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Macro Final

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In 2017, US nominal GDP is $20 trillion. In 2018, US nominal GDP is $20.5 trillion. The growth rate of nominal GDP is (a) 2.50% (b) 5.13% (c) 2.43% (d) 6.45%

(a) 2.50%

Jim is asking to borrow $1000 from Mia. Both of them agree that the fair real interest rate should be 3% to compensate Mia for the delayed used of her cash, as well as the risk associated with the loan. If Mia expects prices a year from now does not change, what interest rate will she demand from Jim? (a) 3% (b) 2% (c) 4% (d) Insufficient information

(a) 3%

Suppose the MPC of a hypothetical economy is 0.75. What is the value of the multiplier? (a) 4 (b) 2.5 (c) 2 (d) 3

(a) 4

Suppose the MPC of a hypothetical economy is 0.75. What is the value of the multiplier? (a) 4 (b) 2.5 (c) 2 (d) 3

(a) 4

Given that the CPI in 2022 was about 274, and the current CPI in 2023 is 287. What is the inflation rate in 2023? (a) 4.7% (b) 3.8% (c) 2.2% (d) 1.5%

(a) 4.7%

What is a recession? (a) A business cycle in which real GDP declines (b) A business cycle in which inflation rate goes up (c) A business cycle in which real GDP increases (d) A business cycle in which inflation rate goes down

(a) A business cycle in which real GDP declines

An expansionary fiscal policy will be most effective (i.e. a given change in government spending or tax leads to the largest change in equilibrium GDP) in which of the following situation? (a) AS curve is flat (b) AS curve is upward-sloping (c) AS curve is vertical (d) They all have the same effect

(a) AS curve is flat

What happens when labor wage goes up? (a) AS curve shifts to the left (b) AS curve shifts to the right (c) Equilibrium GDP is higher (d) The recessionary gap is closed (or gets smaller)

(a) AS curve shifts to the left

What happens when the cost of production goes up? (a) AS curve shifts to the left (b) AS curve shifts to the right (c) Equilibrium GDP is higher (d) The recessionary gap is closed (or gets smaller)

(a) AS curve shifts to the left

Stagflation can occur (a) After the self-correcting mechanism adjust for an inflationary gap (b) After the self-correcting mechanism adjust for a recessionary gap (c) When the government cuts taxes (d) When the government raises taxes

(a) After the self-correcting mechanism adjust for an inflationary gap

Which of the following is an example of a contractionary fiscal policy? (a) An increase in personal income tax (b) A reduction in corporate tax (c) An increase in transfer payment (d) All of the above

(a) An increase in personal income tax

An average family in a hypothetical economy spend their money on pizza, clothes, and coffee. The cost in 2019 is: $10 for a pizza, $20 for 1 piece of clothing and $6 for a cup of coffee. Suppose that this family in 2019 consumes 10 pizzas, 20 pieces of clothing, and 5 cups of coffee per month. What is 2019 cost of living? Suppose cost of living in 2018 is 500, what is inflation rate in 2019? (a) Cost of living = 530, Inflation rate = 6% (b) Cost of living = 520, Inflation rate = 4% (c) Cost of living = 530, Inflation rate = -6% (d) Cost of living = 520, Inflation rate = -4%

(a) Cost of living = 530, Inflation rate = 6%

What is the equilibrium condition for the demand-side equilibrium? (a) GDP = Total expenditure (b) GDP = National Income (c) AD = Total expenditure (d) Inflation = 0

(a) GDP = Total expenditure

What is the outcome of an expansionary fiscal policy? (a) Higher GDP, higher price (b) Higher GDP, lower price (c) Lower GDP, higher price (d) Lower GDP, lower price

(a) Higher GDP, higher price

An advocate for the larger government would suggest (a) Increasing government expenditure (G) to correct for the recessionary gap (b) Reducing taxes to correct for the recessionary gap (c) Reducing taxes to correct for the inflationary gap (d) Increase government expenditure (G) to correct for the inflationary gap

