Test 2 multiple choice

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 pits.

C

"Discouraged workers", those who are unemployed but have given up looking for a job: A.) understate the unemployment rate, because they are no longer counted in the calculation of unemployed workers. B.) overstate the unemployment rate because they are included in the calculation of unemployment even though they have given up. C.) are counted as fully employed, understating the unemployment rate. D.) are counted as part-time workers.

A

A decline in the real interest rate will: A.) increase the amount of investment spending. B.) shift the investment schedule downward. C.) shift the investment-demand curve to the right. D.) shift the investment-demand curve to the left.

A

Cyclical Unemployment is caused by: A.) downturns in the economy, recessions. B.) quitting your job and looking for a new one. C.) a change in the demand structure of a nation. D.) a decrease in demand for bicycles.

A

The GDP is the: A.) monetary value of all final goods and services produced within a nation in a particular year. B.) national income minus all nonincome charges against output. C.) monetary value of all economic resources used in producing a year's output. D.) monetary value of all goods and services, final and intermediate, produced in a specific year.

A

The consumption schedule relates: A.) consumption directly to the level of disposable income. B.) saving inversely to the level of disposable income. C.) disposable income directly to domestic income. D.) consumption directly to saving.

A

The greater is the marginal propensity to consume: A.) the smaller is the marginal propensity to save. B.) the higher is the interest rate. C.) the lower is the average propensity to consume D.) the lower is the price level.

A

The MPC for an economy is: A.) the slope of the consumption schedule or line. B.)the slope of the savings schedule or line. C.) 1 divided by the slope of the consumption schedule or line. D.) 1 divided by the slope of the savings schedule or line

A.)

"For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point GDP gap occurs." This is a statement of: A.) Taylor's rule. B.) Okun's law. C.) Say's law. D.) the Coase theorem.

B

An Increase in price and unemployment, combined with a decrease in output and employment best describes: A.) hyperinflation B.) stagflation C.) real economic growth D.) demand-pull inflation

B

Assume 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

Assume that Hernandez is temporarily unemployed because he has voluntarily quit his job with company A, earned his degree and is currently looking for a better job. Hernandez will be considered as: A.) cyclically unemployed. B.) frictionally unemployed. C.) secularly unemployed. D.) employed.

B

GDP can be calculated by summing: A.) consumption, investment, government purchases, exports, and imports. B.) investment, government purchases, consumption, and net exports. C.) consumption, investment, wages, and rents. D.) consumption, investment, government purchases, and imports.

B

Anne Kasperson works in her own home as a full-time caretaker and homemaker. Officially, she is: A.) unemployed. B.) employed. C.) not in the labor force. D.) in the labor force.

C

The phases of the business cycle, in the order in which they occur are: A.) recession, recovery/expansion, peak, trough B.) trough, recession, recovery/expansion, peak C.) peak, recession, trough, recovery/expansion D.) recovery/expansion, trough, recession, peak

C

The simple multiplier: A.) is used in economics instead of the simple divider. B.) indicates how much a change in Federal income taxes will affect the overall economy. C.) turns a change in government expenditures into a larger change in equilibrium GDP. D.) indicates the amount of debt incurred when consumption exceeds income.

C

Which of the following is a final good or service? A.) diesel fuel bought for a delivery truck B.) fertilizer purchased by a farm supplier C.) a haircut at a professional salon D.) Chevrolet windows purchased by a General Motors assembly plant

C

Which of the following relations is not correct? A.) 1 - MPC = MPS B.) APS + APC = 1 C.) MPS = MPC + 1 D.) MPC + MPS = 1

C.

For many years, the United States has experienced a _________ Net Exports number, which means: A.) a negative Net Exports number, which means exports are greater than imports. B.) a negative Net Exports number, which means imports are greater than exports. C.) a positive Net Exports number, which means exports are greater than imports. D.) a positive Net Exports number, which means imports are greater than exports.

B

Recurring upswings and downswings in an economy's real GDP over time are called: A.) recessions. B.) business cycles. C.) output yo-yos. D.) total product oscillations.

B

The simple multiplier: A.) occurs only in response to a change in the level of investment spending. B.) can be found by taking the reciprocal of the MPS. C.) occurs only when intended investment increases as GDP increases. D. )is measured by the slope of the saving schedule.

