Macroeconomics Exam 3

(See 2nd chart on last pg.) The marginal propensity to consume is: A. .80 B. .75 C. .20 D. . 25

A

As disposable income goes up, the: A. Average propensity to consume falls B. Average propensity to save falls C. Volume of consumption declines absolutely D. Volume of investment diminishes

A

As disposable income increases, consumption: A. And saving both increase B. And saving both decrease C. Decreases and saving increases D. Increases and saving decreases

A

If Trent's MPC is .80, this means that he will: A. Spend eight-tenths of any increase in his disposable income B. Spend eight-tenths of any level of disposable income C. Break even when his disposable income is $8,000 D. Save two-tenths of any level of disposable income

A

If nominal GDP rises: A. Real GDP may either rise or fall B. We can be certain that the price level has risen C. Real GDP must fall D. Real GDP must also rise

A

Which of the following is correct: A. APC+APS=1 B. APC+MPS=1 C. APS+MPC=1 D. APS+MPS=1

A

With a marginal propensity to save of .4, the marginal propensity to consume will be: A. 1.0 minus .4 B. .4 minus 1.0 C. the reciprocal of the MPS D. .4

A

(See 1st chart on last pg.) At the $200 level of disposable income: A. The marginal propensity to save is 2 1/2 percent B. Dissaving is $5 C. The average propensity to save is .20 D. The average propensity to consume is .80

B

The growth of GDP may understate changes in the economy's economic well-being over time if the: A. Distribution of income becomes increasingly unequal B. Quality of products and services improves C. Environment deteriorates because of pollution D. Amount of leisure decreases

B

Demand-pull inflation: A. Occurs when prices of resources rise, pushing up costs and the price level B. Occurs when total spending exceeds the economy's ability to provide output at the existing price level C. Occurs only when the economy has reached its absolute production capacity D. Is also called cost-push inflation

B

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information we can conclude that Harry's production of pepperoni pizzas: A. Increased both nominal and real GDP from last year B. Increased nominal GDP from last year, but real GDP was unaffected C. Increased real GDP from last year, but nominal GDP was unaffected D. Did not change either nominal or real GDP from last year

B

In which of the following cases would real income rise: A. Nominal income rises by 8 percent and the price level rises by 10 percent B. Nominal income rises by 2 percent and the price level remains unchanged C. Nominal income falls by 4 percent and the price level falls by 2 percent D. Real income will rise in all of these cases

B

Real GDP measures the: A. Total dollar value of all goods and services produced within the borders of a country using current prices B. Value of final goods and services produced within the borders of a country, corrected for price changes (inflation) C. Total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes D. Value of all goods and services produced in the world, using current prices

B

The most important determinant of consumption and saving is the: A. Level of bank credit B. Level of income C. Interest rate D. Price level

B

The numerical value of the multiplier will be smaller the: A. Larger the average propensity to consume B. Larger the slope of the saving schedule C. Larger the slope of the consumption schedule D. Smaller the slope of the saving schedule

B

Transfer payments are; A.Excluded when calculating GDP because they only reflect inflation B. Excluded when calculating GDP because they do not reflect current production C. Included when calculating GDP because they are a category of investment spending D. Included when calculating GDP because they increase the spending of recipients

B

Unemployment describes the condition where: A. Equipment and machinery are going unused B. A person cannot get a job but is willing to work and is actively seeking work C. A person does not have a job, regardless of whether or not he or she wants one D.Any resource sits idle

B

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment: A. Frictional and cyclical unemployment B. Structural and frictional unemployment C. Cyclical and structural unemployment D. Frictional, structural, and cyclical unemployment

B

Which of the following statements is most accurate about advanced economies: A. Economies experience a positive growth trend over the short run but experience significant variability in the long-run B. Economies experience a positive growth trend over the long run but experience significant variability in the short run C. Economies experience positive and stable growth over both the long run and short run D. Economies experience little long-run growth in output but can experience significant growth in the short run

