macro final pt2

Refer to the given diagram. The marginal propensity to save is: CB/CF. CD/EF. CB/AF. EF/CB

CD/EF.

The consumption and saving schedules reveal that the: MPC is equal to or greater than one at all income levels. MPC is greater than zero but less than one. APS is positive at all income levels. MPC and APC are equal at the point where the consumption schedule intersects the 45-degree line.

MPC is greater than zero but less than one.

A college graduate using the summer following graduation to search for a job would best be classified as: not officially a member of the labor force. a part of cyclical unemployment. a part of frictional unemployment. a part of structural unemployment

a part of frictional unemployment.

The GDP gap measures the difference between: NI and PI. NDP and GDP. nominal GDP and real GDP. actual GDP and potential GDP.

actual GDP and potential GDP.

Refer to the table. Between years 1 and 2, real GDP per capita grew by approximately __________ percent in Alta. 5 4 3 10

4

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately: 37 percent. 80 percent. 160 percent. 44 percent.

44 percent.

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about: 10-11 years. 5-6 years. 19-20 years. 8-9 years.

8-9 years.

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table. The total change in income resulting from the initial change in investment will be: $80. $20. $200. $100.

$100.

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is: zero dollars. $200,000. $300,000. $100,000.

$200,000.

Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential R GDP 200 Natural Rate of Unemply 6% Actural Rate of Unemply 12% Refer to the given data. The amount of output being forgone by the economy is: $18 billion. $24 billion. $12 billion. $15 billion.

$24 billion.

Answer the question on the basis of the following data. All figures are in billions of dollars. Personal Taxes 40 Social Security Contributions 15 Taxes on the Production 20 Refer to the data. DI is: $329. $284. $274. $402.

$274.

The multiplier is: 1/MPC. 1/(1 - MPS). 1/(1 + MPC). 1/MPS.

1/MPS.

Between 1950 and 2012, U.S. real GDP grew at an average annual rate of about: 3.1 percent. 5.1 percent. 8.6 percent. 2.0 percent.

3.1 percent.

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is: 240. 300. 200. 100.

300.

Refer to the table. Per capita GDP was about: $303 in year 3 in Zorn. $200 in year 1 in Zorn. $5 in year 2 in Alta. $105 in year 3 in Alta.

$303 in year 3 in Zorn.

Refer to the given data. If disposable income was $325, we would expect consumption to be: (DI) (Consumption) 200 205 225 225 250 245 $20. $290. $315. $305.

$305.

Answer the question on the basis of the following data. All figures are in billions of dollars. Personal Taxes 40 Social Security Contributions 15 Taxes on the Production 20 Refer to the data. NI is: $372. $362. $402. $447.

$402.

Answer the question on the basis of the following data. All figures are in billions of dollars. Personal Taxes 40 Social Security Contributions 15 Taxes on the Production 20 Refer to the data. GDP is: $422. $492. $390. $417.

$417.

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is: $510 billion. $490 billion. $990 billion. $10 billion.

$510 billion.

Answer the question on the basis of the following national income data for the economy. All figures are in billions of dollars. Personal Consump 400 Gov Purchases 128 Gross Private Dom 88 Refer to the data. The national income is: $580. $530. $561 $573.

$580.

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by: $6 billion. $3 billion. $2/3 billion. $2 billion

$6 billion.

Use the list below to answer the following question: 1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Refer to the list. As distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are: 1, 2, 5, and 6 only. 2, 4, 5, and 6 only. 2, 5, and 6 only. 1, 3, and 4 only.

1, 2, 5, and 6 only.

At an annual growth rate of 7 percent, real GDP will double in about: 11½ years. 10 years. 13½ years. 9 years

10 years.

Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = 200 Natural Rate of Unemply' = 6% Actual Rate of Unemply' = 12% Refer to the given data. The size of the negative GDP gap as a percent of potential GDP for the economy is: 12 percent. 9 percent. 15 percent. 6 percent.

12 percent.

Answer the question on the basis of the following information about a hypothetical economy: Refer to the given information. The unemployment rate is: 12.5 percent. 16.7 percent. 18.8 percent. 25 percent.

