Exam 2 - Macro 6/7

If disposable income is 4,000, consumption is 3,500, government spending is 1,000, and tax revenues are 800, national saving is equal to: A)300. B)500. C)700. D)1,000.

A

Diane lost her job and immediately started looking for another job. As a result the A) unemployment rate decreases B) labor force increases C) labor force decreases D) unemployment rate remains constant

A

In a closed economy, Y - C - G equals: A)national saving. B)private saving. C)public saving. D)financial saving.

A

In the classical model with fixed income, if the demand for goods and services is greater than the supply, the interest rate will: A)increase .B)decrease. C)remain unchanged. D)either increase or decrease, depending on whether consumption is greater or less than investment.

A

In the classical model, 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

The equation for GDP using the expenditure approach is A) GDP = C + I + G + EX - IM. B) GDP = C + I + G + (IM - EX). C) GDP = C + I + G + EX + IM. D) GDP = C + I + G - EX - IM.

A

The factor that makes national saving equal investment, in equilibrium, is: A)the interest rate. B)private saving. C)public saving. D)fiscal policy.

A

Exports equal A) imports - net exports. B) net exports + imports. C) net exports - imports. D) imports + (exports + imports).

B

If in a year there is a positive inventory investment, then final sales A) exceed GDP. B) are less than GDP. C) equal GDP. D) are zero.

B

If the consumption function is given by C = 500 + 0.5(Y - T), and Y is 6,000 and T is given by T = 200 + 0.2Y, then C equals: A)2,500. B)2,800. C)3,500. D)4,200.

B

An individual who cannot find a job because his or her job skills have become obselete is an example of A) Cyclical B) Seasonal C) Structural D) Frictional

C

Between a peak and a trough, the economy goes through a(n) A) expansion. B) inflation. C) recession. D) boom

C

Between a trough and a peak, the economy goes through a(n) A) recession. B) bust. C) expansion. D) hyperinflation.

C

The government implements fiscal policy when it changes A) spending and/or interest rate. B) money supply and/or taxes. C) taxes and/or spending. D) taxes and/or interest rate.

C

According to the classical model, when government spending increases without a change in taxes: A)consumption increases. B)consumption decreases. C)investment increases. D)investment decreases.

D

Business cycles are: A)regular and predictable. B)irregular but predictable. C)regular but unpredictable. D)irregular and unpredictable.

D

For the 1952-2010 period, output per worker hour:

Fluctuated around an upward trend

Which of the following is a desirable characteristic in an economy?

Low unemployment

Price index

a measurement that shows how the GDP changes over time

Output in an economy can be increased by

adding more workers and/or more machines

Which of the following statements is TRUE? A) Recessions may increase efficiency by driving the least efficient firms in the economy out of business. B) The costs of recessions are distributed equally among all groups of the population. C) A recession often leads to an increase in the inflation rate. D) Recessions tend to increase the demand for imports and therefore improve the nation's balance of payments.

A

If the output is rising and unemployment is falling, the economy MUST be in a(n) A) contraction. B) expansion. C) depression. D) hyperinflationary period.

B

Income Mexican citizens earn in the U.S. counts in A) U.S. GNP. B) Mexican GNP. C) Mexican GDP. D) both U.S. and Mexican GDP.

B

It has become conventional to classify an economic downturn as a recession when aggregate output declines for A) three consecutive quarters. B) two consecutive quarters. C) a year. D) six consecutive quarters.

B

Nominal GDP measures the value of all goods and services A) in constant dollars. B) in current dollars. C) in fixed dollars. D) without inflation.

B

The demand for refrigerators falls when the economy a downturn. If a refrigerator manufacturer lays off workers during an economic downturn, this would be an example of A) natural unemployment B) cyclical unemployment C) frictional unemployment D) structural unemployment

B

The government wants to encourage consumer spending through cutting income taxes. This is an example of A) an incomes policy. B) a fiscal policy. C) a supply-side policy. D) a monetary policy.

