232
Suppose that inventories were $80 billion in 2007 and $70 billion in 2008. In 2008, accountants would:
subtract $10 billion from other elements of investments in calculating total investment.
Why are high rates of unemployment of concern to economists?
there is lost output that could have been produced if the unemployed had been working
Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy. The average propensity to save at this level of output is:
0.10
Which of the following is a final good or service?
A haircut purchased by a father for his 12 year-old son.
Implicit contract
An unwritten agrement in the labor market that the employer will try to to keep wages from falling g when the economy is weak or the business is having getable, and the employee will not expect huge salary increases when the economy or the busyness is strong
The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the:
Bureau of Economic Analysis.
The investment demand curve will shift to the left as the result of:
Business pessimism about future economic conditions
(Advanced analysis) Refer to the diagram. The equation for the consumption schedule is:
C = 60 + .6Y
Real GDP per capita is found by?
Dividing real GDP by population.
Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent. If the bank's required and excess reserves are equal, then its actual reserves:
are $20,000.
In national income accounting, the consumption category of expenditures includes purchases of:
automobiles for personal use but not houses.
As disposable income goes up, the:
average propensity to consume (APC) falls.
Answer the question on the basis of the following data. All figures are in billions of dollars: Refer to the data. GDP is:
$121.
Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table. The change in income in round two will be:
$16
Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion. GDP in year 2 is:
$190 billion.
If the MPC in an economy is 0.75 and aggregate expenditures increase by $5 billion, then equilibrium GDP will increase by:
$20 billion
Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:
$200,000
Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:
$200,000.
Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is:
$210 billion.
Suppose the ABC bank has excess reserves of $4,000 and outstanding checkable deposits of $80,000. If the reserve requirement is 25 percent, what is the size of the bank's actual reserves?
$24,000
Refer to the table above. When there is no investment in this private closed economy, the equilibrium level of GDP will be:
$250 billion
Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is:
$30.
Answer the question on the basis of the following data for a private closed economy. Refer to the data for a private closed economy. If gross investment is $12 billion, the equilibrium level of GDP will be:
$360
The table shows a private open economy. All figures are in billions of dollars. Refer to the above table. The equilibrium real GDP is:
$600
The table shows a private open economy. All figures are in billions of dollars. Refer to the above table. If net exports increased by $10 billion at each level of GDP, the equilibrium real GDP would be:
$650
In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium GDP will decrease by:
$75 billion
If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by:
$9 billion
How do you find the unemployment rate?
(# of people unemployed / labor force) x 100
How do you find the change in CPI?
(CPI latest year - CPI Beginning year / CPI Beginning year) x 100
Growth rate per GDP per capita
(GDP per capita of ending year - GDP per capita of beginning year / GDP per capita of beginning) x 100
How do you find CPI?
(Price of market basket latest year / price of market basket beginning) x 100
What is the growth rate per real GDP formula?
(Real GDP of ending year - Real GDP of beginning year / Real GDP of beginning year) x 100
Imp question
- Why does some level of unemployment resist even when economies are growing strongly? - Why are unemployment rates continually higher in certain economies through good and bad economic years?
Refer to the table. The after-tax MPS shown is:
.33
Refer to the data above. The marginal propensity to consume is:
.60
Refer to the table. The after-tax MPC in the economy shown is:
.67
In determining real GDP, economists adjust the nominal GDP by using the:
GDP price index.
Assume that the size of the underground economy increases both absolutely and relatively over time. As a result:
GDP will tend to increasingly understate the level of output through time.
Refer to the consumption schedule above. At income level 3, the amount of consumption is represented by the line segment:
GH
Bear of Labor Statistics (BLS)
Given 10 question survey if your employe or not (included or not included) "Unemployed" A phd physics working at burger king.
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?
Goods and services produced in the underground economy.
What is government spending (G)?
Goods for government and military
Real GDP per captia can...?
Grow more slowly or rapidly than real GDP.