(a) Increasing government expenditure (G) to correct for the recessionary gap

What can be the reason for nominal GDP grows at a faster rate than real GDP (a) Inflation (b) Deflation (c) By construction, nominal GDP always grows faster than real GDP (d) High unemployment

(a) Inflation

How does the self-correcting mechanism work to correct for an inflationary gap? (a) It shifts the AS curve to the left (b) It shifts the AS curve to the right (c) It shifts the AD curve to the left (d) It shifts the AD curve to the right

(a) It shifts the AS curve to the left

Which of the following contributed to the crisis in Greece in 2008? (a) Large budget deficit led to higher risk of default on government bonds (b) Government printed too much money that create high inflation (c) Government expenditure was too low so aggregate demand was very low (d) The government policy prevented trading with other counties

(a) Large budget deficit led to higher risk of default on government bonds

What is the result of a contractionary fiscal policy? (a) Lower GDP and lower price level (b) Higher GDP and higher price level (c) Lower GDP and higher price level (d) Higher GDP and lower price level

(a) Lower GDP and lower price level

Suppose the econometrician came up with the consumption function as: C = 120 + 0.6DI. If people disposable income increase by $5000. What is the MPC, and what would be the change in consumption level predicted by the model? (a) MPC = 0.6, consumption increases by $3000 (b) MPC = 0.4, consumption increases by $2000 (c) MPC = 120, consumption increases by $2400 (d) MPC = 80, consumption increases by $1500

(a) MPC = 0.6, consumption increases by $3000

Which of the following is true? (a) National Income always equals GDP (b) Aggregate Demand always equals GDP (c) National Income always equals Total expenditure (d) GDP always equals Total expenditure

(a) National Income always equals GDP

Suppose that foreign prices increase. Which of the followings is most likely to happen? (a) Net exports increase (b) Net export decreases (c) No impact on net exports (d) Exports will be equal to imports

(a) Net exports increase

What was the criticism of higher unemployment insurance under the CARES Act? (a) People had fewer incentives to look for a job (b) The amount was too low (c) It didn't target the right group of people (d) The implementation was delayed significantly

(a) People had fewer incentives to look for a job

How to convert nominal GDP to real GDP? Let Pt denote price level at time t (a) Real GDP = Nominal GDP divided by price level (b) Real GDP = Nominal GDP divided by inflation rate (c) Real GDP = Nominal GDP subtract price level (d) Real GDP = Nominal GDP multiplied by price level

(a) Real GDP = Nominal GDP divided by price level

Looking at the indicators of macroeconomics, an analyst reports that the economy this year is twice as productive as it was last year. Which of the following is most likely to be true? (a) Real GDP double what it was last year (b) Nominal GDP double what it was last year (c) Inflation is half of what it was last year (d) Unemployment is half of what it was last year

(a) Real GDP double what it was last year

Suppose the economy experiences a recessionary gap, what does the self-correcting mechanism lead to? (a) Reduction in nominal wage and other inputs' prices (b) Higher unemployment rate (c) Aggregate demand shifts to the right (d) Higher price

(a) Reduction in nominal wage and other inputs' prices

An upward sloping AS curve (neither horizontal nor vertical) will lead to (a) Smaller multiplier compared to analysis without AS curve (b) Larger multiplier compared to analysis without AS curve (c) No difference in multiplier compared to analysis without AS curve (d) Multiplier = 0

(a) Smaller multiplier compared to analysis without AS curve

Which of the following item(s) is counted in the computation of GDP? (a) The value of vegetable bought from a local supermarket (b) The value of McDonald's fries sold in international stores (c) The value of almond milk a local Starbuck bought to make Frappuccino (d) All of the above

(a) The value of vegetable bought from a local supermarket

In 2022, the total government is estimated to spend $5.8 trillion. And the tax revenue is approximately $4.8 trillion. That means in 2022, we have a budget of (a) deficit, $1 trillion (b) surplus, $1 trillion (c) deficit, $2 trillion (d) surplus, $2 trillion

(a) deficit, $1 trillion

Suppose current disposable income is $5,000 and the marginal propensity to consume is 0.5. If expected disposable income a year from today is $6,000 (i.e. change in consumption ∆DI = $1000), what is the expected increase in consumption level (∆C)? (Keeping everything else constant) (a) $400 (b) $500 (c) $1000 (d) $1500

