Test one Econ 311b

If the marginal propensity to consume (MPC) is 0.75, then households spend _____ of each additional dollar of disposable income on consumer goods and services and save _____.

.72; .25

When a competitive firm has hired an additional worker at a real wage of W / P = 6 hamburgers per hour, and the worker produces an additional 6 hamburgers, then the firm should hire an additional _____ worker(s) if its only goal is to maximize profit.

0

Suppose that the pizza demand function is D(P, Y) = 60 − 10P + 2Y, and the pizza supply function is S(P, Pm) = 20P − 20Pm, where P is the price of pizza, Y is aggregate income, and Pm is the price of materials. If Y = 70 and Pm = 5, then the equilibrium price is:

10

The highest unemployment rate recorded in the United States during the recession that followed the financial crisis of 2008-2009 was about _____ percent.

10

Bill sells his car to a used car dealer for $4,000, which then sells it to another household for $5,000. Together, these transactions add _____ dollars to the GDP.

1000

Which U.S. recession is considered to be the worst economic downturn since the Great Depression in the 1930s?

2008-2009

An economy has a labor force of 120 million and total employment of 90 million. In this economy, the unemployment rate is _____ percent.

25%

An economy produces headphones and fish. In 2014, 1 pound of fish cost $10, a set of headphones cost $10, and the economy produced 10 pounds of fish and 10 sets of headphones. In 2015, when the economy produced 5 pounds of fish and 20 sets of headphones, 1 pound of fish cost $20, and a set of headphones cost $5. Real GDP in 2014 (at 2015 prices):

250 - real gdp= 2014 price times 2015 quantity pluse 2014 price times 2015 quantity

Suppose that nominal GDP increases by 6 percent in a year when real GDP increases by 3 percent. This means that the inflation rate, as measured by the percentage change in the GDP deflator, is approximately _____ percent in that year.

3

Prior to the Covid-19 pandemic, the United States experienced its longest expansion in history with the unemployment rate in February 2020 falling to:

3.5

A stock broker charges a 1 percent fee to purchase stock for clients. If a household uses the broker to buy 100 shares of a stock at $50/share, then the transaction contributes _____ spending to GDP.

50$ consumption

Each month, about _____ households are interviewed to measure the unemployment rate.

60,000

Dominique got laid off from a job at a multinational corporation and agreed to work more hours at her second job. As a result:

the establishment survey will show a drop in employment.

The inflation rate is a measure of how fast:

the general level of prices in the economy is rising

For the production function Y = K0.6 L0.4, the larger is the capital stock, K, _______ the marginal productivity of labor.

the larger

Most macroeconomists believe that price flexibility is a suitable assumption for studying the behavior of the economy in:

the long run only

Exogenous variables are variables that:

the model takes as a given

A simple model of the pizza restaurant market would NOT take into account

the price and quantity of pizza

Economic growth since 2009 has been lower than normal because

the recovery from the great recession has been very slow

After 2009, the unemployment rate was generally higher than normal for several years because:

the recovery from the great recession was very slow

Using a market-clearing model to analyze the labor market is _____ because wages usually change _____.

unrealist: infrequently

When studying the unemployment rate, economists _____ to explain why it fluctuates. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

use many models

The price of labor is the _____, and the price of capital is the _____.

wage: rent

Gross domestic product (GDP) is the market value of all _____ produced within an economy in a given period of time.

Final goods and services

_____ refers to the market value of all final goods and services produced within an economy in a given period of time.

Gross domestic Product

The Federal Reserve uses the percentage change in the _____ as its preferred gauge of how quickly prices are rising.

PCE Deflator

In the United States, in practice, the differences among the measures of inflation computed using the CPI, the GDP deflator, and the PCE deflator:

are small

In the classical model, an economy is in equilibrium when C + I + G = Y. Assuming that saving is unresponsive to changes in the interest rate, if firms increase spending because of an investment tax credit, then:

c i g will be unchanged

Real GDP calculations are sensitive to the choice of the base year and might generate vastly different conclusions regarding the real GDP growth rate, depending on the base year chosen. The _____ measures of real GDP avoid this problem by using the _____ of prices in two base years.

chain-weighted; average

The PCE deflator is based on only the _____ component of GDP.

consumption

The demand for goods and services in a closed economy is the sum of:

consumption investment and govenrment purchases

The flow of dollars from households to markets of goods and services is called _____, and the flow of dollars from households to the government is called _____.

consumption: taxes

A consumer in the United States buys a T-shirt at a retail store for $17. The label in the T-shirt says "Made in Sri Lanka." The retailer paid $5 to the supplier who shipped the T-shirt from Sri Lanka to the United States. The T-shirt purchase:

contributes 12 to the U.S. GDP

When investment spending decreases in response to an increase in government purchases, this is called:

crowding out

The labor-force participation rate of women has risen since 1950 for all of these reasons EXCEPT that:

decreasing consumerism has meant that fewer people value the acquisition of money than in previous generations.

