Exam 2 Economics

Suppose that a given year the rate of inflation is 3 percent and the nominal interest rate is 2 percent. The real interest rate is

-1 percent.

The sum of the consumption, investment, government purchase and net exports share equals

1.

If the reserve ratio is 25 percent, then the money multiplier is

4

Which of the following would cause the national saving rate to increase for any given interest rate?

A decline in the government share of GDP

Which of the following will raise the share of GDP available for nongovernment use?

A decrease in government purchases

Which of the following causes the productivity function to shift up?

A technological improvement.

Which of the following is the best measure of labor input?

Aggregate hours

Which of the following would most likely lead to an increase in the real long-term interest rate?

An increase in the consumption share of GDP

The consumption's share of GDP is expressed as

C / Y.

Which of the following best explains the source of increases in productivity?

Increases in capital per worker

Which of the following government policies would encourage R&D?

Increasing tax credits for research

The quantity equation is written as

MV = PY.

What best describes what is included in the GDP measure?

Only newly produced goods and services

Which of the following will most likely reduce the natural unemployment rate?

Reducing unemployment compensation

Which of the following is the largest component of U.S. aggregate income?

Wages and salaries

A decrease in real interest rates leads to

a downward movement along the investment share line.

A recession is best defined as

a fall in real GDP lasting at least six months.

GDP is a measure of

a nation's total production.

Cyclical unemployment tends to increase when the economy is in

a recession.

Policies used to influence economic fluctuations mainly affect

aggregate demand.

Potential GDP corresponds to the concept of

aggregate supply.

In the long run, an increase in the money supply will lead to

an increase in nominal GDP.

Suppose that the capital stock grows faster than the labor force and there is no technological growth. This would cause

an upward movement along the productivity curve.

If the Fed wishes to increase the amount of deposits that banks hold, it can

buy government bonds in an open market operation.

Which of the following is a determinant of aggregate supply capability? (Check all correct answers)

capital, technology, and labor

The primary tools that the Federal Reserve uses to influence aggregate demand are

changes in interest rates.

Suppose a country's real GDP increased 2 percent between 2016 and 2017, while its population increased 3 percent. Between 2016 and 2017, real GDP per capita of this country

decreased by 1 percent.

The unemployment rate

decreases as real GDP increases.

The flattening out of the production function occurs due to

diminishing returns to labor given other fixed inputs.

The long-run upward trend in real GDP is called

economic growth

Transfer payments are

excluded from government purchases and GDP.

Refer to the above graph. The best example of economic growth is

from point A to point D.

Household saving can be considered as

future consumption.

All of the following are found to promote economic growth EXCEPT

high population growth.

National saving is the amount of saving by

households and the government.

In the quantity equation of money, velocity measures

how frequently money is used.

When people accumulate knowledge and skills, they are building

human capital.

According to the quantity equation of money, in the long run, an increase in the growth of the money supply will

increase inflation by the same amount if velocity is constant.

Refer to the above graph. Between point B and point C, the unemployment rate tends to _________ and the inflation rate tends to ______ Between point C and point D, the unemployment rate tends to ____ and the inflation rate tends to ______

increase,decrease, decrease, increase

Which of the following is part of capital income? (Check all correct answers.)

interests and profits

The spending allocation model is designed to explain

long-run movements in the economy.

If the economy is going into a recession, the Federal Reserve is likely to

lower interest rates to increase aggregate demand.

The official definition of a full-time worker is any individual working

more than 35 hours per week.

The natural unemployment rate is the unemployment rate when the economy is in

neither a recession or a boom.

Productivity is best measured as

output per hour of work.

The national saving rate is _____ related to the interest rate because it depends on consumption, which is ____ related to the interest rate

positively; negatively

A base year is a year when

real GDP equals nominal GDP.

If real GDP is growing at a slower rate than the growth rate of population,

real GDP must be growing faster than real GDP per capita.

A measure of the value of production that corrects for inflation is

real GDP.

The labor force is

that part of the population that is working or looking for a job.

A major problem of a barter system is

the absence of a medium of exchange.

Value added is

the increase in the value of a product that occurs at each stage of production.

Economic growth theory explains

the long-term trend in real GDP.

The real wage equals

the nominal wage divided by the price level.

Inflation is defined as

the percentage increase in the overall price level over time.

The unemployment rate is defined as

the percentage of the labor force not working.

The CPI is a measure of

the price of retail goods and services.

All else being equal, an increase in the number of discouraged workers in an economy causes

the unemployment rate to decrease.