Econ test two

Suppose during the course of a year an economy produces $11 trillion of consumer goods, $3 trillion of investment goods, $6 trillion in government services, and has $3 trillion of exports and $1 trillion of imports. For this economy, GDP would be: a. $18 trillion b. $22 trilion c.$23 trillion d. $24 trillion

$22 trillion

Suppose that your income increases from $10,000 to $15,000 and your consumption increase from $9,000 to $12,000. Your APC as $15,000 is: a. 0.4 b. 0.6 c. 0.8 d. 0.9

0.8

The APC is: a. 1 - MPS b. consumption divided by disposable income c. the slope of the propensity-to-consume line d. the proportion of additional disposable income used for consumption

1 - MPS

A social good is best described as: a. a good or service not adequately provided by a free market usually provided by the government b. a good or service not adequately provided by the government and usually provided by a free market c. a good or service that is subjected to the exclusion principle d. a private good or service

A good or service not adequately provided by a free market usually provided by the government

Structural unemployment consists of people who are unemployed due to: a. business recessions b. business depressions c. temporary job changes d. a mismatch between the skills of workers and the skills required by the job market

A mismatch between the skills of workers and the skills required by the job market

Which of the following is not necessarily true? a. C/DI + S/DI = 1 b. APC + APS = 1 c. APC = MPC d. APC + APS = MPC + MPS

APC = MPC

An increase in consumption means that, at each level of the economy's income: a. APC has decreased, and APS has increased b. APC has increased, and APS has decreased c. APC and APS have increased d. APC and APS have decreased

APC has increased, and APS has decreased

A recessionary gap exists if: a. actual real GDP is less than potential real GDP b. actual real GDP exceeds potential GDP c. actual real GDP equals potential real GDP d. the actual equilibrium price level is greater than zero

Actual real GDP is less than potential real GDP

An inflationary gap occurs if: a. actual real output is less than potential real output b. actual real output is greater than potential real output c. unemployment is greater than the natural rate d. unemployment is equal to the natural rate

Actual real output is greater than potential real output

Double counting would occur in GNP statisticians: a. used market prices without a correction for inflation b. included sales taxes in the market prices of goods and services c. added government expenditures on roads, and consumer expenditures on gasoline d. all of the above

All of the above

In the expenditure approach to measuring the GDP the following are categories of spending: a. gross private domestic investment b. personal consumption expenditure c. government expenditure d. all of the above e. none of the above

All of the above

Disposable income includes: a. corporate taxes b. undistributed corporate profits c. depreciation d. allowance given to children by parents

Allowance given to children by parents

In terms of the bathtub theorem, an injection is: a. a leakage from the economy's circular flow of income b. an expenditure that raises the economy's income c. a form saving d. any variable that reduces the economy's income

An expenditure that raises the economy's income

As aggregate income increases, consumption: a. and saving both increase b. and saving both decrease c. decrease and saving increase d. increase and saving decrease

And saving both increase

GDP measures only the value of FINAL goods and services to: a. avoid double counting b. avoid measuring value added c. include nonproductive transactions d. exclude productive transactions

Avoid double counting

The notion that equilibrium occurs when injections are equal to leakage is termed the: a. water paradox b. paradox of thrift c. bathtub theorem d. saving theorem

Bathtub theorem

During a period of high inflation: a. borrowers are better off because they can pay off their loans with currency that is worth less b. borrowers are worse off because they have to pay off their loans with currency that is worth more c. lenders are worse off because they cannot find anyone who wants a loan d. none of the above

Borrowers are better off because they can pay off their loans with currency that is worth less

Cyclical unemployment consists of people who are unemployed due to: a. discrimination b. business recessions c. temporary changes in jobs d. a mismatch between the location of workers and the location of jobs

Business recessions

Household spending on gods and services is: a. taxes b. saving c. exports d. consumption

Consumption

Dissaving occurs if: a. consumption is greater than disposable income b. the APC is negative c. the APC is positive d. the MPC is negative