Demand pull inflation:
occurs when total spending exceeds the economy's ability to provide output at the existing price level
Demand pull inflation:
occurs when total spending in the economy is excessive
The ZZZ Corporation issued $25 million in new common stock in 2008. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment:
of $18 million has occurred.
National income accountants can avoid multiple counting by:
only counting final goods.
The unemployment rate is subject to criticism due to:
part-time employment and discouraged workers.
Unemployment rate=
people / total labor force
During a peroid of hyperinflation
people tend to hold goods rather than money
define unemployment
people who cannot get a job even though they are actively seeking a job
Refer to the above data. The equilibrium level of GDP in this private open economy is:
$600
the term "recession" describes a situation where:
2 consecutive negative quarters of economic growth (GDP)
What is deflation?
A decline in the economy's price level.
In a private closed economy, the equilibrium condition for the economy is:
AE = C + Ig = GDP
Economic decline can be portrayed as:
An inward shift of the production possibilities curve.
Refer to the given diagram. The marginal propensity to save is equal to:
CD/BD
The level of aggregate expenditures in a mixed open economy is comprised of:
Ca + Ig + Xn + G
List and define the 4 components of nominal GDP:
Consumption, investment, government spending, and net exports.
Natural rate of unemployment
Economists hav a tem to describe the remaining level of unemployment that occurs ee when the economy is health. it is called the natural rate of unemployment.
What are the three types of unemployment?
Frictional unemployment, structural unemployment, cyclical unemployment.
If the real interest rate falls, then the:
Investment schedule will shift upward
What is frictional unemployment?
It is seasoned induced and the labor market doesn't operate perfectly.
The phases of the business cycles are:
Peak, recession, trough, and expansion.
Labor Force
Person aged 16 to 65
Personal income usually exceeds disposable income.
TRUE
Market equilibrium
The equilibrium wage, the quantity of labour demanded by employers will equal the quantity supplied.
Define "Natural Rate of Unemployment":
The full-employment unemployment rate; the unemployment rate occurring when there is not cyclical unemployment and the economy is achieving its potential output.
Goods and services sold are not GDP. True or false?
True
Net exports are negative when:
a nation's imports exceed its exports.
Businesses cycles are:
alternating rises and declines in the level of economic activity, sometime over several years.
National income accountants define investment to include:
any increase in business inventories.
inflation initiated by increases in wages or other resource prices is labeled:
cost-push inflation
If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:
deflation of 3.33 percent
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 C only.
Gross domestic product (GDP) measures and reports output:
in dollar amounts and percentage growth.
Unlike demand pull inflation, cost push inflation:
is self limiting
If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system:
m = 1/R.
Inflation
prices on average are rising, although some particular prices may be falling
Tom Atoe grows fruits and vegetables for home consumption. This activity is:
productive but is excluded from GDP because no market transaction occurs.
Okun's law
shows the realtionship between the unemployment rate and the size of the negative GDP gap
(Consider This) Capital is a:
stock, whereas gross investment and depreciation are flows.
(Last Word) Which of the following is a source of data for the consumption component of the U.S. GDP?
the Census Bureau's Retail Trade Survey
Potential output is:
the real GDP that occurs when the economy is fully employed.
Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is:
$1,200.
Refer to the table above. If the real rate of interest is 2%, then the equilibrium level of GDP will be:
$1200 billion
Refer to the table above. If gross investment is $12 billion, the equilibrium level of GDP will be:
$280 billion
(Advanced analysis) In a private closed economy, (a) the marginal propensity to save is 0.25, (b) consumption equals income at $120 billion, and (c) the level of investment is $40 billion. What is the equilibrium level of income?
$280 billion.
Assume the MPC is .8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by:
$40 Billion
A reserve requirement of 20 percent means a bank must have $1,000 of reserves if its checkable deposits are:
$5,000.
The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table above. If planned investment is $25 billion, then aggregate expenditures at the income level of $560 billion will be:
$580 billion
Refer to the table above. The MPC and multiplier are, respectively:
0.75 and 4
The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about:
1.6%
Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Refer to the data. If year 2 is chosen as the base year, the price index for year 1 is:
100.