(b) $500

If real GDP in 2023 was $27 trillion and GDP is expected to grow at an annual rate g = 1%. What is the expected real GDP in 2024? (a) 27.15% (b) 27.27% (c) 27.31% (d) 27.45%

(b) 27.27%

Suppose the population of a hypothetical country consists of: 100 people currently working; 20 college students, currently not working, not looking for a job; 5 college students, currently not working, but are looking for internships/jobs; 10 people serving in the military; 15 people retired in a nursing home; 10 underaged kids; What is the unemployment rate? (a) 3.5% (b) 4.8% (c) 5.6% (d) 7.5%

(b) 4.8%

Suppose that the national debt level in 2022 was $30 trillion. Suppose that on average the interest rate government promised to pay on the debt is 1.5%, such that this year interest payment is $450 billion, which of the following budget can reduce the national debt? (a) A budget deficit of $500 billion (b) A budget surplus of $500 billion (c) A budget deficit of $300 billion (d) A budget surplus of $300 billion

(b) A budget surplus of $500 billion

What is the expenditure schedule? (a) A graphical model showing the relationship between GDP and National Income (b) A graphical model showing the relationship between GDP and Total expenditure (c) A graphical model showing the relationship between GDP and Price level (d) A graphical model showing the relationship between real GDP and nominal GDP

(b) A graphical model showing the relationship between GDP and Total expenditure

Which of the following is an example of structural unemployment? (a) A person becomes unemployed during transition between jobs (b) A person becomes unemployed because their skill is no longer in demand (c) A person becomes unemployed because of a financial crisis that affects the macroeconomics (d) A person becomes unemployed during paternity leave

(b) A person becomes unemployed because their skill is no longer in demand

Price level (CPI) is (a) The transaction price of selling/buying a particular product (b) An index that represents the average cost of living (c) A weighted average of all prices of products in a particular category (d) All of the above

(b) An index that represents the average cost of living

Which of the following is NOT considered a part of labor force? (a) An accountant working for Turbotax (b) An Uber driver (c) An elderly in a nursing home (d) None of the above

Which of the following is counted in aggregate demand? (Select all that apply) (a) James purchases a house worth $500,000 that was previously owned by David (b) Drexel University buys 500 brand new computers (c) Kate invests $1,000 in Apple Inc.'s stocks (d) Government spends $1 million to build a new hospital

(b) Drexel University buys 500 brand new computers (d) Government spends $1 million to build a new hospital

The US's nominal GDP in 1959 is $5 trillion while its nominal GDP in 2019 is approximately $21. That means the US economy is 4 times more productive in 2019 (a) True (b) False

(b) False

The annual growth rate of real GDP and potential real GDP have to be the same in the short run (a) True (b) False

(b) False

What is the outcome of the self-correcting mechanism correcting for a recessionary gap? (a) Higher GDP, higher price (b) Higher GDP, lower price (c) Lower GDP, higher price (d) Lower GDP, lower price

(b) Higher GDP, lower price

Which of the following is true? (a) New home purchases are considered as part of consumer expenditure (b) House rental payment is considered as part of consumer expenditure (c) Increases in inventories do not have any effect on aggregate demand (d) All of the above

(b) House rental payment is considered as part of consumer expenditure

What does automatic stabilizer do? (a) It increases the sensitivity of real GDP with respect to fluctuations in total expenditure (b) It reduces the sensitivity of real GDP with respect to fluctuations in total expenditure (c) It enhances the impact of a particular fiscal policy on the economy (d) It reduces the delay in fiscal policy implementation

(b) It reduces the sensitivity of real GDP with respect to fluctuations in total expenditure

What is relative price? (a) It's the price of a product after adjusting for inflation (b) It's the price of a product in terms of another product (c) It's the price of a product in terms of its base year's price (d) It's the price of a product in foreign currency

(b) It's the price of a product in terms of another product

What of the following occurs in a recession? (a) Higher GDP (b) Lower GDP (c) Negative GDP growth rate (d) Positive GDP growth rate

