Macro Economics Exam 2

deflation

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing:

overstates

Most economists believe that the consumer price index ________ the rate of inflation.

disinflation

The GDP deflator shows that since the mid-1980s, the U.S. economy has had:

closer GDP gets to the natural rate of output

The more time a free market economy has to adjust to price changes, the:

cyclical

The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

$11,512.6 billion

The nominal GDP in 2006 was $13,458.2 billion. The GDP deflator uses 2000 as the base year. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006?

low; low

The nonaccelerating inflation rate of unemployment is the unemployment rate associated with ________ inflation and ________ unemployment:

marginal propensity to consume

The proportion of additional income that consumers spend is known as the:

postive

The relationship between economic freedom and per capita GDP is:

It is likely to occur when the capacity to produce goods and services increases

Which statement about long-run economic growth is true?

Whispering Valley Furniture

Whispering Valley Furniture employs five workers working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs. Which company's workers are more productive?

the price level

A change in ________ will cause a change in the quantity demanded for real GDP.

shows the output that is produced using different combinations of inputs combined with existing technologies

A production function:

decrease; stronger; higher

A(n) _____ in government spending, a _____ domestic currency, and _____ interest rates will shift a country's aggregate demand to the left.

mistaken. Adjusting for price changes, his salary is less than his dad's salary.

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 and the year his dad started work it was 110.8, Dave is:

decrease productivity of the economy

Decreasing the accessibility to college in order to funnel workers into the workforce faster will:

catch-up effect

Developing countries can achieve higher productivity per unit of capitol because they can use technologies developed by other countries. This is known as the:

falls; rises

During cost-push inflation, aggregate output _______ and the aggregate price level _______.

People on a fixed income have increased standards of living

During the periods of inflation, which of the following events does NOT occur?

deflation

From 1999 to 2002, the Japanese inflation rates were, respectively, -0.3%, -0.6%,-0.7%, and -0.7%. During this time, the Japanese economy underwent:

9.09 trillion

GDP is $10 trillion in 2001. The GDP deflator is 100 in 2000 and is 110 in 2001. What is real GDP?

least; lowest

Generally, nations with the ________ economic freedom also have the _________ per capita GDP.

raise costs of production so that the aggregate supply curve shifts to the left.

High taxes and/or heavy regulation:

skills, knowledge, and quality of workers

Human capital refers to:

low labor productivity and low wages

If a country has a low capital-to-labor ration, then it tends to have:

inflation is very low

If actual unemployment is at its natural rate:

4.7%

If an economy's GDP will double in 15 years, then its growth rate must be about:

right; increased

If oil prices decrease, the short-run aggregate supply curve shifts _______ and output supplied will be _______.

0.625%

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was:

left; decrease

If the amount of regulation in an economy increases, the aggregate supply curve shifts _____ and output supplied will _____.

20 years

If the growth rate in an economy is 3.5%, then its GDP will double in about:

Aggregate supply shifts left

If the market power of firms increases, what happens in the AD/AS model?

11.3 trillion

If the nominal GDP is $13 trillion for a given year and the GDP deflator for that year is 115, then the real GDP is:

employed

Lexie works Monday through Friday from 4 PM to 6 PM. in the after-school program at the local elementary school. She began looking for a full time job last week and had already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is:

Cost-of-goods index

Measuring changes in a fixed basket of goods to assess changes in price is a ________ method.

facilitates the movement of capital from savings to investment

One way a stable financial system supports economic growth is that it:

increases; decreases

Other things equal, if a recession gets worse, the number of discouraged workers _______, and the number of those in the labor force _______.

rise; fall

Other things equal, when the U.S. aggregate price level falls, U.S. exports _______ and U.S. imports______.

on strike, on vacation, unpaid family workers

People are considered employed if they are:

income and substitution

Product demand curves slope downward due to effects of:

The company's demand for investment will rise

The Potbelly Pothole Company is undertaking some investment in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen?

the intersection of short run aggregate supply

The actual price level is determined by:

real GDP demanded at various price levels

The aggregate demand curve displays:

shows the amount of real GDP that will be demanded at each possible price level

The aggregate demand curve:

higher in rich countries

The capital-to-labor ratio is:

slow down over time

The catch-up effect tends to:

some function of available labor or capital

The classical form of production function states that output is determined by:

a cost-of-goods index

The current consumer price index is:

and deflation

The drop in aggregate demand that occurred during the great depression caused a drop in real GDP:

economic freedom

The freedom to own property, to make a profit, and to make choices about what to produce, buy, and sell

enhancing physical and human capital

The government decides to subsidize the development of a new communications network. It is acting in its role to promote economic growth by:

higher is its standard of living

The higher the productivity of a nation, the:

the multiplier effect

The idea that new spending creates more new spending is known as:

$41,666.67

What is your new salary if you earned $40,000 last year, the consumer price index went form 120 to 125, and your salary is adjusted by the rate of inflation annually?

a rightward shift of the AD curve

What would cause inflation and employment to increase?

a shift to the right of the SRAS curve

What would cause the price level to decrease and employment to increase?

a shift to the right of the aggregate demand curve

What would cause the price level to rise and employment to increase?

