Econ 313 Quizzes

1. Recessions are periods when real gross domestic product (GDP): a. increases slowly. b. increases rapidly. c. decreases mildly. d. decreases severely.

C

14. In the classical model with fixed income, if the interest rate is too high, then investment is too_______, and the demand for output________the supply. a. high; exceeds b. high; falls short of c. low; exceeds d low; falls short of

D

13. When government spending increases and taxes are increased by an equal amount, interest rates: a. increase. b. remain the same. c. decrease. d. can vary wildly.

A

15. According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person: a. is going to school full time. b. is temporarily absent from a job because of illness. c. has been temporarily laid off. d. is out of a job and was looking for work during the previous four weeks.

A

7. If gross domestic product (GDP) measured in billions of current dollars is $5,465, consumption is $3,657 investment is $741, and net exports are -$1,910, then government purchases are: a. $2,977. b. $1,910. c. -$843. d. $1,067.

A

16. Private saving is: a. income minus consumption minus government spending. b. disposable income minus consumption. c. disposable income minus government spending. d. taxes minus government spending.

B

2. A farmer grows wheat and sells it to a miller for $I; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is: a. $1. b. $2. c. $3. d. $6.

B

1. In the classical model with fixed income, an increase in the real interest rate could be the result of a(n): a. increase in government spending. b. decrease in government spending. c. decrease in desired investment. d. increase in taxes.

A

10. Real gross domestic product (GDP)_________over time, and the growth rate of real GDP__________. a. grows; fluctuates b. is steady; is steady c. grows; is steady d. is steady; fluctuates

A

14. The total income of everyone in the economy is exactly equai to the total: a. expenditure on the economy's output of goods and services. b. consumption expenditures of everyone in the economy. c. expenditures of all businesses in the economy. d. government expenditures.

A

6. The panel of economists appointed by the Senate Finance Committee estimated that the consumer price index (CPI)_______inflation by approximately________percentage point(s) per year. a. overestimates; 1 b. overestimates; 10 c. underestimates; 1 d. underestimates; 10

A

7. An example of decreasing returns to scale is when capital and labor inputs: a. both increase 10 percent and output increases 5 percent. b. both increase 10 percent and output increases 10 percent. c. both increase 5 percent and output increases 10 percent. d. do not change and output increases 5 percent.

A

9. All of these are types of macroeconomics data EXCEPT the: a. price of a computer. b. growth rate of real gross domestic product (GDP). c. inflation rate. d. unemployment rate.

A

1. The amount of capital in an economy is a(n)________, and the amount of investment is a(n)__________. a. flow; stock b. stock; flow c. final good; intermediate good d. intermediate good; final good

B

10. The largest component of national income is: a. corporate profits. b. compensation of employees. c. proprietors' income. d. net interest.

B

12. Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation, a. provides a real, rather than a nominal, rate of inflation. b. gives a better measure of ongoing, sustained price changes. c. is more consistent with measures of inflation used in other countries. d. fluctuates more than measures of inflation that include food and energy prices.

B

2. During the period between 1900 and 2000, the unemployment rate in the Uniced States was highest in the. a. 1920s. b. 1930s. c. 1970s. d. 1980s.

B

3. Government transfer payments: a. are included as part of government purchases, G. b. can be viewed as negative tax payments, T. c. are received as payment for inputs in the factor market. d. do not affect the level of public or private saving.

B

3. The gross domestic product (GDP) deflator is a: a. Laspeyres price index. b. Paasche price index. c. Laspeyres quantity index. d. Paasche quantity index.

B

5. Crowding out occurs when an increase in government spending_________the interest rate and investment_________. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases

B

6. Important characteristics of macroeconomic models include all of these EXCEPT: a. simplifying assumptions. b. functional relationships based on randomized control trials. c. endogenous and exogenous variables. d. implicit or explicit consistency with microeconomic foundations.