If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:
11 percent
The price level has doubled in 35 years. The approximate annual percentage rate of increase in the price level over this period has been: Answer 50 percent. 20 percent. 5 percent. 2 percent.
2 percent.
Suppose that new computer software for accounting and analysis at a business has a useful life of only one year and costs $200,000 before it needs to be upgraded to a new version. The revenue generated by this software is expected to be $250,000. The expected rate of return from this new computer software is:
25 percent
Refer to the above graph for a private closed economy. The multiplier for the above economy is:
3
Suppose the nominal annual interest reate on a two year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years. The annual real rate of interest is:
3 percent
Between 1980 and 2000 the price level approximately doubled. The average annual rate of inflation over this 20 year period was about:
3.5 percent
If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is:
300.
Suppose that a bank's actual reserves are $5 million, its checkable deposits are $5 million, and its excess reserves are $3 million. The reserve requirement must be:
40 percent.
Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately:
44 percent.
If the rate of inflation is 12 percent per year, the price level will double in about:
6 years
If Fred's annunal income rises by 8 percent each year, his annual real income will double in about:
8-9 years
In the flow of income and spending, saving and investment are, respectively:
A leakage and an injection
Insider-outside model
A model that divides workers into insider already workidg for the firm who know the procedures and outsiders who are recent or prospective hires.
What is inflation?
A rise in the general level of prices.
What is a depression?
A very long and severe recession.
What is hyperinflation?
A very rapid rise in the price level; and extremely high rate of inflation.
How do you find a output Gap?
Actual GDP (production) - Potential GDP (production)
Define Nominal GDP:
All goods and services produced in the U.S. non-inflation adjusted
Define "Cost of Living Allowance":
An automatic increase in the incomes (wages) of workers when inflation occurs.
The fraction, or percentage, of total income which is consumed is called the:
Average propensity to consume
Refer to the above figures with consumption schedules in figure (A) and saving schedules in figure (B), which correspond to each other across different levels of disposable income. If, in figure (A), line A2 shifts to A3 because of the so-called wealth effect, then in figure (B) line:
B2 will shift to B1
Refer to the above figures with consumption schedules in figure (A) and saving schedules in figure (B), which correspond to each other across different levels of disposable income. If, in figure (A), consumption shifts from A2 to A3 because of a change in taxes, then in figure (B) line:
B2 will shift to B3
Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the above information suggests that the production capacity in economy:
C is growing more rapidly than economy B.
Given the annual rate of inflation the "rule of 70" allows for one to:
Calculate the number of years required for the price level to double
The MPC can be defined as the:
Change in consumption divided by the change in income
Which of the following would reduce the money supply?
Commercial banks sell government bonds to the public.
If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to:
Consume is .75
Refer to the consumption schedule above. As income falls from level 3 to level 2, the amount of:
Consumption decreases and the amount of saving decreases
Inflation initiated by increases in wages or other resources prices is labeled:
Cost pull inflation
Rising per unit production costs are most directly associated with:
Cost push inflation
Refer to the diagram. At disposable income level D, consumption is equal to:
D minus CD
If disposable income decreases from $1800 to $1500 and MPC = 0.75, then saving will:
Decrease by $75
Refer to the table above. An increase in the real interest rate from 2% to 6% will:
Decrease the equilibrium level of GDP by $400 billion
Real income can be determined by:
Deflating nominal income for inflation
What are the 2 types of Inflation?
Demand-Pull and Cost-Push.
what are Net Exports (NX)
Exports (x) and imports (x)
Disposable income measures the before-tax income received by resource suppliers.
FALSE
NDP can be determined by adding taxes on production and imports to GDP.
FALSE
An individual bank can safely lend out a multiple of its excess reserves, but the banking system can safely lend out only an amount equal to the excess reserves in the banking system.
False
Loans made to customers are a liability on a bank's balance sheet.
False
The purchase of Wal-Mart stock is a part of gross investment, but not of net investment.
