Questions

Cyclical unemployment results from

A deficiency of spending on goods and services

Demand-pull inflation

Occurs when total spending exceeds the economy's ability to provide output at the existing price level

Other things equal, if a change in the tastes of American consumers causes them to purchaser more foreign goods at leach level of the US GDP then

US real GDP will fall

Refer to the diagram for a probate closed economy. The $400 level of GDP is

Unstable because aggregate expenditures are less than GDP

Refer to the figure, the consumptions schedule indicates that

Up to a point, consumption exceeds income but then falls below income

In the aggregate expenditures model, technological progress will shift the investment schedule

Upwards and increase aggregate edxpenditures

Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)

Wealth effect of an increase in stock market prices

refer to the diagrams, in which AD1 an AS1 are the "before" curves and AD2 and AS2 are the "after" curves. other things equal, a decline in net exports caused by the foreign purchases effect of a price-level increase is depicted by the

move from point a to point b in B

Refer to the diagram for a private closed economy. The equilibrium level of GDP is

$300

Refer to the table of information for a private closed economy. If the real interest rate is 10 percent, the equilibrium GDP will be

$300

If actual GDP $340 billion and there is a positive GDP gap of $20 billion, potential GDP is

$320 billion

The table gives data for a private closed economy. If gross investment is $12 billion the equilibrium level of GDP will be

$360

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be

$38 billion

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore the rare of inflation in 2002 was about

1.6 percent

At an annual growth rate of 7 percent, real GDP will double in about

10 years

the table gives aggregate demand and supply schedules for a hypothetical economy. if the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to

150 and $300, respectively.

suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10 and he price of each input is $4. the level of productivity is

2

refer to the tables of information for a private closed economy. The multiplier fort this economy is

2.5

Suppose that a new machine tool having a useful life do only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return this tool is

20 percent

the table gives aggregate demand and supply schedules for a hypothetical economy. the equilibrium price level will be

200

1. Improvements in technology 2. Increase in the supply (stock) of capital goods 3. Purchases of expanding output 4. Obtaining the optimal combination of goods, each at least-cost production 5. Increases in the quantity and quality of natural resources 6. Increases in the quantity and quality of Human Resources Use the accompanying list to answer the following question. As distinct from the supply factors and demand factor of economic growth, the efficiency factor(s) of economic growth is (are)

3 only

in the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is ______, and its long-run AS curve is line _______.

3,2,1

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. if the per unit price of raw materials rises from $4 to $8 and all else remains constant, the per unit cost of production will rise by about

30 percent

refer to the diagrams, in which AD1 an AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by

A and B

refer to the diagrams, in which AD1 an AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, inflation is absent in

A and C

If the dollar appreciates relative to foreign currencies, we would expect

A country's net exports to fall

If unintended increases in business inventories occurs, we can expect

A decline in GDP and rising unemployment

The phase of the business cycle in which real GSP declines is called

A recession

The most important determinant do consumer spending is

The level of income

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

$2

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

$0.10

Complete the accompanying table and answer the question on the basis of the resulting data. All figures are in billions of dollars. For the open economy, the equilibrium GDP

$400 and 5

Refer to the diagram for a private closed economy. At the equilibrium level of GDP investment and saving are both

$50

Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, how much will the change in investment increase

$50 Billion

Refer to the given data for a hypothetical economy. At the $100 level of income, the average propensity to save is

0.10

Refer to the given data for a hypothetical economy. The marginal propensity to consume is

0.80

1. Improvements in technology 2. Increase in the supply (stock) of capital goods 3. Purchases of expanding output 4. Obtaining the optimal combination of goods, each at least-cost production 5. Increases in the quantity and quality of natural resources 6. Increases in the quantity and quality of Human Resources Use the accompanying list to answer the following question. As distinct from the demands and efficiency factors do economic growth, the supply factories of economic growth are

1,2,5, and 6 only

Refer to the table. Between years 1 and 2, real GDP per capital grew by approximately ____ percent in Alta.

4

The table gives data for a private closed economy. At the $370 billion level of DI, the APS is approximately

4 percent

Refer to the diagram for a private closed economy. The multiplier is

AB—GF

Which two aggregate expenditure schedules AE in the diagram for a private closed economy have the same MPC, assuming investment is the same at each level of income?

AE1 and AE2

Suppose a family's consumption exceeds its disposable income. This means that its

APC is greater than 1

The GDP gap measures the difference between

Actual GDP and potential GDP

Planned investment plus unintended increase in inventories equals

Actual investment

Saving is always equal to

Actual investment

Refer to the given diagram. Consumption will be equal to income at

An income of E

Which of the following would not be expected to increase labor productivity?

