Principles of Macroeconomics

Refer to Table 9.2. At an output level of $1,500 billion, the level of aggregate expenditure is ______ billion

$1,400

Bill's income is $1,000 and his net taxes are $350. His disposable income is

$650

If the MPC is 0.5, the tax multiplier is

-1

Refer to Table 9.2. The equilibrium level of output is _______ billion.

1000

The aggregate consumption function is C = 800 + 0.8 Yd. If income is $2,000 and net taxes are $500, consumption equals

2,000

EQUATION 9.1: C= 300 + 0.8Yd G= 400 T= 200 I= 200 The equilibrium level of output is:

3,700

If the MPC is 0.75, the government spending multiplier is

4

In which case will the government collect more tax revenue?

50% tax rate and $50,000 average income.

Refer to Table 6.9. Assume that this economy produces only 2 goods Good X and Good Y. The value for this economy's nominal GDP in year 1 is A) $140 B) $160 C) $180 D) $200

A) $140

Refer to Table 6.9. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year , the value for this economy's real GDP in year 2 is A) $168 B) $179 C) $202 D) $214

A) $168

Refer to Table 7.6. The bundle price for the goods in period 2014 is: A) $41.00 B) $50.50 C) $57.50 D) $100.00

A) $41.00

Refer to Table 6.1. The value for net exports in billions of dollars is A) 150 B) 250 C) 650 D) 800

A) 150

Refer to Figure 8.2. Jerry's consumption equals his his income at Point A) A. B) B. C) C. D) D.

A) A.

The ratio of nominal GDP to real GDP multiplied by 100 is the A) GDP deflator B) national income C) same as depreciation D) NNP

A) GDP deflator

The equation for GDP using the expenditure approach is: A) GDP= C + I + G + EX - IM B) GDP= C + I + G - EX - IM C) GDP= C + I + G + EX + IM D) GDP= C + I + G + (IM - EX)

A) GDP= C + I + G + EX - IM

In June there are 30,000 people classified as unemployed and the size of labor force is 600,000. The only change between June and July is that 10,000 of the unemployed give up looking for work. Which of the following is true? A) In June the unemployment rate was 5% and in July the unemployment rate was 3.9% B) In June the unemployment rate was 3.8% and in July the unemployment rate was 6%. C) In June the unemployment rate was 6% and in July the unemployment rate was 3.8%. D) The unemployment rate in both June and July was 5%.

A) In June the unemployment rate was 5% and in July the unemployment rate was 3.9%.

If Inventory investment is higher than firms planned: A) actual investment is greater than planned investment. B) actual investment must be negative. C) actual and planned investment are equal. D) actual investment is less than planned investment.

A) actual investment is greater than planned investment.

In a business cycle, a peak represents the end of __________ and a trough represents the end of ____________. A) an expansion; a recession B) a recession; an expansion C) a depression; an expansion D) a trough; a peak

A) an expansion; a recession

GDP understates the value of output produced by an economy because it: A) excludes value added from the underground economy, such as tips taken "under the table." B) includes environmental degradation caused by increased output production. C) includes transactions that do not take place in organized markets, such as home-cooked meals. D) excludes the value of the wages and fringe benefits of government employees.

A) excludes value added from the underground economy, such as tips taken "under the table."

Refer to Table 5.1. In this economy, a peak existed around the: A) fourth quarter of the year 2014. B) fourth quarter of the year 2015. C) third quarter of the year 2016. D) third quarter of the year 2014.

A) fourth quarter of the year 2014.

Cheryl graduated from college a month ago and is now without work. She accepted a job that will start next month. Today, Cheryl is: A) in the labor force. B) a discouraged worker. C) employed. D) not in the labor force.

A) in the labor force.

We can safely say that total output can increase if there is a(n): A) increase in the number of machines per worker. B) increase in the size of labor force and a decrease in the productivity of workers. C) decrease in the number of workers per machine. D) decrease in the size of capital and an increase in the productivity of machines.

A) increase in the number of machines per worker.

The productivity of workers is defined as the: A) output produced by a worker per hour. B) number of hours a worker spends at work. C) number of workers needed to produce one day's volume of output. D) total output produced by the labor force.

A) output produced by a worker per hour.

Which of the following is NOT a desirable feature in an economy? A) rapid increase in the general price level. B) rapid increase in output per worker. C) low unemployment. D) low inflation.

A) rapid increase in the general price level.

Deflation is a decrease in: A) the overall price level. B) real gross national product. C) the price of one item. D) the average income level.

A) the overall price level.

The Jackson Tool Company manufactures only tools. In 2016 Jackson Tools manufactured 20,000 tools, but sold 21,000 tools. In 2016 Jackson Tools' change in inventory was: A) -2,000 tools. B) -1,000 tools. C) 1,000 tools. D) 3,000 tools.

B) -1,000 tools.

If Homer is paid an interest rate of 2% on his savings, but the inflation rate is 12%, the real interest rate Homer earns is: A) -12%. B) -10%. C) 2%. D) 14%.

B) -10%.

If the consumption function is of the form [C= 60 + 0.9Y], the MPS equals: A) -0.9. B) 0.1. C) 0.6. D) 0.9.