False
The supply of money increases when the public buys government securities from commercial banks
False
imp questions
How to define unemployment rates? Considering unemployment rates over time? US economy as a whole, as a group and for other countries Considering economic explanation for unemployment, patterns of it, and suggested policies for using it.?
Net exports are negative when:
Imports exceed exports
A change in interest rates would shift the consumption schedule and the saving schedule ______; a change in taxes would shift these two schedules ______.
In opposite directions; in the same direction
Several shocks that can cause business cycles:
Irregular innovation, productivity changes, monetary factors, political events, financial instability.
For a nation's real GDP per captia to rise during a year:
It's real GDP must increase more rapidly than it's population.
(Last Word) Say's law and classical macroeconomics were disputed by:
John Maynard Keynes
Refer to the diagram that applies to a private closed economy. If aggregate expenditures are C + Ig2, the amount of saving at income level J is:
KN
Recently a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining. Is this critic correct?
No, becuase real income may fall if prices increase less proportionately than the increase in nominal income
For every 1 % point that actual unemployment rate exceeds the natural rate, a 2% point negative GDP gap occurs
Okun's law
Transfer payments are included in:
PI.
The labor force consists of:
People who are able and willing to work. Both those who are employed and those who are unemployed but actively seeking work.
What is cyclical unemployment?
People who had jobs that are no longer useful / need?
What is structural unemployment?
People who used to make things that no longer need to be made.
Which of the following transactions would be included in GDP?
Peter buys a newly constructed house.
Adverse Selection of wage cuts argument
Points that when employer reacts to poor business condition by reducing wages for all workers, then the best workers with the best employment. which most likely to leave.
What is the real GDP per capita formula?
Real GDP / Population
what is the real GDP per capita (per person) formula?
Real GDP/ population
How do you find the nominal interest rate?
Real interest rate + inflation %
Unanticipated inflation:
Reduces the real burden of the public debt to the Federal Government
(Advanced analysis) The equation for the given saving schedule is:
S = -20 + .2Yd
If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that:
Saving is $90 billion
The Paradox of Thrift highlights the idea that:
Saving more can be bad for the economy during a recession
Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the:
Slope of the consumption schedule is .75
In an economy, for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the:
Slope of the consumption schedule is .8
Which of the following do national income accountants consider to be investment?
The purchase of a new house.
Efficiency wage theory
The theory that productivity of workers, either individually or as a group, will increase if they are paid more.
A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (Ca + Ig + Xn + G) fall short of real GDP at the full-employment level of real GDP.
True
If nominal GDP is 150 and the GDP price index is 200, real GDP is 75.
True
The greater the MPC, the greater the multiplier.
True
The slope of the consumption schedule is measured by the MPC.
True
Ex- Suppose rogerland has a population of a100 million people 72million people have jobs and 19 million people are unemployed. What is unemployment rate?
Unemployment = 19 19/91= 0.208791
UNEMPLOYMENT RATE.
Unemployment rate is the adult percentage out of labor force, but the adult percentage in labor force and without job.
Saving is $40 billion and planned investment is $28 billion at the $175 billion level of output in a private closed economy. At this level:
Unplanned investment will be positive $12 billion
Suppose Smith pays $100 to Jones.
We need more information to determine whether GDP has changed.
define price index
a measure of the price of specified goods and services in the market basket in a given year as compared to the price of similar goods the previous year
Net exports are negative when...
a nations imports exceed its exports
Cost push inflation
a negative supply shock
define recession:
a period of declining real GDP accompanied by lower real income and higher unemployment
In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving.
actual; planned
The phrase " too much money chasing too few goods" best describes:
demand pull inflation
Which of the following would most likely occur during the expansionary phase of the buisness cycle?
demand pull inflation
If the United States wants to increase its net exports in the short term, it might take steps to:
depreciate the dollar compared to foreign currencies.
Transfer payments are:
excluded when calculating GDP because they do not reflect current production.
The level of aggregate expenditures in the private closed economy is determined by the:
expenditures of consumers and businesses.
