Macro Econ Final Exam

(Consider This) What is the difference between financial investment and economic investment? - There is no difference between the two. - Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods. - Economic investment is adjusted for inflation; financial investment is not. - Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created ca

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

What are the three primary measures used in macroeconomics to assess the performance of an economy? (short answer)

GDP, unemployment and inflation

What social problems have been linked to higher rates of unemployment? (short answer)

Higher crime rates, greater political unrest, and higher rates of depression and heart disease among unemployed people.

Savings are generated... - prices are rising. - current spending exceeds current income. - current income exceeds current spending. - real GDP exceeds nominal GDP.

current income exceeds current spending

One principle of economic growth is the notion that, to raise living standards over time, an economy must... - have full employment of its labor force. - devote some portion of its current output to increasing its future output. - maintain low inflation over the years. - have a small population so that its GDP per person will be high.

devote some portion of its current output to increasing its future output.

Government purchases include... - federal government expenditures, but not state and local government expenditures. - state and local government expenditures, but not federal government expenditures. - just state expenditures, not federal or local government expenditures. - federal, state, and local government expenditures.

federal, state, and local government expenditures

Prices for oil and other commodities tend to be... - stuck. - sticky. - flexible. - inflexible.

flexible

The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice

freedom of enterprise

There are several ways to measure aggregate output. The one favored by the Bureau of Economic Analysis is... - national income. - gross output. - net domestic product. - gross domestic product.

gross domestic product

Shielding employees and suppliers from business risk_________economic outcomes.

improves

An advantage of using capital in the production process is that it...

improves efficiency, increases output, and provides growth

In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern. This is because...

in command economies, no market-pricing mechanism exists to incentivize resource suppliers to increase resource availability when a shortage occurs

Government purchases - include expenditures for schools but not highways. - does not include expenditures for labor. - include direct purchases of resources. - None of the answers are correct.

include direct purchases of resources

For an economy to increase investment, it must... - increase saving. - increase present consumption. - buy more stocks and bonds. - increase nominal GDP.

increase saving

There is such a wide variety of desired goods and services in a market system because...

individual wants are diverse

An increase in the overall level of prices in an economy is called... - growth. - expansion. - inflation. - nominal GDP growth

inflation

A price war... - is won by the firm who goes broke first. - is possible when a firm has just one or two major rivals. - often occurs between a large country and a relatively smaller country when both make the same product. - only occurs when rivals match a price increase.

is possible when a firm has just one or two major rivals

Command system, a market system, or a laissez-faire system... The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens

laissez-faire system

National income accountants define consumer nondurable goods as products that have an expected life of... - less than 3 years. - 3 years or more. - less than 1 year. - None of the answers are correct.

less than 3 years

The economizing problem is one of deciding how to make the best use of

limited resources to satisfy virtually unlimited wants

Which of the following is not a pitfall to sound economic reasoning?

marginal analysis

An institution that brings buyers and sellers together

market

The meaning of the phrase "invisible hand" is that...

market prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society

In a market system, scarce goods are allocated by...

market prices that are determined by consumers and producers acting in their own self-interest

Command system, a market system, or a laissez-faire system... Shops stock and sell the goods their customers want, but the government levies a sales tax on each transaction in order to fund elementary schools, public libraries, and welfare programs for the poor

market system

A higher rate of an investment... - more saving now. - more current consumption. - more future production. - more future inflation.

more future production

Refer to the diagram. The concept of opportunity cost is best represented by the...

move from B on PP1 to C on PP1.

Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off

mutually agreeable

The system that measures the economy's overall performance is formally known as... - national income accounting. - business cycle measurement. - GDP assessment. - final output and income statistics.

national income accounting

(Consider This) Suppose that Toyota buys a factory previously owned by Chrysler Motors. Economists would... - consider this to be an economic investment. - not consider this to be an economic investment, because Toyota is less efficient than Chrysler. - not consider this to be an economic investment, because no new capital is created through the purchase. - not consider this to be an economic investment, because there is no way to know how it will affect stock holdings in the two companies.

not consider this to be an economic investment, because no new capital is created through the purchase

The Latin term "ceteris paribus" means...

other things equal

The _________ of the business are the ones that assume most of the business risk.

owners

The largest expenditure component of GDP is... - government purchases. - personal consumption expenditures. - gross private domestic investment. - net exports.

personal consumption expenditures

Retailers that attempt to keep prices stable and predictable cause... - difficulty for consumers when planning future purchases. - price inflexibility. - customers to be greatly annoyed. - consumers to think they are being taken advantage of.

price inflexibility

The slope of a budget line reflects the...

price ratio of the two products

The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property

private property

The market system depends on private property and the protection of property rights to...

provide an incentive to maintain the property and allow for the orderly transfer of property ownership

The three statistics that are the main focus for those measuring macroeconomic health are... - real GDP, inflation, and unemployment. - real GDP, nominal GDP, and inflation. - nominal GDP, unemployment, and inflation. - real GDP, nominal GDP, and unemployment.

real GDP, inflation and uneployment

In the goods and services portion of the circular flow model, there is a flow of...

real goods and services and a flow of money

In the circular flow model...

resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services

When economists refer to "investment," they are describing a situation where... - people are buying shares of corporate stock. - resources are devoted to increasing future output. - money is saved in a bank account. - financial assets are purchased in the hope of a monetary gain.

resources are devoted to increasing future output

The emergence of self-driving cars is an example of "creative destruction" because...

self-driving cars will likely replace most cars that require drivers

What each individual or firm believes is best for itself and seeks to obtain

self-interest

The business cycle depicts... - fluctuations in the general price level. - the phases a business goes through from when it first opens to when it finally closes. - the evolution of technology over time. - short-run fluctuations in output and employment.

short-run fluctuations in output and employment

Which of the following goods have prices that are least flexible? - oil - natural gas - corn - soda

soda

The term "division of labor" means that workers...

specialize in tasks that take advantage of their individual abilities and skills

Human-made resources that are referred to as "recipes" includes - changes in inventory. - the cost of new equipment for a factory. - spending on new writing that increases the flow of entertainment and education. - consumption of fixed capital.

spending on new writing that increases the flow of entertainment and education

Self-interest helps achieve society's economic goals because...

consumers and producers exercise their freedom to act in their own self-interest

What is produced is ultimately determined by...

consumers, because if the goods offered are not what consumers want, consumers will not buy them

If a positive relationship exists between x and y...

the relationship will graph as an upward-sloping line

To signify government purchases, national income accountants use - the symbol Gn. - the equation (G − M). - the symbol G. - the symbol Gx.

the symbol G

Which of the following will be included in U.S. GDP? - the value of the cars produced at a Japanese-owned Toyota factory in Ohio - the value of the trucks produced at an American-owned Ford factory in Canada - the value of a pair of Hotter shoes made in the United Kingdom - the value of the BMWs produced at the BMW factory in Mexico

the value of the cars produced at a Japanese-owned Toyota factory in Ohio

When an economy relies on specialization...

trade enables individuals to obtain the goods in which they do not have a specialization

Camille is at the candy store with Grandma Mary, who offers to buy her $6 worth of candy. If lollipops are $1 each and candy bars are $2 each, what combination of candy can Camille's Grandma Mary buy her?

two lollipops and two candy bars

The average amount of time between price changes for gasoline is... - two to three days. - two to three weeks. - two to three months. - two to three years.

two to three weeks

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks, she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to...

use the observed data to form a hypothesis about ice cream buying behavior

The scientific method is...

used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses

Suppose you have a money income of $10, all of which you spend on Pepsi and popcorn. In the diagram, the prices of Pepsi and popcorn, respectively, are...

$0.50 and $1.00.

U.S. GDP in 2021 was about -$8 trillion. - $23 trillion. - $890 billion. - $30 trillion.

$23 trillion

Answer this question based on the given information for an economy in some year. Dollar value of resource extraction activity = $20 billion Dollar value of production activity = $50 billion Dollar value of distribution activity = $60 billion Dollar value of final output = $100 billion Gross output for this economy equals - $100 billion. - $60 billion. - $230 billion. - $260 billion.

$230 billion

Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis. Refer to the data sets. Which of the data sets would graph as an upward-sloping line?

1, 2, and 5 only

National income accountants define consumer durable goods as products that have an expected life of... - less than 3 years. - 3 years or more. - more than 1 year. - unlimited years.

3 years or more

The National Income and Product Accounts (NIPA) for the United States are compiled by the -National Bureau of Economic Research. - Bureau of Economic Analysis. - National Census Bureau. - Council of Economic Adviser

Bureau of Economic Analysis

The agency responsible for compiling the National Income and Product Accounts for the U.S. economy is the... - Council of Economic Advisers. - Bureau of Economic Analysis. - National Bureau of Economic Research. - Bureau of Labor Statistics.

Bureau of Economic Analysis

Refer to the diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3 rather than PP2?

A

Compensation of employees - is paid as wages and salaries by business and government to their employees. - includes payments by employers into social insurance. - includes payments into private pension, health, and welfare funds for workers. - All of the answers are correct.

All of the answers are correct

Interest consists of the money households receive on - corporate bonds. - certificates of deposit (CDs). - savings deposits. - All of the answers are correct.

All of the answers are correct

Which of the following is a correct statement? - Economic concepts or laws that are valid during recessions are necessarily valid during prosperity. - Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events. - Economists use the scientific method. Therefore, economic laws are as quantitatively precise as the laws of physics or chemistry. - Because economics is primarily concerned with questions of "ought," it is a branch of applied ethics and not scientific.

Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events

Which of the following is the best example of a microeconomic statement?

Car prices have increased recently because of a microchip shortage

The U.S. government agency responsible for compiling the national income accounts is the... - Census Bureau. - Bureau of Labor Statistics (BLS). - Commerce Department's Bureau of Economic Analysis (BEA). - Government Accountability Office (GAO).

Commerce Department's Bureau of Economic Analysis (BEA)

What are demand shocks? Describe a positive demand shock and a negative demand shock. (short answer)

Demand shocks are unexpected changes in the demand for goods and services. A positive demand shock is when demand is higher than expected. A negative demand shock is when demand is lower than expected.

