Macro test 2
The actual price level is determined by: A) the intersection of short-run aggregate supply and demand. B) monopolists. C) government policy. D) microeconomic equilibrium.
A) the intersection of short-run aggregate supply and demand.
Nominal GDP in 2006 was $13,458.2 billion. The GDP deflator uses 2000 as the base year. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006? A) $11,512.6 billion B) $15,732.6 billion C) $11,522.5 billion D) $15,746.1 billion
A) $11,512.6 billion
The key to being counted as unemployed by the Bureau of Labor Statistics is to be: A) actively seeking work. B) out of a job. C) passively seeking work. D) available for work.
B) out of a job.
Which of the following would NOT cause a shift in the aggregate demand curve? A) a change in the price level B) a change in net exports C) a change in consumption spending D) a change in investment
A) a change in the price level
Infrastructure is: A) a country's public capital. B) unimportant for economic growth because the government provides it. C) not important in a market-based economy. D) typically better when provided by private companies.
A) a country's public capital.
(Table) According to the table, the GDP deflator for 2012 is: A) 100. B) 72.8. C) 0. D) 1.
A) 100.
A change in _____ will cause a change in the quantity demanded of real GDP. A) investment B) the price level C) imports D) consumer spending
B) the price level
Measuring changes in a fixed basket of goods to assess changes in price is a ______ method. A) utility maximization B) cost-of-goods index C) cost-of-living index D) cost-of-production
B) cost-of-goods index
There are 15 million people living in Marketstan, of whom 9 million are working and 1 million are actively looking for work. What is the size of Marketstan's labor force? A) 10 million B) 5 million C) 16 million D) 15 million
A) 10 million
To have long-term economic growth, the production function suggests: A) increasing the availability of technology, capital, and labor. B) increasing government oversight of business decisions. C) redistributing income from the wealthy to the poor. D) keeping interest rates high to encourage saving.
A) increasing the availability of technology, capital, and labor.
In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts in these two curves, what is a likely outcome? A) inflation B) deflation C) higher taxes D) lower imports
A) inflation
In the absence of copyright and patent laws: A) it is difficult for innovators to profit from their efforts. B) the quality of goods and services consumed by purchasers improves. C) the profits of writers and inventors rise. D) innovators can invent more, because they don't have to spend resources navigating the legal system.
A) it is difficult for innovators to profit from their efforts.
The proportion of additional income that consumers spend is known as the: A) marginal propensity to consume. B) average propensity to consume. C) marginal propensity to save. D) average propensity to save.
A) marginal propensity to consume.
The catch-up effect tends to: A) slow down over time. B) remain the same over time. C) remain the same over time unless new technologies are developed. D) speed up over time.
A) slow down over time.
On-the-job training can lead to an increase in: A) the quality of the labor force. B) the financial capital ratio. C) population. D) the capital-to-labor ratio.
A) the quality of the labor force.
_____ occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve leftward. A) Cost-pull inflation B) Cost-push inflation C) Demand-pull inflation D) Demand-push inflation
B) Cost-push inflation
Inflation has significant long-run effects on the economy because: A) it can lead to an improvement in real values. B) creditors can gain from inflation. C) it can enhance the purchasing power of a fixed income. D) it distorts the price signal and produces incentives for speculation.
B) creditors can gain from inflation.
Which of the following is NOT a factor in the production function? A) capital B) money C) labor D) technology
B) money
Human capital refers to: A) funds firms raise by selling stocks and bonds. B) skills, knowledge, and quality of workers. C) infrastructure of a nation. D) equipment, buildings, and inventories.
B) skills, knowledge, and quality of workers.
(Table) According to the table, real GDP for 2014 is approximately: A) $8,488 billion. B) $8,106 billion. C) $7,540 billion. D) $7,894 billion.
C) $7,540 billion.
If an economy's GDP will double in 15 years, then its growth rate must be about: A) 15%. B) 7%. C) 4.7%. D) 10%.
C) 4.7%.
_____ unemployment includes workers who voluntarily quit their jobs to search for better positions. A) Seasonal B) Cyclical C) Frictional D) Structural
C) Frictional
Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely long-run impact? A) A recession occurs. B) Prices fall. C) GDP first rises, and then falls back to long-run equilibrium. D) The impact cannot be determined from the information given.
