Econ exam 3 (ch 19,20,24,30,31)

Which of the following would accurately characterize the portion of a firm's profit paid to the owner of one share of its stock? A) interest B) dividend C) stock D) bond

B

A marginal tax rate is: a. the tax rate paid on a worker's next dollar of income. b. equal to a worker's income tax bracket. c. the total tax paid divided by the amount of taxable income. d. irrelevant for making decisions about earning extra income. e. applied only to high earners under a progressive income tax system.

A

14. Investment spending represents spending on: A) productive physical capital. B) stocks. C) mutual funds. D) corporate bonds

A

26. A stock in a company is: A) a share of ownership of a company held by a shareholder. B) an IOU that pays interest. C) a portion of a firms profits paid to stock owners. D) part of private saving

A

4. If during 2005, the country of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2005 in Sildavia were: A) $36 billion. B) $38 billion. C) $51 billion. D) $64 billion.

A

7. A recessionary gap will be eliminated because there is _______ pressure on wages, causing the _______ . A) downward; short-run aggregate supply curve to shift rightward B) downward; short-run aggregate supply curve to shift leftward C) downward; aggregate demand curve to shift downward D) upward; aggregate demand curve to shift to the left

A

A checking account with $500 is: A) more liquid than a person's new car. B) less liquid than a checking account with $1,000. C) equally liquid as a stock share with a $500 value. D) less liquid than a home with a market value of $250,0

A

A decrease in energy prices will: A) increase short-run aggregate supply. B) decrease the quantity of aggregate output supplied in the short run. C) decrease aggregate demand. D) increase the quantity of aggregate output demanded

A

As an inflationary gap is eliminated through self-correcting adjustment, the equilibrium price level________ and the equilibrium real output________ A) increases; decreases B) increases; increases C) decreases; decreases D) decreases; increases

A

Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to: A) a smaller increase in the marginal product of labor. B) a decrease in the total amount of output produced. C) negative marginal product . D) a constant amount of total outpu

A

Exhibit: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. 20. (Exhibit: Real GDP) The value of nominal GDP in years 1 and 2 respectively is: A) $900; $1,077.50. B) $900; $990. C) $180,000; $257,400. D) $1,000; $1,005

A

Financial assets: A) are paper claims that provide the buyer of the claim future income from the seller of the claim. B) in the form of loans by an individual are an asset to the individual receiving the loan. C) are accompanied by high transaction costs. D) have no financial risk

A

Holding everything else constant, when the government uses an expansionary policy in the presence of a deficit, it will result in: A) an increase in the equilibrium interest rate in the loanable funds market. B) an increase in the level of private investment spending C) an increase in government savings. D) a fall in the equilibrium interest rate in the loanable funds marjet

A

If real GDP doubles in 12 years, its average annual growth rate is approximately: A) 6%. B) 5%. C) 4%. D) 3%

A

In a simple closed economy, all investment spending must come from: A) savings. B) money creation. C) debt issuance. D) foreign borrowing.

A

In an inflationary gap: A) aggregate output is greater than potential output. B) aggregate output equals potential output. C) aggregate output is less than potential output. D) short run flexibility will bring the economy back to its potential output without any intervention

A

Investment spending is: A) spending on productive physical capital. B) spending on bonds. C) spending on shares of stock. D) all of the above

A

National savings is the sum of: A) private savings plus the budget balance. B) private savings and government spending. C) investment spending plus consumption. D) consumption spending minus government spendin

A

Scenario: Growth Rates in Two Countries India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. 24. (Scenario: Growth Rates in Two Countries) About how much will India's real GDP per capita be in 20 years? A) $19,600 B) $56,000 C) $14,000 D) $28,00

A

Scenario: Technological Progress and Productivity Growth in Techland Holding technology and human capital fixed in Techland, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000 during the 1980 to 2010 period. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that the actual increase in real GDP per worker during the 1980 to 2010 period was from $40,000 to $320,000. 31. (Scenario: Technological Progress and Productivity Growth in Techland) What was the growth rate of real GDP per capita in Techland attributable to increasing physical capital per worker during the 1980 to 2010 period? A) 2.0% B) 4.5% C) 8.75% D) 17.5%

