Macroeconomics Quiz 3,4,5

Which of the following is correct? A. APC + APS = 1 B. APC + MPS = 1 C. APS + MPC = 1 D. APS + MPS = 1

A. APC + APS = 1

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy. The average propensity to save at this level of output is A. .10 B. 10.0 C. 0.62 D. 0.84

A. .10

With a marginal propensity to save of 0.4, the marginal propensity to consume will be A. 1.0 minus 0.4 B. 0.4 minus 1.0 C. the reciprocal of the MPS D. 0.4

A. 1.0 minus 0.4

Which of the following is correct? A. MPC + MPS = APC + APS B. APC + MPS = APS + MPC C. APC + MPC = APS + MPS D. APC - APS = MPC - MPS

A. MPC + MPS = APC + APS

Economic growth can be portrayed as A. an outward shift of the production possibilities curve B. an inward shift of the production possibilities curve C. a movement from a point on to a point inside a production possibilities curve D. a movement from one point to another point on a fixed production possibilities curve

A. an outward shift of the production possibilities curve

According to the Bureau of Labor Statistics, to be officially unemployed a person must A. be in the labor force B. be 21 years of age or older C. have lost a job D. be waiting to be called back from a layoff

A. be in the labor force

A nation's gross domestic product (GDP) A. can be found by summing C + Ig + G + Xn B. is the dollar value of the total output produced by its citizens, regardless of where they are living C. can be found by summing C + S + G + Xn D. is always some amount less than its NDP

A. can be found by summing C + Ig + G + Xn

Economic growth is best defined as an increase in A. either real GDP or real GDP per capita B. nominal GDP C. total consumption expenditures D. wealth in the economy

A. either real GDP or real GDP per capita

If Trent's MPC is 0.80, this means that he will A. spend 8/10 of any increase in his disposable income B. spend 8/10 of any level of disposable income C. break even when his disposable income is $8000 D. save 2/10 of any level of disposable income

A. spend 8/10 of any increase in his disposable income

The real-balances, interest-rate, and foreign purchases effects all help explain A. why the aggregate demand curve is downsloping B. why the aggregate supply curve is upsloping C. shifts in the aggregate demand curve D. shifts in the aggregate supply curve

A. why the aggregate demand curve is downsloping

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. The per-unit cost of production in this economy is A. $0.05 B. $0.10 C. $0.50 D. $1.00

B. $0.10

Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per-unit prices of these three goods are A = $2, B = $3, and C = $1. Nominal GDP in the current year is A. $110 B. $115 C. $45 D. $90

B. $115

Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is A. $110 B. $30 C. $40 D. $70

B. $30

If the rate of inflation is 12 percent per year, the price level will double in about A. 4.1 years B. 5.8 years C. 10.2 years D. 12.4 years

B. 5.8 years

John Maynard Keynes created the aggregate expenditures model based primarily on what historical event? A. bank panic of 1907 B. Great Depression C. spectacular economic growth during World War II D. economic expansion of the 1920s

B. Great Depression

Transfer payments are included in A. NI B. PI C. GDP D. NDP

B. PI

Which of the following is an example of a demand shock? A. Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico B. consumers become worried about a job loss and buy fewer goods and services than expected C. floods in the Midwest destroy crops the federal government unexpectedly requires automobile producers to raise fuel efficiency standards

B. consumers become worried about a job loss and buy fewer goods and services than expected

The production of durable goods varies more than the production of nondurable goods because A. durable purchases of durables are not postponable B. durable purchases of durables are postponable C. the producers of nondurables have monopoly power D. producers of durables are highly competitive

B. durable purchases of durables are postponable

Other things equal, a decrease in the real interest rate will A. expand investment and shift the AD curve to the left B. expand investment and shift the AD curve to the right C. reduce investment and shift the AD curve to the left D. reduce investment and shift the AD curve to the right

B. expand investment and shift the AD curve to the right

The determinants of aggregate demand A. explain why the aggregate demand curve is downsloping B. explain shifts in the aggregate demand curve C. demonstrate why real output and the price level are inversely related D. include input prices and resource productivity

B. explain shifts in the aggregate demand curve

Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as A. cyclically unemployed B. frictionally unemployed C. structurally unemployed D. employed

