Econ practice test 1
Which of the following will increase macroeconomic equilibrium real gross domestic product?
A decrease in taxes.
Which of the following can make the unemployment rate fall?
A decrease in the number of people who are looking for work and an increase in the number of people with jobs.
A decrease in government spending will cause
AD to decrease (move to the left).
A decrease in taxes will cause
AD to increase (move to the right).
An increase in input prices will cause
AS to decrease (move to up and to the left).
The expenditures approach to GDP equals
Consumption + Gross Investment + Government Purchases + Net Exports.
If GDP is $10 trillion, Personal Consumption Expenditure is $6.5 trillion, Gross Private Investment is $2.0 trillion, and Government Consumption and Investment Expenditures together are $2.0 trillion
Net Exports are -$0.5 trillion.
Which of the following is NOT a reason that the CPI overstates the cost of living?
There are too frequent updates of the market basket.
Economists consider deflation
dangerous, as it can lead to a depression.
If members of the labor force who had been classified as "unemployed" fail to find a suitable job and stop looking for work, their decision tends to make the unemployment rate
decrease as the labor force decreases.
The fact that when temperature rises snow cone sales rise suggests the two are
directly correlated
When domestic prices rise
interest sensitive consumption falls because interest rates rise
Policy initiatives typically associated with "supply-side economics" would include
investment tax credits
The Consumer Price Index (CPI) is a heavily criticized measure of inflation because
it consistently overstates the increase in the cost-of-living
One problem with using Real Gross Domestic Product as a measure of social welfare is that
it fails to count home production.
As the baby boom starts to retire, you would expect to see the
labor for participation rate steadily fall.
A decrease in household income for a good that is considered normal would
move its demand curve to the left
If a subsidy (going to consumers) is created for a good this would
move its demand curve to the right.
Production possibilities frontier models
the choices we make in setting output alternatives.
If goods A and B are considered complements, an increase in the price of A would cause
the demand curve for B to the left.
If goods A and B are considered substitutes, an increase in the price of A would cause
the demand curve for B to the right
Many forms of seafood (lobster, crab legs etc.) are consumed by dipping the meat in melted garlic butter. If someone suggested that it would therefore be equally appealing to drink melted butter after having eaten garlic and unseasoned seafood, you would know they had fallen victim to which of the following?
the fallacy of composition
The notion that the money in your possession will buy less when the price rises is provided as the explanation for
the real-balances effect.
The fact that we are operating at a point inside a bowed out production possibilities frontier, indicates there is
unemployment
Each person is better off with a bigger tax return than with a small tax return. That means that everyone would be better off if all taxes were zero. A person saying that is
wrong and have fallen victim to the fallacy of composition.
If the inflation rate turns out to be less than what is expected to be, the clear losers are
borrowers
The increase in the price of a good would
cause a movement along the demand curve to a (higher price, lower quantity) point.
If the (steadily increasing) marginal cost of another day spent in the hospital exceeds the (steadily decreasing) marginal benefit of an additional day spent in the hospital, the rational consumer of health care services would be predicted to
choose not to stay in the hospital for that additional day.
An increase in the excise tax imposed upon consumers of gasoline
shifts the demand for gasoline to the left
Elimination of government regulations undertaken explicitly to influence the aggregate supply curve would be an example of
supply-side economics.
Reduction of marginal tax rates undertaken explicitly to increase incentives of innovate, take risks, and work hard would be an example of
supply-side economics.
An increase in taxes will immediately shift
aggregate demand to the left
Congress and the President have control of the tax system and government spending. As a result their policies will directly impact
aggregate demand.