B) 0.1.

Refer to Table 7.6. If 2014 is the base period, the price index in 2014 is: A) 1000. B) 100. C) 10. D) 1.

B) 100.

Refer to Table 7.2. The total number of people unemployed is: A) 13 million B) 15 million C) 17 million D) 20 million

B) 15 million

If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises by $________ and his saving rises by $________. A) 500;100 B) 2,000;500 C) 2,500;200 D) 2,500;20

B) 2,000;500

Refer to Table 6.1. The value of gross domestic product in billions of dollars is A) 3,000 B) 3,075 C) 3,125 D) 3,750

B) 3,075

Refer to Table 7.5. If 2014 is the base year, the inflation rate between 2014 and 2015 is: A) 3.9% B) 6.1% C) 7.4% D) 10.2%

B) 6.1%

Which of the following is NOT a correct statement? A) Shareholders earn dividends but bondholders don't. B) Bondholders earn dividends but shareholders don't. C) Companies can issue shares and issue bonds. D) The government issues bonds but does not issue shares.

B) Bondholders earn dividends but shareholders don't.

Refer to Table 7.2. The labor force: A) equals 130 million. B) equals 150 million. C) equals 170 million. D) cannot be determined from this information.

B) equals 150 million.

Refer to Table 8.6. If the interest rate dropped from 15% to 6%, planned investment would _______ by $__________ billion. A) decrease; 270 B) increase; 90 C) decrease; 90 D) increase; 270

B) increase; 90

An increase in the overall price level is: A) deflation B) inflation C) a price index D) a recession

B) inflation

If the MPS is 0.60, MPC A) is 1.60. B) is 0.40. C) is 0.30. D) cannot be determined by the given information.

B) is 0.40.

Government policymakers would like to have high ___________ and low _____________. A) unemployment and output growth; inflation B) output growth; unemployment and inflation C) output growth and inflation; unemployment D) inflation; unemployment and output growth

B) output growth; unemployment and inflation

The real interest rate is the difference between ____________ and ____________. A) frictional inflation rate; structural inflation rate. B) the interest rate on a loan; the inflation rate. C) inflation rate; GDP deflator. D) nominal interest rate; depreciation.

B) the interest rate on a loan; the inflation rate.

The number of people unemployed equals: A) the number of people employed minus the labor force. B) the labor force minus the number of people employed. C) the labor force plus the number of people employed. D) the number of people employed divided by the labor force.

B) the labor force minus the number of people employed.

After government is added to the income-expenditure model, the formula for the aggregate consumption function is

C = a + b (Y-T)

Refer to Table 7.6. The bundle price for the goods in period 2015 is: A) $100. B) $57.50. C) $50.50. D) $41.00.

C) $50.50.

Assuming there is no government or foreign sector, if the multiplier is 5, the MPC is: A) 0.4 B) 0.5 C) 0.8 D) 5

C) 0.8

Refer to Table 7.4. The total number of people employed is: A) 190 million B) 120 million C) 114 million D) 57 million

C) 114 million

The United States economy experienced stagflation during the: A) 1950s B) 1960s C) 1970s D) 1990s

C) 1970s

Refer to Table 6.1. The value for gross private domestic investment in billions of dollars is A) 300 B) 375 C) 425 D) 450

C) 425

Refer to Table 7.4. The total number of people unemployed is: A) 10 million B) 8 million C) 6 million D) 3 million

C) 6 million

A prolonged and deep recession is called: A) hyperinflation B) a stagflation C) a depression D) a business cycle

C) a depression

A price index is: A) a sustained increase in the overall price level. B) a decrease in the overall price level. C) a measurement showing how the average price of a bundle of goods changes over time. D) a measurement showing the cost of a bundle of goods at a point in time.

C) a measurement showing how the average price of a bundle of goods changes over time.

Output in an economy can be increased by: A) decreasing inflation B) limiting the work week C) adding more workers D) using fewer machines

C) adding more workers

Which of the following decreases the real interest rate? A) an increase in the nominal interest rate, holding the inflation rate constant. B) a decrease in both the nominal interest rate and the inflation rate by the same percentage points. C) an increase in both the inflation rate, holding the nominal interest rate constant. D) an increase in both the nominal interest rate and the inflation rate by the same percentage points.

C) an increase in both the inflation rate, holding the nominal interest rate constant.

Refer to Table 7.4. The labor force A) equals 200 million. B) equals 130 million. C) equals 120 million. D) equals 110 million.

C) equals 120 million.

A period during which aggregate output rises is known as a(n): A) hyperinflation B) recession C) expansion D) inflation

C) expansion

Inflation is a(n): A) decrease in the overall price level. B) increase in the overall level of economic activity. C) increase in the overall price level. D) decrease in the overall level of economic activity.

C) increase in the overall price level.

Households and purchase stocks and bonds from firms in the ________ market. A) goods-and-services B) labor C) money D) foreign exchange

C) money

Consumption is: A) positively related to household income and wealth, interest rates, and households' expectations about the future. B) determined only by income. C) positively related to household income and wealth and households' expectations about the future, but negatively related to interest rates. D) negatively related to household income and wealth, interest rates, and households' expectations about the future.