C) GDP first rises, and then falls back to long-run equilibrium.
Which of the following statements about the role of social media in promoting economic growth is FALSE? A) Social media allow firms to do more with fewer resources. B) Social media allow buyers and sellers to interact more seamlessly. C) The advent of social media raised costs for firms, which now must invest in Web pages and information gathering technology to stay competitive. D) Many people who used to get information about products from their local newspaper now access this information via social media.
C) The advent of social media raised costs for firms, which now must invest in Web pages and information gathering technology to stay competitive.
(Figure: Determining SRAS Shifts 3) Which of the following might be a cause of the change in short-run aggregate supply? A) Subsidies to firms increase. B) Workers and firms believe that inflation is going to decrease. C) Unions successfully negotiate higher wages. D) Consumer incomes drop.
C) Unions successfully negotiate higher wages.
Whispering Valley Furniture employs five workers working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs. Which company's workers are more productive? A) Rocky Gap Furniture's workers are more productive. B) The two companies' workers are equally productive. C) Whispering Valley Furniture's workers are more productive. D) It is not possible to determine which workers are more productive.
C) Whispering Valley Furniture's workers are more productive.
The current consumer price index is: A) calculated by dividing the market basket's cost in the base period by its cost in the current period. B) based on a changing bundle of goods and services from one period to the next. C) a cost-of-goods index. D) a true cost-of-living measure.
C) a cost-of-goods index.
What would cause the price level to decrease and employment to increase? A) a shift to the right of the AD curve B) a shift to the left of the SRAS curve C) a shift to the right of the SRAS curve D) a shift to the left of the AD curve
C) a shift to the right of the SRAS curve
In the United States, the Census Bureau computes the unemployment rate from: A) tax records. B) the Current Population Survey. C) data on applications for unemployment compensation. D) data reported to it by firms when employees leave.
C) data on applications for unemployment compensation.
The government decides to ) enhancing physical and human capital.subsidize the development of a new communications network. It is acting in its role to promote economic growth by: A) ensuring a stable and secure financial system. B) promoting free and competitive markets. C) enhancing physical and human capital. D) ensuring a stable legal system.
C) enhancing physical and human capital.
When the price of a given product declines, the consumer's spendable income rises because it takes less income to purchase the same quantity. This is called the: A) substitution effect. B) interest effect. C) income effect. D) net export effect.
C) income effect.
Cost-push inflation occurs because of a shift to the: A) left of the aggregate demand curve. B) right of the short-run aggregate supply curve. C) left of the short-run aggregate supply curve. D) right of the aggregate demand curve.
C) left of the short-run aggregate supply curve.
The nonaccelerating inflation rate of unemployment is the unemployment rate associated with ____ inflation and ____ unemployment: A) high; low B) low; high C) low; low D) high; high
C) low; low
Which of the following technologies most strongly affected the growth in U.S. productivity in recent decades? A) petrochemicals B) railroads C) microcomputers D) ticker tape
C) microcomputers
Most economists believe that the consumer price index ______ the rate of inflation. A) disinflates B) understates C) overstates D) accurately states
C) overstates
The relationship between economic freedom and per capita GDP is: A) negative for advanced economies and positive for developing economies. B) positive for advanced economies and negative for developing economies. C) positive. D) negative.
C) positive.
The aggregate demand curve: A) is downward sloping because production costs decline as real GDP increases. B) shows the amount of expenditures required to induce the production of each possible level of real GDP. C) shows the amount of real GDP that will be demanded at each possible price level. D) is upward sloping because a higher price level is necessary to make production profitable as production costs rise.
C) shows the amount of real GDP that will be demanded at each possible price level.
The costs of cyclical unemployment can be minimized by: A) providing training for individuals who have a job. B) providing training for new entrants into the labor force. C) keeping the economy on a steady, low-inflationary growth path. D) providing training for individuals who have lost their job and who want a new career.
C) keeping the economy on a steady, low-inflationary growth path.
