Econ 202

When the aggregate demand curve shifts, the steeper the SAS curve the _____ will be a change in the price level and the ___will be the multiplier.

larger; smaller

In the very short term, plnned investment ________ when GDP changes and planned consumption expenditure __________ when GDP changes.

does not change; changes

Gross domestic product (GDP) measures the

market value of final goods and services produced in the economy in a given time period.

Studying the determination of prices in individual markets is primarily a concern of

microeconomics.

In any year, real GDP

might be greater or less than potential GDP.

A consumption function shows a

positive (direct) relationship between consumption expenditure and disposable income.

The maximum amount of production that can be produced while avoiding shortages of labor,capital, land, and entrepreneurship that would bring rising inflation is called

potential GDP.

The real wage rate measures the

quantity of goods and servies that an hour of work will buy

In the short-run, an increase in the price of raw materials will _____the price level and ____ real GDP

raise; decrease

The aggregate production fucntion describes the relationship between

real GDP and the quantity of labor employment.

The series of ups and downs the economy tends to move in is called

the business cycle

Which of the following measurements of inflation strips out volatile food and fuel prices?

the core PCE

Which of the following is a macroeconomic issue?

the effect of increasing the money supply on inflation

If this year's price level exceeds last year's,

the inflation rate between these years has been positive

At the beginning of the year, your wealth is $10,000. During the year, you have an income of $80,000 and you spend $90,000 on consumption. You pay no taxes. Your wealth at the end of the year is

$0

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________.

$1.3 billion; $1.0 billion

The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP ________.

$14 trillion

In the above figure, at the price level of 140 and real GDP of

$15 trillion , firms will not be able to sell all their output.

Use the information in the table above to calculate the value of national saving.

$25 million

The table above shows the labor market for the country of Pickett. When the labor market is in equilibrium, the real wage rate is ________ and ________ of labor a year are employed.

$30 an hour; 40 billion hours

The above table gives data for a hypothetical nation. Gross domestic product is

$4,079 billion.

In the figure above, autonomous consumption is

$5 trillion

If the number of people unemployed is 100, the number of people employed is 1,000, and theworking-age population is 1,400, then the labor force is

1,100.

If the present value of $220 one year from now is $200, then the interest rate is

10 PERCENT

Using the Rule of 70, if China's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double?

10 years

If the CPI was 121.5 at the end of last year and 138.3 at the end of this year, the inflation rate over these two years was

13.83% Inflation: ((CPI2-CPI1)/(CPI1)) (100) (138.3-121.5)/121.5 (100)= 13.83%

National savings equals

Both answers B and C are correct. (household saving + business saving +net taxes - gov. expenditures - gov. saving)

GDP equals

C + I + G + (X - M).

Which of the following correctly describes "frictional unemployment"?

Frictional unemployment is a normal occurrence in a growing economy.

According to the real business cycle theory, the immediate effects from a change in productivity include which of the following? I. Investment demand changes II. Demand for labor changes III. Government expenditures change.

I and II

The component of aggregate expenditure include I. imports II. Consumption III. government transfer payments

I and II

Which of the following directly creates growth in labor productivity? I.Growth in capital per hour of labor II.Technological change III.Population growth

I and II

In an article regarding Bangladesh's econ0omy the author suggest that the government ..."[g]ive double tax breaks . Suppose the multiplier in Bangladesh is 2. As a result of enacting the proposed policies, which of the following describe possible outcomes in the short run?

I and II only

Which of the following items are considered physical capital? I.shares of Ford stock traded on the New York Stock Exchange II.the Taco Bell store nearest you III.the rental cars owned by Hertz Rental-A-Car IV.the salaries paid to Intel executives

II and III

Of the following, which is CORRECT?

Nominal GDP increases when the prices of goods and services increase.

Which of the following is FALSE about saving?

Saving equals wealth minus consumption expenditures.

The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. In short-run equilibrium, there 9is

a recessionary gap of $100

The best definition for economic growth is

a sustained expansion of production possibilities measured as the increase in realm GDP over a given period.

Real GDP can be criticized as a measure of economic welfare because it

does not include leisure time available to a society, does not include the value of products produced in the household, does not take account of the degradation of environmental quality

If the government has a budget deficit, crowding out might occur. Crowding out leads to all of the following EXCEPT.

decreased private saving

if the nation's capital stock incraeses so that workers become more productive, the

demand for labor will increase

A decrease in the government budget deficit decreases the ______ loanable funds and an increase in the government budget surplus increases the ______ loanable funds.

demand for; supply of

Real GDP is not a perfect indicator of economic welfare because

economic welfare depends on many factors not measured or not measured accurately by realGDP.

Which of the following most likely would decrease frictional unemployment?

effective internet-based employment services and job registries.

The percentage of people employed aged 16 years and older divided by the working-agepopulation is known as the

employment-to-population ratio.

In the circular flow of income

households demand goods and services that are supplied by firms, while supplying factorsthat are demanded by firms.

