Macroeconomics Final

Suppose that the consumption function is C = $500 + 0.8YD, where YD is disposable income. If disposable income increases by $2,000, consumption will increase by: $500. $2,000. $1,600. $400.

$1,600.

Assume an open economy in which GDP is $55 trillion. If consumption is $35 trillion, government spending is $7 trillion, taxes are $5 trillion, government transfers are $3 trillion, exports are $5 trillion, and imports are $2 trillion, what is investment? $10 trillion $18 trillion $2 trillion $13 trillion

$10 trillion

Assume an open economy in which GDP is $55 trillion. If consumption is $35 trillion, government spending is $7 trillion, taxes are $5 trillion, government transfers are $3 trillion, exports are $5 trillion, and imports are $2 trillion, what is private savings? $13 trillion $18 trillion $53 trillion $20 trillion

$18 trillion

Assume an open economy in which GDP is $12 trillion. If consumption is $8 trillion, government spending is $2 trillion, taxes are $0.5 trillion, exports are $1 trillion, and imports are $3 trillion, what is national savings? $4 trillion $3.5 trillion $2 trillion $5.5 trillion

$2 trillion

Assume an open economy in which GDP is $12 trillion. If consumption is $8 trillion, government spending is $2 trillion, taxes are $0.5 trillion, exports are $1 trillion, and imports are $3 trillion, what is the net capital inflow? $1 trillion $2 trillion $3 trillion $4 trillion​

$2 trillion

Assume a closed economy in which GDP is $20 trillion. If consumption is $14 trillion, government spending is $3 trillion, taxes are $1 trillion, and government transfers are $0, what is national savings? $4 trillion $3 trillion $1 trillion $2 trillion

$3 trillion

Chart #7 The value of national savings is: $14 trillion. $3 trillion. $3.5 trillion. -$0.5 trillion.

$3 trillion.

Chart #9 Government purchases of goods and services are: $50 billion. $1,085 billion. $300 billion. $400 billion.

$400 billion.

Chart #4 Assume that an economy produces only lemonade and cookies. If 2019 is the base year, real GDP in 2018 was: $400. $420. $425. $445.

$425.

If, during 2019, the Republic of Sildavia recorded a GDP of $75 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2019 in Sildavia were: $46 billion. $36 billion. $26 billion. $16 billion.

$46 billion.

In a closed economy, investment spending, I, must equal: GDP - C - G. GDP - C. GDP - C - G - X. GDP - [C × G].

GDP - C - G.

Assume that the real GDP of the United States is approximately $21 trillion and that the population of the United States is approximately 350 million. What is real GDP per capita for the US? $35,000 $40,000 $60,000 Real per capita GDP can't be determined without more information.

$60,000

Chart #12 Per capita real GDP in 2016 was: $600. $400. $300. $30.

$600.

Chart #3 The short-run effect of a decrease in planned investment spending is illustrated by panel: ​ (a). (b). (c). (d).

(b).

Daniela receives a tax refund of $800. Of this, she spends $600 and saves $200. Daniela's marginal propensity to consume is: 0.6. 0.75. 0.25. 0.20.

0.75.

Chart #5 Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume that the unit prices of these goods are as follows for the years noted and that 2018 is the base year. What is the value of the price index in 2018? 100 111 90 0

100

If the cost of the market basket in the base year is $5,000, and the cost of the market basket in the current year is $5,100, the price index for the current year is ___. 102 1.02 0.98 98

102

Chart #10 Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume that the unit prices of these goods are as follows for the years noted and that 2018 is the base year. What is the rate of inflation between 2018 and 2019? -10% 11% 32% 0%

11%

Chart #16 The table shows the prices of three common school supplies in 2018 and 2019 and the quantities of these goods sold in 2018, the base year. The school supply price index for 2019 is: 81.8. 100. 122.2. 124.

122.2.

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: 7%. 10%. 14.29%. 4.2%.

14.29%.

If the marginal propensity to consume is 0.5, the multiplier is: 5. 2. 1. 0.5.

2.