B

The productivity of workers is defined as the A) total output produced by the labor force. B) output produced by a worker per hour. C) number of hours a worker spends at work. D) number of workers needed to produce one dayʹs volume of output

B

When an economics professors quit his/her job at a university and starts looking for a better job in another university, he/she is A) Naturally Unemployment B) Frictionally Unemployment C) Cyclically Unemployed D) Structurally Unemployed

B

Which of the following is a topic studied in Macroeconomics? A) the functioning of individual industries B) aggregate behavior of households and industries C) the behavior of individual households D) the decision-making behavior of individual business firms

B

Which of the following is included in both the U.S. GDP and GNP? A) The value of all cars produced by Ford in Mexico. B) The value of all cars produced by General Motors in the U.S. C) The value of all cars produced by Toyota in the U.S. D) The value of cars produced by Nissan in Japan and the U.S.

B

n a closed economy, private saving equals :A)Y - C - G. B)Y - T - C. C)Y - I - C. D)Y - T.

B

n the classical model with fixed income, if households save more than firms invest, then: A)the interest rate rises. B)the interest rate falls .C)output increases. D)output falls.

B

The major lesson of the circular flow diagram is that A) saving must always be less than investment. B) taxes must always be greater than government expenditures. C) total income in the economy must always equal total spending. D) tax receipts must be equal to transfer payments

C

The natural rate of unemployment is generally thought of as the A) ratio of the frictional unemployment rate to the cyclical unemployment rate B) sum of structural unemployment and cyclical unemployment C) sum of frictional unemployment and structural unemployment D) sum of frictional unemployment and cyclical unemployment

C

The single largest expenditure component in GDP is A) government spending. B) investment. C) consumption. D) net exports.

C

The supply and demand for loanable funds determines the: A)real wage. B)real rental price of capital. C)real interest rate. D)nominal interest rate.

C

When GDP growth declines, investment spending typically ______ and consumption spending typically ______. A)increases; increases B)increases; decreases C)decreases; decreases D)decreases; increases

C

Which of the following is NOT counted in the GNP of the United States? A) The wage of a U.S. citizen who works in a foreign country for a foreign firm. B) The interest earned by a U.S. bank on loans to a business firm located in Brazil. C) The profit earned by a restaurant located in the United States but owned by a Mexican company. D) The value of services that are produced by state and local governments in the United States.

C

Which of the following is an example of an intermediate good? A) the dough you buy to fix yourself a pizza for dinner B) the chocolate you buy to make yourself some cookies C) the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to D) lumber you buy to build a house for your dog

C

Gross Domestic Product measures A) the total income of everyone in the economy B) the total spending of everyone in the economy C) the value of all output in the economy D) all of the above

D

Gross national product is the total market value of A) all final and intermediate goods and service produced by resources owned by a country in a given year. B) all final and intermediate goods and services produced in a country, regardless of who owns the resources. C) all final goods and services produced in a country in a given year, regardless of who owns the resources. D) all final goods and services produced by resources owned by a country, regardless of where production takes place.

D

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

In the classical model with fixed output, the supply and demand for goods and services are balanced by: A)government spending .B)taxes. C)fiscal policy. D)the interest rate.

D

In which of the following conditions is the inflation rate likely to fall and the unemployment rate likely to rise A) Boom B) Stagflation C) Hyperinflation D) Recession

D

In which of the following conditions is the inflation rate likely to fall and the unemployment rate likely to rise? A) stagflation B) hyperinflation C) boom D) recession

D

The demanders in the goods-and-services market are A) households and business firms. B) households, the government, and the rest of the world. C) the government and business firms. D) households, the government, business firms, and the rest of the world.

D

Which of the following is an example of a final good or service? A) wheat a bakery purchases to make bread B) coffee beans Starbucks purchases to make coffee C) lumber purchased by a construction company to used in building houses D) a computer purchased by Federal Express to track shipments

D