The advent of social media raised costs for firms, which now must invest in Web pages and information gathering technology to stay competitive

Which of the following statements about the role of social media in promoting economic growth is FALSE?

Frictional unemployment is generally short-term, whereas structural unemployment is often long-term

Which of the following statements regarding the types of unemployment is TRUE?

microcomputers

Which of the following technologies most strongly affected the growth in the U.S. productivity in recent decades?

an increase in immigration from other countries

Which of the following will shift the short-run aggregate supply curve to the right:

cost-push inflation

_________ occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve leftward.

Retirees and creditors:

__________ are hurt by inflation because their purchasing power drops.

total factor productivity

the amount of output that can be achieved with a given amount of factor inputs. (Examples: natural disasters, climate, or cultural norms)

aggregate demand

the output of goods and services (real GDP) demanded at different price levels

aggregate expenditures

According to Keynes, what determines the level of employment and income?

increase; aggregate demand for

An increase in the incomes of the countries that purchase U.S.-made products will cause a(n) _____ in the _____ U.S.-made products.

a country's public capital

Infrastructure is:

1%

For which growth rate would the Rule of 70 be most accurate?

shift the PPF outward

Improvements in production capacity will:

inflation

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts in these two curves, what is a likely outcome?

fixed; flexible

In the Keynesian model, the price level is _______; in the aggregate demand and supply model, the price level is ___________.

the consumer price index

In the United States our principle measure of inflation is:

not in the labor force

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents, According to the Bureau of Labor Statistics, Jordan is:

$68,578

Last year, Megans salary was $65,000. The consumer price index increased from 109 to 115. If Megan received a cost-of-living adjustment, what would her salary be?

structural

Since the invention of automatic teller machines, many bank tellers have lost their job. This is an example of ______ unemployment

GDP first rises, and then falls back to long-run equilibrium

Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely long-run impact?

created cost-push inflation

The 1973 oil shocks:

long-run aggregate supply curve

The _____ is vertical at full employment

$1.25 per day

The world bank defines extreme poverty as a person living on less than:

10 million

There are 15 million people living in Marketstan, of whom 9 million are working and 1 million are actively looking for work. What is the size of Marketstan's labor force?

increasing the availability of technology, capital, and labor

To have long-term economic growth, the production function suggests:

frictional

_______ unemployment includes workers who voluntarily quit their jobs to search for better positions.

diminishing returns to capital

each additional unit of capital provides a smaller increase in output than the previous unit of capital

left of the short run aggregate supply curve

Cost-push inflation occurs because of a shift to the:

rising resource costs reduce short run aggregate supply

Cost-push inflation occurs when:

the Current Population Survey

In the United States, the Census Bureau computes the unemployment rate from:

it is difficult for innovators to profit from their efforts

In the absence of copyright and patent laws:

technology

Increases in _________ often lead to economic growth.

capital

Increases in __________ often lead to economic growth.

it distorts the price signal and produces incentives for speculation

Inflation has significant long run effects on the economy because:

decrease; remain unchanged

Suppose energy prices spike. In the short run, output will________; in the long run, output will _________ from its starting point.

measures the quality of a country's intangible infrastructure

The Index of Economic Freedom:

an increase; left

The collapse of home values that began in 2008 led to _______ in American's saving rates, shifting aggregate demand to the_________.

a decrease; an increase

The collapse of home values that began in 2008 led to _________ in Americans' consumption and _______ in their saving rates.

Keeping the economy on a steady, low-inflationary growth path

The costs of cyclical unemployment can be minimized by:

actively seeking work

The key to being counted as unemployed by the bureau of labor statistics is to be:

the economy will gravitate to the position of full employment when all variables are flexible.

The long-run aggregate supply curve is vertical because:

land and natural resources

The natural gas deposits found in the United States over the past decade are an example of an increase in:

physical capital

When Main Street Bank buys new automatic teller machines, the quantity of _________ in the economy increases.

moving resources from production to pension benefits

Which is NOT a source of productivity growth?

Walmart stores

Which is NOT an example of infrastructure?

high inflation

Which is NOT consistent with the level of output in the long run?

an increased money supply

Which of the following does NOT increase productivity?

income

Which of the following factors is NOT a component of aggregate demand?

money

Which of the following is NOT a factor in the production function?

decreasing the capital-to-labor ratio

Which of the following is NOT a source of productivity growth?

Many federal benefits and income tax rates are indexed to the consumer price index

Which of the following is NOT generally considered a problem with using the consumer price index to measure consumer prices?

A 10% growth in population

Which of the following is likely to have the smallest impact on a country's growth in real GDP per capita?

acquisition of obsolete skills

Which of the following items is NOT an example of investment in human capital?

an increase in the price level

Which of the following would NOT affect (shift) the short-run aggregate supply curve?

a change in the price level

Which of the following would NOT cause a shift in the aggregate demand curve?

2.5

If the marginal propensity to consume is 0.6, then the spending multiplier is:

the quality of the labor force

On-the-job training can lead to an increase in:

wealth effect

One reason the amount of real output demanded declines when the aggregate price level rises is the resulting reduction in household wealth, called the:

the wealth effect

One reason the amount of real output demanded declines when the aggregate price level rises is the resulting reduction in household wealth, called: