Macroeconomics Test 1
116) If personal income is $925 billion and personal income taxes are $70 billion, the value of disposable personal income is
$855 billion.
85) When calculating GDP, exports are ________ and imports are ________.
added; subtracted
14) In a business cycle, a peak represents the end of
an expansion.
9) A decrease in the overall price level is known as
deflation
35) In the circular flow diagram, firms ________ labor and households ________ goods and services.
demand; demand
12) A period during which aggregate output rises is known as a(n)
expansion
31) A household that spends less than it receives in income during a given period is
saving.
41) Rapid increases in the price level during periods of recession or high unemployment are known as
stagflation.
57) The GDP includes
the value of all final goods and services.
28) In the circular flow diagram, the different payments made by firms to households include
wages and profits.
83) If gross investment in 2012 is $750 billion and depreciation in 2012 is $850 billion, net investment in 2012 is
-$100 billion.
119) If disposable personal income is $400 billion and personal saving is $8 billion, the personal saving rate is
2%.
29) An example of a transfer payment is
a Social Security retirement benefit.
30) A transfer payment is
a cash payment made by the government to people who do not supply goods, services or labor in exchange for the payment.
47) Which of the following is an example of a final good or service?
a computer purchased by Federal Express to track shipments
13) A period when the economy shrinks is known as
a contraction. a recession. a slump. all of the above.
16) A prolonged and deep recession is called
a depression.
25) The government wants to encourage consumer spending through cutting income taxes. This is an example of
a fiscal policy.
48) Which of the following is a good or service counted in GDP?
a new tire you buy for your personal car
15) In a business cycle, a trough represents the end of
a recession.
2) Which of the following is a topic studied in Macroeconomics?
aggregate behavior of households and industries
51) Gross national product is the total market value of
all final goods and services produced by resources owned by a country, regardless of where production takes place.
77) If in a year there is a positive inventory investment, then final sales
are less than GDP.
45) The suppliers in the goods-and-services market are
business firms and the rest of the world.
89) Net interest is the interest on loans paid by
businesses.
44) A household that spends more than it receives in income during a given period is
dissaving.
76) If the change in business inventories is zero, then final sales are
equal to GDP.
21) If output is rising and unemployment is falling, the economy MUST be in a(n)
expansion
17) Between a trough and a peak, the economy goes through a(n)
expansion.
36) In the circular flow diagram, households demand ________ and supply ________.
goods and services; labor
46) The total market value of all final goods and services produced within a given period by factors of production located within a country is
gross domestic product.
78) Net investment equals
gross investment minus depreciation.
79) Net investment is
gross investment minus depreciation.
34) The demanders in the goods-and-services market are
households, the government, business firms, and the rest of the world.
8) A period of very rapid increase in the overall price level is known as
hyperinflation.
86) If the value of net exports is negative, then
imports exceed exports.
91) What type of tax affects the amount of money you pay for a product?
indirect tax
5) An increase in the overall price level is known as
inflation
120) If the personal saving rate is 5% and personal saving is $10 billion, the value of personal disposable income
is $200 billion.
73) In 2012 final sales equal $200 billion, and the change in business inventories is $50 billion. GDP in 2012
is $250 billion.
74) In 2012 final sales equal $350 billion and the change in business inventories is -$60 billion. GDP in 2012
is $290 billion.
117) If personal saving is -$10 billion and disposable personal income is $370 billion, then personal consumption spending
is $380 billion.
115) Personal income
may be greater than or less than national income.
24) If the central bank decreases the money supply, it is conducting
monetary policy.
84) Exports equal
net exports + imports.
90) Interest paid by households and by the government is
not counted in GDP because it is not assumed to flow from the production of goods and services.
56) The GDP of the U.S. in 2012 was around $15.9 trillion. This means
that total income in the U.S. in 2012 was around $15.9 trillion. that total spending on final goods and services in the U.S. in 2012 was around $15.9 trillion. that the value of output in the U.S. in 2012 was around $15.9 trillion. all of the above
55) Profits earned in the United States by foreign-owned companies are included in
the U.S. GDP but not GNP.
112) Personal income is national income minus
the amount of national income not going to households.
75) In 2012, GDP was exactly equal to final sales. This implies that
there was no change in inventories that year.
