Macro

27) Use the information in the table above to calculate the value of private saving. 27) ______ A) -$15 million B) $25 million C) $40 million D) $20 million

B) $25 million

90) Suppose that M = 300, P = 150, and Y = 6. Then the velocity of circulation equals 90) ______ A) 0.02. B) 3.00. C) 2.00. D) 0.50.

B) 3.00.

24) Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world 24) ______ A) I and II only B) II and III only C) I and III only D) I, II, and III

B) II and III only

22) At the beginning of the year, your wealth is $10,000. During the year, you have an income of $90,000 and you spend $80,000 on consumption. You pay no taxes. Your wealth at the end of the year is 22) ______ A) $20,000.00. B) $90,000.00. C) $0. D) $100,000.00.

A) $20,000.00.

2) Slowdonia's current growth rate of real GDP per person is 2 percent a year. How long will it take to double real GDP per person? A) 35 years B) 28.6 years C) approximately 10 years D) half a year

A) 35 years

64) Using the Rule of 70, if the country of Flowerdom'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? 64) ______ A) 7 years B) 1 year C) 0.7 years D) 10 years

A) 7 years

75) The tendency for private saving to increase in response to growing government deficits is known as the 75) ______ A) Ricardo-Barro effect. B) Keynes effect. C) money illusion effect. D) crowding out effect.

A) Ricardo-Barro effect.

38) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. With no changes in aggregate demand or long-run aggregate supply, in long-run macroeconomic equilibrium, the price level will be ________ and real GDP will be ________. 38) ______ A) 120; $400 B) 90; $400 C) 110; $500 D) 100; $600

D) 100; $600

62) In 2008, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2009, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2008 to 2009? 62) ______ A) 8.3 percent B) 3.8 percent C) 0.38 percent D) 9.0 percent

D) 9.0 percent

60) Inflation is a problem when 60) ______ A) it causes the value of money to vary unpredictably. B) it causes resources to be diverted from productive uses. C) it is unpredictable. D) All of the above answers are correct.

D) All of the above answers are correct.

78) The term "crowding out" relates to 78) ______ A) increases in the real interest rate due to government budget deficit. B) decreases in private investment because of a government budget deficit. C) an effect of a government budget deficit. D) All of the above answers are correct.

D) All of the above answers are correct.

8) Which of the following contributes to economic growth? A) technological improvements B) capital accumulation C) increases in labor productivity D) All of the above contribute to economic growth.

D) All of the above contribute to economic growth.

11) ________ is the knowledge and skill that people have obtained from education and on-the-job training. A) Capital B) Labor productivity C) Technology D) Human capital

D) Human capital

96) Which of the following is considered a purpose of the federal budget? I. To help the economy achieve full employment. II. To finance the activities of the federal government. III. To promote sustained economic growth. 96) ______ A) I and II B) II and III C) I and III D) I, II and III

D) I, II and III

5) Real GDP grows when I. the quantities of the factors of production grow. II. persistent advances in technology make factors of production increasingly productive. III. human capital grows. A) only I B) only II C) both I and III D) I, II, and III

D) I, II, and III

92) Monetary policy goals include I. maximum employment. II. stable prices III. moderate long-term interest rates. 92) ______ A) I and II only. B) I only. C) II only. D) I, II, and III.

D) I, II, and III.

91) Which of the following are policy instruments available to the Fed as it tries to achieve its macroeconomic goals? I. government expenditures on goods and services and taxes II. the government budget deficit or surplus III. changes in the federal funds rate 91) ______ A) I and II B) II only C) II and III D) III only

D) III only

45) Which of the following are included in autonomous expenditure? 45) ______ A) investment B) autonomous consumption expenditure C) government expenditures D) all of the above

D) all of the above

15) Which of the following ideas apply to the neoclassical growth theory? I. Technological change results from chance. II. Growth in real GDP stops if technology stops advancing. 15) ______ A) I only B) II only C) neither I nor II D) both I and II

D) both I and II

93) Monetary policy affects real GDP by 93) ______ A) creating budget surpluses. B) creating budget deficits. C) changing aggregate supply. D) changing aggregate demand.