12.5 percent.

If the secular trend of labor productivity rises from 2 percent per year to 4 percent, the number of years that it will take for the standard of living to double will decline by about: 23.8 years. 5.2 years. 10.1 years. 17.5 years.

17.5 years.

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is: 10. 2. 3.33. 5.

2

Between 1950 and 2012, U.S. real GDP per capita grew at an average annual rate of about: 4.2 percent. 5.5 percent. 2.0 percent. 3.2 percent.

2.0 percent.

If the growth trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about: 17 years. 15 years. 23 years. 20 years.

23 years.

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2011): 8th and 6th, respectively. 5th and 7th, respectively. 9th and 10th, respectively. 1st and 1st, respectively.

9th and 10th, respectively.

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the: Bureau of Labor Statistics. Council of Economic Advisers. Bureau of Economic Analysis. National Bureau of Economic Research.

Bureau of Economic Analysis.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the information suggests that the production capacity in economy: B is growing more rapidly than that in either economy A or C. C is growing more rapidly than that in economy B. A is growing less rapidly than that in economy B. A is growing more rapidly than that in either economy B or C.

C is growing more rapidly than that in economy B.

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output? Agricultural commodities. Military goods. Textile products. c

Capital goods.

In a typical year, which of the following measures of aggregate output and income is likely to be the smallest? Gross domestic product. Personal income. Disposable income. National income.

Disposable income.

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result: GDP will tend to increasingly overstate the level of output through time. real GDP will rise more rapidly than nominal GDP. GDP will tend to increasingly understate the level of output through time. the accuracy of GDP will be unaffected through time.

GDP will tend to increasingly understate the level of output through time.

The given figure suggests that: as income increases, consumption decreases as a percentage of income. saving is zero at the $120 billion income level. as income increases, consumption decreases absolutely. consumption would be $60 billion even if income were zero.

as income increases, consumption decreases as a percentage of income.

What is the primary reason that changes in total spending lead to cyclical changes in output and employment? Government is unable to respond by changing the amount of money in circulation. Prices are flexible in the long run. Changes in total spending cause supply shocks that cause cyclical variation. Prices are sticky in the short run.

Prices are sticky in the short run.

Other things equal, which of the following would increase labor productivity the most? The increase in the stock of real capital exceeds the increase in inputs of labor. The stock of real capital and inputs of labor increase proportionately. The increase in inputs of labor exceeds the increase in the stock of real capital. Inputs of labor increase and the stock of real capital remains constant.

The increase in the stock of real capital exceeds the increase in inputs of labor.

Which of the following is an intermediate good? The purchase of a pizza by a college student. The purchase of baseball uniforms by a professional baseball team. The purchase of gasoline for a ski trip to Colorado. The purchase of jogging shoes by a professor.

The purchase of baseball uniforms by a professional baseball team.

Which of the following institutional arrangements is most likely to promote growth? Unrestricted trade between nations. All of these. Strong government control over resource allocation decisions. Patents and copyrights that expire quickly and are loosely enforced.

Unrestricted trade between nations.

In the treatment of U.S. exports and imports, national income accountants: add both exports and imports in calculating GDP. subtract exports, but add imports, in calculating GDP. subtract both exports and imports in calculating GDP. add exports, but subtract imports, in calculating GDP.

add exports, but subtract imports, in calculating GDP.

Investment spending in the United States tends to be unstable because: innovation occurs at an irregular pace. all of these contribute to the instability. expected profits are highly variable. capital goods are durable.

all of these contribute to the instability.

Most economists agree that the immediate cause of most business cycle variation is: an unexpected change in the productivity of workers. the growth and subsequent bursting of financial bubbles. an unexpected change in the level of total spending. the invention of new products.

an unexpected change in the level of total spending.

National income accountants define investment to include: any increase in business inventories. the purchase of any durable good, for example, an automobile or a refrigerator. the purchase of common or preferred stock. the addition of cash to a savings account.

any increase in business inventories.

Inflation is undesirable because it: reduces everyone's standard of living. arbitrarily redistributes real income and wealth. invariably leads to hyperinflation. usually is accompanied by declining real GDP

arbitrarily redistributes real income and wealth.

