ECO TRUE/FALSE
The costs of pollution are subtracted from the value of final sales before calculating GDP.
FALSE
The difference between GNP and GDP is depreciation.
FALSE
The economy is in equilibrium when aggregate output equals consumption spending.
FALSE
The income of U.S. citizens working abroad counts in U.S. GDP.
FALSE
The larger the MPC, the smaller the multiplier.
FALSE
The natural rate of unemployment in the economy is determined by the Congress and the president of the country.
FALSE
The only source of economic growth is growth in the number of workers in the economy.
FALSE
There are no costs associated with inflation if the inflation rate is perfectly anticipated.
FALSE
Total income in the economy can sometimes be greater than total spending.
FALSE
Transfer payments are subtracted from national income to get to personal income.
FALSE
Uncertainty about the future is likely to increase current spending.
FALSE
When aggregate expenditure is greater than aggregate output, there will be an unplanned build up of inventories.
FALSE
When investment is greater than planned investment, output grows.
FALSE
When taxes depend on income, a higher tax rate implies a higher government spending multiplier.
FALSE
When the MPC is 0.8 and t is 0.4, then the government spending multiplier is about -1.54.
FALSE
A tax cut of $12 billion will have less effect on the economy than an increase in government purchases of $12 billion.
TRUE
A weakness in the concept of GDP is that it ignores income distribution.
TRUE
Actual investment equals planned investment plus unplanned changes in inventories.
TRUE
An inflation rate that is lower than expected benefits creditors.
TRUE
Assuming there is no government or foreign sector, the economy will be in equilibrium if, and only if, planned investment equals actual investment.
TRUE
Automatic stabilizers include those elements of government spending that automatically grow during a recession.
TRUE
Depreciation is included in GDP, but excluded from NNP.
TRUE
Disposable income is income less net taxes.
TRUE
Disposable personal income is personal income minus personal taxes.
TRUE
Final sales plus changes in inventories equals GDP.
TRUE
Firms react to negative inventory investment by increasing output.
TRUE
Fixed weight indexes can not account for new goods.
TRUE
For the economy to be in equilibrium, the following condition must be satisfied: G + I = S + T.
TRUE
GDP measured in base year prices is real GDP.
TRUE
If discouraged workers were counted as unemployed, the measured unemployment rate would increase.
TRUE
If in the same period output doubles and the price level remains the same, nominal GDP doubles
TRUE
If more workers have more capital to work with, then production will increase.
TRUE
If planned investment increases, equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment, assuming there is no government or foreign sector.
TRUE
If real GDP increased during a year, then output must have increased.
TRUE
If tax receipts are less than government expenditures the government is running a deficit.
TRUE
If the GDP deflator next year is less than the GDP deflator this year, then the price level has fallen.
TRUE
If the MPC is .75, then the multiplier is 4.
TRUE
If the MPS is .1, then the multiplier is 10.
TRUE
If the MPS is 0.4 and t is 0.3, then the tax multiplier is about -1.03.
TRUE
If the government increases taxes by $4 billion and increases spending by $4 billion, equilibrium output increases by $4 billion.
TRUE
If the government runs a deficit, then the government debt increases.
TRUE
Labor productivity is total output divided by the total number of worker hours.
TRUE
Production in the illegal or underground economy is not reflected in GDP.
TRUE
Productivity is output per worker hour.
TRUE
The CPI somewhat overstates changes in the cost of living because it does not allow for substitutions that consumers might make in response to price changes.
TRUE
The actual real rate of interest is the nominal rate less the actual inflation rate.
TRUE
The balanced-budget multiplier works whenever the government increases spending and increases taxes by the same amount.
TRUE
The government budget is balanced when tax receipts equal government spending.
TRUE
The marginal propensity to consume is the change in consumption per change in income.
TRUE
The natural rate of unemployment is the unemployment rate during a period of full employment.
TRUE
The paradox of thrift is that all people deciding to save more could lead to them saving less.
TRUE
The smaller the MPS, the larger the multiplier.
TRUE
The structural deficit is the deficit at full employment.
TRUE
Value added is the difference between the value of good as they leave a stage of production and cost of the goods as they entered that stage of production.
TRUE
When more people who are not working start looking for jobs, the labor-force participation rate increases.
TRUE
When the economy is in equilibrium, savings equals planned investment.
TRUE
When the tax rate increases, the absolute value of the tax multiplier falls.
TRUE
When there is an unplanned draw down of inventories, firms will increase production.
TRUE
Workers who take a job related training course are enhancing their human capital.
TRUE
In an expansion the U.S. federal government deficit automatically grows.
FALSE
Stock market transactions are part of GNP.
FALSE
The amount the government owes to the public is the deficit.
FALSE
A 100% increase in the price of salt changes the CPI more than a 10% increase in rent.
FALSE
A GDP deflator is real GDP divided by nominal GDP times 100.
FALSE
All economic activities in the economy are included in the GDP.
FALSE
An increase in search costs will decrease structural unemployment.
FALSE
An increase in the MPC, reduces the multiplier.
FALSE
An unemployment rate of 10% means that the average worker has been unemployed for 10% of the year.
FALSE
Anyone 16 years of age or older who is not classified as employed is classified as unemployed.
FALSE
As interest rates fall, spending decreases.
FALSE
As the MPC decreases, the government spending multiplier increases.
FALSE
Consumers can spend their entire personal income
FALSE
Dairy Queen opens a branch in Estonia. The sales of the restaurant enter the U.S. GDP and the Estonian GNP.
FALSE
Defense spending is the largest part of the U.S. government spending.
FALSE
During recessions, automatic stabilizers work to reduce government expenditures and increase government revenues.
FALSE
Firms react to an unplanned inventory investment by increasing output.
FALSE
GDP measures the total income of everyone and the total spending by everyone in the economy.
FALSE
If actual investment is greater than planned investment, unplanned inventories decline.
FALSE
If aggregate expenditure decreases, then equilibrium output increases.
FALSE
If autonomous spending increases, the aggregate expenditure function becomes steeper.
FALSE
If investment is larger than depreciation, the capital stock decreases
FALSE
If labor markets were perfectly efficient, the unemployment rate would fall to zero.
FALSE
If nominal GDP rises, then so must real GDP
FALSE
If planned saving exceeds planned investment, injections are greater than leakages.
FALSE
If real GDP rises, then so must nominal GDP.
FALSE
If the MPS is 0.25 and t is 0.4, then the tax multiplier is about -2.96.
FALSE
If the marginal propensity to consume is .8, the marginal propensity to save is 8.
FALSE
If the population is growing as fast the economy, then per capita output is growing.
FALSE