D) changing aggregate demand.

7) Equilibrium in the labor market A) cannot occur if the production function is shifting upward. B) can happen only when real GDP exceeds potential GDP. C) occurs when actual GDP is equal to potential GDP D) means that resources are allocated inefficiently

C) occurs when actual GDP is equal to potential GDP

25) If the government runs a budget deficit, then 25) ______ A) national saving is negative. B) national saving cannot fund investment. C) part of household and business saving finances the deficit. D) household but not business saving must pay for the deficit.

C) part of household and business saving finances the deficit.

69) Factors that influence labor productivity include ________. 69) ______ A) physical capital, the real wage rate, and technology B) the inflation rate, the real wage rate, and the exchange rate C) physical capital, human capital, and technology D) the labor demand curve

C) physical capital, human capital, and technology

68) The aggregate production function describes the relationship between 68) ______ A) the rate of growth of real GDP and inflation. B) real GDP and the price level. C) real GDP and the quantity of labor employed. D) real GDP and the unemployment rate.

C) real GDP and the quantity of labor employed.

49) Which of the following is NOT an important factor affecting economic growth? 49) ______ A) the rate of growth of capital B) the rate of growth in labor productivity C) the rate of fall in the price level D) the rate of saving

C) the rate of fall in the price level

29) Suppose Molly has an income of $35,000 annually and has inherited a savings account of $20,000. Wyatt has a job that pays $35,000 annually, but has debts totaling $6,000. Which of the following is true? 29) ______ A) We can expect Molly to save more than Wyatt this year. B) We can expect Wyatt and Molly to save the same proportion of their incomes this year. C) We can expect Wyatt and Molly to have equal amounts of consumption this year. D) We can expect Wyatt to save more than Molly this year.

A) We can expect Molly to save more than Wyatt this year.

The best definition for economic growth is... A) a sustained expansion of production possibilities measured as the increase in real GDP over a given period. B) a sustained expansion of consumption goods over a given period. C) a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period. D) a sustained expansion of production goods over a given period

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

40) Inflation occurs over time as a result of 40) ______ A) aggregate demand increasing faster than long-run aggregate supply. B) long-run aggregate supply increasing faster than aggregate demand. C) decreases in aggregate demand. D) long-run aggregate supply increasing faster than short-run aggregate supply.

A) aggregate demand increasing faster than long-run aggregate supply.

37) The AD curve shows the sum of 37) ______ A) consumption expenditure, investment, government expenditures on goods and services, and net exports. B) consumption expenditure, investment, the price level, and real GDP. C) the price level, employment, and real GDP. D) consumption expenditure, investment, and real GDP.

A) consumption expenditure, investment, government expenditures on goods and services, and net exports.

57) Unemployment caused by the normal labor turnover is called ________ unemployment. 57) _______ A) frictional B) cyclical C) part-time D) involuntary

A) frictional

55) The total number of people aged 16 years and over who are not institutionalized ________. 55) _______ A) is the working-age population B) is the labor force C) does not include students D) equals the number of employed plus unemployed

A) is the working-age population

18) According to new growth theory ________. 18) ______ A) knowledge does not experience diminishing returns B) ever-advancing productivity keeps the population growth rate high C) growth rates and income levels per person around the globe will converge D) knowledge is subject to the law of diminishing returns

A) knowledge does not experience diminishing returns

41) In the Keynesian model of aggregate expenditure, real GDP is determined by the 41) ______ A) level of aggregate demand. B) level of taxes. C) level of aggregate supply. D) price level.

A) level of aggregate demand.

13) The subsistence real wage rate is the A) minimum real wage rate necessary to sustain life4. B) real wage rate that causes technological progress to occur. C) real wage rate that produces an excess demand for labor. D) real wage rate that produces an excess supply of labor.