A

Some people argue that social insurance taxes should be increased to remedy the fiscal problems faced by Social Security. What is a potential problem with this proposed solution? a. This solution might only be a temporary fix, as it does not address the fundamental issue of a growing elderly population and a shrinking working population. b. It puts too much of the burden on the middle class and not enough on wealthy households. c. It would eliminate the need for private savings, thus hurting banks. d. This solution does not address the fact that the number of retirees is increasing. e. Payroll taxes cannot be increased high enough to solve the problem

A

The interest rate effect of a change in the aggregate price level occurs: A) when a higher price level decreases the purchasing power of money resulting in an increase in interest rate. B) when the Fed uses contractionary monetary policy causing an increase in interest rate C) when the government borrowing in the loanable funds market causes interest rate to increase. D) when the price of a bond increases resulting in a fall in the interest rate.

A

The short-run aggregate supply curve may shift to the right if: A) productivity increases. B) nominal wages increase. C) personal income taxes decrease. D) commodity prices rise

A

Throughout the twentieth century, nations in Latin America experienced disappointing growth rates primarily due to: A) low rates of national savings, political instability, and little emphasis on education. B) low rates of investment in physical capital that offset a strong emphasis on education. C) abundant natural resources, rapid technological progress, and political instability. D) low rates of national savings, a scarcity of natural resources, and political instability

A

Which of the following will shift the short-run aggregate supply curve to the right? A) an economy-wide decrease in commodity prices B) an increase in nominal wages C) a decrease in productivity D) a decrease in government purchases of goods and service

A

Which of the following would NOT be considered to be one of the four main types of financial assets? A) robots on an assembly line B) bonds C) bank deposits D) loans

A

____________ a mandated federal program that funds health care for retired persons. a. Medicare is b. Medicaid is c. Unemployment compensation is d. Social Security is e. Food stamps are

A

____________ would be considered a mandatory outlay in your monthly budget. a. A student loan payment b. A donation to your alma mater c. A grocery bill d. Your electric bill e. Gasoline money (for travel to and from work)

A

15. The top 1% of households in the United States: a. contribute no federal income tax revenues become of tax loopholes. b. contribute nearly 40% of all federal income tax revenues. c. contribute more than 50% but less than 75% of all federal income tax revenues. d. contribute more than 75% but less than 90% of all federal income tax revenues. e. contribute more than 90% of all federal income tax revenues

B

A share in the ownership of a company held by a shareholder is considered a(n): A) bond. B) stock. C) dividend. D) IOU

B

All other things unchanged, a general increase in the amount of government borrowing will typically: A) shift the loanable funds demand curve to the left and decrease interest rates. B) shift the loanable funds demand curve to the right and increase interest rates. C) have no effect on the loanable funds demand curve. D) have no effect on the demand for loanable fund

B

An increase in the short-run aggregate supply curve may be caused by: A) a decrease in productivity. B) an increase in productivity. C) an increase in the price of inputs. D) an increase in wages.

B

An inflationary gap causes: A) short-run aggregate supply to gradually increase. B) short-run aggregate supply to gradually decrease. C) aggregate demand to gradually increase. D) aggregate demand to gradually decrease

B

Exhibit: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. (Exhibit: Real GDP) Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is: A) 10%. B) 7.8%. C) 19.7%. D) 8.8%

B

GDP tends to understate our economic well being because it: A) includes the value of services produced in the home. B) excludes the value of leisure C) includes expenditures on crime prevention equipment. D) includes health care costs related to the consumption of cigarettes

B

Goods that are produced domestically but sold abroad are: A) imports. B) exports. C) part of domestic consumption. D) investment

B

Human capital refers to: A) changes in inventories B) the education or training which workers possess. C) funds available for investment spending. D) spending on physical capital, such as machines which aid workers

