Macro HW / Sample Exam 1 Quizlet

Long run economic growth can be measured with _____ _____ _______

GDP Per Capita

In 2006, unemployment was lowest in which of the following i ndustries? A) educational and health services B) leisure and hospitality services C) construction D) manufacturing

a

Total income in an economy is equal to A) the sum of wages, interest, re nt, and profit. B) firm revenues. C) GDP minus net exports. D) income minus taxes.

a

Which of the following causes the unemployment rate to understate the true extent of joblessness? A) Discouraged workers a re not counted as unemployed. B) A drug dealer reports herself as unemployed. C) Discouraged workers are counted as unemployed. D) Persons who collect unemployment benefits report themselves to be searching for a job. E) Many full time workers really want to be part time workers.

a

An efficiency wage A) is lower than the market wage and tends to increase productivity. B) is higher than the market wage and tends to d ecrease productivity. C) is higher than the market wage and tends to increase productivity. D) is lower than the market wage and tends to decrease productivity.

c

If nominal GDP rises we can say that If nominal GDP rises we can say that A) prices have risen and production remains constant. B) production has fallen and prices have risen. C) production has risen or prices have risen or both have risen. D) production has risen and prices remain constant.

c

It has become conventional to classify an economic downturn as a recession when aggregate output declines for _ consecutive quarters

2

Aggregate behavior is A) the behavior of each household and firm. B) the behavior of each individual. C) the behavior of all households and firms together. D) none of the above.

C

To get the economy out of a slump, Keynes believed that the government should ________ taxes and/or __________ government spending.

DECREASE INCREASE

According to new growth theory, growth ________. A) depends on the population growth rate B) is unending C) occurs when real GDP greater than the subsistence level D) cannot be sustained without government help E) ends when competition disappears

b

Classical growth theory predicts that in the long run there will be A) positive economic growth. B) zero economic growth. C) negative economic growth. D) sustained increases in the productivity growth rate E) sustained increases in economic growth.

b

Efficiency wages cause unemployment because A) firms pay wages that are below the market wage, causing labor demand to be greater than labor supply. B) firms pay wages that are above the market wage, causing labor demand to be less than labor supply. C) firms pay wages that are above the market wage, causing labor demand to be greater than labor supply. D) firms pay wages that are below the market wage, causing labor demand to be less than labor supply.

b

Which of the following are not considered part of government purchases? A) a bridge purchased by the state government B) welfare benefits C) a tank purchased by the federal government D) teacher's salaries paid by a local government

b

represents the transactions in an economy by flows around a circle

circular flow diagram

The largest component of spending in GDP is ________ spending

consumption

Deflation occurs when A) there is a one - time increas e in the price level. B) there is a sustained increase in the price level. C) there is a decrease in the expected rate of inflation. D) there is a decline in the price level.

d

Neoclassical growth theory predicts that real GDP will A) grow only when the population grows. B) remain at the subsiste nce level. C) continue to grow because of the choices people make in the pursuit of profit. D) grow at a rate that is determined by the pace of technological change. E) grow but at a rate that will slow as time progresses and population growth inc reases.

d

Property rights protect A) t he government's right to impose taxes. B) only the rights to financial property. C) all rights except rights to intellectual property. D) rights to physical property, financial property, and intellectual property. E) only the rights to physical property.

d

The economic growth rate is expressed as the ________. A) growth rate of the population B) growth rate of real GDP minus the growth rate of population C) annual percentage change of real GDP per person D) annual percentage change of real GDP E) the standard of living

d

We say that the economy is at full employment if the unemployment rate is equal to A) zero. B) the sum of structural and cyclical unemployment. C) the sum of frictional and cyclical unemployment. D) the natural rate of unemployment. E) the amount of cyclical unemployment.

d

When prices are rising, which of the following will be true? A) The real interest rate will be higher than the nominal interest rate. B) The nominal interest rate will be negative. C) The real interest rate will be negative. D) The real interest rate will be lower than the nominal interest rate.

d

Unemployment implies that in the labor market there is an _____supply of labor

excess

According to the Classical model, unemployment could not persist because wages would _____ to eliminate the excess supply of labor.

fall

_________ contribute to investment spending

firms

% real income formula

income2 - income1 / income1 x 100 - % of inflation(through that time period)

When considering economic growth, many policy makers focus on real GDP per capita since it takes into account the potentially distorting effects of ________ and __________ _____________

inflation population change

Unit-of-cost accounts make money a less reliable source of _____________

measurement

keep track of the spending of consumers, sales of producers, business investment spending, government purchases, and a variety of other flows of money between different sectors of the economy

national income and product accounts

When families and businesses are worried about the possibility of economic hard times they prepare by cutting their spending.

paradox of thrift

GDP is not a perfect measure of well-being because it is not adjusted for __________

pollution

A higher GDP deflator indicates a higher ______ _______

price level

Why might firms pay wages that are above the equilibrium wage in a market? To increase the __________ of their workers

productivity

A dividend is the portion of a corporation's ______ that the firm pays out each period to its shareholders.

profits

In periods when prices are falling, on average, ______ GDP would be growing faster than _______ GDP

real nominal

Cyclical unemployment only occurs during __________

recessions

economic growth is important to understand because it is closely related to the _________ ___ __________

standard of living

Value added is the ______ _______ minus the intermediate goods purchased

total sale

Excluding underemployed, discouraged and marginally attached workers means the true level of unemployment is ________________

understated

Another way you can calculate GDP from firms is by adding the ______ _________ by each firm

value added