Macroeconomics Exam 2

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When inflation rises unexpectedly, borrowers will _____, and lenders will _____. a. be hurt; benefit b. benefit; be hurt c. be hurt; be hurt d. benefit; benefit

b. benefit; be hurt

The budget balance equals: a. taxes plus government spending. b. taxes minus government spending. c. consumption plus investment. d. imports minus exports.

b. taxes minus government spending.

Inflation can be measured by the:

the percentage change in the CPI

Capital inflows equal:

the total inflow of foreign funds minus the total outflow of domestic funds.

Which example illustrates an intermediate good?

tires General Motors purchased from Goodyear for new electric cars

Unemployment rate

unemployed#/labor force# X 100%

GDP

C+I+G+(X-IM)

In a closed economy, investment spending, I, must equal:

GDP - C - G

National savings

GDP - C - G

Which of the following is TRUE of an open economy?

GDP = C + I + G + X - IM

Real GDP

Nominal GDP/Deflator

rate of inflation

Price Index year 2 - Price Index year 1/Price Index year 1 x 100

Income divided by the price level is _____ income.

Real income

In an open economy, investment spending, I, must equal:

Snational + (IM-X) [Snational = GDP - C - G]

what is an intermediate good?

Used as inputs in the production of other goods. Ex. Wheels to a car

If the cost of the market basket in the base year is $5,000, and the cost of the market basket in the current year is $5,100, the price index for the current year is ___. a. 102 b. 1.02 c. 0.98 d. 98

a. 102 (Cost of market basket in a given year/Cost of market basket in the base year x 100)

A drop in the inflation rate is called: a. disinflation. b. deflation. c. stagflation. d. hyperinflation.

a. disinflation.

Capital inflows into a country are associated with: a. imports exceeding exports. b. a small amount of funds available for domestic investment. c. imports equaling exports. d. exports exceeding imports.

a. imports exceeding exports.

Disposable income equals: a. income plus government transfers minus taxes. b. income plus government spending minus taxes. c. income minus taxes plus government spending. d. income minus taxes minus government transfers.

a. income plus government transfers minus taxes.

In a closed economy, national savings equals private savings: a. minus consumption spending. b. plus the government's budget balance. c. minus investment spending. d. minus tax receipts. ​

a. minus consumption spending.

Real GDP per capita is: a. a perfect measure of a country's standard of living. b. the only way to measure living standards across different countries. c. an incomplete measure of a country's standard of living. d. used only by the United Nations to compare nations in terms of well-being.

c. an incomplete measure of a country's standard of living.

Employment is the total: a. labor force. b. population of working age. c. number of people actively working, either full time or part time. d. number of people not unemployed.

c. number of people actively working, either full time or part time.

The inflation rate is the: a. price level in the current year minus the price level in the previous year. b. price level in the current year plus the price level in the previous year. c. percentage change in the price level from one year to the next. d. price level in the current year multiplied by the price level in the previous year.

c. percentage change in the price level from one year to the next.

per capita real GDP

country's GDP/Population

net capital inflow

imports - exports

labor force participation rate

labor force/population 16 and older x 100

Assume a closed economy in which GDP is $110 billion. If government spending is $30 billion, consumption is $70 billion, taxes are $20 billion, and investment spending is $10 billion, then:

private savings is $10 billion.

real income

wages/(1+inflation rate)

A survey reveals that, on a small island, 1,000 people have jobs, 250 people are unemployed and looking for jobs, and 450 people are neither working nor looking for work. The unemployment rate on the island is _____%.

20 (unemployed#/labor force# X 100)

​Measuring GDP (billions of dollars): Personal consumption expenditures: $600 Gross private domestic investment: 200 Net exports -5 State and local government purchases of goods and services 300 Federal government purchases of goods and services 100 Imports 15 ​ Government purchases of goods and services are: options: $50 billion. $1,085 billion. $300 billion. $400 billion.

400 billion

price index

Cost of market basket in a given year/Cost of market basket in the base year x 100

Anong's credit union charges a fee for transferring funds from her money market account to her checking account. The rate of inflation has been 12% lately, so Anong has transferred funds from her money market account to her checking account more often than usual. This cost is an example of the _____ costs of high inflation.

Shoe Leather Costs

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _____ frequently than they did before. This is an example of _____ costs. a. more; menu b. less; menu c. more; unit-of-account d. less; unit-of-account

a. more; menu

The budget balance equals: a. taxes minus government spending. b. transfers minus government spending. c. taxes plus government spending. d. savings plus taxes.

a. taxes minus government spending.

The government can increase national savings by: a. taxing more than it spends. b. spending more than it taxes. c. increasing inflation. d. increasing the deficit.

a. taxing more than it spends.

Which item would NOT be part of GDP? a. used car sales b. new residential construction c. a new truck purchased by a building contractor d. cable TV service purchased for a home

a. used car sales

If money income remains constant while the price level doubles: a. nominal income will fall. b. real income will fall. c. interest rates will fall. d. purchasing power will increase.

b. real income will fall.


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