When the general price level in the economy is decreasing, the economy is experiencing:

deflation

C + I + G is the _____ for the economy's output, and F(K, L) is the _____ of the economy's output. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

demand: supply

Endogenous variables are:

determined within the model.

The field of macroeconomics does NOT study the:

effects of a tariff on imported steel on the prices of automobiles in the United States.

In the model of demand and supply for goods and services produced, consumption, investment, and the interest rate are considered _____ variables.

endogenous

The _____ survey measures the employment of workers that firms have on their payrolls.

establishment

The price of an input is treated as a(n) _____ variable in the supply-and-demand model.

exogenous

In an economic model:

exogenous variables affect endogenous variables

In the supply-and-demand model for pizzas, the prices of inputs such as tomatoes and pepperoni are examples of _____ variables and are determined _____ the model.

exogenous: outside

In microeconomics, when economists state that households and firms "optimize," they mean that:

firms make production decisions to maximize their profits and households maximize their utility.

A _____ index is computed as the average of a Paasche and a Laspeyres index.

fisher

The core inflation rate measures the increase in price of a consumer basket that excludes:

food and energy products

The long-run model of output determination assumes that factors of production are _____ utilized.

fully

A(n) _____ is a mathematical concept that shows the ways in which one variable depends on a set of other variables.

function

The notation I = I(r) indicates that investment I is a _____ of r, the real interest rate.

function

Important characteristics of macroeconomic models include all of these EXCEPT:

functional relationships based on randomized control trials.

In the simplest model of consumer behavior, the most important determinant of consumption spending by a household is the: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

households disposable income

A typical trend during a recession is that:

incomes fall

Crowding out occurs when

increase in governtment purchased decreased investment

Every time something is produced within the domestic economy, gross domestic product (GDP):

increases

When _____, the _____ rate tends to decrease.

inflation increases: unemployment

The percentage change in the price level from one period to the next is called the:

inflation rate

National saving represents the amount of output that has not been claimed by consumers and the government. In equilibrium, in a closed economy, national saving must equal:

investment

According to the classical model, if an economy is in equilibrium with C + I + G = Y, and consumers increase spending because of a stock market boom, then:

investment will drop because r will increase

All these statements are true regarding the PCE deflator EXCEPT that it:

is more volatile than the CPI and GDP deflator.

The _____ is the percentage of the adult population that is in the labor force.

labor-force participation rate

The CPI has a fixed basket of goods and is an example of a _____ index.

laspeyres

A worker is employed for an additional hour at a wage of W = $15 and produces 4 hamburgers with a price of $3 per hamburger during that hour. The marginal product of the worker is _____ the real wage, and the worker _____ be hired for the additional hour if profit is the only consideration.

less than should not

Economic expansions are usually associated with

low unemployment

Since the early 1980s, inflation in the United States has been relatively _____ and _____.

low: stable

Each statement about macroeconomic data is true EXCEPT:

macroeconomic data are obtained from controlled experiments

Macroeconomic Models

make different assumptions to explain different aspects of the macroeconomy.

During a recession, the price level:

may increase or decrease

S = Y − C − G is _____ saving, while Y − T − C is _____ saving.

national; Private

The demand for goods and services in a closed economy is the sum of all of these EXCEPT:

net exports

Reiner has a full-time job and a part-time job. If Reiner quits the part-time job, the household survey will show _____ in employment, and the establishment survey will show _____ in employment.

no change: a decrease

Real GDP is often plotted using a logarithmic scale. On such a scale, equal distances represent equal _____ changes.

percentage

All variables in the classical model are measured in _____ terms; this means they only represent quantities of goods and services.

real

A higher economic standard of living results from growth in:

real GDP per person

In the simple circular flow diagram in the text, households:

recieve all the income becaus househols are the owners of the firms

In the supply-and-demand model, a change in an exogenous variable will result in a:

shift of either the supply or demand curve

An assumption of _____ is more plausible for studying the short-run behavior of the economy, while an assumption of _____ is more plausible for studying the long-run, equilibrium behavior of the economy.

sticky prices: flexible

The percentage change of a product of two variables is approximately the _____ of the percentage changes in each of the variables.

sum

In the simple circular flow diagram in the text, income is measured as:

sum of wages and profits

The _____ is responsible for compiling the CPI from the prices of thousands of goods and services.

Bureau of Labor Statistics

You are looking at the interest rates on two bonds, bond A and bond B, and you notice that the interest rate on bond A is lower than that on bond B. Which inference is consistent with this observation?

bond a is. inflation protected and bond b is not