What would cause the price level to rise and employment to increase? A) a shift to the left of the short-run aggregate supply curve B) a shift to the left of the aggregate demand curve C) supply shift to the right of the short-run aggregate supply curve D) a shift to the right of the aggregate demand curve
D) a shift to the right of the aggregate demand curve
Which of the following items is NOT an example of investment in human capital? A) apprenticeship B) policy of universal education C) on-the-job training D) acquisition of obsolete skills
D) acquisition of obsolete skills
Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 and the year his dad started work it was 110.8, Dave is: A) mistaken. Adjusting for quantity changes, his salary is less than his dad's salary. B) correct. Adjusting for price changes, his salary is more than his dad's salary. C) correct. Adjusting for quantity changes, his salary is more than his dad's salary. D) mistaken. Adjusting for price changes, his salary is less than his dad's salary.
D) mistaken. Adjusting for price changes, his salary is less than his dad's salary.
Cost-push inflation occurs when: A) a supply shock shifts the short-run aggregate supply curve to the right. B) subsidies to businesses are increased. C) total spending expands so much that equilibrium output exceeds full-employment output. D) rising resource costs reduce short-run aggregate supply.
D) rising resource costs reduce short-run aggregate supply.
A production function: A) shows the output that is most highly valued by consumers. B) shows the most desired production method for a given level of output. C) shows the output that is produced using different combinations of technology combined with existing inputs. D) shows the output that is produced using different combinations of inputs combined with existing technology.
D) shows the output that is produced using different combinations of inputs combined with existing technology.
If the market power of firms increases, what happens in the AD/AS model? A) Aggregate demand shifts right. B) Aggregate demand shifts left. C) Aggregate supply shifts left. D) Aggregate supply shifts right.
C) Aggregate supply shifts left.
Suppose energy prices spike. In the short run, output will ____; in the long run, output will _____from its starting point. A) remain unchanged; increase B) remain unchanged; decrease C) decrease; remain unchanged D) decrease; increase
C) decrease; remain unchanged
The aggregate demand curve displays: A) the business cycle. B) GDP demanded at various investment levels. C) real GDP demanded at various price levels. D) nominal GDP versus real GDP.
C) real GDP demanded at various price levels.
Last year, Megan's salary was $65,000. The consumer price index increased from 109 to 115. If Megan received a cost-of-living adjustment, what would her salary be? A) $61,320 B) $67,564 C) $68,578 D) $61,553
C) $68,578
GDP is $10 trillion in 2001. The GDP deflator is 100 in 2000 and is 110 in 2001. What is real GDP? A) $110 trillion B) $10 trillion C) $11.1 trillion D) $9.09 trillion
D) $9.09 trillion
If the growth rate in an economy is 3.5%, then its GDP will double in about: A) 70 years. B) 3.5 years. C) 245 years. D) 20 years.
D) 20 years.
People are considered employed if they are: A) on strike. B) on vacation. C) unpaid family workers. D) All of those listed are considered employed.
D) All of those listed are considered employed.
The World Bank defines extreme poverty as a person living on less than: A) $5,763 per year. B) $16 per day C) $1.25 per day. D) $2 per day.
C) $1.25 per day.
Which of the following does NOT increase productivity? A) improvements in labor quality B) capital investment C) an increased money supply D) research and development
C) an increased money supply
Which of the following is NOT generally considered a problem with using the consumer price index to measure consumer prices? A) Quality improvements are difficult to account for. B) Only private goods are considered and public goods are excluded. C) New products are often overlooked. D) Many federal benefits and income tax rates are indexed to the consumer price index.
D) Many federal benefits and income tax rates are indexed to the consumer price index.
According to Keynes, what determines the level of employment and income? A) government spending B) aggregate supply C) aggregate savings D) aggregate expenditures
D) aggregate expenditures
During periods of inflation, which of the following events does NOT occur? A) People on a fixed income have reduced standards of living. B) Mortgage lenders seek inflation adjustments. C) Workers seek escalator clauses. D) People on a fixed income have increased standards of living.
.D) People on a fixed income have increased standards of living.
The collapse of home values that began in 2008 led to ____ in Americans' consumption and _____ in their saving rates. A) a decrease; an increase B) an increase; an increase C) a decrease; a decrease D) an increase; a decrease
A) a decrease; an increase
The more time a free market economy has to adjust to price changes, the: A) closer GDP gets to the natural rate of output. B) closer the economy gets to the horizontal portion of the aggregate demand curve. C) more volatility is seen in the business cycle. D) greater the rate of inflation.