(b) Lower GDP (c) Negative GDP growth rate

In case of a recessionary gap, the fiscal government should (a) Increase taxes (b) Reduce taxes (c) Decrease spending (d) Print more money

(b) Reduce taxes

The difference between a self-correcting mechanism and a fiscal policy to close the recessionary gap is the following: Self-correcting mechanism shifts the supply curve ____________ resulting in __________ output and price. Fiscal policy shifts the demand curve __________ result in ________ output and price (a) Right, higher, outward, lower (b) Right, lower, outward, higher (c) Left, higher, inward, lower (d) Left, lower, inward, higher

(b) Right, lower, outward, higher

Which of the following goods/services would be counted in GDP (a) Milk purchased by Starbucks to make smoothie (b) Textbook bought by a college student (c) Apples that a farmer grows and consumes by himself (d) Profit of investment made oversea

(b) Textbook bought by a college student

Which of the following statements is true? Suppose the actual real GDP in equilibrium is $2.5 trillion, while the potential GDP is $2 trillion. a) The economy is experiencing a recessionary gap of $500 billion (b) The economy is experiencing an inflationary gap of $500 billion (c) The economy is experiencing a recessionary gap of $4.5 trillion (d) The economy is experiencing an inflationary gap of $4.5 trillion

(b) The economy is experiencing an inflationary gap of $500 billion

What is pure inflation? (a) An inflation rate equals 0 (b) The inflation occurs when every product in the economy has the same change in price (c) The inflation occurs when the relative price of a pair of product increases over time (d) The targeted inflation rate of government

(b) The inflation occurs when every product in the economy has the same change in price

Which of the following can be example of automatic stabilizer? (a) Fixed taxes such as property tax or poll tax (b) Unemployment insurance (c) Higher government expenditure (d) Higher exchange rate

(b) Unemployment insurance

Which of the following is NOT a type of unemployment? (a) Structural unemployment (b) Voluntary unemployment (c) Cyclical unemployment (d) Frictional unemployment

(b) Voluntary unemployment

In 2022, the government announced their expected budget for 2023 as follow: G = $5 trillion and T = $6 trillion. That means the government expected to have a budget of (a) deficit, $1 trillion (b) surplus, $1 trillion (c) deficit, $11 trillion (d) surplus, $11 trillion

(b) surplus, $1 trillion

Suppose that the consumption level is $200 billion if disposable income is $500 billion and consumption level is $400 billion if disposable income is $800 billion. What is the marginal propensity to consume? (a) 0.43 (b) 0.50 (c) 0.67 (d) 0.75

The economy experiences a recessionary gap of $100 billion. Suppose multiplier = 5. What is the additional spending the government should spend to close the recessionary gap? (a) 10 million (b) 15 million (c) 20 million (d) 25 million

What is stagflation? (a) A combination between an increase in GDP and inflation (b) A combination between an increase in GDP and deflation (c) A combination between a decrease in GDP and inflation (d) A combination between a decrease in GDP and deflation

Suppose that prices of Japan manufactured car decreases. Which of the followings is most likely to happen to the AD of the United States? (a) AD decreases because of lower Consumption (b) AD increases because of higher Imports (c) AD decreases because of lower Net Exports (d) AD increases because of lower Government Expenditure

In 2020, the government increased transfer payments (stimulus check) to help the economy. The policy will be the LEAST effective when: (a) AS curve is flat (b) AS curve is upward sloping (c) AS curve is vertical (d) They all have the same elect

Which of the following can lead to an increase in the current year Consumption level? (a) An increase in income tax (b) An increase in interest rate (c) An increase in expected future income (d) All of the above

Suppose the economy experiences an inflationary gap. Which of the following can close or reduce the gap (a) An increase in government spending (b) An increase in wage (c) An increase in tax (d) An increase in price level

What factor can lead to a SHIFT in the AS curve? (a) Change in price level (b) Change in government expenditure (c) Change in input cost (d) Change in consumer's disposable income