B. frictionally unemployed

Harry's Pizza Parlor produced 10,000 large pizzas last year that sold for $10 each. This year Harry's produced 11,000 large pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information, we can conclude that Harry's production of large pizzas A. increased nominal GDP from last year, but real GDP was unaffected B. increased both nominal and real GDP from last year C. increased real GDP from last year, but nominal GDP was unaffected D. did not change either nominal or real GDP from last year

B. increased both nominal and real GDP from last year

Growth is advantageous to a nation because it A. promotes faster population growth B. lessens the burden of scarcity C. eliminates the economizing problem D. slows the growth of wants

B. lessens the burden of scarcity

The term "recession" describes a situation where A. inflation rates exceed normal levels B. output and living standards decline C. an economy's ability to produce is destroyed D. government takes a less active role in economic matters

B. output and living standards decline

If aggregate expenditures exceed GDP in a private closed economy, A. leakages will exceed injections B. planned investment will exceed saving C. unplanned investment in inventories will occur D. saving will exceed planned investment

B. planned investment will exceed saving

For a nation's real GDP per capita to rise during a year, A. consumption spending must increase B. real GDP must increase more rapidly than population C. population must increase more rapidly than real GDP D. investment spending must increase

B. real GDP must increase more rapidly than population

Dissaving means A. the same thing as disinvesting B. that households are spending more than their current incomes C. that saving and investment are equal D. that disposable income is less than zero

B. that households are spending more than their current incomes

Assume that in a private closed economy, consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus, A. saving is $10 billion B. unplanned decreases in inventories of $10 billion will occur C. the MPC is 0.80 D. unplanned increases in inventories of $10 billion will occur

B. unplanned decreases in inventories of $10 billion will occur

Real GDP measures the A. total dollar value of all goods and services produced within the borders of a country using current prices B. value of final goods and services produced within the borders of a country, corrected for price changes C. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes D. value of all goods and services produced in the world, using current prices

B. value of final goods and services produced within the borders of a country, corrected for price changes

Full-Time Employed=80 Part-Time Employed=25 Unemployed=15 Discouraged Workers=5 Members of underground Economy=6 Consumer Price Index=110 Refer to the given information above about a hypothetical economy. If members of the underground economy are currently counted as part of the unemployed, when in fact they are employed, the official unemployment rate is overstated by about A. 0 percentage points B. 2 percentage points C. 5 percentage points D. 6 percentage points

C. 5 percentage points

The 45-degree line on a graph relating consumption and income shows A. all the points where the MPC is constant B. all the points at which saving and income are equal C. all the points at which consumption and income are equal D. the amounts households will plan to save at each possible level of income

C. all the points at which consumption and income are equal

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)? A. a reduced amount of excess capacity B. increased government spending on military equipment C. an appreciation of the U.S. dollar D. increased consumer optimism regarding future economic conditions

C. an appreciation of the U.S. dollar

Which of the following would not be expected to increase labor productivity? A. technological advance B. the acquisition of more education and training by the labor force C. an increase in the size of the labor force D. the realization of economies of scale

C. an increase in the size of the labor force

Other things equal, which of the following would increase the rate of economic growth, as measured by changes in real GDP? A. a decline in the average length of the workweek B. a decrease in the labor force participation rate C. an increase in the size of the working-age population D. a decline in the amount of capital per worker

C. an increase in the size of the working-age population

If Carol's disposabe income increases from $1200 to $1700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to A. save is 3/5 B. consume is 1/2 C. consume is 3/5 D. consume is 2/5

C. consume is 3/5

The aggregate demand curve is A. vertical under conditions of full employment B. horizontal when there is considerable unemployment in the economy C. downsloping because of the interest-rate, real-balances, and foreign purchases effects D. downsloping because production costs decrease as real output rises

C. downsloping because of the interest-rate, real-balances, and foreign purchases effects

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is A. cyclically unemployed B. structurally unemployed C. frictionally unemployed D. not a member of the labor force

C. frictionally unemployed

Final goods and services refers to A. goods and services that are unsold and therefore added to inventories B. goods and services whose value has been adjusted for changes in the price level C. goods and services purchased by ultimate users, rather than for resale or further processing D. the excess of U.S. exports over U.S. imports

C. goods and services purchased by ultimate users, rather than for resale or further processing

A private economy includes A. households, businesses, and government, but not international trade B. households, businesses, and international trade, but not government C. households and businesses, but not government or international trade D. households only

C. households and businesses, but not government or international trade

Inflation means that A. all prices are rising, but at different rates B. all prices are rising at approximately the same rate C. prices on average are rising, although some particular may be falling D. real incomes are rising