A) closer GDP gets to the natural rate of output.
The 1973 oil shocks created: A) cost-push inflation. B) a shift to the right of the aggregate demand curve. C) demand-pull inflation. D) a shift to the right of the aggregate supply curve.
A) cost-push inflation.
From 1999 to 2002, the Japanese inflation rates were, respectively, -0.3%, -0.6%, -0.7%, and -0.7%. During this time, the Japanese economy underwent: A) deflation. B) inflation. C) hyperinflation. D) a rise in its price level.
A) deflation.
n the Keynesian model, the price level is ___________; in the aggregate demand and supply model, the price level is _______________. A) fixed; flexible B) fixed; fixed C) flexible; flexible D) flexible; fixed
A) fixed; flexible
Which is NOT consistent with the level of output in the long run? A) high inflation B) the natural rate of output C) the natural rate of unemployment D) full capacity output level
A) high inflation
Which of the following factors is NOT a component of aggregate demand? A) income B) net exports C) investment D) consumption
A) income
Retirees and creditors: A) are hurt by inflation because their purchasing power drops. B) benefit from inflation because they are paid in cheaper dollars. C) are hurt by inflation because taxes fall. D) benefit from inflation because interest rates rise
A) are hurt by inflation because their purchasing power drops.
Other things equal, if a recession gets worse, the number of discouraged workers __________, and the number of those in the labor force _____________. A) decreases; increases B) increases; increases C) increases; decreases D) decreases; decreases
A) decreases; increases
What is your new salary if you earned $40,000 last year, the consumer price index went from 120 to 125, and your salary is adjusted by the rate of inflation annually? A) $40,125 B) $41,666.67 C) $38,400 D) $41,600
B) $41,666.67
For which growth rate would the Rule of 70 be most accurate? A) 30% B) 1% C) 15% D) 20%
B) 1%
Which of the following statements regarding the types of unemployment is TRUE? A) Structural unemployment is the result of normal labor turnover. B) Frictional unemployment is generally short-term, whereas structural unemployment is often long-term. C) Cyclical unemployment is due to expansions in the business cycle. D) Frictional unemployment is brought about by changes in technology
B) Frictional unemployment is generally short-term, whereas structural unemployment is often long-term.
Which statement about long-run economic growth is TRUE? A) It is likely to occur when obstacles preventing resources from being used are reduced. B) It is likely to occur when the capacity to produce goods and services increases. C) It occurs when an economy makes use of underutilized resources. D) It is easier to achieve than short-run economic growth
B) It is likely to occur when the capacity to produce goods and services increases.
Which of the following would NOT affect (shift) the short-run aggregate supply curve? A) a decline in the price of imported oil B) an increase in the price level C) an increase in labor productivity D) a decline in business taxes
B) an increase in the price level
Increases in ___________ often lead to economic growth. A) government regulations B) capital C) public goods D) money supply
B) capital
Decreasing the accessibility to college in order to funnel workers into the workforce faster will: A) have no impact on the economy. B) decrease productivity of the economy. C) increase productivity of the economy. D) increase real wages.
B) decrease productivity of the economy.
Which of the following is NOT a source of productivity growth? A) improvements in technology B) decreasing the capital-to-labor ratio C) increasing the quality of the labor force D) All of these are sources of productivity growth.
B) decreasing the capital-to-labor ratio
If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing: A) disinflation. B) deflation. C) hyperinflation. D) inflation.
B) deflation.
The GDP deflator shows that since the mid-1980s, the U.S. economy has had: A) hyperinflation. B) disinflation. C) deflation. D) an increasing inflation rate.
B) disinflation.
The higher the productivity of a nation, the: A) larger is its labor force. B) higher is its standard of living. C) lower is its capital-to-labor ratio. D) greater is its population growth.
B) higher is its standard of living.
If actual unemployment is at its natural rate: A) the unemployment rate is zero. B) inflation is very low. C) interest rates are rising. D) there is deflation.
B) inflation is very low.
Generally, nations with the _________ economic freedom also have the _________ per capita GDP. A) most; lowest B) least; lowest C) least; highest D) most; mean
B) least; lowest
Developed nations tend to have: A) large amounts of both labor and capital. B) limited labor supplies but lots of capital. C) low capital-to-labor ratios. D) limited amounts of both labor and capital
B) limited labor supplies but lots of capital
f a country has a low capital-to-labor ratio, then it tends to have: A) high labor productivity but low wages. B) low labor productivity and low wages. C) low labor productivity but high wages. D) high labor productivity and high wages.
