macro midterm

(Figure: Productivity) An improvement in technology with everything else remaining unchanged is shown on the figure Productivity as a movement from: A. A to B. B. B to C. C. B to A. D. A to C.

B. B to C.

Which would shift the production function upward? A. an increase in the price of oil B. a decline in the birth rate C. an improvement in technology D. a decrease in the supply of labor

C. an improvement in technology

(Table: Calculating GDP) Using the information in the table Calculating GDP, which is the correct calculation for GDP? A. $21,485 B. $47,475 C. $34,085 D. $12,200

D. $12,200

If a country has a population of 1,000, an area of 100 square miles, and a GDP of $5 million, then its GDP per capita is: A. $50,000. B. $500. C. $5 million. D. $5,000.

D. $5,000.

If the marginal propensity to consume is 0.5, the multiplier is: A. 5. B. 1. C. 0.5. D. 2.

D. 2.

Whenever planned aggregate spending exceeds GDP: A. unplanned inventory investment is positive. B. planned investment spending exceeds consumption. C. unplanned inventory investment is zero. D. unplanned inventory investment is negative.

D. unplanned inventory investment is negative.

The sources of funds for investment spending are: A. savings by households, government, and foreigners. B. directed to their most productive uses by the U.S. government. C. always equal to U.S. spending on imports. D. taxes and transfer payments.

A. savings by households, government, and foreigners.

Human capital is: A. the improvement in labor created by education and knowledge that is embodied in the workforce. B. robots that can perform tasks that only humans could do in the past. C. not as important as physical capital. D. the machinery and tools that each individual worker owns.

A. the improvement in labor created by education and knowledge that is embodied in the workforce.

(Figure: Aggregate Expenditures Curve II) According to the figure Aggregate Expenditures Curve II, suppose that the consumption function in this figure rises by $100. The result would be a shift in the aggregate expenditures curve upward by: A. $100. B. $150. C. $100 times the multiplier. D. $250.

A. $100.

(Table: GDP) GDP in the table GDP is: A. $94 billion. B. $139 billion. C. $188 billion. D. $168 billion.

A. $94 billion.

Figure: Expanded Circular-Flow Model) According to the figure Expanded Circular-Flow Model, what is the value of net exports? A. -$20 B. $50 C. $20 D. $130

A. -$20

If disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume is equal to: A. 0.8. B. 9. C. 20. D. 1.25.

A. 0.8.

(Figure: The Aggregate Consumption Function and Planned Aggregate Spending) According to the figure The Aggregate Consumption Function and Planned Aggregate Spending, if expected future disposable income decreases in this economy, then the: A. AE will shift down. B. AE will shift up. C. economy will move downward along the AE. D. economy will move upward along the AE.

A. AE will shift down.

Total factor productivity is a measure of the: A. amount of output that can be produced with a given amount of factor inputs. B. cost of human capital inputs. C. cost of incorporating new technology in the production process. D. cost of technology inputs.

A. amount of output that can be produced with a given amount of factor inputs.

(Figure: Circular-Flow Model) According to the figure Circular-Flow Model, if the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of that box), which is likely to happen if there is an increase in investment spending? A. an increase in the nominal GDP B. an increase in the unemployment rate C. a decrease in the inflation rate D. a decrease in the nominal GDP

A. an increase in the nominal GDP

The aggregate consumption function depends on: A. disposable income, expected future disposable income, and wealth. B. wealth. C. disposable income. D. expected future disposable income.

A. disposable income, expected future disposable income, and wealth.

When there are diminishing returns to physical capital, A. each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity. B. increasing the amount of physical capital in the production process will not increase output. C. improvements in technology will not be effective in improving output. D. each successive increase in the amount of physical capital per worker leads to a larger increase in productivity.

A. each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity.

Which is an example of an intermediate good? A. flour purchased from Pillsbury by a bakery to make birthday cakes. B. a computer purchased from Apple by a college student to be used to take online courses. C. an iPhone purchased by Mary as a birthday gift for her daughter. D. new tires purchased by Jim for his 2010 Camry.

A. flour purchased from Pillsbury by a bakery to make birthday cakes.

Long-run economic growth is: A. higher in countries with a strong rule of law and political stability. B. lower in countries with a strong government and independent judiciary. C. higher in countries with a weak rule of law and excessive government intervention. D. lower in countries whose courts enforce property rights and whose government protects its citizens.

