Macro-economics Final

Suppose an economy moves from a point inside of its production possibilities curve to a point on the curve. The most likely source of this economic growth is: increases in the quality of inputs supply factors technological change demand and efficiency factors

demand and efficiency factors

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. regressive progressive optional proportional

regressive

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is: 91 percent 11 percent. 10 percent. 33 percent

11 percent.

Short-run fluctuations in output and employment are referred to as: Business cycles Recession and inflation Economic growth Inventory cycles

Business cycles

In the expansion phase of a business cycle: The inflation rate and productive capacity decrease Employment and output increase The inflation rate decreases, but productive capacity increases Employment increases, but output decreases

Employment and output increase

In response to the Great Recession, Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks. While this was done to help workers financially and to help the economy by stimulating demand, it had what unintended consequence? It drove the unemployment rate lower than the lowest pre-recession rate It prompted inefficiently long searches that kept the unemployment rate higher It significantly increased the rate of inflation. It encouraged millions of unemployed workers to return to school, driving up projected future rates of labor productivity.

It prompted inefficiently long searches that kept the unemployment rate higher

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual is structurally unemployed? Ricardo George Mollie Jeanette

Jeanette

GDP that we measure in terms of actual prices that exist at the time (current prices) is : Black Market GDP Real GDP Nominal GDP Trade Balance

Nominal GDP

A central bank has four tools to implement monetary policy in the economy. Which of the following is one of the tools Changing taxes Changing spending Open market operations all the other three

Open market operations

The "G" term in C + Ig + G + Xn includes all of the following except: state government purchases of new computers Social Security checks received by retirees salaries received by members of the military local government expenditures for building new roads

Social Security checks received by retirees

Discretionary fiscal policy is the deliberate changing of what? Taxing and Spending Money Supply Trade Spending Aggregate Supply

Taxing and Spending

open free trade tends to introduce more competition in market economies. This tends to increase the Supply of goods in most markets in the U.S. Which macroeconomics topic would be most positively affected by this in the short term at least. U.S. GDP salaries of economics professors U.S. unemployment U.S. inflation

U.S. inflation

Which of the following is a valid criticism of the use of money as a store of value in modern economies? storing money is wasteful money supply is too narrowly defined annual inflationary loss of buying power imperfect as a unit of account

annual inflationary loss of buying power

If an economy moves into a recession, causing that country to produce less than potential GDP, then: tax revenue and government spending will be higher because of automatic stabilizers. tax revenue and government spending will be lower because of automatic stabilizers. automatic stabilizers will cause tax revenue to decrease and government spending to increase. automatic stabilizers will cause tax revenue to increase and government spending to decrease.

automatic stabilizers will cause tax revenue to decrease and government spending to increase.

expansionary fiscal policy includes lower interest rates raise personal taxes done by lowering the banking reserve ratio increase spending on public education

increase spending on public education

It is common to use________________ as a measure of economic welfare or standard of living in a nation income inequality real GDP inflation unemployment

real GDP

Cost-push inflation: increases real output reduces the unemployment rate raises the natural rate of unemployment. reduces real output

reduces real output

Unanticipated inflation: hurts people whose sole source of income is from Social Security benefits helps savers. hurts borrowers and helps lenders. reduces the real burden of the public debt to the federal government.

reduces the real burden of the public debt to the federal government.

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? monetary requirements discount requirements reserve requirements deposit requirements

reserve requirements

We call the highest point of the economy, before the recession begins, a recession an expansion the trough the peak

the peak

a progressive tax is one that the tax rates increase as a household's income increases an example is sales tax the tax rates increase as a household's income decreases one where the poor pay more in taxes

the tax rates increase as a household's income increases

Which of the following would an economist consider to be investment? All of these. Oprah buying a $10 million home from a fellow celebrity. Boeing building a new factory. A stockbroker buying 10,000 shares of Starbucks stock.