A survey reveals that, on a small island, 1,000 people have jobs, 250 people are unemployed and looking for jobs, and 450 people are neither working nor looking for work. The unemployment rate on the island is _____%. 20 25 45 15.6

20

Chart #15 The table shows the prices of three common school supplies in 2018 and 2019 and the quantities of these goods sold in 2018, the base year. Using this price index, the inflation rate from 2018 to 2019 was: 22%. 122%. 82%. 18%.

22%.

If the nominal interest rate is 4%, and the inflation rate is 1%, then the real interest rate is _____%. 4 3 5 1

3

Suppose that planned investment spending increases by $50 billion, and as a result, equilibrium GDP increases by $200 billion. The multiplier is: 8. 10. 4. 0.25.

4.

Chart #6 Assume that an economy produces only lemonade and cookies. Assuming that 2019 is the base year, the growth rate of real GDP from 2018 to 2019 is: Question 42 options: -5%. 4.7%. 11.25%. 20%.

4.7%.

If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about: 5.26%. 5.56%. 6.5%. 10%.

5.56%.

Chart #13 The labor force participation rate is _________. 69.8% 4.3% 84.4% 80.7%

84.4%

Which transaction is included in the nation's gross domestic product? A college student buys a used textbook from his roommate. A construction company purchases lumber to build a new house. A college student buys a pizza and has it delivered to her dorm room. A group of college students volunteer to rake leaves at an assisted living facility for senior citizens.

A college student buys a pizza and has it delivered to her dorm room.

Chart #1 If the real value of household wealth increases due to reasons other than a change in the aggregate price level, the _____ curve will shift to the _____. SRAS; left SRAS; right AD; right AD; left

AD; right

A price index: always includes a base year. is used to measure the cost of a market basket across different years. is normalized so that it equals 100 in the base year. All of the above are true.

All of the above are true.

Which federal agency calculates and reports the official unemployment rate? Federal Reserve Bank Treasury Department Department of Health and Human Services Bureau of Labor Statistics

Bureau of Labor Statistics

Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption, and YD represents disposable income. If housing prices throughout the United States decrease rapidly because of an increase in mortgage foreclosures, which equation could represent the new aggregate consumption function? C = 100 + 0.8YD C = 250 + 0.8YD C = 200 + 0.9YD C = 200 + 0.7YD

C = 100 + 0.8YD

Capital inflows into a country are associated with: a trade deficit. a small amount of funds available for domestic investment. imports equaling exports. a trade surplus.

a trade deficit.

The wealth effect explains why the: aggregate demand curve slopes downward, since changes in the aggregate price level alter the purchasing power of people's wealth. aggregate supply curve slopes upward, since an increase in wealth leads to more consumption. aggregate supply curve shifts, since changes in wealth affect production. aggregate demand curve slopes upward, since wealth allows consumers to purchase more, regardless of the price level.

aggregate demand curve slopes upward, since wealth allows consumers to purchase more, regardless of the price level.

According to the short-run aggregate supply curve, when the _____ rises, the quantity of aggregate output _____ rises. profit per unit of output; demanded aggregate price level; supplied aggregate price level; demanded interest rate; supplied

aggregate price level; supplied

Chart #11 A movement from point B on AD1 to point E on AD2 may result from: an increase in consumer optimism. an increase in consumer pessimism. an increase in personal income taxes. the central bank reducing the quantity of money.

an increase in consumer optimism.

Which factor will decrease short-run aggregate supply? an increase in patents for new inventions an increase in the aggregate price level an increase in the price of oil an increase in productivity

an increase in the price of oil

Interest rates and planned investment spending: are positively related. are negatively related. are unrelated, since planned investment is fixed. are unrelated if the firm has retained earnings.

are negatively related.

When inflation rises unexpectedly, borrowers will _____, and lenders will _____. be hurt; benefit benefit; be hurt be hurt; be hurt benefit; benefit

benefit; be hurt

A person who is NOT working or looking for work is: counted as unemployed. underemployed. a member of the labor force who is not working. not counted as unemployed.

not counted as unemployed.

A movement along the aggregate demand curve is caused by a(n): change in the aggregate price level. increase in consumer spending. reduction in taxes. reduction in government spending.

change in the aggregate price level.