B

Banks and other financial institutions: A. Are the primary investors in equipment, factories, and other capital goods B. Lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity C. Promote economic growth by helping to direct household saving to businesses that want to invest D. Often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods

C

Dissaving occurs where: A. Income exceeds consumption B. Saving exceeds consumption C. Consumption exceeds income D. Saving exceeds income

C

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is: A. 18 percent B. 24 percent C. 12 percent D. 6 percent

C

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the: A. Frictional unemployment rate is 5 percent B. Cyclical unemployment rate and the frictional unemployment rate together are 5 percent C. Cyclical unemployment rate is 4 percent D. Natural rate of unemployment will eventually increase

C

Macroeconomics is mostly focused on: A. The individual markets within an economy B. Only the largest industries in the economy C. The economy as a whole D. Why specific businesses fail

C

Other things equal, a 10 percent decrease in corporate income taxes will: A. Decrease the market price of real capital goods B. Have no effect on the location of the investment-demand curve C. Shift the investment-demand curve to the right D. Shift the investment-demand curve to the left

C

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: A. Seasonal unemployment B. Cyclical unemployment C. Structural unemployment D. Frictional unemployment

C

The GDP gap measures the difference between: A. NDP and GDP B. NI and PI C. Actual GDP and potential GDP D. Nominal GDP and real GDP

C

The natural rate of unemployment is: A. Higher than the full-employment rate of unemployment B. Lower than the full-employment rate of unemployment C. That rate of unemployment occurring when the economy is at its potential output D. Found by dividing total unemployment by the size of the labor force

C

The phase of the business cycle in which real GDP is at a minimum is called: A. The peak B. A recession C. The trough D. The underside

C

The type of unemployment associated with recessions is called: A. Frictional unemployment B. Structural unemployment C. Cyclical uemployment D. Seasonal unemployment

C

Which of the following statements best describes price flexibility in the economy: A. Prices tend to be sticky in the short run and stuck in the long run B. Prices tend to be just as sticky in the short run as in the long run C. Prices tend to be sticky in the short run but become more flexible over time D. Prices tend to be flexible in the short run but become more sticky over time

C

Why are economists concerned about inflation: A. Inflation generally causes unemployment rates to rise B. Real GDP is necessarily falling when there is inflation C. Inflation lowers the standard of living for people whose income does not increase as fast as the price level D. Inflation increases the value of peoples' saving and encourages overspending on goods and services

C

Shocks to the economy occur when: A. Stock prices rise by more than 10 percent per year B. Government takes a more active role in the economy C. Prices are flexible D. Actual economic events do not match what people expected

D

The business cycle depicts: A. Fluctuations in the general price level B. The phases a business goes through from when it first opens to when it finally closes C. The evolution of technology over time D. Short-run fluctuations in output and employment

D

The multiplier is useful in determining the: A. Full-employment unemployment rate B. Level of business inventories C. Change in the rate of inflation from a change in the interest rate D. Change in GDP resulting from a change in spending

D

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production: A. The services of health care workers B. The services of military personnel C. The construction of new buildings D. Goods and services produced in the underground economy

D

Which of the following is most closely related to recessions: A. Positive long-run economic growth B. Rapid growth in the price level C. Falling rates of unemployment D. Negative real growth in output

D

Which of the following is used to measure directly the average standard of living across countries: A. Real GDP B. Nominal GDP C. Purchasing power parity D. GDP per person or per capita GDP

D

Which of the following transactions would be included in GDP: A. Mary buys a used book for $5 at a garage sale B. Nick buys $5,000 worth of stock in Microsoft C. Olivia receives a tax refund of $500 D. Peter buys a newly constructed house

D

Which one of the following will cause a movement down along an economy's consumption schedule: A. An increase in stock prices B. A decrease in stock prices C. An increase in consumer indebtedness D. A decrease in disposable income

D