The aggregate expenditure curve shows

how planned aggregate expenditure and real GDP are related

All economic questions are about

how to cope with scarcity.

In every economic system, choices must be made because resources are ________ and our wants are ___________.

imited; limited

As the price level falls and other things remain the same, real wealth ________ and _________.

incraeses; the quanity of real GDP demanded increases

In order to drive economic growth in real GDP per person, the changes in information technology that the article addresses must

increase labor productivity.

In 2016, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2017, real GDP was $4.59 billion and population as 2.97 million. From 2016 to 2017, Armenia's standard of living

increased

Suppose there is a rise at the price level, but no change in the money wage rate. As a result, the quantity of labor demanded.

increases

The labor force particpation rate

increases as the real wage rate increases

An increase in education and training

increases labor productivity

During a cost-push inflation spiral, the moeny wage rate ______ and the quantity of money _______.

increases; increases

In the above figure, flow B represents

household purchases of goods and services.

In January 2017, Jim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell off by 30 percent. During 2017, Tim spent $200,000 on new machines. During 2017, Tim spent $200,000 on new machines. During 2017, Tim's net investment totaled

-$100,000

Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent. Then cyclical unemployment is...

-1 percent Actual= Natural unemployment + Cyclical unemployment 3.5=4.5-C

The expected profit from an investment will change with

2. a change in technology

If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals

225 (Price current/price base)(100) (450/200)(100) =(450/2)=225

In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million areof working age. How many people are not in the labor force?

5 million

The population of Tiny Town is 100 people and the labor force is made up of 75 people. If 5 of thesepeople are unemployed, the unemployment rate is

5/75 × 100.

Use the information in the table above to calculate the value of government saving.

69

If the population is 300 million, with 70 million under the age of 16 and institutionalized, another70 million not in the labor force, 10 million unemployed and 150 million employed, the labor forceparticipation rate is

69.6 percent.

Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double?

7 years

Suppose there are 100 million in the labor force, and 6 million unemployed people. During the nextmonth, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed persons is

94.1 million; 5.9 percent

The above table shows answers given by people interviewed in a government survey ofhouseholds. Which individuals are considered to be a part of the labor force?

A, B, and C

Demand-pull inflation starts with a shift of the

AD curve rightward.

We are interested in long-term growth primarily because it brings

higher standards of living

Which of the following questions is NOT a microeconomic question?

Can the Federal Reserve keep income growing by cutting interest rates?

Which of the following is associated with classical growth theory?I.Growth in real GDP can continue indefinitely.II.Technological growth increases as the population grows.III.Population explosions bring real GDP per person back to subsistence levels.

III

According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Which of the following is TRUE?

India's PPF has been shifting rightward since 1997.

Which of the following statement regarding aggregate supply is CORRECT?

Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.

Which people are structurally unemployed?

Person B: At the age of 45, this person was laid off from the automobile industry when new equipment was installed and the person did not have the skills necessary to use the equipment. This person now is searching to find a new job. Person C: As a result of this person's skills becoming obsolete in the industry, this person is looking for a new job.

In the above figure, which path represents a cost-push inflation?

Point A to B to D to E to G

Suppose the Consumer Price Index is 143.6. What does that number mean?

Prices rose 43.6 percent over the refernece base period, on average.

In 2008, the dollar appreciated relative to the euro. This appreciation caused ______ and a _______

a decrease in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve

In 2008, the dollar appreciated relative to the euro. This appreciation caused _______ and a ________.

a decrese in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve.

An economic model is

a description of some aspect of the economic world that includes only those features of theworld that are needed for the purpose at hand.

In the macroeconomic short run

actual real GDP may be less than or more than potential GDP.

If Nike, an American corporation, produces sneakers in Thailand this would

add to Thailand's GDP but not to U.S. GDP.

The price level falls if

aggregate demand increases more slowly than aggregate supply.

People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect that their profits will fall during the next five years, Australia's ________ this year.

aggregate demand will increase

People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect that their profits will fall during the next five years, Australia's _____ this year.

aggregate demand will increase.

n the above figure, the distance between points T and U represents

an expansion.

Which of the following is NOT a potential start of a demand-pull infaltion?

an increase in the money wage rate

If real GDP is less than potential GDP, then the economy is ______ equilibrium.

at a below-full-employment

a short-run macroeconomic equilibrium occurs

at the intersection of the short-run aggregate supply curve and the aggregate demand curve.

Nominal GDP is the value of final goods and services

at the prices of that year.

In computing GDP, it is essential to

avoid double counting

Suppose an economy has some inflation. Then, after a base year, the value of real GDP will

be greater than nominal GDP.

Savings is an important factor influencing economic growth because saving

can finance new investment and capital formation.

According to the intertemporal substitution effect, a fall in the price level will

cause the interest rate to fall so that investment increases and the quanity of ral GDP demanded increases.