Boeing building a new factory.

automatic stabilizers cause the correct fiscal policy to happen without Congress or Presidential action. So Congress hates to cut taxes and increase spending so automatic stabilizers are mainly used to expand the economy discretionary fiscal policy must always be used because market economies are unfair IF given time the economy will mainly correct itself Econ professors should get raises

IF given time the economy will mainly correct itself

As distinct from the demand and efficiency factors of economic growth, a supply factors of economic growth is: Obtaining the optimal combination of goods, each at least-cost production. a night of having beer and wings Purchases of expanding output. Improvements in technology.

Improvements in technology.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? Nominal and real GDP would both be unchanged. Real GDP would rise, but nominal GDP would be unchanged. Nominal and real GDP would both rise. Nominal GDP would rise, but real GDP would be unchanged.

Nominal GDP would rise, but real GDP would be unchanged.

As distinct from the supply factors and demand factor of economic growth, a efficiency factor of economic growth is : Purchases of expanding output. Increases in the supply (stock) of capital goods. Obtaining the optimal combination of goods, each at least-cost production. Improvements in technology.

Obtaining the optimal combination of goods, each at least-cost production.

As distinct from the supply factors and efficiency factor of economic growth, a demand factor of economic growth is: Purchases of expanding output. Obtaining the optimal combination of goods, each at least-cost production. Improvements in technology. Increases in the supply (stock) of capital goods.

Purchases of expanding output.

Cost-push inflation may be caused by: a decrease in wage rates. an increase in resource availability a decline in per unit production costs. a negative supply shock

a negative supply shock

The phase of the business cycle in which real GDP declines is called: a recession an expansion the trough the peak

a recession

Inflation is defined as: the growth phase of the business cycle. a situation where all prices in the economy rise simultaneously. the rate of growth in nominal GDP. an increase in the overall level of prices.

an increase in the overall level of prices.

Which of the following factors contribute to economic growth? an increase in the average wage rate paid to workers an increase in the proportion of the population that is college educated a decrease in the productivity of labor an increase in the standard of living

an increase in the proportion of the population that is college educated

which is not a functions of money in economics store of value unit of account capital for investment medium of exchange

capital for investment

In the short run, aggregate demand will tend to increase if there is an increase in: excess production capacity consumer wealth the prices of resources tax rates

consumer wealth

An inflation rate of - 1.5% is an example of deflation hyper-inflation booming, strong economy low unemployment rate

deflation

APPLYING IT!!! Goods market If the country is producing efficiently (on the PPC) and the actual production keeps growing, people's money income increases. This increase in income can lead to increases in the demand for most goods in the economy. What will happen to the prices of most goods doesn't matter businesses do what they want increase stay the same decrease

increase

While GDP includes spending on recreation and travel, what is something GDP does not include that increases a persons standard of living? paying for a hotel buying dinner buying drinks at a bar leisure time like laying at a beach

leisure time like laying at a beach

If the actions above cause large deficits then what may happen to investment spending will be increased will be used to promote turtle soup industry may be crowded out will not be affected

may be crowded out

Demand-pull inflation: occurs when prices of resources rise, pushing up costs and the price level occurs when total spending exceeds the economy's ability to provide output at the existing price level is also called cost-push inflation occurs only when the economy has reached its absolute production capacity

occurs when total spending exceeds the economy's ability to provide output at the existing price level

During a period of hyperinflation: creditors gain because their loans are repaid with dollars of higher value. income is redistributed away from borrowers the real value of the national currency rises people tend to hold goods rather than money.

people tend to hold goods rather than money.

The three statistics that are the main focus for those measuring macroeconomic health are: nominal GDP, unemployment, and inflation. real GDP, inflation, and unemployment. real GDP, nominal GDP, and unemployment. real GDP, nominal GDP, and inflation.

real GDP, inflation, and unemployment.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will: rise by about 25 percent. rise by about 15 percent. fall by about 20 percent fall by about 2 percent.

rise by about 15 percent.