A. higher in countries with a strong rule of law and political stability.

In the long run, an increase in saving will generally: A. increase the rate of economic growth. B. increase consumption simultaneously. C. reduce the rate of economic growth. D. leave the rate of economic growth unchanged.

A. increase the rate of economic growth.

An example of investment spending is the: A. purchase of a freezer by an ice-cream parlor. B. purchase of stock shares by a mutual fund. C. amount of funds raised by the government in the financial markets. D. purchase of government bonds by a private household.

A. purchase of a freezer by an ice-cream parlor.

Productivity is equal to: A. real GDP divided by the number of workers. B. the total output produced. C. real GDP divided by the population. D. the number of workers per machine.

A. real GDP divided by the number of workers.

If the MPC is greater than zero but less than one, then we can be sure that when disposable income rises by $1 consumption will: A. rise by less than $1. B. rise by exactly $1. C. rise by more than $1. D. not be affected.

A. rise by less than $1.

A. each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity. A. the lack of political stability within countries. B. overpopulation. C. the prevalence of military conflicts among neighboring countries. D. the lack of natural resources.

A. the lack of political stability within countries.

To calculate real GDP, we measure the total value of output using: A. the prices that prevailed during a selected base year. B. current prices, with base-year quantities. C. estimated quantities, based on population growth. D. estimated quantities, based on average family size.

A. the prices that prevailed during a selected base year.

In the aggregate expenditures model, if aggregate expenditures are higher than real GDP: A. there are unplanned decreases in inventories. B. employment decreases. C. aggregate output decreases. D. actual real output is greater than equilibrium real output.

A. there are unplanned decreases in inventories.

At levels of GDP below the income-expenditure equilibrium, A. unplanned investment is negative. B. planned investment is zero. C. unplanned investment is positive. D. unplanned investment is zero.

A. unplanned investment is negative.

Double counting would occur if: A. used goods were included in the GDP calculation. B. GDP were calculated by adding together C, I, G, and NX. C. imports were subtracted from GDP. D. inventories were added to the GDP calculation.

A. used goods were included in the GDP calculation.

A trade surplus occurs A. when the value of goods and services a country imports is less than the value of goods and services it exports. B. when the value of goods and services a country imports exceeds the value of goods and services it exports. C. when unemployment is rising. D. during economic contractions only.

A. when the value of goods and services a country imports is less than the value of goods and services it exports.

(Table: Price and Output Data) According to the table Price and Output Data, the value of year 2's output in real dollars is: A. $12. B. $4. C. $15. D. $16.

C. $15.

The primary cause of the recession that ended in late 2001 was: A. too much investment spending by households, crowding out business investment spending. B. a slump in business investment spending. C. an increase in income tax rates. D. a decrease in government spending.

B. a slump in business investment spending.

Diminishing returns to physical capital may disappear if we: A. allow a long time period for adjustment. B. also increase the level of technology and human capital per worker. C. look only at high-tech industries. D. look only at low-tech industries.

B. also increase the level of technology and human capital per worker.

Figure: Aggregate Expenditures Curve I) According to the figure Aggregate Expenditures Curve I, the equilibrium level of real GDP in the aggregate expenditures model shown in this figure is: A. $3,200. B. $1,600. C. $800. D. $1,000.

B. $1,600.

If Daylight Doughnuts spends $300 on doughnut ingredients, makes doughnuts and sells them for $750, the value added by Daylight Doughnuts is: A. $300 B. $450 C. $750 D. $1,050

B. $450

Figure: Consumption and Real GDP) According to the figure Consumption and Real GDP, if real GDP is $8 trillion, consumption is _______ trillion and saving is _______ trillion. A. $4; $4 B. $5; $3 C. $7; $1 D. $6; $2

B. $5; $3

(Figure: Consumption and Disposable Personal Income) According to the figure Consumption and Disposable Personal Income, when disposable personal income is $1200 billion, consumption is _______ billion. A. $2000 B. $800 C. $600 D. $1200

B. $800

If real GDP grows at an annual rate of 1%, it will double in approximately _______ years. A. 35 B. 70 C. 11 D. 23

B. 70

The difference between an investment good and an input is that: A. there is no difference between inputs and investment goods. B. an investment good will last for many years and be used repeatedly, but an input is used up quickly in the production process. C. an input will last for many years and will be used repeatedly, but an investment good is used up quickly in the production process. D. inputs are almost always more expensive than investment goods.