Consumption is greater than disposable income

Which of the following is not a type of unemployment? a. seasonal b. structural c. cost-push d. cyclical

Cost-push

Real GDP measures: a. current output at current prices b. current output at base year prices c. base year output at current prices d. none of the above

Current output at base year prices

In terms of the 'bathtub' theorem a withdrawal of leakage: A. Expands the economy's income B. Has a neutral effect on the economy's income C. Reduces the economy's income D. Is a form of investment

Reduces the economy's income

During recession, government tax receipts(revenue): A. Is unaffected B. Overflow C. Underestimated D. Decrease E. Increase

Decrease

The expression "too much money chasing too few good" best describes the condition called: a. cost-push inflation b. wage-push inflation c. demand-pull inflation d. market-power inflation

Demand-pull inflation

The GDP gap is the: a. difference between nominal GDP and real GDP b. difference between potential GDP and actual GDP c. ration of nominal GDP to real GDP d. ratio of potential GDP to actual GDP

Difference between potential GDP and actual GDP

The relationship between income and consumption is expected to be: a. direct b. inverse c. independent d. none of the above

Direct

GDP measures all goods un units of: a. pounds b. feet c. tons d. dollars

Dollars

Gross national product is earned from: a. foreign production b. domestic production c. foreign production less net domestic factor income d. domestic production plus net foreign factor income

Domestic production plus net foreign factor income

In the bathtub theorem, injections are: a. leakages from total income b. withdrawals that are dependent on income c. expenditures that are dependent on income d. expenditures that are not dependent on income

Expenditures that are dependent on income

People who are in the process of changing jobs are accounted for by which one of the following unemployment categories? a. frictional unemployment b. involuntary unemployment c. structural unemployment d. cyclical unemployment

Frictional unemployment

Suppose the total market value of all final goods and services produced in a particular country in 2006 is $500 billion and the total market value of final goods and services sold is $450 billion. We can conclude that: a. GDP in 2006 is $450 billion b. NDP in 2006 is $950 billion c. GDP in 2006 is $500 billion d. Inventories in 2006 fell by $50

GDP in 2006 is $450 billion

Which of the following factors is NOT a component of aggregate demand? A. Consumption B. Investment C. Income D. Net export

Income

Value added is equal to the sum of all: a. wages paid to labor b. income generated from production c. intermediate transactions involved in the production of a good d. intermediate transactions involved in the production of a good, less profit

Income generated from production

A rise in the general price level of goods and services is: A. Depreciation B. Deflation C. Inflation D. Expectations

Inflation

The MEI expresses a relationship between: a. consumption and investment b. interest rates and consumption c. investment and savings d. interest rates and investment

Interest rates an investment

An example of an injection in the bathtub theorem is a. taxes b. saving c. imports d. investment

Investment

Spending by business firms on physical capital is: a. taxes b. saving c. exports d. investment

Investment

The most important factor determining a family's consumption expenditures is likely to be the: a. neighborhood in which it lives b. level of its disposable income c. average age of its members d. size of the family

Level of its disposable income

The expected annual rate of return on an additional unit of a capital good is the: a. APS b. APC c. MEI d. MPC

MEI

Aggregate output is the: a. money value of a nation's total production b. sum of money income earned by the suppliers of labor, land, capital and entrepreneurship c. income earned by owners of foreign factors of production less income earned by domestic factors of production d. total value of goods and services purchased by the business sector

Money value of a nation's total production

A measure of the economy's output in current dollars is: a. deflation b. real GDP c. nominal GDP d. constant GDP

Nominal GDP

Which of the following states that a 3% increase in real GNP will yield a 1% point decrease in the unemployment rate? a. phillips curve b. GDP gap c. Okun's law d. Stephen's law

Okun's law

The GDP for one year differs from the GDP of another because: a. price changes b. physical output changes c. people are not patriotic d. only a and b

Only a and b

In the short run, the aggregate supply curve is: A. horizontal B. Negatively Sloped C. Positively Sloped D. Vertical