Which is true of the FED? decides taxing and spending of the Government completely owned by the Federal Government of the US controlled by the President run by a Board of Governors

run by a Board of Governors

expansionary fiscal policy includes raising the money supply defense spending cuts tax cuts raising taxes

tax cuts

The natural rate of unemployment is: that rate of unemployment occurring when the economy is at its potential output found by dividing total unemployment by the size of the labor force higher than the full-employment rate of unemployment. lower than the full-employment rate of unemployment

that rate of unemployment occurring when the economy is at its potential output

When the central bank decides it will sell bonds using open market operations: interest rates decrease. the money supply is unaffected. the money supply increases. the money supply decreases.

the money supply decreases.

the lowest point of a recession, before a recovery begins, is a recession an expansion the trough the peak

the trough

The income approach to GDP sums: Government spending wages, profits, interest and rents adds net transfer payments and personal taxes C + I + G + Xn

wages, profits, interest and rents

Recurring upswings and downswings in an economy's real GDP over time are called: output yo-yos total product oscillation business cycles. recessions

business cycles.

Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is: unemployed in the labor force not in the labor force employed

not in the labor force

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is: $500. $1,100. $1,200. $2,300.

$1,200.

Which of the following would be a reasonable inflation rate indicating a good economy? 5% 12.5% 1.5% - 1.0%

1.5%

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about: 2.8 percent 1.6 percent. 3.4 percent 4.1 percent

1.6 percent.

Given the information below answer the questions: Unemployed: 7 Total Population: 145 Employed: 95 Discouraged Workers: 3 Refer to the given information. The labor force in Scoob is: 105 million. 95 million 145 million. 102 million

102 million

Which is true of the FED? 12 regional Federal Reserve banks must get polices approved by Congress decides taxing and spending of the Government controlled by the President

12 regional Federal Reserve banks

If real GDP was $5,000 billion last year and is $5,200 billion this year, the approximate rate of economic growth over the past year is: 3.84% 4% $200 billion 2%

4%

If the price level is expected to increase by three percent next year and a key market interest rate is expected to increase by seven percent, the real interest rate of interest is: 7% 3% 4% 10%

4%

The consumer price index in an economy is 180 one year and 189 the next year. The rate of inflation in the economy that year is: 18% 8% 1% 5%

5%

Given the information below answer the questions: Unemployed: 7 Total Population: 145 Employed: 95 Discouraged Workers: 3 Refer to the given information. The unemployment rate in Scoob is: 3.2 percent 6.9 percent 2.5 percent 5.0 percent.

6.9 percent

Which of the following is a final good or service? Chevrolet windows purchased by a General Motors assembly plant. A haircut purchased by a father for his 12 year-old son. Fertilizer purchased by a farm supplier. Diesel fuel bought for a delivery truck.

A haircut purchased by a father for his 12 year-old son.

Which of the following is included in the calculated Gross Domestic Product? Farmer Freddie sells his second tractor to his son. Mr. Farkle buys a used lawn mower from his neighbor, Mr. Sparkle. Suzanne buys a love seat and chair for $85 at the yard sale on the corner. A local ice cream store sells $17,000 worth of cones and sundaes on July 1.

A local ice cream store sells $17,000 worth of cones and sundaes on July 1.

Which of the following is not a supply factor in economic growth? The size and quality of the labor force. The stock of capital. Technological advance. Aggregate expenditures of households, businesses, and government.

Aggregate expenditures of households, businesses, and government.

Which would most likely increase aggregate supply? A decrease in business subsidies An increase in productivity A decrease in personal income taxes An increase in the prices of imported products

An increase in productivity

Which of the following would not be expected to increase labor productivity? The realization of economies of scale. Technological advance. The acquisition of more education and training by the labor force. An increase in the size of the labor force.

An increase in the size of the labor force.