B. an investment good will last for many years and be used repeatedly, but an input is used up quickly in the production process.

Natural resources: A. are still the most important factor in determining the productivity of human or physical capital for all countries. B. are a less significant source of productivity growth in most countries today than in earlier times. C. can be used to explain the differences in productivity growth among countries. D. are the only factor which consistently shows a positive impact on productivity for wealthy countries.

B. are a less significant source of productivity growth in most countries today than in earlier times.

Workers now are more productive than in the past because workers today: A. have more natural resources to use. B. are better educated and so have more human capital. C. are physically larger than their parents. D. work four-day weeks.

B. are better educated and so have more human capital.

The expansion and collapse of the housing market in Ft. Myers between 2003 and 2010 is primarily an example of how: A. too much government regulation is harmful to the economy. B. changes in investment spending can have an effect on consumer spending and an impact on the entire economy. C. immigration affects local economies. D. high tax rates can decrease economic activity in an area.

B. changes in investment spending can have an effect on consumer spending and an impact on the entire economy.

If other things are equal, expectations of lower disposable income in the future would ________ and shift the consumption function _________. A. increase autonomous consumption; up B. decrease autonomous consumption; down C. decrease the marginal propensity to consume; down D. increase the marginal propensity to consume; up

B. decrease autonomous consumption; down

All factors determine investment spending EXCEPT: A. expected future real GDP. B. expectations about future disposable income. C. production capacity. D. the market interest rate.

B. expectations about future disposable income.

Which would be included in the calculation of GDP? A. buying an existing house B. expenditure on new construction C. a retiree's monthly Social Security check D. buying shares of Home Depot stock

B. expenditure on new construction

When planned investment is less than actual investment, there must be unplanned: A. depreciation. B. inventory investment. C. technological progress. D. inventory disinvestments.

B. inventory investment.

Greenhouse gas emissions are an example of a: A. positive externality. B. negative externality. C. private good. D. public good.

B. negative externality.

A key statistic to measure economic growth is: A. the size of the government's budget. B. real GDP per capita. C. the Dow Jones stock market index. D. life expectancy

B. real GDP per capita.

The standard of living in a country can be best measured by: A. the productivity growth rate. B. real GDP per capita. C. nominal GDP per capita. D. the business cycles.

B. real GDP per capita.

In 1798, the English economist Thomas Malthus predicted that: A. the recently independent American colonies would rejoin the British empire out of economic necessity. B. rising population growth would cause productivity to fall. C. the French Revolution would improve the economies of most European countries.

B. rising population growth would cause productivity to fall.

Economists say that long-run economic growth is almost entirely due to: A. population growth. B. rising productivity. C. a democratically elected government. D. a balanced budget.

B. rising productivity.

In order to measure the quantity of goods and services produced, we adjust GDP for changes in: A. population. B. the price level. C. family size. D. firm size

B. the price level.

Which measure is typically used as an indicator of the conditions in the labor market? A. the trade deficit B. the unemployment rate C. the population growth rate D. the inflation rate

B. the unemployment rate

In the aggregate expenditures model, if aggregate expenditures are higher than real GDP: A. aggregate output decreases. B. there are unplanned decreases in inventories. C. employment decreases. D. actual real output is greater than equilibrium real output.

B. there are unplanned decreases in inventories.

In the aggregate expenditures model, if real GDP equals $700 billion and aggregate expenditures equal $400 billion: A. investment plus saving equals $300 billion. B. unplanned inventory accumulation equals $300 billion. C. consumption plus investment equals $300 billion. D. investment equals -$300 billion.

B. unplanned inventory accumulation equals $300 billion.

Planned investment spending is: A. not considered part of GDP. B. what investment firms plan to make during a given period. C. dependent only on interest rates. D. inventory investment changes.

B. what investment firms plan to make during a given period.

Consider an economy that produces only two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is: A. $700. B. $300 C. $1,300. D. $100.