32) The major lesson of the circular flow diagram is that
total income in the economy must always equal total spending.
43) Welfare payments are an example of
transfer payments.
3) We can use macroeconomic analysis to
understand why economies grow.
20) The unemployment rate equals
unemployed/labor force
58) The equation for GDP using the expenditure approach is
GDP = C + I + G + EX - IM.
72) The change in business inventories is measured as
GDP minus final sales.
109) If depreciation equals zero and retained earnings equal $5 billion, then
GNP equals net national product.
96) If receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world, then
GNP is greater than GDP.
110) Net national product is
GNP minus depreciation.
54) The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________.
GNP; GDP
53) Which of the following is included in both the U.S. GDP and GNP?
The value of all cars produced by General Motors in the U.S.
26) The ________ can change the quantity of money in the economy.
Federal Reserve
19) Unemployment implies that in the labor market
there is an excess supply of labor.
70) A company produced 8 dishwasher machines in 2012. The company sold 6 in 2012 and added 2 to its inventories. The market value of the dishwasher machines in 2012 was $200 per unit. What is the value of this company's output that will be included in the 2012 GDP?
$1,600.
81) If net investment in 2012 is $350 billion and gross investment in 2012 is $500 billion, depreciation in 2012 is
$150 billion.
108) If GNP is $200 billion and depreciation is $20 billion, then net national product is
$180 billion.
104) If GNP is $200 billion, receipts of factor income from the rest of the world are $10 billion, and payments of factor income to the rest of the world are $30 billion, then GDP is
$220 billion.
113) If national income is $600 billion, personal income is $400 billion, personal taxes are $120 billion, then disposable income equals
$280 billion.
106) If GDP is $300 billion, depreciation is $30 billion, and net factor income from the rest of the world is -$40 billion, then net national product is
$310 billion.
82) If net investment in 2013 is $500 billion and gross investment in 2013 is $900 billion, depreciation in 2013 is
$400 billion.
103) If GNP is $600 billion, receipts of factor income from the rest of the world are $50 billion, and payments of factor income to the rest of the world are $30 billion, then GDP is
$580 billion.
107) If GNP is $800 billion and depreciation is $90 billion, then net national product is
$710 billion.
23) Which of the following statements is FALSE?
Business cycles are always symmetricthe length of an expansion is the same as the length of a contraction.
105) If GDP is $500 billion and depreciation is $40 billion, then net national product
cannot be determined from this information.
39) An increase in the value of an asset over the price initially paid for it is a
capital gain.
27) The diagram that shows the income received and payments made by each sector of the economy is the
circular flow diagram.
87) The largest income component of GDP is
compensation of employees.
59) The single largest expenditure component in GDP is
consumption.
37) A promissory note issued by a corporation when it borrows money is a
corporate bond.
38) Dividends are
corporate profits distributed among shareholders.
50) Double counting can be avoided by
not counting the value of intermediate goods in GDP.
33) In the goods-and-services market, households
only demand.
71) A farmer buys a new tractor from John Deere to use on her cotton farm. This tractor is included in GDP as
part of gross private domestic investment.
111) The total income of households is
personal income.
18) Between a peak and a trough, the economy goes through a(n)
recession
114) Which of the following is subtracted from national income to get to personal income?
retained earnings
22) Unemployment generally ________ during recessions and ________ during expansions.
rises; falls.
11) The term business cycle refers to the
short-term ups and downs in the level of economic activity.
4) Macroeconomics
studies the behavior of the economy as a whole.
80) Depreciation is
the amount of used up machinery in a year.
7) Deflation occurs when
the average price level declines.
6) Aggregate behavior is
the behavior of all households and firms together.
52) If no foreign companies produce in a country, but many of the country's companies produce abroad, then
the country's GNP will tend to exceed its GDP.
88) Proprietors' income is
the income of unincorporated businesses.
10) The trend of the economy is
the long run growth path of the economy.
118) The personal saving rate is
the percentage of disposable personal income that is saved.
49) Which of the following is an example of an intermediate good?
the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to
40) A dividend is
the portion of a corporation's profits that the firm pays out each period to its shareholders.
1) Which of the following is NOT a topic studied in Macroeconomics?
the price of Dell computers
42) Stagflation occurs when the economy's inflation rate is high and
the unemployment rate is high.