B) low labor productivity and low wages.
Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents, According to the Bureau of Labor Statistics, Jordan is: A) a discouraged worker. B) not in the labor force. C) unemployed. D) employed.
B) not in the labor force.
If oil prices decrease, the short-run aggregate supply curve shifts _____ and output supplied will be _____. A) left; reduced B) right; increased C) right; reduced D) left; increased
B) right; increased
Other things equal, when the U.S. aggregate price level falls, U.S. exports _______ and U.S. imports ________. A) fall; fall B) rise; fall C) rise; rise D) fall; rise
B) rise; fall
Improvements in production capacity will: A) move the economy up to the PPF. B) shift the PPF outward. C) rotate the production possibility frontier (PPF) clockwise. D) move the economy along the PPF.
B) shift the PPF outward.
In the United States, our principal measure of inflation is: A) the producer price index. B) the consumer price index. C) the Leading Economic Index. D) gross domestic product.
B) the consumer price index.
Which is NOT an example of infrastructure? A) airports B) Hoover Dam C) Walmart stores D) the federal highway system
C) Walmart stores
The drop in aggregate demand that occurred during the Great Depression caused a drop in real GDP: A) but an increase in the price level. B) but a modest rise in inflation. C) and deflation. D) but no change in the price level.
C) and deflation.
Which of the following will shift the short-run aggregate supply curve to the right? A) an increase in the actual price level B) an increase in the price of oil C) an increase in the minimum wage D) an increase in immigration from other countries
D) an increase in immigration from other countries
The collapse of home values that began in 2008 led to ____ in Americans' saving rates, shifting aggregate demand to the ____. A) an increase; right B) a decrease; left C) a decrease; right D) an increase; left
D) an increase; left
Developing countries can achieve higher productivity per unit of capital because they can use technologies developed by other countries. This is known as the: A) productivity effect. B) increasing returns to capital effect. C) copycat effect. D) catch-up effect.
D) catch-up effect.
The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted? A) statistical B) structural C) frictional D) cyclical
D) cyclical
Since the invention of automatic teller machines, many bank tellers have lost their job. This is an example of ______ unemployment. A) statistical B) cyclical C) structural D) frictional
D) frictional
The natural gas deposits found in the United States over the past decade are an example of an increase in: A) labor. B) physical capital. C) entrepreneurial ability, technology, and ideas. D) land and natural resources.
D) land and natural resources.
When Main Street Bank buys new automatic teller machines, the quantity of _____ in the economy increases. A) entrepreneurial ability, technology, and ideas B) land and natural resources C) labor D) physical capital
D) physical capital
Increases in ___________ often lead to economic growth. A) money supply B) government regulations C) public goods D) technology
D) technology
The idea that new spending creates more new spending is known as: A) the wealth effect. B) the crowding-out effect. C) the interest rate effect. D) the multiplier effect.
D) the multiplier effect.
One reason the amount of real output demanded declines when the aggregate price level rises is the resulting reduction in household wealth, called the: A) interest rate effect. B) income effect. C) substitution effect. D) wealth effect.
D) wealth effect.
Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a local elementary school. She began looking for a full-time job last week and has already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is: A) not in the labor force. B) a discouraged worker. C) unemployed. D) employed.
D) employed
(Figure: Determining SRAS Shifts) If there is a decrease in input prices, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will become _____. A) SRAS1; P1 B) SRAS2; P2 C) SRAS1; P0 D) SRAS2; P1
A) SRAS1; P1
The Potbelly Pothole Company is undertaking some investment in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen? A) The company's demand for investment will rise. B) The company's demand for investment will first fall as interest rates fall and then rise as technology improves. C) The company's demand for investment will fall. D) There will be no change in the company's demand for investment.
A) The company's demand for investment will rise.
If the nominal GDP is $13 trillion for a given year and the GDP deflator for that year is 115, then the real GDP is: A) $12 trillion. B) $13 trillion. C) $14.95 trillion. D) $11.3 trillion.
D $11.3 trillion.