unit 2

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the information. Positive net investment is occurring in: -economy A only. -economy B only. -economies A and B only. -economy C only.

-economy C only.

Proponents of economic growth say that pollution: -is an inevitable by-product of growth. -is detrimental to economic growth. -declines as a country moves from agriculture to industry. -occurs, not because of growth, but because common resources are treated as free goods.

-occurs, not because of growth, but because common resources are treated as free goods.

Use the list below to answer the following question:1. Improvements in technology.2. Increases in the supply (stock) of capital goods.3. Purchases of expanding output.4. Obtaining the optimal combination of goods, each at least-cost production.5. Increases in the quantity and quality of natural resources.6. Increases in the quantity and quality of human resources.Refer to the list. As distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are: 1, 3, and 4 only. 2, 5, and 6 only. 2, 4, 5, and 6 only. 1, 2, 5, and 6 only.

1,2,5,6

The multiplier is: 1/(1 - MPS). 1/(1 + MPC). 1/MPS. 1/MPC.

1/MPS

Between 1950 and 2012, U.S. real GDP per capita grew at an average annual rate of about: 5.5 percent. 2.0 percent. 3.2 percent. 4.2 percent.

2.9 percent

Which of the following statements is true about causes of business cycle fluctuations? -Economists all agree that productivity shocks are the cause of most business cycle changes. -Economists all agree that supply shocks are the cause of most business cycle fluctuations. -There are a wide range of theories as to the underlying causes of business cycle movements. -Economists all agree that monetary changes are primarily responsible for business cycle fluctuations.

Correct! There are a wide range of theories as to the underlying causes of business cycle movements.

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services? Wait unemployment. Search unemployment. Cyclical unemployment. Frictional unemployment.

Cyclical unemployment.

Other things equal, which of the following would increase labor productivity the most? Inputs of labor increase and the stock of real capital remains constant. The increase in the stock of real capital exceeds the increase in inputs of labor. The stock of real capital and inputs of labor increase proportionately. The increase in inputs of labor exceeds the increase in the stock of real capital.

The increase in the stock of real capital exceeds the increase in inputs of labor.

Which of the following is not economic investment? The purchase of 100 shares of AT&T by a retired business executive. The purchase of a new drill press by the Ajax Manufacturing Company. The piling up of inventories on a grocer's shelf. Construction of a suburban housing project.

The purchase of 100 shares of AT&T by a retired business executive.

Which of the following is an intermediate good? -The purchase of gasoline for a ski trip to Colorado. -The purchase of a pizza by a college student. -The purchase of baseball uniforms by a professional baseball team. -The purchase of jogging shoes by a professor.

The purchase of baseball uniforms by a professional baseball team.

The period in the U.S. economy from 1995 to 2012 is characterized by: a higher trend rate of saving. a higher trend rate of productivity growth. the end of the business cycle. a higher natural rate of unemployment.

a higher trend rate of productivity growth.

The GDP gap measures the difference between: nominal GDP and real GDP. actual GDP and potential GDP. NI and PI. NDP and GDP.

actual GDP and potential GDP.

In the treatment of U.S. exports and imports, national income accountants: subtract exports, but add imports, in calculating GDP. add exports, but subtract imports, in calculating GDP. subtract both exports and imports in calculating GDP. add both exports and imports in calculating GDP.

add exports, but subtract imports, in calculating GDP

Given the annual rate of economic growth, the "rule of 70" allows one to: calculate the size of the GDP gap. calculate the number of years required for real GDP to double. determine the accompanying rate of inflation. determine the growth rate of per capita GDP.

calculate the number of years required for real GDP to double.

Real GDP per capita: can grow either more slowly or more rapidly than real GDP. cannot grow more rapidly than real GDP. cannot grow more slowly than real GDP. necessarily grows more rapidly than real GDP.

can grow either more slowly or more rapidly than real GDP.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are: services and nondurable consumer goods. military goods and capital goods. clothing and education. capital goods and durable consumer goods

capital goods and durable consumer goods

The APC is calculated as: change in consumption/change in income. change in income/change in consumption. consumption/income. income/consumption.

consumption/income.

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would: increase. decline. be unchanged. increase in the short run but eventually decline.

decline

The amount of after-tax income received by households is measured by: disposable income. national income. discretionary income. personal income.

disposable income

The consumption schedule is drawn on the assumption that as income increases, consumption will: be unaffected. increase absolutely but remain constant as a percentage of income. increase absolutely but decline as a percentage of income. increase both absolutely and as a percentage of income.

increase absolutely but decline as a percentage of income.

A decline in the real interest rate will: shift the investment schedule downward. shift the investment demand curve to the left. shift the investment demand curve to the right. increase the amount of investment spending.

increase the amount of investment spending.

A nation's gross domestic product (GDP): - is the dollar value of all final output produced within the borders of the nation during a specific period of time. -is the dollar value of all final output produced by its citizens, regardless of where they are living. -can be found by summing C + In + S + Xn. -is always some amount less than C + Ig + G + Xn.

is the dollar value of all final output produced within the borders of the nation during a specific period of time.

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by: disposable income. national income. gross domestic product. personal income.

national income

By summing the dollar value of all market transactions in the economy, we would: -determine the value added for the economy. -determine the market value of all resources used in the production process. -measure GDP. -obtain a sum substantially larger than the GDP

obtain a sum substantially larger than the GDP.

Investment spending in the United States tends to be unstable because: capital wears out quickly and must be replaced often. profits are highly variable. the price level fluctuates rapidly. investment spending is affected by interest rates.

profits are highly variable.

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal: r will exceed i at all possible levels of investment. less investment will be forthcoming when r rises. more investment will be forthcoming when i exceeds r. r will fall as more investment is undertaken.

r will fall as more investment is undertaken.

Unanticipated inflation: reduces the real burden of the public debt to the federal government. hurts people whose sole source of income is from Social Security benefits. hurts borrowers and helps lenders. helps savers.

reduces the real burden of the public debt to the federal government.

Innovations such as the microchip and the Internet lead to business cycle variations because: they cause prices to be sticky. they cause prices to be flexible. significant innovations occur irregularly and unexpectedly. the central bank will often change the money supply in response.

significant innovations occur irregularly and unexpectedly.

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called: frictional unemployment. compositional unemployment. cyclical unemployment. structural unemployment.

structural unemployment.

The unemployment rate of: -teenagers is much higher than that of adults. -managerial and professional workers exceeds that of construction and extraction workers. -women greatly exceeds that of men. -whites is roughly equal to that of African Americans.

teenagers is much higher than that of adults.

Economic growth rates in follower countries: - tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs. -tend to be lower than in leader countries because labor forces in follower countries are too small. -will never bring real GDP per capita up to the same levels as in leader countries, even if follower growth rates are greater than those in leader countries. -typically average about 2 percent per year.

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs.

During the Great Recession of 2007-2009, both real interest rates and investment spending declined. This suggests that: -purchases of capital from abroad increased, and these were not reflected in investment spending figures for that period. -the investment demand curve was positively sloped during this period. - the investment demand curve shifted inward. -firms were optimistic about future sales.

the investment demand curve shifted inward.

All of the following are sources of increasing returns and economies of scale except: simultaneous consumption. network effects. the multiplier effect. learning by doing.

the multiplier effect.

A large underground economy results in an: understated GDP. understated GDP price index. overstated GDP. overstated GDP price index.

understated GDP.