Net exports are:
exports less imports.
(Advanced analysis) The equation C = 35 + .75Y, where C is consumption and Y is disposable income, shows that:
households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.
Not included
if a person is 11 years old working can we count in labor force? Non-working aren't part of labor force. Full time student melanie's daughter whose student. Discouraged Worker Marvin lost his job and was looking for job and after being discouraged. They stopped looking for job.
The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:
in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.
Gross domestic product (GDP) measures and reports output:
in dollar amounts.
Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:
inflated to $1,080 billion.
Included
melani lost job but still looking for job. Mlanie's sister hanna still working at the same place.
Other things equal, a decrease in the real interest rate will:
move the economy downward along its existing investment demand curve.
Cost push inflation
moves the economy inward from its production possibilities curve
Environmental pollution is accounted for in:
none of these.
Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's income will:
remain constant
The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:
reserves lost by any particular bank will be gained by some other bank.
The value of U.S. imports is:
subtracted from exports when calculating GDP because imports do not constitute production in the United States.
define savings
occurs when consumption is less than your current income
Refer to the graph above for a private closed economy. In this economy, investment is:
$100 billion
Answer the question on the basis of the following data. All figures are in billions of dollars. The gross domestic product for the above economy is:
$101.
Refer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be:
$100 billion
Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:
GDP in 2010 is $500 billion.
What is full employment?
Full employment is less than 100% percent employment of Labor when experiencing frictional and structural unemployment.
Real GDP refers to:
GDP data that have been adjusted for changes in the price level
The total population of an economy is 175 million, the labor force is 125 million, and the number of unemployed is 8 million. The unemployment rate for this economy is: Answer 4.6 percent. 5.8 percent. 6.4 percent. 7.8 percent.
6.4 percent.
Suppose that lenders want to recieve a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:
7 percent
Define economic growth.
An increase in real GDP occurring over some time period. or An increase in real GDP per capita occurring over some period of time.
Define Consumer Price Index:
An index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer.
Economic growth can be portrayed as:
An outward shift of the production possibilities curve.
Who is least likely to be hurt by unanticipated inflation?
An owner of a small buisness
As disposable income decreases, consumption
And saving both decrease
1 + MPS = MPC.
False, MPC+MPS=1
The market for immediately available reserve balances at the Federal Reserve is known as the:
Federal funds market.
Bob voluntarily quit his job as an insurance agent to return to school full-time to earn a MBA degree. With the degree in his hand, he is now searching for a position in management. Bob is presently?
Fictionally unemployed.
Real GDP refers to:
GDP data that have been adjusted for changes in the price level.
The system that measures the economy's overall performance is formally known as:
National income accounting
Which of the following best measures improvements in the standard of living of a nation?
The growth of real GDP per capita
Refer to the data above. At the $300 level of disposable income:
There is a dissaving of $10
Puzzle unemployment and equilibrium in the labor
These people are represented by the circles part of the supply curve. There problem is that they can't find someone who is hiring and willing got pay the wage that others of their skill level are receiving.
What is Cost-Push Inflation?
When cost of business production increases the price consumers pay will increase.
What is Demand-Pull Inflation?
When demand outpaces the economy's ability to produce goods & services.
A price index is?
a comparison of current price of a market basket to a fixed point of reference
A price index is:
a comparison of the current price of a market basket to a fixed point of reference.
The value added of a firm is the market value of:
a firm's output less the value of the inputs bought from others.
Which of the following is a final good or service?
a haircut purchased by a father for his 12 year-old son
In the treatment of U.S. exports and imports, national income accountants:
add exports, but subtract imports, in calculating GDP.
Refer to the diagram. The change in aggregate expenditures as shown from (C + Ig + Xn2) to (C + Ig + Xn1) might be caused by:
an appreciation of this nation's currency relative to the currencies of its trading partners.
Infaltion is undesirable becuse it:
arbitrarily redistributes real income and wealth
In national income accounting, consumption expenditures include purchases of:
automobiles for personal use, but not houses.