A) minimum real wage rate necessary to sustain life4

76) If we import more than we export from the rest of the world we 76) ______ A) must borrow an equal amount from the rest of the world. B) are running a trade surplus. C) can lend an equal amount to the rest of the world. D) are helping to finance investment in the rest of the world

A) must borrow an equal amount from the rest of the world.

73) If the government runs a budget deficit, then 73) ______ A) part of household and business saving finances the deficit. B) national saving cannot fund investment. C) national saving is negative. D) household but not business saving must pay for the deficit.

A) part of household and business saving finances the deficit.

39) In short-run macroeconomic equilibrium 39) ______ A) real GDP and the price level are determined by short-run aggregate supply and aggregate demand. B) real GDP equals potential GDP and aggregate demand determines the price level. C) the price level is fixed and short-run aggregate supply determines real GDP. D) real GDP is less than potential GDP.

A) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.

6) The aggregate production function shows how ________ varies with ________. A) real GDP; labor B) labor; capital C) labor; leisure time D) leisure time; labor

A) real GDP; labor

66) The aggregate production function shows how ________ varies with ________. 66) ______ A) real GDP; labor B) labor; capital C) leisure time; labor D) labor; leisure time

A) real GDP; labor

95) An increase in government expenditure shifts the AD curve ________ and an increase in taxes shifts the AD curve ________. 95) ______ A) rightward; leftward B) rightward; rightward C) leftward; rightward D) leftward; leftward

A) rightward; leftward

58) Structural unemployment is the result of 58) _______ A) technological change or foreign competition. B) irresponsible workers with poor work habits. C) a slowdown in the rate of economic expansion. D) normal labor market turnover.

A) technological change or foreign competition.

94) Fiscal policy can be defined as 94) ______ A) use of the federal budget to reach macroeconomic objectives. B) government spending and tax decisions accomplished using automatic stabilizers. C) government policy to retire the federal government debt. D) government policy with respect to transfer payments such as unemployment compensation and welfare.

A) use of the federal budget to reach macroeconomic objectives.

59) Cyclical unemployment occurs when 59) _______ A) individuals enter into the labor market making the rounds of potential employers. B) a business cycle recession decreases employment. C) individuals give up the search for employment. D) individuals with skills no longer valued in the labor market cannot find employment.

B) a business cycle recession decreases employment.

30) Which of the following shifts the demand for loanable funds curve leftward? 30) ______ A) a decrease in the taxes paid by the business B) a decrease in the expected profit C) a fall in the real interest rate D) a rise in the real interest rate

B) a decrease in the expected profit

44) The sum of the components of aggregate expenditure that are not influenced by real GDP is called 44) ______ A) the MPC. B) autonomous expenditures. C) autonomous consumption. D) induced expenditures.

B) autonomous expenditures.

89) Money is created by 89) ______ A) banks taking in deposits. B) banks making loans. C) banks paying for depositor's insurance. D) government taxation.

B) banks making loans.

26) If foreigners spend more on U.S.-made goods and services than we spend on theirs, 26) ______ A) funds flow in from abroad to help finance U.S. investment. B) foreigners must borrow from the United States or sell U.S. assets to make up the difference. C) we must borrow from foreigners because of low imports. D) all U.S. national saving remains in the United States

B) foreigners must borrow from the United States or sell U.S. assets to make up the difference.

48) When a government has a budget surplus, the surplus 48) ______ A) increases the world real interest rate. B) helps finance investment. C) crowds-out private saving. D) must be subtracted from private saving.

B) helps finance investment.

84) A Keynesian economist believes that 84) ______ A) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. B) if the economy was left alone, it would rarely operate at full employment. C) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. D) the economy is self-regulating and always at full employment.

B) if the economy was left alone, it would rarely operate at full employment.

50) Which of the following contributes to an increase in labor productivity? 50) ______ A) decreased investment B) increased capital stock C) increased consumption expenditure D) All of the above contribute to an increase in labor productivity.

B) increased capital stock

23) If a bank's net worth is negative, then the bank definitely is 23) ______ A) solvent. B) insolvent. C) liquid. D) illiquid.