A movement along the short-run aggregate supply curve occurs, all else equal, when there is a: change in commodity prices. supply shock. change in the aggregate price level. productivity change.

change in the aggregate price level.

Using the spending approach, GDP is calculated as: consumer spending + government purchases of goods and services + financial spending + exports - imports. consumer spending + government transfers + investment spending + exports - imports. disposable income + taxes + investment spending + exports + imports. consumer spending + government purchases of goods and services + investment spending + exports - imports.​

consumer spending + government purchases of goods and services + investment spending + exports - imports.​

An inflationary gap occurs if: current aggregate output is less than potential output. current aggregate output is greater than potential output. current aggregate output is equal to potential output. unemployment is greater than the natural rate of unemployment.

current aggregate output is greater than potential output.

Other things equal, expectations of lower disposable income would _____ and shift the consumption function _____. increase autonomous consumption; up decrease the marginal propensity to consume; down decrease autonomous consumption; down increase the marginal propensity to consume; up

decrease autonomous consumption; down

Demand shocks do NOT include a(n): increase in money supply. tax decrease. decrease in government spending. decrease in commodity prices.

decrease in commodity prices.

A shift to the left of the short-run aggregate supply curve may be caused by a(n): decrease in productivity. increase in productivity. decrease in the price of inputs. decrease in nominal wages.​

decrease in productivity.

Chart #8 If the economy is at point X, an appropriate fiscal policy to close the output gap would be to: increase taxes and decrease government spending. decrease taxes and increase government spending. increase the money supply and interest rates. decrease the money supply and interest rates.​

decrease taxes and increase government spending.

Suppose that a financial crisis decreases planed investment spending by $100 billion, and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, and a constant price level, equilibrium real GDP will _____ by _____. decrease; $500 billion decrease; $200 billion decrease; $800 billion increase; $400 billion

decrease; $500 billion

Suppose the economy is operating in long-run equilibrium and that a positive demand shock hits. In the short-run, we would expect an increase in real GDP and the price level. In the transition to the long run, we'd expect a(n) _____ in real GDP and a(n) _____ in the price level. decrease; increase increase; increase decrease; decrease increase; decrease​

decrease; increase

A drop in the inflation rate is called: disinflation. deflation. stagflation. hyperinflation.

disinflation.

Gross domestic product is the market value of all _____ produced in an economy over a given period. goods and services final goods and services intermediate goods and services consumer goods and services

final goods and services

CHART #2 If the economy is at point F, potential output is _____ than actual output, and unemployment is _____. ​ less; high less; low greater; high greater; low

greater; high

The AD curve will shift to the left: because of the wealth and interest rate effects. if household wealth decreases for reasons other than a change in the aggregate price level. if the aggregate price level falls. if the government decreases taxes paid by households.

if household wealth decreases for reasons other than a change in the aggregate price level.

GDP counts the dollar value of only final goods and services because: we can measure only the value of final goods and services, not the value of inputs. if we counted the value of all goods, we would count inputs, such as the value of steel in a new automobile, more than once. intermediate goods reduce GDP. only final goods and services matter for the economy.

if we counted the value of all goods, we would count inputs, such as the value of steel in a new automobile, more than once.

One difference between a closed economy and an open economy is that: in the latter, foreign savings complement domestic savings in financing investment spending. in the latter, the government is more open to the idea of financing investment spending than in the former. in the former, foreign savings complement domestic savings in financing investment spending. in the former, foreign savings finance more investment spending than in the latter.​

in the latter, foreign savings complement domestic savings in financing investment spending.

The long run in macroeconomic analysis is a period: in which nominal wages and other prices are flexible. in which wages are sticky. of less than one year. of one to two years.

in which nominal wages and other prices are flexible.

Suppose that the government increases spending by $100 billion as a stimulus package. If the marginal propensity to consume is 0.6, then equilibrium real GDP will (assuming a constant price level): decrease by $250 billion. increase by $250 billion. increase by $600 billion. decrease by $400 billion.

increase by $250 billion.

Suppose an economy's current aggregate output is below potential output. If the government wishes to use fiscal policy to bring the economy back to potential output, it could: increase the money supply. increase government purchases. increase taxes. decrease the money supply.

increase government purchases.