Positively sloped

Tom Atoe grows tomatoes for home consumption. This activity is: a. excluded from GDP in order to avoid double counting b. excluded from GDP because an intermediate good is involved c. productive but is excluded from GDP because no market transaction occurs d. included in GDP because it reflects production

Productive but is excluded from GDP because no market transaction occurs

In general terms, the economic role of the government includes the broad functions of the: a. Provision of private goods and the regulation of social goods b. Promotion and regulation of the private sector and the provision of private goods c. promotion and regulation of the private sector and the provision of social goods d. promotion and regulation of the public sector and the provision of quasi-public goods

Promotion and regulation of the private sector and the provision of social goods

Government expenditure depends to a large extent on: a. the stock of capital b. public needs c. credit conditions d. the structure of taxes

Public needs

In order to know if differences in GDP is a result of changes in prices or output GDP is expressed in the way of: A. Dollars and cents B. Nominal C. Real D. only b and c E. only a and c

Real

A measure of the economy's output in constant dollars is: a. intermediate GDP b. current GDP c. nominal GDP d. real GDP

Real GDP

The consumption function expresses the: a. purposes of consumption b. relation between consumption and prices c. relation between consumption and saving d. difference between consumption and taxes

Relation between consumption and saving

That part of a person's income which is not consumed is his or her: a. saving b. profit c. excess d. surplus

Saving

Macroeconomics deals with the action of: a. individuals only b. societies only c. atmosphere only d. both a and b

Societies only

Economist use the term "Aggregate expenditure" to mean: A. Spending for all final foods and services B. The sum of planned spending for all products and factor services C. Household spending for all consumption goods D. Business Spending for all investment goods E. Spending for all products except exports

Spending for all final goods and services

The simple circular flow diagram shows that economic aggregates can be calculated either by the ______ flows in the product market or by the ______ flowing to households in the resource market. A. Spending; Income B. Income; Spending C. Output; Spending D. Spending; Output

Spending; Income

Frictional unemployment consists of people who are unemployed due to: a. discrimination b. business recessions c. business depressions d. temporary changes in jobs

Temporary changes in jobs

Aggregate supply is: a. the amount of real aggregate output that will be made available at various national income amounts b. the amount of real aggregate output that will be purchased at various national income levels c. the amount of real aggregate output that will be purchased at various national income levels d. the amount of real aggregate output that will be made available at various average price levels

The amount of real aggregate output that will be made available at various average price levels

The lower the market rate of interest, other things being equal: a. the higher the MEI b. the lower the rate of investment c. the lower the MEI d. the higher the rate of investment

The higher the rate of investment

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

The periodic fluctuation of economic activity

The MPS is: a. 1 - MPS b. saving divided by consumption c. the slope of the propensity-to-consume line d. the proportion of additional disposable income used for saving

The proportion of additional disposable income used for saving

As price level rises: a. the purchasing power of cash holding rises b. the purchasing power of cash holdings falls c. the purchasing power of cash holding remain constant d. all of the above

The purchasing power of cash holdings falls

The best reason economists take only final goods and services into account when calculating GDP is: a. this is the way things have always been done b. they want to avoid the problem of final counting c. they want to avoid the problem of double counting d. this is the only way things can be done

They want to avoid the problem of double counting

A recessionary gap occurs if: a. actual real output is greater than potential real output b. actual real output is equal to potential real output c. unemployment is less than the natural rated d. unemployment is greater than the natural rate

Unemployment is greater than the natural rate

The aggregate supply curve is: a. downward-sloping b. upward-sloping c. vertical d. horizontal

Upward-sloping

Aggregate expenditure is the sum of desire or planned spending that: a. occurs only when the economy is in equilibrium b. occurs only when the economy is at full employment c. will be undertaken by the household sector after taxes d. will be undertaken at each aggregate-income level by all sectors of the economy

Will be undertaken at each aggregate-income level by all sectors of the economy

The economic role of government can be considered to: a. promotion and regulation of the private sector b. provision of social goods and services c. accumulation debts d. a and b above

a and b above