B) insolvent.

51) Gross domestic product (GDP) measures the 51) _______ A) number of final goods and services sold in the economy in a given time period. B) market value of final goods and services produced in the economy in a given time period. C) market value of old and new final goods and services sold in the economy in a given time period. D) number of final goods and services produced in the economy in a given time period.

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

71) If the economy's capital stock increases over time, 71) ______ A) gross investment equals depreciation. B) net investment is positive. C) depreciation exceeds gross investment. D) depreciation is less than zero.

B) net investment is positive.

19) The increase in the capital stock equals the amount of 19) ______ A) private sector spending. B) net investment. C) gross investment. D) depreciation.

B) net investment.

83) A classical economist believes that 83) ______ A) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. B) the economy is self-regulating and always at full employment. C) if the economy was left alone, it would rarely operate at full employment. D) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic.

B) the economy is self-regulating and always at full employment.

20) The term capital, as used in macroeconomics, refers to 20) ______ A) financial wealth. B) the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. C) investment. D) the sum of investment and government purchases of goods.

B) the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.

36) The AS/AD model studies the relationship between 36) ______ A) unemployment and real GDP. B) the price level and real GDP. C) the price level and unemployment. D) nominal GDP and inflation.

B) the price level and real GDP.

81) For movements along the long-run aggregate supply curve, 81) ______ A) potential GDP is dependent on the price level. B) the price level and the money wage rate change by the same percentage. C) the prices of goods and services change while the prices of productive resources hold steady. D) All of the above are correct.

B) the price level and the money wage rate change by the same percentage.

34) The supply of real GDP is a function of 34) ______ A) only the state of technology. B) the quantities of labor, capital and the state of technology. C) the sum of wages, salaries, corporate profits, rents and interest. D) the total expenditures of consumers, investors and government

B) the quantities of labor, capital and the state of technology.

31) When government saving is negative, 31) ______ A) the real interest rate decreases if the Ricardo-Barro effect does not apply. B) the real interest rate increases if the Ricardo-Barro effect does not apply. C) investment increases. D) the real interest rate falls if the crowding-out effect applies.

B) the real interest rate increases if the Ricardo-Barro effect does not apply.

77) When government saving is negative, 77) ______ A) the real interest rate falls if the crowding-out effect applies. B) the real interest rate increases if the Ricardo-Barro effect does not apply. C) the real interest rate decreases if the Ricardo-Barro effect does not apply. D) investment increases.

B) the real interest rate increases if the Ricardo-Barro effect does not apply.

97) The largest item of government outlays is ________. 97) ______ A) debt interest B) transfer payments C) debt reduction D) expenditures on goods and services

B) transfer payments

4) Over the last 100 years, the average U.S. growth rate in real GDP per person was about A) 6 percent per year. B) 12.5 percent per year. C) 2 percent per year. D) 1 percent per year.

C) 2 percent per year.

82) The economy is in its short run equilibrium at the point where the 82) ______ A) AD curve intersects the LAS curve. B) SAS curve intersects the LAS curve. C) AD curve intersects the SAS curve. D) price level is stable.

C) ADcurve intersects theSAScurve

43) Which of the following statements is FALSE? 43) ______ A) Disposable income - saving = consumption expenditure. B) Consumption expenditure + saving = disposable income. C) Consumption expenditure = saving - disposable income. D) Saving = disposable income - consumption expenditure.

C) Consumption expenditure = saving - disposable income.

67) Real GDP grows when I. the quantities of the factors of production grow. II. persistent advances in technology make factors of production increasingly productive. III. human capital grows. 67) ______ A) only I B) only II C) I, II, and III D) both I and III

C) I, II, and III

33) The tendency for private saving to increase in response to growing government deficits is known as the 33) ______ A) Keynes effect. B) money illusion effect. C) Ricardo-Barro effect. D) crowding out effect.

C) Ricardo-Barro effect.

61) The best definition for economic growth is 61) ______ A) a sustained expansion of consumption goods over a given period. B) a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period. C) a sustained expansion of production possibilities measured as the increase in real GDP over a given period. D) a sustained expansion of production goods over a given period.

