Economics Final Exam

what would happen in an economy if total planned production exceeded total planned real expenditures?

inventories would accumulate, and firms would tend to lower prices

spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

investment

other things being constant, the only way to move along a given supply curve for a product is for

the product's relative price to change

the position of the long-run aggregate supply curve is determined by

the production possibilities cirve

a recessionary gap is the amount by which

the short-run equilibrium level of real GDP is below the full-employment level of real GDP

sugar is an input used to produce cereal. Suppose that the price of sugar rises. as a result:

the supply curve for sugar will shift to the right

an increase in supply will occur when

the supply curve shifts downward to the right

suppose the prices of cheese rises. (cheese is an ingredient of pizza) In the market for pizza, one would expect that

the supply of pizza would decrease, and price would rise

the recognition time lag recognizes that it takes time

to collect information about the state of the economy

the existence of automatic stabilizers will

reduce the size of the recessionary and inflationary gaps

a weakening in consumer confidence causes a

shift of the aggregate demand curve to the left

Fred recently lost his job as a teller at the bank. the bank explained hat they were replacing Frank and others with ATM machines. Fred falls into a category of unemployment known as:

structural unemployment

Bob's assembly line job has been replaced by robots, and Bob lacks abilities and skills required to attain other jobs. He is considered:

structurally unemployed

Collin has lost his job with a telemarketing company, which has moved its operations to India. Collin is considered:

structurally unemployed

Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or the supply changed, but not both. What must have occurred?

supply decreased

which one of the following statements is true? -the Keynesian model shows that the level of real GDP is supply-determined -the Keynesian model assumes complete flexibility of wages and prices -the classical model cannot explain periods of prolonged unemployment -the Keynesian model cannot explain periods of prolonged unemployment

the classical model cannot explain periods of prolonged unemployment

an increase in demand occurs when

the demand curve shifts to the right

suppose that demand for tablets increases, and simultaneously, the supply of tablets increases. which of the following would you conclude definitely will occur in the market for tablets

the equilibrium quantity will rise

suppose there is a simultaneous increase in the demand for wheat and increase in the supply of wheat. which of the following will occur as a result of these simultaneous events? -the market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise -the market clearing price will fall,but the equilibrium quantity may rise, fall, or stay the same -both the market clearing price and equilibrium quantity will rise -the market clearing price will fall, but the equilibrium quantity will rise

the market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise

the marginal propensity to consume is 0.7. there is a $1,000 increase in autonomous consumption. Real GDP will increase by

$3,333

suppose when real disposable income is $5,000, planned real consumption is $4,000. when real real disposable income increases to $6,000, planned real saving increases by $500. the new planned real consumption expenditures is

$4,500

a price floor set below the equilibrium price will cause which of the following

NOT an increase in demand, a shortage, or a surplus AKA NONE OF THE ABOVE

the aggregate demand curve would shift to the right as a result of

a decrease in the U.S. real interest rate

What will not cause a shift in the supply of jeans?

a decrease in the prices of jeans

the long-run aggregate supply curve of an economy corresponds to

a point on the production possibilities curve

an increase in aggregate demand is shown by

a rightward shift in the aggregate demand curve

the Keynesian model is basically

a short-run theory

the value added method of calculating GDP means

adding up the difference between the sale price and the value of intermediate goods of each product at every stage of production

the total of all planned expenditures in the entire economy is the definition of

aggregate demand

the total of all planned production for the entire economy is known as

aggregate supply

macroeconomics deals with

aggregates within the economy

which of the following are lags that fiscal policy makers must cope with? -effect time lags -recognition time lags -action time lags -all of the above are correct

all of the above are correct

which of the following would cause the long-run aggregate supply curve to shift to the right? -an increase in demand -an increase in taxes on profits -an increase in productivity -an increase in wages

an increase in productivity

if two goods, J and K, are complements, then what statement is false?

an increase in the price of J causes the demand for K to rise

the gap that exists whenever short-run equilibrium real GDP per year is greater than full-employment real GDP is shown by the position of the long-run aggregate supply curve is

an inflationary gap

a decrease in demand and an increase in supply will lead to

an unambiguous decrease in price, but the effect on quantity is indeterminate

a decrease in demand and a decrease in supply will lead to

an unambiguous decrease in quantity, but the effect on price is inderterminate

in every economic system, choices must be made because resources

are limited, but human desires and wants are unlimited

of the following, which is the least likely to be an example of substitute goods? -beef and chicken -beer and pretzels -tea and coffee -margarine and butter

beer and pretzels

the action time lag is the time period that elapses

between the recognition of an economic problem and implementing policies to solve it

the concept that increased government spending will lead to higher interest rates and thus, lower investment spending is referred to as the

crowding out effect

Annie had a job as a human resource manager of a restaurant chain that went out of business due to a downturn in the economy. This is an example of:

cyclical emplyment

suppose equilibrium for an economy occurs when C+I+G+X=$14 trillion. if the real GDP is $13 trillion, then unplanned inventories are

decreasing, and real DP will expand

if equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

demand decreased

if consumers expect that the price of pretzels will decrease next week, what would happen today?

demand today for pretzels would decrease

which of the following is the main cause of the persistent inflation that we have experienced in the United States? -supply-side secularity factors -demand-side inflationary factors -a combination of supply-and-demand-side inflationary factors -supply-side inflationary factors

demand-side inflationary factors

when television commentators refer to "tax and spend" policy, they are referring to

fiscal policy

when the government deliberately alters its level of spending and/or taxes in order to achieve specific national economic goals, it is exercising

fiscal policy

In economic terminology, a normal good is a good

for which demand increases when income increases

fiscal policy involves discretionary changes in

income tax rates

to close a recessionary gap through fiscal policy, the government should

increase government spending in order to increase aggregate demand

if the MPS is one-third, a $100 increase in net exports will

increase real GDP by $300

with respect to the market clearing price and the equilibrium quantity of good X, increases in the demand for and the supply of good X will definitely:

increase the equilibrium quantity of good C bu have an uncertain impact on the market clearing price of X

market failure takes place when

market transactions lead to underproduction or overprodcution of a good

which of the following will cause a movement along the supply curve for oil? -government subsidies to oil producers in Wyoming -an increase in the number of oil-producing firms -a change in the price of oil -new technology to drill oil underwater in the Gulf of Mexico

new technology to drill oil underwater in the Gulf of mexico

which of the following can cause supply-side inflation? -tax cuts -an increase in human capital -increases in the money supply -none of the above

none of the above

comparative advantage is the ability to

perform an activity at a lower opportunity cost

in the automobile industry, workers have just negotiated a new contract giving workers a large raise. There has also been an increase in the number of licensed drivers who are in the market for a new car. In the market for new automobiles, the effects tat there changes will have on the equilibrium price and quantity are:

price will increase, and quantity will decrease

in a market system, ____ provide signals about whether resources are relatively scarce or abundant

prices

a key component of the Keynesian model is that

prices are sticky

automatic stabilizers are

provisions that cause changes in government spending and taxes without new action by Congress or the President

if autonomous investment increases by $200 billion and the MPC is 0.5, then

real GDP will ride by $400 billion