macroeconomics test 1

Q10: The paradox of thrift suggests that when households intend to save more, they will _____ consumption, which will ultimately lead to _____ actual aggregate saving. a. increase; lower b. reduce; higher c. increase; higher d. reduce; lower

answer 10: d. reduce lower

Q27: According to the table, what is the labor force of this economy? a. 500 b. 50 c. 350 d. 300

answer c: employed+ unemployed= labor force

Q5: Economics is best defined as the study of how: a. to classify resources used to produce final goods and services. b. resources are apportioned to be satisfy human wants. c. people make rational decisions. d.technology can be used to change scarce resources into free resources

c. people make rational decisions Review

Q24: Wages that are higher than equilibrium can leader to: a. a downward wage price spiral b. overemployment c. unemployment d. a labor shortage

c. unemployment chapter 6: pg.144 Employers often keep wages above market equilibrium to reduce turnover, boost morale, and increase employee productivity. These efficiency wages give employees an incentive to work hard and remain with their present employers, because at other jobs they could only get market wages. These higher wages, however, can also prevent employers from hiring new workers, thus contributing to unemployment.

Q18: According to the table, GDP for 2010 was: a. $16, 843.8 billion b. $15603.1 billion c. $13,562.1 billion d. $14,592.3 billion

chapter 5: answer: d. $14, 592.3 billion

Q17: Refer to the GDP expenditures for 2010 chart According to the table, net exports of goods and services are equal to: a. $505.4 billion b. -$505.4 billion c. -$738.9 billion d. $738.9 billion

chapter 5: Exports- Imports= net exports b. exports 1,746.1 billion- 2,251.5= -$505.4 billion

Q19: According to the table, net domestic product for 2010 was: a. 738.9 billion b. 15622.5 billion c. 14592.3 billion d. 13562.1 billion

chapter 5: net domestic product: GDP- depreciation, or the capital consumption allowance d. 13562.1 billion

Q20: ____ is a reduction in the rate of inflation a. the price level b. hyperinflation c. deflation d. disinflation

chapter 6 pg.131 d. disinflation

Q25: according to the table, what is the employment rate of this economy? (Refer to table) a. 16.67% b. 14.3% c. 25% d.10%

chapter 6: unemployment rate: unemployment/ labor force (employed+ unemployed) b. 14.3%

Q21: Which of the following occurrences in NOT a source of productivity growth? a. increasing the level of consumption spending b. increasing the capital-to-labor ratio c. improvements in technology d. increasing the quality of the labor force

chapter 7: pg. 167 answer: a. increasing the level of consumption spending

Q26: According to the table if 50 discouraged workers suddebly decide to start actively seeking employment again, what will be the unemployment rate of this economy? a. 25% b. 14.3% c. 10% d. 16.67%

unemployment rate: unemployment/ labor force (employed+ unemployed) Number employed: 50+50= 100 Number employed: 300+100= 400 100/400= 25%

Q3: Suppose in 2010 the cost of purchasing a basket of goods was $100. The same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is: a. 250 b. 150 c. 100 d. 50

A3: chapter 6: CPI= (cost in current period/ costs in base period)*100 b. (150/100)*100= 150

Q4: The multiplier effect shows that a change in aggregate spending: a. causes output to change even more than the change in aggregate demand b. leaves output unaffected c. causes output to change by something less than the change in aggregate spending d. will cause output to move in the opposite direction

A4: a. causes output to change even more than the change in aggregate spending.

Q11: If a country's population increases at a slower rate than the growth in its real GDP a. average output per person has decreased b. GDP per capita has increased c. the standard of living in the country has declined d.the country's rate of inflation has decreased

Answer 11: b. GDP per capita has increased pg. 118 growth Domestic product: population/ GDP

Q9: Gross domestic product is the total market value of all: a. final and intermediate goods and services produced in the US by labor and property b. final goods and services produced in the US by labor and property. c. final goods and services sold in the US d. intermediate goods produced in the US by labor and property

Answer 9: b. final goods and services produced in the US by labor and property. chapter 5. pg. 112

Question 1. In the Keynesian model, the principal determinant of saving is: a. investment b. tax rates c. income d. interest rates

Answer : c. income

Q7: Economists believe that changes in investment spending are important for forecasting the business cycle because: a.increases in investment spending raise tax revenues, which allows government to spend more b. investment is a key determinant of economic growth. c. investment closely reflects consumer sentiment d. changes in investment show where the economy has been.