An increase in the size of the labor force

Most economists agree that the immediate cause of most business cycle variation is

An unexpected change in the level of total spending

As disposable income increases, consumptions

And saving both increase

As disposable income goes up, the

Average propensity to consumer falls

refer to the diagrams, in which AD1 an AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, a decline in productivity is depicted by

B

refer to the diagrams, in which AD1 an AS1 are the "before" curves and AD2 and AS2 are the "after" curves. cost- push inflation is depicted by

B

which of the diagrams for the US economy best portrays the effects of a decrease in the availability of key natural resources?

B

Refer to the diagram. If next exports are Xn2, the GDP in the open economy will exceed GDP in the closed economy by

BD

Refer to the diagram for a private closed economy. The MPC and MPS are

Both 0.5

The government agency responsibility for collection and reporting unemployment data is the

Bureau of Labor Statistics

Recurring upswings and downswings in an economy's real GDP over time are called

Business cycles

refer to the diagrams, in which AD1 an AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Growth, full-employment, and price stability are depicted by

C

which of he diagrams for the US economy best portrays the effects of an increase in foreign spending on US products?

C

Refer to the given diagram. The marginal propensity to consume is equal to

CB—AB

Refer to the given diagram. At income level F, the volume of saving is

CD

Refer to the diagram. At disposable income level D, the average propensity to save is equal to

CD—0D

Refer to the given diagram. The marginal propensity to save is

CD—EF

The industries or sectors of economy in which business cycle fluctuations tend to affect output most are

Capital goods are durable consumers goods

Which of the following statement is most accurate about the prospects for poorer ("follower") countries catching up with richer ("leader") countries?

Catching up is possible, as "follower countries" tend to grow faster than "leader countries"

If the economy's real GDP doubles in 18 years, we can

Conclude that its average annual rate of growth is about 3.9 percent

If carols disposable income increases from $1,200 TO $1,700 and her level of saving increases from minus $100, her marginal propensity to

Consume is three-fifths

Refer to the diagram for a private closed economy. At the $200 level of GDP

Consumption is $200 and planned investment is $50. So aggregate expenditures are $250

which of the diagrams for the US economy best portrays the effects of decline in the incomes of US trading partners?

D

Which of the following is correct?

Total output= worker hours x labor productivityh

If the consumer price index falls from 120 to 116 in a particular year,, through economy's has experienced

Deflation of 3.33 percent

Real income if found by

Dividing nominal income hby the price index (in hundredths)

If at some level of GDP the economy is experiencing an unintended decrease in inventories

Domestic output will increase

The production of durable goods varies more than the production nondurable goods because

Durable purchases of durables are postponable

The immediate determinants of investment spending are the

Expected rate to return on capital goods and the real interest rate

The level of aggregate expenditures in the private closed economy is determined by the

Expenditures of consumers and business

Part time workers who wants full time work are counted as

Fully employed and therefore the official unemployment rate may understate the level of employment

Refer to the diagram which applies to a private closed economy. The APC is equal to 1 at income level

G

Refer to the diagram for a private closed economy. Aggregate saving in this economy will be zero when

GDP is $60 billion

Refer to the diagram, for a private closed economy. In this economy, aggregate expenditures

Increase by $2 for every $3 increased in GDP

Refer to the table of information for a private closed economy. In this economy a 3 percentage point decrease in the interest rate will

Increase equilibrium GDP by $100

Refer to the diagram. The most likely cause of a shift from AB to CD would be a(n)

Increase in productivity

The achievement of full emoployment through time will

Increase the realized rate of economic growth

If the number of worker hours in an economy is 100 and its labor productivity is the $5 of output per worker hour, the economy's real GDP

Is $500

Refer to the diagrams. Curve A

Is an investment demand curve, and curve B is an investment schedule

Refer to the given consumption schedules. DI signifies disposable income and C represents consumption expenditure. All figures are in billions of dollars. The marginal propensity to consume

Is highest in economy (3)

Refer to the diagram which applies to a private closed economy. If aggregate expenditures are C + Ig2, the amount of saving at income level J is

KN

The percentage of the working age population in the labor force (=employed + officially unemployed) is called the

Labor force participation rate

Suppose total output (real GDP) is $10,000 and worker hours are 20,000. We can conclude that

Labor productivity must be $0.50

Refer to the diagrams. Other things equal, an interest rathe decrease will

Leave curve A in place but shift curve B upward

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3?

Lower expected rates of return on investment

Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the

MPC is greater than A than in B

The equilibrium level of GDP is associated with

No unintended changes in inventories

in the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports and M is imports. All figures are in billions of dollars. which of the following schedules constitutes aggregate demand in this country?