People talk about the "Good ole days" when people lived better than now. In some ways, the rise in GDP understates the actual rise in the standard of living. Which of the following is an example? absolute poverty rates have increased over the last century the typical workweek for a U.S. worker has fallen over the last century from about 60 hours per week to less than 40 hours per week The literacy has decreased over the last century healthcare has decreased over the last century

Answer the typical workweek for a U.S. worker has fallen over the last century from about 60 hours per week to less than 40 hours per week

Which of the following would be considered "employed" Full time worker only temporary worker only part time worker only Anyone who does any work for pay

Anyone who does any work for pay

How will bond prices and interest rates change if the Fed increases the money supply by buying Bonds Bond price increases; rates increase Bond price increases; rates decrease Bond price decrease; rates decrease Bond price decrease; rates increase

Bond price increases; rates decrease

the components of aggregate demand are Land, labor, capital, entrepreneurial ability Beer + Wings + Pizza Taxes + Gov. spending C + I + G + Xn

C + I + G + Xn

Changes in the price level is used to measure inflation. The main price index used by the Government to measure inflation rate is the WTH CBO CPI GDP

CPI

A central bank has four tools to implement monetary policy in the economy. Which of the following is one of the tools Changing taxes Changing banking laws Changing reserve requirements all the other three

Changing reserve requirements

Because of the representative democracy we have in the US, which policy will almost never implemented even if it the correct one? Restrictive Monetary policy Contractionary Fiscal policy Expansionary Fiscal policy Expansionary Monetary policy

Contractionary Fiscal policy

GDP per capita = Inflation - unemployment change in GDP/ change in unemployment Nominal GDP/PI GDP/population

GDP/population

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual is cyclically unemployed? George Mollie Jeanette Ricardo

George

An increase in expected future income of households will: Increase aggregate demand Decrease aggregate demand and aggregate supply Increase aggregate supply Increase aggregate demand and aggregate supply

Increase aggregate demand

If the price of crude oil decreases, then this would most likely: Decrease aggregate supply in the U.S. Increase aggregate demand in the U.S. Decrease aggregate demand in the U.S. Increase aggregate supply in the U.S.

Increase aggregate supply in the U.S.

Which of the following best describes the relationship between economic growth and literacy? There is no correlation between economic growth and literacy. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. As the economy grows, literacy declines because it becomes less and less useful in a developed economy.

Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

As distinct from the demand and efficiency factors of economic growth, a supply factors of economic growth is: Increases in the quantity and quality of human resources. Purchases of expanding output. I like turtles Obtaining the optimal combination of goods, each at least-cost production.

Increases in the quantity and quality of human resources.

Which of the following did not result in economic growth? Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California. Increased government funding of post-secondary education. The invention of a threshing machine for harvesting grains. Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual is frictionally unemployed? Ricardo Jeanette Mollie George

Mollie

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual(s) would be included in the calculation of the natural unemployment rate? Jeanette only Mollie only Mollie and Jeanette Ricardo only

Mollie and Jeanette

What do economists mean by investment, or business spending? Which of the following would all be included GDP as "Investment". New Stocks New factories Trading Financial Assets New Bonds

New factories

Recently a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining. Is the critic correct? Yes, because real income may fall if prices increase less proportionately than the increases in nominal income No, because real income may fall if prices increase less proportionately than the increases in nominal income Yes, because when you have a large nominal income, your standard of living automatically increases No, because real income may fall if prices increase more proportionately than the increase in nominal income.

No, because real income may fall if prices increase more proportionately than the increase in nominal income.

Which of the following transactions would be included in GDP? Olivia receives a tax refund of $500. Peter buys a newly constructed house. Nick buys $5,000 worth of stock in Microsoft. Mary buys a used book for $5 at a garage sale.

Peter buys a newly constructed house.