An increase in the price level decreases planned expenditures because

current prices rise relative to future prices; decreasing expenditure

Which type of unemployment increases during a recession?

cyclical unemployment

Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond

falls from 10 percent to 8 percent.

The funds used to buy and operate physical capital are

financial capital.

Which of the following is a final good?

flour purchased at the store to bake cookies

The relatonship between the unemployment rate and the natural unemployment rate is that the unemployment rate

fluctuates about the natural rate.

Unemployment caused by the normal labor turnover is called __________ unemployment.

frictional

3 types of unemployment

frictional, structural, cyclical

Structural unemployment...

generally lasts longer than frictional unemployment.

The circular flow model shows that consumer goods and services produced by business firms are sold in the

goods market.

The aggregate production function relating real GDP to labor hours

has a positive slope and becomes less steep as employment increases.

The data in the above table indicate that when the price level is 120

inventories rise and the price level falls.

If prices are fixed, an increase in aggregate expenditures results in an increase in equilibrium GDP that

is greater than the change in aggregate expenditure.

If a new and better good replaced an older and less expensive good, then the price level measured by the CPI ________.

is higher than the actual price level.

The total number of people aged 16 years and over who are not institutionalized

is the working-age population.

Inflation is a problem when

it causes resources to be diverted away from productive uses. it disrupts saving and borrowing. it causes the value of money to vary unpredictably.

The real wage rate will fall if the

labor supply curve shifts rightward and the labor demand curve does not shift.

The real wage rate will fall if the

labor supply curve shifts rightward and the labor demanded curve does not shift.

The quantity of real GDP demanded equals $18.4 trillion when the price level is 95. If the price level falls 90 , the quantity of real GDP demanded equals

more than $18.4 trillion

The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will

move to point such as Z.

The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will

move to the point such as Z.

As labor increaseas there is a

movement along the aggregate production function and real GDP will increase less with each additional increase in labor.

A decrease in the real interest rate leads to a ______ the demand for loanable funds curve, and a decrease in the expected profit leads to a ______ the demand for loanable funds curve.

movement down along; leftward shift in

The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a

movement from Point W to Point Z

An economy recovering from a recession

moves up from its trough to a period of expansion.

frictional + structural unemployment

natural rate of unemployment

A recession is commonly defined as a period with

negative growth rate in real GDP that lasts at least two quarters.

According to the data in the above table, at what level of disposable income is savings negative?

never because saving cannot be negative

According to the data in the above table, at what level of disposable income is savings negative?

never because saving cannot be negative.

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

nothing; that is, in the long run real GDP equals $8,000

The labor force is the sum of the

number of employed people and the number of unemployed people.

In the above figure, the initial supply of loanable funds curve is SLF0 and the initial demand for loanable funds curve is DLF0. An increase in the expected profit would

only shift the demand for loanable funds curve rightward to a curve such as DLF1.

Scarcity is

our inability to satisfy all our wants.

Which of the following means that the CPI overstates the actual inflation rate?

outlet substitution bias, new goods bias, quality change bias

Human capital is

people's knowledge and skills

In the above figure, which point represents the under use of resources?

point G

In the above figure, a decrease in the real interest rate will result in a movement from point E to

point G.

All of the following contributre to labor productivity growth EXCEPT

population growth

labor productivity is

real GDP per hour of labor

In the above figure, if the economy is at point a, an increase in ______ will move the economy to _________.

real wealth from the fall in the price level; point c

The four parts of the business cycle occur in the following order

recession, trough, expansion, peak.

The long-run aggregate supply curve illustrates the

relationship between the price level and real GDP when the economy is at full employment.

An increase in the working age population results in a

rightward shift of the supply of labor curve and an increase in potential GDP

Moving upward along the short-run aggregate supply curve results in a ________ in the price level and ________ in real GDP.

rise; an increase

Economic models

simplify reality.

In the above figure the economy is initially at Point A on the aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result

the AE curve shifts upward to a curve such as AE2.

The unemployment rate equals

the percentage of the labor force currently unemployed.

Gross domestic product (GDP) is

the sum of consumption expenditure, investment, government expenditure on goods andservices, and net exports, the sum of compensation of employees, proprietors' income, net interest, rental income,corporate profits, depreciation, and indirect business taxes minus subsidies, the value of all final goods and services produced in a country during a year.D)all of the above.

The circular flow diagram shows that

the total amount of income generated by the economy equals the total purchases of finalgoods and services.

When cyclical unemployment is zero

the unemployment rate equals the natural unemployment rate.

Real GDP is

the value of total production of all the nation's farms, factories, shops and offices measured inthe prices of a base year.

In the above figure, at the real wage rate of $50

there is a surplus of 60 billion hours per year

Full employment means that

there is no cyclical unemployment

If the real interest rate increases from 3 percent to 5 percent

there will be a movement up along the demand for loanable funds curve.

The long-run aggregate supply curve is ________ because along it, as prices rise, the money wage rate ________.

vertical; rises

Hyperinflation is defined as

very high inflation rates

All economic questions arise because we

want more than we can get.