Which type of unemployment can NOT occur when the economy is at full employment? (a) Frictional unemployment (b) Structural unemployment (c) Cyclical unemployment (d) All types of unemployment must be at zero when the economy is at full employment

Which of the following can SHIFT the consumption function upward? (a) Lower income tax rate (b) Inflation (c) Deflation (d) Receiving a stimulus check

Which of the following statement is true? (a) Equilibrium GDP can increase only if consumption level increases. It will not change if any other components of aggregate demand increases. (b) Equilibrium GDP can increase only if all components of aggregate demand increases (c) Equilibrium GDP can increase if any component of aggregate demand increases, and other components stay the same (d) Equilibrium GDP is a fixed number and cannot increase

Suppose the government is voting on a new scal policy to reduce taxes by $100 million. They want to know what would be the impact of this new policy on the equilibrium GDP. Suppose they use the following model: C = 25 + 0.8DI. What is the predicted change in equilibrium GDP if government decides to implement this tax cut? (a) GDP increases by $200 million (b) GDP increases by $300 million (c) GDP increases by $400 million (d) GDP increases by $500 million

Which of the following shifts the AD curve to the left? (a) Higher labor wage (b) Higher government expenditure (c) Higher taxes (d) Higher net exports

An advocate for the larger government would suggest to (a) Increase government expenditure (G) to correct for an inflationary gap (b) Reduce government expenditure (G) to correct for inflationary gap (c) Increase taxes to correct for inflationary gap (d) Reduce taxes to correct for inflationary gap

When the economy experiences a recessionary gap, government wants to encourage more total expenditure (either from C or G). Suppose the consumption function is C = 50 + 0.6DI. Which of the following would be most effective? (a) Reducing taxes by $100 million (b) Increasing transfer payments to consumers by $100 million (c) Increasing Government expenditure by $100 million (d) They all lead to the same increase in total expenditure (AD)

The difference between a self-correcting mechanism and a fiscal policy to close an inflationary gap is the following: Self-correcting mechanism shifts the supply curve to the _____ resulting in higher output and ______ price. Fiscal policy shifts the demand curve to the ________ resulting in higher output and ______ price. a) Right, higher, right, lower (b) Right, lower, right, higher (c) Left, higher, left, lower (d) Left, lower, left, higher

What is most likely to be the fiscal policy if the economy is experiencing an inflationary gap, and the leader of the country is an advocate for a smaller government (a) Reduce taxes (b) Increase taxes (c) Lower Government expenditure (d) Higher Government expenditure

Which of the following is true regarding the difference between macroeconomics and microeconomics? (a) They are two totally different, unrelated fields (b) Both fields study individual consumers and firms, but they address different questions (c) Microeconomics focuses on decisions of individual units, while macroeconomics focuses on behavior of entire economies (d) Both b and c are correct

(c) Microeconomics focuses on decisions of individual units, while macroeconomics focuses on behavior of entire economies

Equilibrium GDP is efficient when (a) Aggregate demand = Total expenditure (b) National Income = Total expenditure (c) Potential GDP = Equilibrium GDP (d) Aggregate demand = Aggregate Supply

Which of the following is NOT a limitation of GDP (a) It places no value on leisure (b) It is not a measure of well-being (c) Sometimes it declines (d) It does not take into account pollution or any other non-market activities

What is potential GDP? (a) The level of GDP when frictional unemployment is zero (b) The level of GDP when structural unemployment is zero (c) The level of GDP when cyclical unemployment is zero (d) The level of GDP when unemployment rate is zero

When does the AS have the greatest impact on the multiplier (a) When AS is flat (b) When AS's slope is 0 (c) When AS is vertical (d) AS does not have any impact on the multiplier

Abby put her money in a investment account that earns her annual nominal interest rate of 5%. If the inflation rate is 8%, what is Abby's real interest rate? (a) 1.5% (b) -1.5% (c) 3% (d) -3%

(d) -3%

To design the appropiate scal policy, we need to know the measure of the economy's multiplier. In the most simple model without the AS curve, we measure the multiplier = 10. Suppose that, in reality, the Aggregate Supply curve is an upward sloping curve, which of the following is most likely to be the value of the actual multiplier with AS curve incorporated? (HINT: think about how the AS affect the multiplier) (a) 20 (b) 15 (c) 10 (d) 5