Refer to the diagram for a private closed economy. The MPC and MPS are:
both .5
Inflation affects:
both the level and the distribution of income
Banks create money when they:
buy government bonds from households.
Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information we:
cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.
Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information, we:
cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.
In an economy experiencing a persistently falling price level:
changes in nominal GDP understate changes in real GDP.
If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase:
consumption by $80 billion.
What is consumption (C)?
consumption of goods and services only by consumers
GDP can be calculated by summing:
consumption, investment, government purchases, and net exports.
The largest component of total expenditures in the United States is:
consumption.
In a typical year, which of the following measures of aggregate output and income is likely to be the smallest?
disposable income
The amount of after-tax income received by households is measured by:
disposable income.
Real income is found by:
dividing nominal income by the price index(in hundreths)
As applied to the price level, the "rule of 70" indicated that the number of years required for the price level to double can be found by:
dividing the annual rate of inflation into "70"
Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the above information. Positive net investment is occurring in:
economy C only.
The labor force includes:
employed workers and person who are officially unemployed
It is true that:
equal increases in government spending and taxes increase the equilibrium GDP.
When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule:
equals the MPC.
A college graduate using the summer following graduation to search for a job would best be classified as: Answer not officially a member of the labor force. a part of structural unemployment. a part of cyclical unemployment. a part of frictional unemployment.
frictional unemployment.
What are the three types of Unemployment?
frictional, structural, and cyclical.
Final goods and services refer to:
goods and services purchased by ultimate users, rather than for resale or further processing.
Final goods and services refer to:
goods and services purchased by ultimate users, rather thatn for resale or further processing
What is investment (Ig)?
goods only for businesses
define storage
goods that have been produced but remain unsold
Government purchases include government spending on:
government consumption goods and public capital goods.
If net foreign factor income is zero and there are no statistical discrepancies, the sum of national income and the consumption of fixed capital equals:
gross domestic product.
the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.
gross domestic product.
Frictional unemployment consists of:
happens as workers move between jobs.
higher rates of unemployment are linked with:
higher crime rates as the unemployed seek to replace lost income
The consumption schedule is drawn on the assumption that as income increases, consumption will:
increase absolutely but decline as a percentage of income.
Cyclical unemployment.
increase in unemployment in recession. it is closely tied to business cycle.
If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock:
increased by $65 billion.
Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:
inflated to $1080 billion
Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:
inflated to $1080 billion.
why are economist concerned about inflation?
inflation lowers the standard of living for people whose income doesn't increase as fast as the price level.
If both the real interest rate and the nominal interest rate are 3 percent, then the:
inflation premium is zero
Refer to the diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE1, the:
inflationary expenditure gap is ei.
(Consider This) When making a capital stock and reservoir analogy, the:
inflow from the river is gross investment.
In 2007, Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November of 2007. The bicycle was sold to E.Z. Ryder in March of 2008. This bicycle is counted as:
investment in 2007 and as negative investment in 2008.
Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Refer to the given data. The marginal propensity to save:
is highest in economy (1).
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 and can be found by summing C + Ig + G + Xn.
The opportunity cost of unemployment
is the output teat cold have been produced by the unemployed workers.
Economists say that the economy is fully employed when:
it is experiencing only frictional and structural unemployment.
The numerical value of the multiplier will be smaller the:
larger the slope of the saving schedule.
The annumal rate of inflation can be found by subtracting:
last year's price index from this year's price index and dividing the difference by last year's price index
A lender need not be penalized by inflation if the:
lender correctly anticipates inflation and increases the nominal interest rate accordingly
The system that measures the economy's overall performance is formally known as:
national income accounting.
The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by:
national income.
Refer to the consumption schedule above. At income level 1, the amount of saving is:
negative
Compared to other industrial nations, inflation rates in the United States are:
neither significantly higher nor significantly lower
Refer to the diagram. If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy, we can conclude that:
net exports are positive.
The smallest component of aggregate spending in the United States is:
net exports.
if depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:
net investment is negative
If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:
net investment is negative.