P--GDP 128--$19 125--$25 122--$31 119--$37 116--$43

Strong property right are important for modern economic growth because

People are more likely to invest if don't fear that others can take their returns on investments without compensation

If aggregate expenditures exceed GDP in a private closed economy

Planned investment will exceed saving

The aggregate expenditures model is built appointed which of the following assumptions?

Prices are fixed

What's the primary reason that changes in total spending lead to cyclical changes in output and employment?

Prices are sticky in the short run

Under what circumstances do rates of economic growth understate the growth of economic well-being?

Product quality has improved.

Suppose than an economy's labor productivity fell by 3 percent and its total worker hours remained constant between year 1 and year 2. We could conclude that this economy's

Real GDP declined

For a nations real GDP per capita to ride during a year

Real GDP must increase more rapidly than population

Labor productivity is measured by

Real output per worker hour

Refer to the given graph. A movement from b to along C1 might be caused by a(n)

Recessions

In contrast to investment, consumption is

Relatively stable

If a nations real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita

Remain constant

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease

Saving by $20 billion

Refer to the graph. An increase in the economy's human capital would

Shift curve AB to CD

The largest contributor to increases in the productivity of American labor is

Technological advance

During a severe recession, we would expect output to fall the most in

The construction industry

Economies of scale refers to

The fact that larger producers may be able to use more efficient technologies than smaller producers

The real interest rate is

The percentage increase in purchasing power that the lender receives on a loan

Human capital refers to

The skills and knowledge that enable to be more productive

the table gives aggregate demand and supply schedules for a hypothetical economy. if the amount of real output demanded at each price level falls by $200, this might have been caused by

a worsening of business expectations

In the figure, AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The change in aggregate demand and supply in the diagram produce

an expansion of real output and a stable price level

The multiplier effect means that

an increase in investment can cause GDP to change by a larger amount

Critics of economic growth

argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the

determinants of aggregate demand

Real GDP per capita is found by

dividing real GDP by population

A competitive market system

encourages growth by allowing producers to make profitable investment decisions based on market signals.

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

frictionally unemployed

Which of the following best measures Improvements in the standard of living of nation

growth of real GDP per capita

the determinants of aggregate supply

include resource prices and resource productivity

in an effort to avoid recession, the government implements a tax rebate program effectively cutting taxes for households. we would expect this to

increase aggregate demand

other things equal, a reduction in personal and business taxes can be expected to

increase both aggregate demand and aggregate supply

Refer to the diagram. Other things equal, a shift of the aggregate supply curve from AS0 to AS1 might be caused by a(n)

increase in government regulation

in the diagram, a shift from AS1 to AS3 might be caused by a(n)

increase in the prices of imported resources

A decline in the real interest rate will

increase the amount of investment spending

the short run aggregate supply curve represents circumstances where

input prices are fixed and output prices are flexible

Alex works in his own home as a homemaker and full time caretaker of his children. Officially, he is

not in the labor force

suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of input is $4. all else being equal, if the price of each input increased from $4 to $6, productivity

remain unchanged

Imports have the same effect on the current side of GDP is

saving

The aggregate demand curve

shows the amount of real output that will be purchased at each possible price level

the aggregate supply curve

shows the various amounts of real output that businesses will produce at each price level.

Innovations such as the microchip and the Internet lead to business cycle variations because:

significant innovations occur irregularly and unexpectedly.

Tessa's break-even income is $10,000 and her MPC is 0.75. If her disposable income is $16,000 her level of

Consumption spending will be $14,500

Inflation initiated by increases in wages or other resource prices is labeled

Cost-push inflation

The table contains information about the hypothetical economy of Scoob. All figures are in millions. If the natural rate of unemployment in Scoob in 5 percent, then

Cyclical unemployment is about 2 percent

Refer to the diagram, which applies to a private closed economy. If gross investment is Ig1, the equilibrium GDP and the level of consumption will be

H and HF, respectively

Proponents of economic growth say that pollution

Occurs, not because of growth, but because common resources are treated as free goods

For ever 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percent point negative GDP gap occurs. This is a statement of

Okuns law

Susie had lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipated that a new job will be available. We can say that Susie is faced with

Structural unemployment

Follower countries achieve high fastest of growth by adopting technologies developed by leaders countries

True

Follower countries achieve high rates of growth by adopting technologies developed by leader countries

True

Growth in well-bring tends to be understated by growth in real GDP because of increases in leisure time

True

The presence of discouraged workers

may cause the official unemployment rate to understate the true amount of unemployment.

The natural rate of unemployment is

that rate of unemployment occurring when the economy is at its potential output.