In national income accounting, the consumption category of expenditures includes purchases of: automobiles for personal use but not houses. both new and used consumer goods. consumer nondurable goods and services but not consumer durable goods. consumer durable and nondurable goods but not services

automobiles for personal use but not houses.

Real GDP per capita: cannot grow more slowly than real GDP. cannot grow more rapidly than real GDP. necessarily grows more rapidly than real GDP. can grow either more slowly or more rapidly than real GDP.

can grow either more slowly or more rapidly than real GDP.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are: capital goods and durable consumer goods. services and nondurable consumer goods. military goods and capital goods. clothing and education.

capital goods and durable consumer goods.

Tessa's break-even income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of: consumption spending will be $13,000. consumption spending will be $15,500. consumption spending will be $14,500. saving will be $2,500.

consumption spending will be $14,500.

The consumption schedule directly relates: consumption to saving. disposable income to domestic income. saving to the level of disposable income. consumption to the level of disposable income.

consumption to the level of disposable income.

The number of years required for real GDP to double can be found by: multiplying the annual growth rate by 70. dividing the annual growth rate by .07. dividing 70 by the annual growth rate. adding 14 to annual growth rate.

dividing 70 by the annual growth rate.

(Consider This) The main point of the Consider This box about hypothetical countries Slogo, Sumgo, and Speedo is that over several decades differing: economic growth rates create large differences in real GDP per capita. ratios of defense spending to GDP create large differences in real GDP per capita. inflation rates create large differences in real GDP per capita. unemployment rates create large differences in real GDP per capita.

economic growth rates create large differences in real GDP per capita.

Economic growth is best defined as an increase in: nominal GDP. wealth in the economy. either real GDP or real GDP per capita. total consumption expenditures.

either real GDP or real GDP per capita.

The immediate determinants of investment spending are the: level of saving and the real interest rate. interest rate and the expected price level. expected rate of return on capital goods and the real interest rate. marginal propensity to consume and the real interest rate.

expected rate of return on capital goods and the real interest rate.

The National Income and Product Accounts (NIPA) help economists and policymakers to: follow the long-run course of the economy to determine whether it has grown or stagnated. determine which firms are likely to succeed or fail. measure what is occurring in each specific labor market. accomplish all of these.

follow the long-run course of the economy to determine whether it has grown or stagnated.

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is: not a member of the labor force. structurally unemployed. cyclically unemployed. frictionally unemployed.

frictionally unemployed.

Final goods and services refer to: the excess of U.S. exports over U.S. imports. goods and services whose value has been adjusted for changes in the price level. goods and services purchased by ultimate users, rather than for resale or further processing. goods and services that are unsold and therefore added to inventories.

goods and services purchased by ultimate users, rather than for resale or further processing.

Government purchases include government spending on: government consumption goods only. government consumption goods and public capital goods. government consumption goods, public capital goods, and transfer payments. public capital goods only.

government consumption goods and public capital goods.

An unexpected increase in total spending will cause an increase in GDP: regardless of whether prices are sticky or fully flexible. if prices are sticky. You Answered if prices are fully flexible. only if prices are stuck in the long term.

if prices are sticky.

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because: the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. the MPC in the United States is greater than 1. in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes. the real-world MPS is larger than the MPS in the examples.

in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because: the real-world MPS is larger than the MPS in the examples. the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes. the MPC in the United States is greater than 1.

in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.

Gross domestic product (GDP) measures and reports output: as an index number. in percentage terms. in quantities of physical units (for example, pounds, gallons, and bushels). in dollar amounts and percentage growth.

in dollar amounts and percentage growth.

Refer to the diagram. The most likely cause of a shift from AB to CD would be a(n): decrease in the size of the labor force. recession. increase in the price level. increase in productivity.

increase in productivity.

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

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

Network effects are: the change in real GDP resulting from a change in investment or government spending. reductions in per unit production cost as firms learn by doing. increases in demand resulting from products being mentioned positively in a television program. increases in the value of a product to each user, including existing users, as the total number of users rises.

increases in the value of a product to each user, including existing users, as the total number of users rises.