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

35) The equilibrium level of GDP occurs at the level of GDP at which the 35) ______ A) aggregate demand curve becomes vertical. B) unemployment rate is zero. C) aggregate quantity demanded equals the aggregate quantity supplied. D) All of the above answers are correct.

C) aggregate quantity demanded equals the aggregate quantity supplied

12) The one-third rule states that a one percent increase in ________ per hour of labor with ________ in technology results in a one-third of one percent increase in ________ per hour of labor. A) the real wage; no change; capital B) the real wage; an increase; capital C) capital; no change; real GDP D) capital; an increase; real GDP

C) capital; no change; real GDP

16) According to new growth theory, technological change is driven by 16) ______ A) foreign firms' attempts to increase their sales in the domestic market. B) government policies. C) firms' attempts to increase their profit. D) random chance.

C) firms' attempts to increase their profit.

10) Labor productivity rises A) if the amount of capital per worker decreases. B) if firms invest in hiring more workers rather than buying more capital. C) if the amount of capital per worker increases. D) in the absence of technological progress.

C) if the amount of capital per worker increases.

65) Looking at real GDP per person in the United States over the past 100 years, we see that real GDP 65) ______ A) only grew after World War II. B) has usually stayed constant. C) increased during most of the years but not all of them. D) each year has always increased.

C) increased during most of the years but not all of them.

85) In the short run, with fixed prices and no imports and no income taxes, an increase in investment of $100 billion 85) ______ A) increases real GDP by less than $100 billion. B) decreases real GDP because of the decrease in induced expenditures. C) increases real GDP by more than $100 billion. D) increases real GDP by $100 billion

C) increases real GDP by more than $100 billion.

47) The real interest rate is ________ in the United States compared to Zimbabwe because ________. 47) ______ A) higher; more firms want to borrow financial capital in the United States. B) lower; the United States is a net borrower. C) lower; there is a lower risk premium in the United States. D) higher; Zimbabwe is a net borrower.

C) lower; there is a lower risk premium in the United States

86) The functions of money are 86) ______ A) interest rates, prices and output. B) M1, M2 or currency. C) medium of exchange, unit of account, and store of value. D) currency, deposits, and traveler's checks.

C) medium of exchange, unit of account, and store of value.

28) People expect an inflation rate of 5 percent and the real interest rate is positive. Then the nominal interest rate will be 28) ______ A) 5 percent. B) less than 5 percent. C) more than 5 percent. D) Without more information it is impossible to tell if the nominal interest rate will be more than, less than, or equal to 5 percent.

C) more than 5 percent.

72) A country's investment can be financed by ________. 72) ______ A) only saving by households and firms B) a government budget surplus C) national saving and foreign borrowing D) making exports exceed imports

C) national saving and foreign borrowing

56) During a recession, the ________. 56) _______ A) number of aggregate hours worked increases B) unemployment rate decreases C) number of discouraged workers increases D) employment-to-population ratio increases

C) number of discouraged workers increases

14) An assumption of classical growth theory is that when ________ the population growth rate ________. A) people become more skilled; decreases B) saving declines; decreases C) the real wage rate exceeds the subsistence real wage rate; increases D) the real wage rate decreases; increases

C) the real wage rate exceeds the subsistence real wage rate; increases

9) In the above figure, at the real wage rate of $50 A) there is shortage of 20 billion hours per year. B) there is a shortage of 100 billion hours per year. C) there is a surplus of 60 billion hours per year. D) there is a surplus of 100 billion hours per year.

C) there is a surplus of 60 billion hours per year.

80) In the macroeconomic long run, 80) ______ A) output always is above potential GDP. B) GDP always is below potential GDP. C) there is full employment and real GDP is equal to potential GDP. D) there is full employment with no unemployment.

C) there is full employment and real GDP is equal to potential GDP.