Answer: B. investment is a key determinant of economic growth. chapter 5: pg.114

Question 2: If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals: a. 250 b. 150 c. 100 d. 50

Answer: b. $140 chapter 5: GDP= C+I+G+ (X-M)

Q6: Whispering valley furniture employs five workers working 8 hours each to produce 80 rocking chairs. Rocky Gap Furniture employs 10 workers working 8 hours each to produce 160 rocking chairs. Which company's workers are more productive? a. rocky gap furniture's workers are more productive. b. the two companies workers are equally productive c. whispering valley furniture's workers are more productive d. it is not possible to determine which workers are more productive

Answer: b. the two companies workers are equally productive

Q12: Refer to chart At point A: a. saving is $20 b. consumptions exceeds income by $20 c. consumption is zero d. saving is zero

Answer: d. saving is zero Y (disposable personal income)= C+S pg. 117

Question 28: John Maynard Keynes advised the US president Franklin Roosevelt to: a. balance the budget in order to reduce the interest rate. b. pass the Versailles treaty in order to eliminate Germany as a competitor c.increase government spending in order to stimulate the economy d. increase the interest rate to increase savings so investment would be stimulated

answer c: increase the interest rate in order to stimulate the economy

Q14: Assume that the marginal propensity to consume is 0.75. John's Clean Clones builds a factory that costs $1 billion. How much does the macroeconomic equilibrium increase? a. $4 billion b. $1 billion c. $10 billion d. 0

answer: a. 4 billion chapter 8:

Q15: The rule of 70 states that the number of years required for a value to double in size is: a. the growth rate divided by 70. b. 70 divided by the growth rate c. 70 times the growth rate. d. 70.

answer: b. 70/ growth rate

Q13: As a rule, the more captial employed with workers, the ____ their productivity and the ____ their earnings. a. lower; higher b. higher; higher c. higher; lower d. lower; lower

answer: b. higher; higher

Q8: When a recession gets under way: a. inflation always rises because the government prints more money b. inflation falls because the government reduces its budget deficit c. firms start to lay off workers to reduce costs. d. consumer confidence rises because people expect the eventual recovery

answer: c. firms start to lay off workers to reduce costs. chapter 5: pg. 105 "once a recession is under way, businesses react by curtailing hiring and perhaps even laying off workers ,thus adding to the recessions depth)".

Q16: suppose the market basket of goods costs $10,000 in 2009, the reference or base period, and that same basket of goods now costs $11,200. What is the consumer price index for today? a. 89.3 b.132.0 c. 112.0 d. 120.0

answer: c.112.0 chapter 6: CPI (11,200/10,000)*100 (current year/base year)*100= 112.0

Q23: According to Malthus, what part of the economy might increase at a rate such that the data would show an increase from 1000 to 2000 to 4000 to 16000?

b population chapter 9: Malthus wrote "An Essay on the Principle of Population as it affects the future improvement of society" . he argued that the origins of poverty were rooted in an unavoidable contradiction: population, when allowed to grow without limits, increases geometrically, while the food supply could only increases arithmetically.

Q22: A benefit of using GDP per capita instead of GDP is that it: a.takes into account the differences in wealth between the rich and poor with a country b. measures the effects of outliers skewing the averages c. takes into account the size of the population when measuring the value of the goods and services a country produces d. takes into account the environmental benefits or harm of economic activity.

chapter 5 pg. 118 answer c. takes into account the size of the population when measuring the value of the goods and services a country produces