The Industrial Revolution began in... - the United States in the mid-1900s. - England in the late 1700s. - the Roman Empire around 500 B.C. - China in A.D. 1800.

England in the late 1700's

The Bureau of Economic Analysis compiles the NIPA accounts. The letters NIPA represent... - National Inflation and Production Assessment. - National Income and Product Accounts. - Net Income of Production Analysis. - National Incorporation for Professional America.

National Income and Product Accounts

(Consider This) Which of the following is an example of economic investment? - Volvo buys an old factory building from General Motors. - New Balance buys a new machine that increases shoe production. - Bill Gates buys shares of stock in IBM. - Warren Buffet buys U.S. savings bonds.

New Balance buys a new machine that increases shoe production.

Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis. Refer to the data sets. The equation for data set 3 is...

P = 90 − 0.5N

Which of the following statements is correct? - The value of the independent variable is determined by the value of the dependent variable. - The value of the dependent variable is determined by the value of the independent variable. - The dependent variable designates the "cause" and the independent variable the "effect." - Dependent variables graph as upward-sloping lines; independent variables graph as downward-sloping lines.

The value of the dependent variable is determined by the value of the independent variable

Inflation is defined as... - a general increase in the price level. - the rate of growth in nominal GDP. - a situation where all prices in the economy rise simultaneously. - the growth phase of the business cycle.

a general increase in price level

In a command economy, scarce goods are allocated by...

a government-appointed planning board based on the board's long-term priorities

The phrase "other things equal" means that...

a number of relevant variables are assumed to be constant

The period when output and living standards decline is referred to as... - inflation. - economic decline. - an inventory downturn. - a recession.

a recession

To manage the problem of adding dissimilar items when calculating GDP, the BEA - adds the monetary values of each final good or service produced. - uses the measurement of weight, adding the pounds of each final good or service produced. - uses the measurement of height, adding the inches of each final good or service produced. - goes ahead and adds apples and oranges, adding the numbers of each final good and service produced.

adds the monetary values of each final good or service produced

For which of the following goods and services are prices least sticky? - newspapers - haircuts - microwave ovens - airline tickets

airline tickets

Sticky output prices are caused by... - businesses that know their customers prefer predictable prices. - businesses fearing price wars. - the stickiness of wages and salaries. - all of the above are reasons for sticky output prices.

all of the above are reasons for sticky output prices.

Buying a new pair of jeans for yourself would increase - consumer services and subsequently personal consumption expenditures. - consumer nondurable goods and consequently personal consumption expenditures. - consumer durable goods and therefore personal consumption expenditures. - capital goods and therefore gross domestic private investment.

consumer nondurable goods and consequently personal consumption expenditures

The two broad categories of the nation's stock of capital - are informally referred to as "tools" and "recipes." - are consumer goods and services. - includes computers and servers, but not software. - comprises spending on only physical resources, like land and equipment.

are informally referred to as "tools" and "recipes"

Most retailers try to maintain stable prices as much as they can... - even though they know that consumers will adjust quickly to rapidly fluctuating prices. - so they never have sales. - because consumers would be annoyed if the price of a product cost one price one day and another price another day. - none of the above are correct.

because consumers would be annoyed if the price of a product cost one price one day and another price another day

Refer to the diagram. Assume that the horizontal axis measures the quantity of a good and the vertical axis measures the marginal benefit and marginal-cost of the good. Assuming that producing any amount of a good comes with positive costs, which line(s) represent(s) best represent possible marginal-cost curve(s)?

both A and D

Refer to the diagram. Which line(s) show(s) a negative relationship between x and y?

both C and E

In the circular flow model businesses...

businesses sell goods and buy labor; households buy goods and sell labor

Command system, a market system, or a laissez-faire system... A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area.

command system

The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit

competition

The post hoc fallacy is the error of...

concluding that just because one event precedes another, the first must have caused the second

Buying new furniture for your home would increase - consumer services and subsequently personal consumption expenditures. - consumer nondurable goods and consequently personal consumption expenditures. - consumer durable goods and therefore personal consumption expenditures. - changes in inventory and therefore gross domestic private investment.

consumer durable goods and therefore personal consumption expenditures

Transfer payments are not included in government purchases because - they are included in personal consumption expenditures. - such payments generate no production. -households that receive transfer payments usually spend the money very quickly. - All of the answers are correct.

such payments generate no production

Spending that pays for new or improved software is in... - the "tools" category of investment. - the "recipe" category of investment. - government expenditures. - None of the answers are correct.

the "recipe" category of investment

In 2020, the three largest economies in the world were (listed in order, from largest) - the United States, China, Germany. - China, the United States, Japan. - the United States, China, Japan. - China, the United States, Germany.

the United States, China, Japan

Some large hardware stores, such as Home Depot, boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of...

the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits

If we are considering the relationship between two variables and release one of the other-things-equal assumptions, we would expect...

the line representing that relationship on a graph to shift

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that...

the principle of increasing opportunity costs is relevant

Some agricultural sub-Saharan nations of Africa have over-farmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggests that...

the production possibilities curves of such nations have shifted inward