As a result of a decrease in the value of the dollar in relation to other currencies, U.S. exports increase. Consequently, there is a(n): increase in short-run aggregate supply. decrease in the quantity of aggregate output supplied in the short run. increase in aggregate demand. decrease in the quantity of aggregate output demanded.

increase in aggregate demand.

Chart #14 If the economy is in equilibrium at Y1 in panel (a), and the government decreases taxes, the result will likely be a(n): increase in unemployment. decrease in interest rates. decrease in aggregate demand. increase in aggregate demand.

increase in aggregate demand.

The interest rate effect leads to a downward-sloping aggregate demand curve because a lower price level causes consumer spending to _____ and investment to _____. decrease; decrease decrease; increase increase; decrease increase; increase

increase; increase

In April 2020, the unemployment rate _____ as a result of COVID-19. decreased slightly decreased significantly increased slightly increased significantly

increased significantly

In official unemployment statistics, discouraged workers are: counted as employed. included in the labor force. not included in the labor force. counted as underemployed.

not included in the labor force.

When the aggregate price level _____, firms usually experience a(n) _____ in profit per unit and _____ output. increases; increase; increased increases; increase; decreased increases; decrease; increased decreases; increase; decreased

increases; increase; increased

According to the wealth effect, when prices decrease, the purchasing power of assets _____ and consumer spending _____. decreases; decreases increases; decreases decreases; increases increases; increases

increases; increases

Besides consumption, the component(s) of aggregate demand is/are: investment expenditures. investment expenditures and government expenditures. investment expenditures and net exports. investment expenditures, government expenditures, and net exports.

investment expenditures, government expenditures, and net exports.

If an economy is closed and wishes to increase its investment spending: its only source of funding is domestic saving. its sources of funding are domestic and foreign saving. the government will have to increase its spending to provide for this. the government will increase taxes to provide for this.​

its only source of funding is domestic saving.

Which factor would shift the aggregate demand curve to the RIGHT? monetary policy that lowers the interest rate a decrease in the aggregate price level a decrease in consumer wealth weaker consumer optimism about income

monetary policy that lowers the interest rate

A $200 million increase in planned investment spending will increase equilibrium real GDP by _____. more than $200 million $100 million $200 million $0

more than $200 million

A $600 million decrease in planned investment spending will decrease equilibrium real GDP by ____ . more than $600 million $600 million $300 million $0

more than $600 million

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _____ frequently than they did before. This is an example of the _____ costs of inflation. more; menu less; menu more; unit-of-account less; unit-of-account

more; menu

If the aggregate price level rises, all else equal, consumers will: need more money to purchase the same basket of goods, which will lead to an increase in the demand for money, in turn pushing up interest rates and hence reducing the quantity of aggregate output demanded via a decrease in investment demand. find their purchasing power has increased and will purchase more goods and services, leading to an increase in aggregate output demanded. demand less aggregate output at all price levels, resulting in a rightward shift right of the AD curve. need less money to purchase the same basket of goods, which will lead to a decrease in the demand for money, in turn pushing down interest rates and hence increasing the quantity of aggregate output demanded via an increase in investment demand.

need more money to purchase the same basket of goods, which will lead to an increase in the demand for money, in turn pushing up interest rates and hence reducing the quantity of aggregate output demanded via a decrease in investment demand.

If a country has a trade surplus, we can conclude that it also has a: budget surplus. net capital outflow. net capital inflow. budget deficit.​

net capital outflow.

The only spending category in GDP that can be negative is _____. consumer spending investment spending government purchases of goods and services net exports

net exports

Employment is the total: labor force. population of working age. number of people actively working, either full time or part time. number of people not unemployed.

number of people actively working, either full time or part time.

The unemployment rate is the: percent of the labor force that is unemployed. number of people unemployed. the labor force minus the number of people unemployed. average length of time someone is unemployed.

percent of the labor force that is unemployed.

The inflation rate is the: price level in the current year minus the price level in the previous year. price level in the current year plus the price level in the previous year. percentage change in the price level from one year to the next. price level in the current year multiplied by the price level in the previous year.

percentage change in the price level from one year to the next.