Suppose an economy in the long-run equilibrium experiences a supply shock from substantially higher energy costs. In which of the following ways are real GDP and the price level most likely to change? Real GDP decrease, Price level increase Real GDP increase, Price level increase real GDP no change, Price level no change real GDP decrease, Price level no change

Real GDP decrease, Price level increase

In the short run, how will an increase in aggregate demand most likely affect real GDP and the overall price level? Real GDP increase, Price level no change Real GDP no change, Price level increase Real GDP decrease, Price level increase Real GDP increase, Price level increase

Real GDP increase, Price level increase

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? A congressional proposal to incur a federal surplus to be used for the retirement of public debt. Reductions in agricultural subsidies and veterans' benefits. Postponement of a highway construction program. Reductions in federal tax rates on personal and corporate income.

Reductions in federal tax rates on personal and corporate income.

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual would be classified as a discouraged worker? Jeanette George Ricardo Mollie

Ricardo

Which of the following institutions oversees the safety and stability of the U.S. banking system? Federal Financial Institutions Examination Council Office of the Comptroller of the Currency Federal Open Market Committee The Federal Reserve

The Federal Reserve

When comparing an increase in government spending G, with an increase in private investment I; which of the following is true Government spending will increase AD; private investment decreases AD. They both increase aggregate demand Government spending is inflationary, private investment is not Government spending must equal taxes, private investment must equal savings

They both increase aggregate demand

Which of the following is true in the short run when comparing an increase in government spending to an increase in private investment spending? Government spending will increase aggregate demand: private investment spending will decrease aggregate demand. Government spending is not inflationary; private investment spending is Government spending must equal taxes: private investment spending must equal savings They will both increase aggregate demand.

They will both increase aggregate demand.

APPLYING IT!!! Labor market and Goods market The Government decides to raise minimum wage to $20/hr nationwide and in general many other wages increase as well. This leads to costs increases for businesses. This, in general, leads to a decrease in supply in most markets. What is the likely overall Macroeconomic effect of this policy (in general). Choose the BEST answer Higher Inflation all of the other choices will likely occur GDP Decrease Higher Unemployment

all of the other choices will likely occur

A ______________________ means that government spending and taxes are equal. contractionary fiscal policy fiscal budget balanced budget discretionary fiscal policy

balanced budget

According to the Bureau of Labor Statistics, to be officially unemployed a person must: be waiting to be called back from a layoff. be in the labor force be 21 years of age or older have lost a job

be in the labor force

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. regressive tax budget surplus budget deficit corporate tax

budget deficit

If the Government is spending more than it is receiving in tax revenue it is running a: budget for growth balanced budget budget surplus budget deficit

budget deficit

Recurring upswings and downswings in an economy's real GDP over time are called business cycles. recessions. output yo-yos. total product oscillations.

business cycles.

A central bank that wants to increase the quantity of money in the economy will: buy bonds in open market operations. reverse quantitative easing. raise the discount rate. sell bonds in open market operations.

buy bonds in open market operations.

How are the specific interest rates for the lending and borrowing markets determined? through open market operations by altering the discount rate U.S. Treasury Department Board policy by the forces of supply and demand

by the forces of supply and demand

GDP excludes expenditures for: government purchases of military equipment new housing additions to inventories corporate stock

corporate stock

Given the information below answer the questions: Unemployed: 7 Total Population: 145 Employed: 95 Discouraged Workers: 3 Refer to the given information. If the natural rate of unemployment in Scoob is 5 percent, then: structural unemployment is about 3 percent frictional unemployment is about 2 percent cyclical unemployment is about 2 percent. hidden unemployment is about 5 percent.

cyclical unemployment is about 2 percent.

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced: inflation of 4 percent inflation of 3.33 percent deflation of 4 percent deflation of 3.33 percent

deflation of 3.33 percent

Fiscal policy refers to the: altering of the interest rate to change aggregate demand. deliberate changes in government spending and taxes to achieve greater equality in the distribution of income. deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level. fact that equal increases in government spending and taxation will be contractionary.

deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level.

