ECO Final Exam
Which part of real GDP fluctuates most over the course of the business cycle?
investment expenditures
Recession come at
irregular intervals. During recessions investment spending falls relatively more than consumption spending.
The average income in a rich country
is more than ten times that in a poor country. Further, people in rich countries have longer life expectancy.
National saving
is the total income in the economy that remains after paying for consumption and government purchases
Which of the following rises during recessions?
layoffs but not consumer spending
According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would
leave national saving unchanged and reduce private saving.
Which of the following is correct?
When real GDP falls, the rate of unemployment rises.
Which of the following equations will always represent GDP in an open economy?
Y = C + I + G + NX
Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,000; national saving = $12,000. Refer to Scenario 26-1. For this economy, investment amounts to
$12,000.
Scenario 26-2. Assume the following information for an imaginary, closed economy. GDP = $200,000; consumption = $120,000; government purchases = $35,000; and taxes = $25,000.
$45,000.
The country of Growpaw does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $6 billion in taxes, and provides $2 billion in transfer payments to households. Private saving in Growpaw is $4 billion. What is investment in Growpaw?
$5 billion
Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?
-1 percent, 6 percent
Last quarter in a closed economy GDP was 100,000. Expenditures on capital goods such as business equipment and structures was 10,000, inventory rose 1,000, and new construction of homes was 5,000. Consumption was 65,000, taxes were 15,000. What was public saving?
-4,000
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?
1,000, 500, and 1,500, respectively
The average income in a rich country, such as the United States or Japan, is more than
10 times, but less than 20 times, the average income in a poor country, such as Indonesia or Nigeria.
In some East Asian countries, average income, as measured by real GDP per person, has recently grown at an average annual rate that implies output will double about every
10 years.
Over the past century in the United States, real GDP per person has grown, on average, by about
2 percent per year
During the past century the average growth rate of U.S. real GDP per person implies that it doubled, on average, about every
35 years.
In recent decades, average income in some East Asian countries, such as South Korea, Singapore, and Taiwan, has risen about
7 percent per year.
In the United States, as measured by real GDP per person, average income is about how many times as high as average income a century ago?
8
Over the past 100 years, U.S. real GDP per person has doubled about every 35 years. If it continues to double every 35 years, then in 100 years U.S. real GDP per person will be about
8 times higher than it is now
In a closed economy, national saving equals
All of the above are correct.
Net exports must equal zero for any economy
All of the above are correct.
Which of the following is correct?
During recessions sales and profits tend to fall.
Cassie purchases 1,000 shares of a mutual fund for $1,000. Cassie's purchase of these shares contributes $1,000 to which magnitude in the identity Y = C + I + G?
None of the above are correct.
A budget surplus is created if
None of the above is correct.
Which of the following is not always correct for a closed economy?
Private saving equals investment.
Which of the following is not correct?
Purchases of capital goods are excluded from GDP.
Consider the expressions T - G and Y - T - C. Which of the following statements is correct?
The first of these is public saving; the second one is private saving.
Ethan purchases a new house for $170,000. Ethan's purchase of the house contributes $170,000 to which magnitude in the identity Y = C + I + G?
The first of these is public saving; the second one is private saving.
Which of the following is correct concerning recessions?
They are associated with comparatively large declines in investment spending.
Which of the following would be included as investment in the GDP accounts?
a firm increases its capital stock
Which of the following are residents of rich countries likely to have in greater quantities, or better quality, than residents of poor countries?
all of the above
If an economy is closed and if it has no government, then
all of the above are correct
The assumption of a closed economy
applies to the world economy
In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is
below the natural rate, so real GDP growth was likely high.
In a closed economy, if Y remained the same, but G rose, T rose by the same amount as G, and C fell but by less than the increase in T, what would happen to private and national saving?
both national saving and private saving would fall
Which of the following fall during a recession?
both retail sales and employment
Historical evidence for the U.S. economy indicates that
changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
Which of the following lists correctly identifies the four expenditure categories of GDP?
consumption, government purchases, investment, net-exports
In a closed economy, national saving is
equal to investment.
As recessions begin, production
falls and unemployment rises.
During recessions investment
falls by a larger percentage than GDP.
Historically, as recessions have ended the unemployment rate declined
gradually to a rate of about 5%-6%.
The purchase of a new house is the one form of
household spending that is investment rather than consumption.
In 2001, the United States was in recession. Which of the following things would you not expect to have happened?
increased investment spending
Real GDP
measures economic activity and real income.
A country experiencing a growth rate of 8% per year can go from being one of the poorest to one of the richest in
one generation. In the last couple of decades China's growth rate has been higher than 8%.
A country experiencing a growth rate of 8% per year can go from being one of the poorest to one of the richest in how many generations?
one. In the last couple of decades China's growth rate has been higher than 8%.
Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?
only Curly Corporation's
In a closed economy, what does (Y - T - C) represent?
private saving
Productivity is the amount of goods and services
produced for each hour of a worker's time. It is linked to a nation's economic policies.
Which of the following is most commonly used to monitor short-run changes in economic activity?
real GDP
When we say that economic fluctuations are "irregular and unpredictable," we mean that
recessions do not occur at regular intervals.
If the tax revenue of the federal government exceeds spending, then the government necessarily
runs a budget surplus.
During recessions
sales and profits fall.
Investment is a
small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
During recessions unemployment typically rises
substantially. As the recession ends, unemployment declines gradually.
A closed economy does not
trade with other economies.
Which of the following typically rises during a recession?
unemployment