B

8. According to the model developed in Chapter 3, when government spending increases and taxes increase by an equal amount, consumption: a. and investment both increase. b. and investment both decrease. c. increases and investment decreases. d. decreases and investment increases.

B

5. Deflation occurs when: a. real gross domestic product (GD decreases. b. the unemployment rate decreases. c. prices fall. d. prices increase but at a slower rate.

C

I3. When a firm sells a product out of inventory, gross domestic produer (GDP): a. increases. b. decreases. c. is not changed. d. increases or decreases, depending on the year the product was produced.

C

1. If increased immigration raises the labor force, the neoclassical theory of distribution predicts that: a. the real wage will rise and the real rental price of capital will fall. b. both the real wage and the real rental price of capital will fall. c. both the real wage and the real rental price of capital will rise. d. the real wage will fall and the real rental price of capital will rise.

D

8. When studying the short-run behavior of the economy, an assumption of__________is more plausible, whereas when studying the long-run equilibrium behavior of an economy, an assumption of__________is more plausible. a. inflation; unemployment b. unemployment; inflation c. flexible prices; sticky prices d. sticky prices; flexible prices

D

10. The nesclassical theory of distribution explains the allocation of: a output between goods and services. b. putput among consumption, investment, and government spending. c. income among factors of production. d. income between saving and investment.

C

4. Gross national product (GNP) equals gross domestic product (GDP)_______income earned domestically by foreigners_______income that nationals earn abroad. a. plus; plus b. minus; minus c. minus; plus d. plus; minus

C

4. The inflation rate is a measure of how fast: a. the total income of the economy is growing. b. unemployment in the economy is increasing. c. the general level of prices in the economy is rising. d. the number of jobs in the economy is expanding.

C

8. If the adult population equals 250 million, of which 145 million are employed and 5 million are unemployed, the labor-force participation rate equals percent. a. 50 b. 58 c. 60 d. 67

C

15. The Gini coefficient is a measure of the: a. difference between real and nominal interest rate. b. risk associated with an investment opportunity. c. debt to GDP ratio of a country. d. income dispersion within a country.

D

16. All of these actions are investments in the sense of the term used by macrocconomists EXCEPT: a. Apple building a new factory. b. a corner candy store buying a new computer. c. John Smith buying a newly constructed home. d. Sandra Santiago buying 100 shares of Apple stock.

D

3. In a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza__________and the quantity purchased___________. a. increases; increases b. decreases; increases c. decreases; decreases d. increases; decreases

D

5. Which of these is a flow variable? a. wealth b. the number unemployed c. government debt d. income

D

6. The government raises lump-sum taxes on income by $100 billion, and the neoclassical ecenomy adjusts so that output does not change. If the marginal propensity to consume is 0.6, private saving: a. rises by $40 billion. b. rises by $60 billion. c. falls by $60 billion. d. falls by $40 billion.

D

7. Macroeconomists are like scientists in that they both: a. design data and conduct controlled experiments to test their theories. b. rely on data analyzed from experiments they set up in a laboratory. c. are unlimited in their use of controlled experiments. d. collect data, develop hypotheses, and analyze the results.

D

9. Gross domestic product (GDP) is the market value of all________goods and services produced within an economy in a given period of time. a. used b. intermediate c. consumer d. final

D

11. An example of increasing returns to scale is when capital and labor inputs: a. both increase 10 percent and output increases 5 percent. b. both increase 10 percent and output increases 10 percent. c. both increase 5 percent and output increases 10 percent. d. do not change and output decreases 5 percent.

C

11. If gross domestic product (GDP) measured in bilions of current dollars is $5, 465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are: a. $673. b. -$673. c. $704. d. -$704.

C

12. A production function is a mathematical relationship between: a. factor prices and the marginal product of factors. b. factors of production and factor prices. c. factors of production and the quantity of output produced. d. factor prices and the quantity of output produced.

C

2. According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, workers should experience high rates of real wage growth when: a. real interest rates are high. b. real interest rates are low. c. labor productivity is growing rapidly. d. capital's share of income is growing rapidly.

C