The phrase "too much money chasing too few goods" best describes: the GDP gap the inflation premium cost-push inflation. demand-pull inflation.

demand-pull inflation.

A higher price for inputs will: discourage production lowering AS increase household consumption increasing AD make large businesses stronger increasing AS increase government tax revenues making the economy stronger increasing AS

discourage production lowering AS

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as: structurally unemployed. not in the labor force. employed frictionally unemployed.

employed

Free trade: encourages growth by promoting the rapid spread of new inventions and innovations. encourages growth by effectively eliminating all patent and copyright barriers to growth. discourages growth compared to situations where the government strongly controls foreign trade. discourages growth by increasing competitive pressures on domestic firms.

encourages growth by promoting the rapid spread of new inventions and innovations.

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? discretionary standardized contractionary expansionary

expansionary

hyper-inflation is extremely high rates of inflation stable relatively low inflation an increase in the value of money extreme deflation

extremely high rates of inflation

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: follow tight monetary policy. follow expansionary monetary policy. follow quantitative easing policy. follow loose monetary policy.

follow tight monetary policy.

On a graph showing the PPC, if a point is shown starting inside the PPC then a second point at a later date is shown on the PPC. Which of the following changes in the unemployment rate most likely shows this change. from 3.8% to 6.5% from 6.5% to 3.8% from 1.1% to - 2.3% from 6.5% to 6.6%

from 6.5% to 3.8%

Part-time workers who want full-time work are counted as: fully employed and therefore the official unemployment rate may overstate the level of unemployment unemployed and therefore the official unemployment rate may understate the level of unemployment. fully employed and therefore the official unemployment rate may understate the level of unemployment. unemployed and therefore the official unemployment rate may overstate the level of unemployment

fully employed and therefore the official unemployment rate may understate the level of unemployment

mark the one components that does NOT lead directly to LONG RUN economic growth government control over business increase in human resources and natural resources increase in capital increase in technology

government control over business

Other things equal, a reduction in personal and business taxes can be expected to: increase aggregate demand and decrease aggregate supply. decrease aggregate demand and increase aggregate supply. decrease both aggregate demand and aggregate supply. increase both aggregate demand and aggregate supply.

increase both aggregate demand and aggregate supply.

An increase in the incomes of U.S. trading partners would cause the U.S aggregate demand to: decrease causing a recession not change but change aggregate supply only increase causing economic growth increase causing unemployment to increase

increase causing economic growth

For an economy to increase investment, it must: buy more stocks and bonds. increase saving. increase present consumption. increase nominal GDP.

increase saving.

Over the past several decades, the percentage of women in the paid U.S. workforce has: decreased because relatively more women are staying home to raise their children. increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors. increased for unmarried women but decreased for married women. increased in spite of declining wages for women.

increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas this year: left nominal GDP unchanged but increased real GDP by $20,000. increased nominal GDP by $120,000 and increased real GDP by $100,000. increased nominal GDP by $120,000 but left real GDP unchanged. increased nominal GDP by $20,000 but left real GDP unchanged.

increased nominal GDP by $20,000 but left real GDP unchanged.

The crowding-out effect of expansionary fiscal policy suggests that: it is very difficult to have excessive aggregate spending in the U.S. economy. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment. consumer and investment spending always vary inversely

increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.

APPLYING IT!!! Goods market If the country is producing efficiently (on the PPC) and the actual production keeps growing, people's money income increases. This increase in income can lead to increases in the demand for most goods in the economy. This can lead workers to request higher wages to match the price increases. When output prices and input prices are raising we call this unfair as businesses take advantage deflation unemployment inflation

inflation

inflation is measured by the inflation rate comaring the housing prices from one time period to another Real GDP growth rate unemployment rate

inflation rate

a regressive tax is one for which does not exist people with higher incomes pay a larger share of their income in tax means rich people pay a lower part of income earned in taxes earned income tax is an example of it

means rich people pay a lower part of income earned in taxes earned

Cost-push inflation: is a mixed blessing because it has positive effects on real output and employment is caused by excessive total spending shifts the nation's production possibilities curve leftward moves the economy inward from its production possibilities curve.

moves the economy inward from its production possibilities curve.