C. $1,300.

Suppose that the aggregate consumption function is given by the equation: C = 200 + 0.8 YD, where C represents consumption and YD represents disposable income. (Scenario: Aggregate Consumption Equation) According to the scenario Aggregate Consumption Equation, if disposable income is $500, aggregate consumption is: A. $0. B. $400. C. $200. D. $600.

C. $200.

If the planned aggregate spending rises by $10 billion and the MPC is 0.75, then equilibrium GDP changes by: A. $10 billion. B. $7.5 billion. C. $40 billion. D. $2.5 billion.

C. $40 billion.

In an economy with no taxes or imports, if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to save is: A. 2.5. B. $400. C. 0.40. D. $600.

C. 0.40

The slope of the consumption function equals A. 1 - MPC. B. MPC/MPS. C. 1/(1 - MPS). D. 1 - MPS.

C. 1/(1 - MPS).

If output is growing at 5% annually, how many years will it take for output to quadruple? A. 20 years B. 10 years C. 28 years D. 14 years

C. 28 years

If your professor wins the lottery: A. the economy will clearly be better off. B. GDP goes up. C. GDP is not affected. D. GDP goes down.

C. GDP is not affected.

Which transaction will be included in the official measurement of GDP? A. Monica illegally downloaded movies to her laptop. B. Stan sold his house at a huge gain. C. Sean bought a new iPhone. D. Ben won the state lottery.

C. Sean bought a new iPhone.

Investment spending: A. is paid for by capital outflows. B. must be paid for by government spending. C. comes from either the savings from domestic households or the savings of foreign households. D. must be paid for by the consumption of domestic households.

C. comes from either the savings from domestic households or the savings of foreign households.

Research and development is defined as the process of: A. discovering new uses for old products. B. improving existing products. C. creating new technologies and preparing them for practical use. D. making basic scientific discoveries.

C. creating new technologies and preparing them for practical use.

Nominal GDP is the: A. real GDP minus depreciation. B. constant-dollar GDP. C. current-dollar GDP. D. inflation-adjusted GDP.

C. current-dollar GDP.

In the expanded circular-flow diagram, the three markets of the economy are: A. corporations, partnerships, and sole proprietorships. B. government, for-profit firms, and non-profit organizations. C. factor markets, financial markets, and markets for goods and services. D. local, state, and federal.

C. factor markets, financial markets, and markets for goods and services.

Which represents an outflow of funds from a domestic economy? A. government tax collections B. government transfer payments C. imports D. household savings

C. imports

People are likely to save the most during what part of the life cycle, according to the life-cycle hypothesis? A. the older they get. B. in their old age. C. in their peak earnings years. D. as they get closer to retirement.

C. in their peak earnings years.

(Figure: Aggregate Expenditures Curve I) According to the figure Aggregate Expenditures Curve I, suppose that the government's purchases of goods and services in this economy rise by $100. Real GDP would: A. increase by $800. B. decrease by $100. C. increase by $200. D. decrease by $200.

C. increase by $200.

Suppose the government increases spending by $100 billion as a stimulus package. If the MPC is 0.6, then equilibrium income will: A. decrease by $250 billion. B. decrease by $400 billion. C. increase by $250 billion. D. increase by $600 billion.

C. increase by $250 billion.

An increase in aggregate wealth: A. decreases the aggregate consumption function. B. increases the consumption of each individual. C. increases the aggregate consumption function. D. decreases the consumption of each individual.

C. increases the aggregate consumption function.

When the government invests in building roads, ports, and a reliable power grid, the government is investing in a nation's: A. technological progress. B. private property. C. infrastructure. D. human capital.

C. infrastructure.

(Figure: Consumption and Real GDP) According to the figure Consumption and Real GDP, the slope of the consumption function is called the: A. average propensity to consume. B. marginal consumption increment. C. marginal propensity to consume. D. marginal propensity to save.

C. marginal propensity to consume.

Which is NOT included in the calculation of GDP? A. a coffee you purchase from the coffee shop down the street B. the wages you pay to the employee who cleans your house C. the Social Security check your relative receives each month D. the new textbook you purchase for a college course

C. the Social Security check your relative receives each month

Planned aggregate expenditures are represented by a line that A. vertical. B. not sloped. C. upward sloping. D. horizontal.