(d) 5

Suppose that the real GDP in 2021 was $22 trillion and the real GDP in 2020 was $20.9 trillion. What was the growth rate of nominal GDP in 2021? (a) 1.1% (b) 3.6% (c) 4.2% (d) 5.3%

(d) 5.3%

Due to the stay-at-home order during the COVID pandemic in 2020, Alison became unemployed and therefore needed to borrow money from the bank and promised to pay back the money in 1 year. The bank expected inflation rate to be 5%. If the bank wanted to collect 3% real interest rate, how much nominal interest rate should they charge Alison for the loan? (a) 2% (b) 3% (c) 5% (d) 8%

(d) 8%

Marginal propensity to consume is (a) The ratio of the change in consumption, over the change in disposable income (b) The slope of the consumption function (c) How much more consumers will spend if their disposable income increases by $1 (d) All of the above

(d) All of the above

What are some limitations of the fiscal policy? (a) Effects of fiscal policies might not be seen immediately (b) Expansionary policies can lead to large budget deficits, which can have huge, long-run costs to the government (c) Some features of the economy (multiplier, potential GDP,...) cannot be measured without error (d) All of the above

(d) All of the above

What are the issues of the fiscal policy? (a) The actual value of the multiplier is not known with certainty (b) The fiscal policy is usually implemented at a lag (c) There might be political interference (d) All of the above

(d) All of the above

What are the tools the fiscal government can use to correct for market's inefficiency? (a) Taxes (b) Transfer payment (c) Government expenditure (d) All of the above

(d) All of the above

What can the fiscal authority use to increase aggregate demand? (a) Increase government expenditure (b) Increase transfer payment (c) Reduce tax payment (d) All of the above

(d) All of the above

What is issue of the self-correcting mechanism on inflationary gap? (a) It results in even higher price (b) It creates stagflation (c) It might restrain future economic growth (d) All of the above

(d) All of the above

Which of the following is limitation of GDP? (a) It does not consider non-market activities (b) It does not put any value on leisure c) Transactions involving pollution or warfare are counted in GDP (d) All of the above

(d) All of the above

Which of the following is the drawback of the self-correcting mechanism? (a) It takes a long time to bring the economy back to potential level (b) Wage and input prices cannot adjust flexibly (especially downward) (c) Closing an inflationary gap leads to stagflation (d) All of the above

(d) All of the above

Which of the following is true? (a) Potential GDP is obtained when the economy is producing at maximum capacity (i.e. adding night shifts or overtime) (b) The economy can never produce output level beyond its potential GDP level 1 (c) When the economy grows faster than its potential level, unemployment rate rises (d) Given the same number of hours input and technology, level of output rises if the economy obtains more capital

(d) Given the same number of hours input and technology, level of output rises if the economy obtains more capital

If the economy's multiplier is 10. Suppose the net export increase by $10 billion, how does the equilibrium GDP change? (a) Increase by $2 billion (b) Increase by $10 billion (c) Increase by $50 billion (d) Increase by $100 billion

(d) Increase by $100 billion

What is Stagflation? (a) Periods of extremely slow growth (b) Periods of extremely high inflation (c) Periods that follow a recessionary gap (d) Periods of both slow growth and high inflation

(d) Periods of both slow growth and high inflation

An advocate for a smaller government would suggest (a) Increase tax to correct for an inflationary gap (b) Reduce tax to correct for an inflationary gap (c) Increase government spending to correct for an inflationary gap (d) Reduce government spending to correct for an inflationary gap

(d) Reduce government spending to correct for an inflationary gap

when talking about inflation, we say one limitation of inflation is the arbitrary and uncontrolled redistribution of wealth. What do we mean by that? (a) Relative price changes redistribute wealth from the poor to the rich (b) Relative price changes redistribute wealth from the rich to the poor (c) Relative price changes redistribute wealth from domestic consumers to foreign consumers (d) Relative price changes redistribute wealth from one type of producer to another product's producer