99) All of the following components represent sources of government revenue EXCEPT 99) ______ A) personal income taxes. B) Social Security taxes. C) transfer payments. D) corporate income taxes.

C) transfer payments

79) The United States regularly runs a trade ________ and therefore ________. 79) ______ A) deficit; loanable funds flow out of the United States B) surplus; loanable funds are sent to the United States C) surplus; loanable funds flow out of the United States D) deficit; loanable funds are sent to the United States

D) deficit; loanable funds are sent to the United States

21) If the economy's capital stock decreases over time, 21) ______ A) depreciation is less than zero. B) gross investment equals net investment. C) net investment is positive. D) depreciation exceeds gross investment.

D) depreciation exceeds gross investment.

52) The factor market can best be described as where 52) _______ A) governments sell goods and services. B) firms buy goods and services. C) households buy goods and services. D) firms buy the services of labor, land and capital.

D) firms buy the services of labor, land and capital.

3) We are interested in long-term growth primarily because it brings A) trade wars with our trading partners. B) higher price levels. C) lower price levels. D) higher standards of living.

D) higher standards of living.

53) In the circular flow of income 53) _______ A) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from other firms. B) households demand goods and services that are supplied by firms, and the firms demand factors that are supplied by intermediate firms. C) households sell goods and services while firms sell factors. D) households demand goods and services that are supplied by firms, while supplying factors that are demanded by firms.

D) households demand goods and services that are supplied by firms, while supplying factors that are demanded by firms.

63) In 2008, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2009, real GDP was $4.59 billion and population was 2.97 million. From 2008 to 2009, Armenia's standard of living ________. 63) ______ A) did not change B) decreased C) might have increased, decreased, or remained unchanged but more information is needed to determine which. D) increased

D) increased

46) If we import more than we export from the rest of the world we 46) ______ A) are helping to finance investment in the rest of the world. B) are running a trade surplus. C) can lend an equal amount to the rest of the world. D) must borrow an equal amount from the rest of the world.

D) must borrow an equal amount from the rest of the world.

54) The largest component of GDP is 54) _______ A) net exports of goods and services. B) gross private domestic investment. C) government expenditure on goods and services. D) personal consumption expenditures.

D) personal consumption expenditures

98) What is the largest source of revenue for the federal government? 98) ______ A) corporate income taxes B) Social Security taxes C) sales tax D) personal income taxes

D) personal income taxes

88) Cigarettes served as money in some POW camps during World War II. Given this fact, we would expect to observe 88) ______ A) people usually resorting to barter rather than using cigarettes as money. B) only government-issued cigarettes being accepted as money. C) no one ever smoking a cigarette. D) prices of other goods expressed in terms of cigarettes.

D) prices of other goods expressed in terms of cigarettes.

70) The physical capital in the economy is the total 70) ______ A) quantity of plant and equipment owned by governments. B) financial assets held by firms. C) financial assets of the public. D) quantity of plant, equipment, and inventories.

D) quantity of plant, equipment, and inventories

42) An inflationary gap is occurs when 42) ______ A) real GDP equals potential GDP. B) real GDP is less than potential GDP. C) the economy is at full employment. D) real GDP exceeds potential GDP.

D) real GDP exceeds potential GDP.

32) The idea that a government budget deficit decreases investment is called 32) ______ A) the capital investment effect. B) government dissaving. C) the Ricardo-Barro effect. D) the crowding-out effect.

D) the crowding-out effect

74) The idea that a government budget deficit decreases investment is called 74) ______ A) government dissaving. B) the Ricardo-Barro effect. C) the capital investment effect. D) the crowding-out effect.

D) the crowding-out effect.

87) Barter is 87) ______ A) another type of money. B) printing too much money. C) the exchange of goods and services for any type of money. D) the exchange of goods and services directly for other goods and services.

D) the exchange of goods and services directly for other goods and services.

17) The notion that technological change is not random but instead is driven by the pursuit of profits is an essential element of 17) ______ A) neoclassical growth theory. B) classical growth theory. C) perpetual growth theory. D) the new growth theory

D) the new growth theory.