My Florida Everblades ticket prices increased. Is that inflation? yes if the price of beer increases too yes if the price of beer and parking increase too yes always true no

no

APPLYING IT!!! Labor market and Goods market The Government decides to raise minimum wage and in general many other wages increase as well. This leads to costs increases for businesses. This, in general, leads to a decrease in supply in most markets. What happens to the prices and quantities in most of these markets price increase, quantity decrease price increase, quantity increase price decrease, quantity decrease price decrease, quantity increase

price increase, quantity decrease

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

productive but is excluded from GDP because no market transaction occurs.

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. proportional tax progressive tax regressive tax excise tax

progressive tax

Banks and other financial institutions: often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods. promote economic growth by helping to direct household saving to businesses that want to invest. lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity. are the primary investors in equipment, factories, and other capital goods.

promote economic growth by helping to direct household saving to businesses that want to invest.

Mark what is NOT true of the crowding out effect will slow the economy and may lower GDP proves that increasing government is always beneficial describes lowering private business investment due to large budget deficits caused by large budget deficits

proves that increasing government is always beneficial

contractionary fiscal policy includes being used to fight unemployment raise personal taxes cuts in business taxes increased federal government spending

raise personal taxes

What are the options for the President and congress to reduce inflation raise taxes; lower Gov spending raise taxes; raise Gov spending lower taxes; lower Gov spending increase money supply

raise taxes; lower Gov spending

Each year, the government borrows funds from U.S. citizens and foreigners to cover its budget deficits. How does it do this? selling government bonds and securities (Treasury bonds, notes, and bills) selling land raising taxes borrowing money from banks directly

selling government bonds and securities (Treasury bonds, notes, and bills)

The change in real GDP is not an accurate measure of the change in economic welfare because, for example: Government spending is not counted some production creates pollution expenditures for personal services are excluded the price level changes over time

some production creates pollution

Which of the following best explains why a $7 billion tax cut can lead to a $9 billion increase in consumer spending in the short run? Tax cuts reduce government spending, which encourages consumer spending. tax cuts increase government transfer payments, which leads to higher national income and additional spending. tax cuts reduce interest rates, which stimulates consumer spending and borrowing. tax cuts increase disposable income, which leads to higher national income and additional consumer spending

tax cuts increase disposable income, which leads to higher national income and additional consumer spending

If intermediate goods and services were included in GDP: the GDP would then have to be deflated for changes in the price level. the GDP would be overstated. the GDP would be understated. nominal GDP would exceed real GDP.

the GDP would be overstated.

When the central bank lowers the reserve requirement on deposits: the money supply increases and interest rates decrease. the money supply decreases and interest rates increase. the money supply and interest rates increase. the money supply and interest rates decrease.

the money supply increases and interest rates decrease.

The limit to total production capacity in the economy is set by: the amount of money in circulation the quantity and quality of its productive resources. the amount of government spending and taxation business demand for goods and services.

the quantity and quality of its productive resources.

Because economists associate a rise in confidence with higher consumption and investment demand, it will lead to an increase in the AD to a higher quantity of output and a higher price level, to a lower quantity of output and a lower price level, to a lower quantity of output and a higher price level, to a higher quantity of output and a lower price level,

to a higher quantity of output and a higher price level,

The unemployment rate measures: unemployed workers as a percentage of the population. the number of people unemployed divided by the number of people employed. unemployed workers as a percentage of the labor force. unemployed workers as a percentage of the population age over-sixteen.

unemployed workers as a percentage of the labor force.

On a graph showing the PPC, if a point is shown inside the PPC what problem is most likely occurring? unemployment inflation pollution income inequality

unemployment