Real GDP is preferred to nominal GDP as a measure of economic performance because
nominal GDP uses current prices and thus may over-or understate true changes in output
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:
not counted.
In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:
not counted.
In national income accounting, government purchases include:
purchases by Federal, state, and local governments.
In national income accounting , government purchases include:
purchases by federal, state and local governments
In national income accounting, government purchases include:
purchases by federal, state, and local governments.
The growth of GDP may understate changes in the economy's economic well-being over time if the:
quality of products and services improves.
If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:
r is greater than i.
If the monetary authorities want to reduce the monetary multiplier, they should:
raise the required reserve ratio.
If nominal GDP rises:
real GDP may either rise or fall.
What is the formula for growth rate per real GDP?
real GDP of ending or current year - real GDP of beginning or previous year / real GDP of beginning or previous year X 100
Which of the following formulas is correct? Percentage change in:
real income approximates percentage change in nominal income minus percentage change in price level
Cost push inflation
reduced real output
define investment
relates to businesses and is the creation of new business and new capital goods
In contrast to investment, consumption is:
relatively stable.
Suppose that inventories were $80 billion in 2012 and $70 billion in 2013. In 2013, national income accountants would:
subtract $10 billion from other elements of investment in calculating total investment.
Consumption of fixed capital (depreciation) can be determined by:
subtracting NDP from GDP.
Value added can be determined by:
subtracting the purchase of intermediate products from the value of the sales of final products.
Corporate profits are found by:
summing corporate income taxes, dividends, and undistributed corporate profits.
what are the 4 macroeconomic key objectives
sustainableand steady economic growth and inflation, low unemployment, equillibrium on the balance of payments.
Nominal GDP is adjusted for price changes through the use of:
the GDP price index
Nominal GDP is adjusted for price changes through the use of:
the GDP price index.
If intermediate goods and services were included in GDP:
the GDP would be overstated.
Value added refers to:
the difference between the value of a firm's output and the value of the inputs it has purchased from others.
macroeconomics is mostly focused on...
the economy as a whole
If depreciation exceeds gross investment:
the economy's stock of capital is shrinking.
define value added
the market valve of a firms output less the valv of the inputs the firms has bought form others
Real GDP is:
the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.
The unemployment rate is:
the percentage of the labor force unemployed: unemployment rate = unemployed / labor force X 100 (U/L)=(U/E+U)
In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:
the price level may change over time.
a consumer price index attempts to measure changes in
the price of a select market basket of goods and services
In 1933, net private domestic investment was a minus $6.0 billion. This means that:
the production of 1933's GDP used up more capital goods than were produced in that year.
Which of the following do national income accountants consider to be investment?
the purchase of a new house
When the receipts given by goldsmiths to depositors were used to make purchases:
the receipts became in effect paper money.
define basket of goods
the specific collection of goods and services in a given or current year as compared to the price of identical items the year befo
nominal GDP is:
the sum of all monetary transactions involving final goods and services that occur in the economy in a year
Nominal GDP is:
the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
(Advanced analysis) If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:
the vertical intercept would be +20 and the slope would be +.6.
If the economy adds to its inventory of goods during some year:
this amount should be included in calculating that year's GDP.
One way in which opportunity cost become apparent is
through its effect on government budget.
Cost of living adjustment clauses (COLAs)
tie wage increases to changes in the price level
The concept of net domestic investment refers to:
total investment less the amount of investment goods used up in producing the year's output.
Demand-pull inflation occurs when..
total spending exceeds the economy's ability to provide output at the existing price level
The GDP tends to:
understate economic welfare because it does not take into account increases in leisure.
Structural unemployment consists of:
unemployed workers who find it hard to obtain a new job without retraining, gaining additional education, or relocating.
Assume that in a private closed economy consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus:
unplanned decreases in inventories of $10 billion will occur.
Real GDP measures the:
value of final goods and services produced within the borders of a country, corrected for price changes. btw inflation is taken into account
In the late 1990s, the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the:
wealth effect.