If the Federal Reserve increases interest rates to reduce inflation, other things equal: planned investment spending is most likely to increase. planned investment spending is most likely to decrease. planned investment spending is most likely to remain the same. unplanned investment in inventories is likely to be negative.

planned investment spending is most likely to decrease.

The aggregate demand curve is negatively sloped, in part because of the impact of the changes in the price level on interest rates, which in turn affect: potential output. taxation. planned investment spending. government purchases.

planned investment spending.

In a closed economy, national savings equals private savings: minus consumption spending. plus the government's budget balance. minus investment spending. minus tax receipts.

plus the government's budget balance.

The short-run aggregate supply curve has a ____ slope, showing that increases in the price level will ____ the quantity of aggregate output supplied by firms. positive: increase positive; decrease negative; increase negative; decrease

positive: increase

Profit per unit of output equals: price per unit minus cost per unit. price per unit divided by cost per unit. cost per unit minus price per unit. price per unit minus the nominal wage rate.

price per unit minus cost per unit.

The producer price index is often regarded as a warning sign of inflation because: prices of inputs will ultimately be reflected in prices of final products. producers are likely to have monopoly control over prices. consumers have to pay the prices charged. commodity producers can sell whatever they want at higher prices.

prices of inputs will ultimately be reflected in prices of final products.

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate: quantity of output supplied. money supply. unemployment rate. employment.

quantity of output supplied.

Nominal income divided by the price level is _____ income. personal real disposable national

real

If real GDP falls while nominal GDP rises, then prices on average have: risen. fallen. stayed the same. Real GDP cannot rise when nominal GDP falls.

risen.

A negative demand shock will, all else equal: shift the AD curve to the left and result in a lower aggregate price level and lower aggregate output in the short run. shift the AS curve to the left and result in a lower aggregate price level and lower aggregate output in the short run. move the economy downward along the AD curve. move the economy upward along the AD curve.

shift the AD curve to the left and result in a lower aggregate price level and lower aggregate output in the short run.

Suppose that productivity increases as workers' health improves. This increase in productivity will: cause a movement up the short-run aggregate supply curve from left to right. cause a movement down the short-run aggregate supply curve from right to left. shift the short-run aggregate supply curve to the right. shift the short-run aggregate supply curve to the left.

shift the short-run aggregate supply curve to the right.

An example of an intermediate good is: wages paid to an employee. steel purchased by aircraft manufacturers. vegetables purchased for your dinner. electric bills for your house.

steel purchased by aircraft manufacturers.

If nominal wages rise, then the short-run aggregate _____ curve shifts to the _____. supply; right supply; left demand; right demand; left

supply; left

If nominal wages fall, then the short-run aggregate _____ curve shifts to the _____. supply; right supply; left demand; right demand; left

supply; right

The government's budget balance is zero when: taxes minus government spending and transfers equals zero. government transfers minus government spending equals zero. taxes plus government spending equals zero. savings plus taxes equals zero.

taxes minus government spending and transfers equals zero.

The government's budget balance equals: taxes plus government spending. taxes minus government spending. consumption plus investment. imports minus exports.​

taxes minus government spending.

Which item would NOT be included in this year's GDP? the production of a television show the purchase of a new hybrid truck the hiring of a new school teacher the purchase of your neighbor's house, which was built in 2010

the purchase of your neighbor's house, which was built in 2010

In an open economy, capital inflows equal: GDP plus exports minus imports. the growth of the capital stock minus investment spending. foreign direct investment. the total inflow of foreign funds minus the total outflow of domestic funds.

the total inflow of foreign funds minus the total outflow of domestic funds.

The unemployment rate equals the number _____ divided by the number _____ times 100. unemployed; employed unemployed; in the population employed; in the labor force unemployed; in the labor force

unemployed; in the labor force

Which item would NOT be part of GDP? used car sales new residential construction a new truck purchased by a building contractor cable TV service purchased for a home

used car sales

Because the aggregate price level has no effect on aggregate output in the long run, the long-run aggregate supply curve is: upward sloping. vertical. horizontal. downward sloping.

vertical.