C. upward sloping.

On which does the aggregate production function does NOT depend? A. the state of technology B. human capital per worker C. the quantity of physical capital per worker D. the amount of natural resources

D. the amount of natural resources

(Figure: Aggregate Expenditures Curve II) According to the figure Aggregate Expenditures Curve II, suppose that the consumption function in this economy rises by $200. The result would be an increase in equilibrium real GDP of: A. $250. B. $200. C. $100. D. $500.

D. $500.

Consider an economy that produces only two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is: A. $900. B. $100. C. $1,100. D. $700.

D. $700.

If real GDP grows at an average rate of 3% per year, it will double in approximately _______ years. A. 20 B. less than 10 C. 36 D. 23

D. 23

Income-expenditure equilibrium occurs when: A. consumption and investment are equal. B. GDP is equal to actual aggregate spending. C. GDP is equal to unplanned aggregate expenditure. D. GDP is equal to planned aggregate spending.

D. GDP is equal to planned aggregate spending.

Which is TRUE regarding the trade-off a firm makes when it spends money on an investment project? A. Borrowing money will always be more expensive than using retained earnings. B. The cost of retained earnings is unrelated to the cost of borrowing money. C. Using retained earnings has a higher opportunity cost than does using borrowed money because retained earnings come from past profits.

D. The trade-off a firm faces when using retained earnings or borrowed funds is the same.

A downward shift in the consumption function can be caused by: A. a decrease in disposable income. B. expectations of higher permanent income. C. an increase in disposable income. D. a decrease in wealth.

D. a decrease in wealth.

Transfer payments are: A. counted in GDP. B. another term for government taxation. C. a means by which government raises funds. D. a redistribution of funds from one individual to another individual in the economy.

D. a redistribution of funds from one individual to another individual in the economy.

When the value of a country's exports exceed the value of its imports, the country is experiencing: A. a trade deficit. B. inflation. C. a recession. D. a trade surplus.

D. a trade surplus.

From the standpoint of economic growth, banks are important to: A. channel investment into savings. B. keep interest rates low. C. fight inflation. D. channel savings into investment.

D. channel savings into investment.

Gross domestic product is defined as: A. consumer spending + government purchases + financial spending + exports - imports. B. consumer spending + government transfers + investment spending + exports - imports. C. disposable income + taxes + investment spending + exports + imports. D. consumer spending + government purchases + investment spending + exports - imports.

D. consumer spending + government purchases + investment spending + exports - imports.

The rule of 70 is most useful in: A. identifying the causes of economic growth. B. estimating the productivity of labor. C. identifying the sources of economic growth. D. estimating the doubling time of real GDP for a given growth rate.

D. estimating the doubling time of real GDP for a given growth rate.

A period of rising real GDP is a(n): A. peak. B. trough. C. recession. D. expansion.

D. expansion

Education's effect on productivity: A. depends on the wealth of the country. B. has fallen in the past century in the United States. C. is believed to be less important than the amount of physical capital with which a worker has to work. D. is an even more important determinant of growth than increases in physical capital.

D. is an even more important determinant of growth than increases in physical capital.

Don has built an expansion to his house. This transaction will be: A. included in GDP because Don is a professional builder. B. included in GDP because building is Don's hobby. C. not included in GDP because it is an intermediate good. D. not included in GDP because it is not produced for the marketplace.

D. not included in GDP because it is not produced for the marketplace.

Whenever GDP exceeds planned aggregate expenditure, unplanned investment is _______; whenever GDP falls short of planned aggregate expenditure, unplanned investment is _________. A. zero; negative B. zero; positive C. negative; positive D. positive; negative

D. positive; negative

When an economy is in an expansion, unemployment: A. and overall prices tend to rise. B. tends to rise, and overall prices tend to fall. C. and overall prices tend to fall. D. tends to fall, and overall prices tend to rise.

D. tends to fall, and overall prices tend to rise.

Which is an example of an intermediate good? A. a wedding ring purchased by an engineer for his fiancée B. stocks and bonds purchased by a business executive C. a cellular telephone purchased by a college student D. tires purchased from Goodyear by General Motors for newly produced electric cars

D. tires purchased from Goodyear by General Motors for newly produced electric cars

Which would NOT be included in this year's GDP? A. the production of a television show B. the purchase of a new work truck C. the hiring of a new police officer D. your purchase of your neighbor's 2001 Toyota

D. your purchase of your neighbor's 2001 Toyota