C. prices on average are rising, although some particular may be falling

Suppose that an economy's labor productivity and total worker-hours each grew by 4 percent between year 1 and year 2. We could conclude that this economy's A. real GDP also increased by 4 percent B. real GDP remained constant C. production possibilities curve shifted outward D. capital stock increased by 4 percent

C. production possibilities curve shifted outward

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift A. leftward by $50 billion at each price level B. rightward by $10 billion at each price level C. rightward by $50 billion at each price level D. leftward by $40 billion at each price level

C. rightward by $50 billion at each price level

Macroeconomics is mostly focused on A. the individual markets within an economy B. only the largest industries in the economy C. the economy as a whole D. why specific businesses fail

C. the economy as a whole

National income measures A. nominal GDP after it has been inflated or deflated for changes in the value of the dollar B. the after-tax income of resources suppliers C. the total of all sources pf private income plus government revenue from taxes on production and imports D. the amount of wage, rent, interest, and profits income actually received by households

C. the total of all sources pf private income plus government revenue from taxes on production and imports

The phase of the business cycle in which real GDP is at a minimum is called A. the peak B. a recession C. the trough D. the underside

C. the trough

Core inflation measures A. changes in the prices of the most commonly used goods, including good and energy B. underlying changes in the CPI, after accounting for the price volatility of high-tech goods C. underlying increases in the CPI after removing volatile food and energy prices D. changes in key input prices

C. underlying increases in the CPI after removing volatile food and energy prices

Potential Real GDP = $300 Billion Natural Rate of Unemployment = 6 Percent Actual Rate of Unemployment = 12 Percent Refer to the accompany date above, which is for a specific year in a hypothetical economy for which Okun's law is applicable. The amount of output being forgone by the economy is A. $12 billion B. $15 billion C. $18 billion D. $24 billion

D. $24 billion

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. The MPC is A. 0.45 B. 0.20 C. 0.50 D. 0.90

D. 0.90

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. The level of productivity is A. 20 B. 10 C. 5 D. 2

D. 2

Unemployed= 7 Total Population =145 Employed =95 Discouraged Workers= 3 The table contains information about the hypothetical economy of Scoob. All figures are in millions. The unemployment rate in Scoob is A. 2.5 percent B. 3.2 percent C. 5.0 percent D. 6.9 percent

D. 6.9 percent

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the information suggests that the production capacity in economy A. B is growing more rapidly than that in either economy A or C B. A is growing more rapidly than that in either economy B or C C. A is growing less rapidly than that in economy B D. C is growing more rapidly than that in economy B

D. C is growing more rapidly than that in economy B

Which of the following results from firms holding inventories? A. The economy is much more susceptible to business cycle fluctuations B. Demand shocks occur with greater frequency C. Demand shocks occur less frequently D. Firms can maintain production levels and adjust inventories in response to demand shocks

D. Firms can maintain production levels and adjust inventories in response to demand shocks

Which of the following is not a supply factor in economic growth? A. the stock of capital B. technological advance C. the size and quality of the labor force D. aggregate expenditures of households, businesses, and government

D. aggregate expenditures of households, businesses, and government

Which of the following would not shift the aggregate supply curve? A. an increase in labor productivity B. a decline in the price of imported oil C. a decline in business taxes D. an increase in the price level

D. an increase in the price level

If the economy's real GDP doubles in 18 years, we can A. not say anything about the average annual rate of growth B. conclude that its average annual rate of growth is about 5.5 percent C. conclude that its average annual rate of growth is about 2.4 percent D. conclude that its average annual rate of growth is about 3.9 percent

D. conclude that its average annual rate of growth is about 3.9 percent

Which of the following is most closely related to recessions? A. positive long-run economic growth B. rapid growth in the price level C. falling rates of unemployment D. negative real growth in output

D. negative real growth in output

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

D. short-run fluctuations in output and employment

The consumption schedule shows A. that the MPC increases in proportion to GDP B. that households consume more when interest rates are low C. that consumption depends primarily on the level of business investment D. the amounts households intend to consume at various possible levels of aggregate income

D. the amounts households intend to consume at various possible levels of aggregate income

(Consider This) Rising wages for women in the United States have increased A. the proportion of women working part time compared to working full time B. labor costs and thus shifted the nation's production possibilities curve inward C. average family size in the United States D. the percentage of married women in the workforce

D. the percentage of married women in the workforce