(d) Relative price changes redistribute wealth from one type of producer to another product's producer

Which of the following policy can help the economy during a recession? (a) Higher tax rate (b) Lower transfer payment (c) Lower government expenditure (d) Unemployment insurance

(d) Unemployment insurance

What can happen when GDP > AD? (a) Unemployment rate is too high, and firms have too many inventories they can't sell (b) Unemployment rate is too low and rms have too many inventories they can't sell (c) Unemployment rate is too high, and firms have too little inventories (d) Unemployment rate is too low, and firms have too little inventories

(d) Unemployment rate is too low, and firms have too little inventories

Which of the following statement is true? (a) A contractionary fiscal policy has no impact on the budget (b) A larger budget surplus can only be caused by a contractionary fiscal policy (c) An expansionary fiscal policy can only be associated with a budget deficit (d) Whether we have a budget deficit or surplus depends on not only the fiscal policy, but also the realized real GDP

(d) Whether we have a budget deficit or surplus depends on not only the fiscal policy, but also the realized real GDP

Which of the following does NOT lead to an increase in potential GDP? (a) Capital stocks of the economy increases (b) R&D leads to new innovations that make computers and machines more efficient (c) Increase in the labor force (d) Workers working over-time

(d) Workers working over-time

What is limitation of price index (a) There is no such thing as a "perfect price index" that is correct for every consumer (b) Consumer might update their basket over time (c) Prices of products in the basket might change (d) a and b are correct

(d) a and b are correct

Suppose that in an analysis without the AS curve, we determine that the multiplier is 5. If the actual AS curve is at, the actual value of the multiplier is ___. If the actual AS curve is vertical, the actual value of the multiplier is ____.

5, 0

Suppose the real GDP in the US is $16 trillion in 2012 and $17 trillion in 2013. The growth rate of real GDP in 2013 is _______. Assume that growth rate of GDP is constant over time and is equal to what you've just computed. The prediction of GDP in 2022 is _____

6.25%, 29.34 trillion

Suppose the population of a hypothetical country consists of: 100 people currently working; 50 people within working age, not working and are actively seeking for a job; 30 people within working age, not working and have quit looking for jobs; 10 elderly people in a nursing home; 15 people under the legal working age. What is the unemployment rate? a) 33.33% b) 39.02% c) 44.44% d) 24.39%

a) 33.33%

If the economy experiences a recessionary gap, which of the following is true? a) actual GDP < potential GDP b) actual GDP > potential GDP c) total expenditure is too high d) total expenditure is too low

a) actual GDP < potential GDP

Given that the expenditure schedule following the equation: AD = 65 + 0.8Y. What is the multiplier of this economy? a) 3 b) 5 c) 7 d) 9

b) 5

Suppose the population of a hypothetical country consists of: 100 people currently working; 50 people within working age, not working and are actively seeking a job; 30 people within working age, not working and have quit looking for jobs; 10 elderly people in a nursing home; 15 people under the legal working age. What is the labor force participation rate? a) 55.56% b) 83.33% c) 87.80% d) 73.17%

b) 83.33%

Suppose the population of a hypothetical country consists of: 100 people currently working; 20 college students, currently not working, not looking for a job; 5 college students, currently not working, but are looking for internships/jobs; 10 people serving in the military; 15 people retired in a nursing home; 10 underaged kids; What is the labor force participation rate? a) 75% b) 84% c) 89% d) 91%

b) 84%

Which of the following is an example of a contractionary fiscal policy? (a) A reduction in the income tax rate (b) A reduction in transfer payment (c) A reduction in interest rate (d) An increase in government expenditure

b) A reduction in transfer payment

Which of the following statements is true? (a) Aggregate demand curve shifts left to correct for a recessionary gap (b) Aggregate supply curve shifts right to correct for an inflationary gap (c) An inflationary gap occurs when potential output is lower than equilibrium output (d) All of the above

c) An inflationary gap occurs when potential output is lower than equilibrium output

When is the level of GDP efficient? a) when national income = total expenditure b) when aggregate demand = GDP c) when actual GDP = potential GDP d) when aggregate supply = aggregate demand

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