C) positively related to household income and wealth and households' expectations about the future, but negatively related to interest rates.

Legalizing all forms of illegal activities would A) reduce both the underground economy and measured GDP. B) increase the size of the underground economy and reduce measured GDP. C) reduce the size of the underground economy and increase measured GDP. D) reduce measured GDP.

C) reduce the size of the underground economy and increase measured GDP.

Rapid increases in the price level during periods of recession or high unemployment are known as: A) stagnation B) inflation C) stagflation D) depression

C) stagflation

An auto worker in Ohio who loses her job because the company relocated the plant to another country represents an example of: A) cyclical unemployment B) frictional unemployment C) structural unemployment D) seasonal unemployment

C) structural unemployment

Which of the following is NOT a topic studied in Macroeconomics? A) the unemployment rate B) gross domestic product C) the price of Dell computers D) the inflation rate

C) the price of Dell computers

Which of the following would NOT be counted in 2016's GDP? A) the commissions earned by a sales associate in selling home theater systems built prior to 2016. B) the 2016 salary of a used furniture salesperson. C) the value of a 1976 convertible you purchase from a dealer in 2016. D) the value of a laser printer manufactured in 2016 but not sold in 2016.

C) the value of a 1976 convertible you purchase from a dealer in 2016.

Diane lost her job and immediately started looking for another job. As a result the: A) labor force decreases. B) unemployment rate remains constant. C) unemployment rate increases. D) labor force increases.

C) unemployment rate increases.

Assume there is no government or foreign sector. If the multiplier is 4, a $20 billion increase in investment will cause aggregate output to increase by: A) $5 billion. B) $20 billion. C) $40 billion. D) $80 billion.

D) $80 billion.

Refer to Table 7.6. If 2014 is the base year, the price index in 2015 is: A) 76.8. B) 81.9. C) 119.1. D) 123.2.

D) 123.2.

Refer to Table 7.6. If 2014 is the base year, the inflation rate between 2014 and 2015 is: A) 12.4%. B) 17.6%. C) 19.1%. D) 23.2%.

D) 23.2%.

If C= 100 + 0.8Y and I=50, then the equilibrium level of income is: A) 187.5 B) 375 C) 600 D) 750

D) 750

Refer to Figure 8.2. The line segment BD represents Jerry's: A) saving when income is Y1. B) consumption when income equals Y1. C) saving when income equals zero. D) consumption when income equals zero.

D) consumption when income equals zero.

In the circular flow diagram, firms ___________ labor and households ________ goods and services. A) supply; demand B) supply; supply C) demand; supply D) demand; demand

D) demand; demand

A period of very rapid increase in the overall price level is known as: A) stagnation B) stagflation C) depression D) hyperinflation

D) hyperinflation

Discouraged workers are: A) considered cyclically unemployed. B) considered frictionally unemployed. C) considered structurally unemployed. D) not considered as part of the labor force.

D) not considered as part of the labor force.

In macroeconomics, equilibrium is defined as that point at which: A) saving equals consumption. B) aggregate output equals consumption minus investment. C) planned aggregate expenditure equals consumption. D) planned aggregate expenditure equals aggregate output.

D) planned aggregate expenditure equals aggregate output.

Refer to Figure 8.2. Along the line segment AC, Jerry's: A) consumption is greater than his income. B) consumption equals his income. C) saving is zero. D) saving is positive.

D) saving is positive.

According to Classical economists, if the quantity of labor demanded exceeds the quantity supplied, there is: A) shortage of labor and wages will fall. B) surplus of labor and wages will fall. C) surplus of labor and wages will rise. D) shortage of labor and wages will rise.

D) shortage of labor and wages will rise.

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are: A) market prices B) administered prices C) regulatory prices D) sticky prices

D) sticky prices.

The MPC is: A) the change in saving divided by the change in income. B) consumption divided by income. C) the change in consumption divided by the change in saving. D) the change in consumption divided by the change in income.

D) the change in consumption divided by the change in income.

Human capital is: A) the money people have B) the property people own C) the machines people own D) the mental or physical skills people have

D) the mental or physical skills people have

Which of the following best explains the growth in output per worker hour during the 20th century? A) the quantity of labor increased during that period. B) the quality of labor declined during that period. C) the worker-capital ratio increased during that period. D) the quality of capital improved during that period.

D) the quality of capital improved during that period.

Which of the following is NOT a category of fiscal policy?

Government policies regarding money supply in the economy.

The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________ A) GDP; GDP B) GNP; GDP C) GDP; GNP D) GNP; GNP

GNP; GDP

The difference between what a government spends and what it collects in taxes in a year is

The government budget deficit or surplus

Which of the following is a correct sequence of events during a recession?

Unemployment rises, income falls, tax revenue falls, unemployment benefits rise, an the budget deficit rises.

When the government sector is included in the income-expenditure model, the equation for aggregate income is:

Y = C + I + G

If the government spending multiplier is 5 and government spending decreases by $200 billion, output will ______ by $_______ billion.

decrease; 1,000

Personal taxes are the ___________ in the government's budget.

largest revenue source