? How?

Workers who lose their jobs, along with their families Workers who keep their jobs but experience lower or stagnant wages Corporations that see lower profits

The union's demands have an effect similar to

a minimum wage.

(23,24,30,31) When unemployment is high, in the short run, nominal wages will:

be inflexible.

The only government policy that has a DIRECT effect on the aggregate demand curve is:

changing the level of government purchases of final goods and services.

A laptop computer purchased by a private individual for personal use is considered to be:

consumption spending.

When the economy is at full employment, _____ is zero.

cyclical unemployment

Samantha asks her employer for a 5% raise for the coming year. If the inflation rate during the next year is 5.5%, then her real wage will:

decrease by 0.5%.

The interest rate effect leads to a downward-sloping aggregate demand curve because a higher price level causes consumption to _____ and investment to _____.

decrease; decrease

If the Fed increases the quantity of money in circulation, interest rates _____, investment spending _____, and the aggregate demand curve shifts to the _____.

decrease; increases; right

If the price level falls by 10%, the purchasing power of $10,000 will:

increase to $11,000.

If more women enter or reenter the labor force, the natural rate of unemployment is likely to:

increase.

A laptop computer that is purchased by an accounting firm is considered to be:

investment spending.

Suppose that the stock market crashes, which causes a large decrease in the value of many households' financial assets. The most likely outcome is a _____ the aggregate demand curve.

leftward shift of

(23,24,30,31) To help increase investment spending, the government can:

lower taxes on the returns from savings so that total savings increase and the interest rate falls.

An intermediate good would be:

lumber used to build a house.

In an open economy, total investment equals:

national savings plus capital inflow.

(14,15)Purchases of imported products are:

not a part of the GDP calculation.

Investment spending is spending on:

productive physical capital.

GDP does not exclude:

the value of owner-occupied housing.

Which example illustrates an intermediate good?

tires General Motors purchased from Goodyear for new electric cars

When the economy is doing well, a significant share of unemployment is frictional.

true

The supply of loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.

upward; savers; decreasing