B

Tires sold to the Ford Plant are considered ________________ goods. Including these tires in GDP would ________________ GDP. A.) final, overstate B.) intermediate, overstate C.) final, understate D.) intermediate, understate

B

Which of the following best defines personal income? A.) the after-tax income received by households B.) the before-tax income received by households C.) all income earned by resource suppliers for their current contributions to production D.) the market value of the annual output net of consumption of fixed capital

B

Which of the following is considered Economic Investment? A.) a deposit into a savings account. B.) building of a factory. C.) the purchase of 50 shares of Home Depot stock by a school teacher. D.) the purchase of an Ipad by a college student.

B

Cost-push inflation may be caused by: A.) a decline in per unit production costs. B.) a decrease in wage rates. C.) an increase in wage rates or other resource prices. D.) an increase in resource availability.

C

If the consumption schedule shifts upward, this means that: A.) consumption has decreased. B.) savings has increased. C.) Consumption has increased D.) consumption has not changed.

C

In the early 2000's the U. S. real estate market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the: A.) Keynes effect. B.)interest-rate effect. C.) wealth effect. D.) multiplier effect.

C

Margaret sews clothes for her family. She does not sell them to anyone. This activity is: A.) is non-productive and does not get included in GDP. B.) is included in GDP but not GNP. C.) a non-market transaction and does not get included in GDP D.) a non-market transaction and therefore should be included in GDP.

C

National income accountants can avoid multiple counting by: A.) including transfers in their calculations. B.) counting both intermediate and final goods. C.) only counting final goods. D.) only counting intermediate goods.

C

The "Paradox of thrift" suggests: A.) spending is bad and saving is good, because when our society spends, the economy contracts. B.) if everyone saves, society will benefit. C.) saving is bad and spending is good, because when our society saves, the economy contracts. D.) saving and spending are unrelated to GDP.

C

The United States' economy is considered to be at "full employment" when: A.) 90 percent of the total population is employed. B.) 90 percent of the labor force is employed. C.) about 5 percent of the labor force is unemployed. D.) 100 percent of the labor force is employed.

C

The multiplier effect means that: A.) consumption is typically several times as large as saving. B.) a small change in spending or taxes can cause a much larger increase in investment. C.) a small change in spending or taxes can cause GDP to change by a larger amount. D.) a small decline in the MPC can cause equilibrium GDP to rise by several times that amount.

C

The oil embargo of the 1970's created a situation in the economy where: A.) inflation and unemployment were low B.) inflation was high and unemployment was low C.) inflation and unemployment were high D.) inflation was low and unemployment was high

C

A graph which demonstrates the tradeoff between unemployment and changes in price levels, specifically inflation best describes: A.) the demand curve B.) the production possibilities curve C.) the unemployment curve D.) the phillips curve

D

An "inflationary gap" is the amount by which: A.) equilibrium GDP falls short of the full-employment GDP. B.)aggregate expenditures exceed any given level of domestic output. C.) saving exceeds investment at the full-employment GDP. D.) aggregate demand exceeds the amount that our companies are capable of producing (Aggregate Supply)

D

An "recessionary gap" is the amount by which: A.) equilibrium GDP falls short of the full-employment GDP. B.) aggregate expenditures exceed any given level of domestic output. C.) saving exceeds investment at the full-employment GDP. D.) aggregate demand falls short of what our businesses are capable of producing (Aggregate Supply).

D

Part-time workers are counted as: A.) unemployed and therefore the official unemployment rate may overstate the level of unemployment. B.) unemployed and therefore the official unemployment rate may understate the level of unemployment. C.) fully employed and therefore the official unemployment rate may overstate the level of unemployment. D.) fully employed and therefore the official unemployment rate may understate the level of unemployment.

D

People on social security, with a fixed income: A.) benefit from unanticipated inflation. B.) benefit from unanticipated unemployment. C.) are hurt by unanticipated unemployment. D.) are hurt by unanticipated inflation

D

Suppose that a person's nominal income rises by 5% and the price level rises by 4%. The person's real income will: A.) fall by about 1 percent. B.) remain constant. C.) rise by about 4 percent. D.) rise by about 1 percent.

D

The most important factor in determining how much consumers spend in a year is: A.) their outstanding debt. B.) their expectations of future prices. C.) the value of their assets. D.) the amount of income they earn.

D

The term "real GDP" refers to: A.) the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income. B.) GDP data that embody changes in the price level, but not changes in physical output. C.) GDP data that reflect changes in both physical output and the price level. D.) GDP data that have been adjusted for changes in the price level. (Current output multiplied by the base year price)

D

When Aggregate Demand slips below our capability to produce, the economy will experience: A.) full employment B.) an expansionary gap C.) an inflationary gap D.) a recessionary gap

D