Skeptics of the 1995-2012 rise in the average rate of productivity growth say that: the improved growth performance of the U.S. economy between 1995 and 2012 resulted from shrewd monetary policy and not from increases in productivity. t he difficulties of the dot.com companies in 2001 will eventually undermine productivity. it is too soon to judge whether the high productivity advances between 1995 and 2012 are long lasting or transitory. between 1995 and 2012 the economy moved below its natural rate of unemployment and paid the price in the form of accelerating inflation.

it is too soon to judge whether the high productivity advances between 1995 and 2012 are long lasting or transitory.

A lender need not be penalized by inflation if the: short-term rate of inflation is less than the long-term rate of inflation. lender correctly anticipates inflation and increases the nominal interest rate accordingly. long-term rate of inflation is less than the short-term rate of inflation. inflation is unanticipated by both borrower and lender.

lender correctly anticipates inflation and increases the nominal interest rate accordingly.

In annual percentage terms, investment spending in the United States is: more variable than real GDP. less variable than the price level. less variable than consumption spending. less variable than real G

more variable than real GDP.

Refer to the diagram. Realized economic growth is best represented by a: move from Z to X along AB. move from X on AB to Y on CD. move from X to Z along AB. shift in the production possibilities curve from CD to AB.

move from X on AB to Y on CD.

By summing the dollar value of all market transactions in the economy, we would: determine value added for the economy. obtain a sum substantially larger than the GDP. measure GDP. determine the market value of all resources used in the production process.

obtain a sum substantially larger than the GDP.

Strong property rights are important for modern economic growth because: people are more likely to invest if they don't fear that others can take their returns on investment without compensation. business cycle fluctuations will be smaller and less likely to disrupt investment patterns. they allow governments to extract the gains from private citizens' investments. they ensure an equitable distribution of income.

people are more likely to invest if they don't fear that others can take their returns on investment without compensation.

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal: more investment will be forthcoming when i exceeds r. r will fall as more investment is undertaken. r will exceed i at all possible levels of investment. less investment will be forthcoming when r rises.

r will fall as more investment is undertaken.

(Consider This) During the Great Recession of 2007-2009: real interest rates increased, choking off investment spending. real interest rates and investment spending both increased. real interest rates and investment spending both declined. real interest rates decreased, but expected returns from investment remained unchanged.

real interest rates and investment spending both declined.

Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with: frictional unemployment. structural unemployment. seasonal unemployment. cyclical unemployment.

structural unemployment.

The consumption schedule shows: the amounts households intend to consume at various possible levels of aggregate income. that households consume more when interest rates are low. that consumption depends primarily on the level of business investment. the MPC increases in proportion to GDP

the amounts households intend to consume at various possible levels of aggregate income.

Value added refers to: the difference between the value of a firm's output and the value of the inputs it has purchased from others. the portion of any increase in GDP that is caused by inflation as opposed to an increase in real output. any increase in GDP that has been adjusted for adverse environmental effects. the excess of gross investment over net investment.

the difference between the value of a firm's output and the value of the inputs it has purchased from others.

National income measures: the amount of wage, rent, interest, and profits income actually received by households. the total of all sources of private income plus government revenue from taxes on production and imports. the after-tax income of resource suppliers. nominal GDP after it has been inflated or deflated for changes in the value of the dollar.

the total of all sources of private income plus government revenue from taxes on production and imports.

Proponents of economic growth make all of the following arguments except: growth is the basic means of improving living standards. growth provides an economic environment favorable to education and self-fulfillment. there is a direct relationship between a growing real GDP and rising pollution. it is easier to reduce poverty when the economy is growing than when it is not.

there is a direct relationship between a growing real GDP and rising pollution.

Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n): recession. increase in saving. wealth effect of an increase in stock market prices. increase in income tax rates

wealth effect of an increase in stock market prices.

An economy is enlarging its stock of capital goods: whenever gross investment is positive. when net investment exceeds gross investment. when gross investment exceeds replacement investment. when replacement investment exceeds gross investment.

when gross investment exceeds replacement investment.