B

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is: A) 4.8%. B) 5%. C) $5,000. D) $105,000

B

If an economy is currently operating at an output level below its potential real GDP, if government wishes use fiscal policy to bring the economy back to its potential real GDP, it will: A) increase the money supply. B) increase government spending. C) increase taxation. D) decrease the money supply

B

If both aggregate output and the aggregate price level increase: A) real GDP will increase faster than nominal GDP. B) nominal GDP will increase faster than real GDP. C) it makes no difference to real or nominal GDP. D) either A or B may be correct

B

If government increases income tax rates, the aggregate demand curve is likely to: A) shift to the right. B) shift to the left. C) remain constant. D) become positively sloped

B

Inventory investment is counted as investment because: A) inventory is used for future production. B) inventory is a source of future sales. C) inventory has no opportunity cost. D) inventory is tax deductible

B

Rising high school graduation rates are an example of an increase in: A) technological progress. B) human capital. C) population stock. D) fertility rates

B

Someone who has to make a choice involving whether to receive $100 now or $100 one year from now will probably choose ________, since there is a(n) ________ in waiting to use money. A) one year from now; benefit B) now; opportunity cost C) one year from now; opportunity cost D) now; bene

B

Suppose that political instability in the Middle East temporarily interrupts the supply of oil to the United States. Which of the following is most likely to occur? A) The short-run aggregate supply curve shifts right, output increases, and prices decrease. B) The short-run aggregate supply curve shifts left, output decreases, and prices increase. C) The aggregate demand curve shifts left, output decreases, and prices decrease. D) The aggregate demand curve shifts right, output increases, and prices increase

B

The savings-investment spending identity says that: A) each person in the economy must invest as much as he or she saves. B) savings and investment spending are always equal for the economy as a whole. C) savings must equal government investment for the economy as a whole. D) each person in the economy must save as much as he or she inve

B

The short-run aggregate supply curve is positively sloped because: A) business people suffer from money illusion. B) wages are sticky or don't readily adjust to changes in economic conditions in the short run. C) workers care about nominal wages, not real wages. D) of diminishing returns to labor

B

Value added in national income accounts refers to: A) the value added by labor to the production process. B) the difference in the final price and the value of inputs purchased. C) the difference in profits at various stages of production. D) the value of all the inputs used by the final produce

B

. The official unemployment rate ignores: A) people with professional jobs B) people who work on commission. C) discouraged workers who have given up looking for a job. D) all of the above

C

11. If there is a sudden increase in commodity prices, this will lead to a shift in the: A) SRAS curve to the right resulting in higher aggregate output. B) AD curve to the right resulting in higher aggregate price levels. C) SRAS curve to the left resulting in lower aggregate output D) AD curve to the left resulting in lower aggregate price levels

C

16. In the long run, wages and prices are considered to be: A) sticky. B) constant. C) flexible. D) irrelevant

C

18. A decrease in the supply of money shifts the aggregate: A) supply curve to the left. B) supply curve to the right. C) demand curve to the left. D) demand curve to the right.

C

28. If the growth rate of GDP is above its historical average, then there is a tendency for the unemployment rate to: A) fall to zero. B) rise. C) fall. D) stabilize

C

A natural disaster that destroys part of a country's infrastructure is a type of _________and therefore shifts the _________ to the _________. A) negative demand shock; aggregate demand curve; right B) negative supply shock; aggregate demand curve; left C) negative supply shock; short-run aggregate supply curve; left D) negative demand shock; long-run aggregate supply curve; left

C

A negative demand shock can cause: A) a liquidity trap. B) crowding out. C) a recessionary gap. D) an inflationary gap

C

An example of a government transfer is a(n): A) expenditure on an interstate highway. B) bequest from a deceased relative. C) Social Security payment. D) salary for members of the armed forces.

C

Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is: A) $100. B) $700. C) $1,300. D) none of the above

C

Crowding out is a phenomenon: A) in which an increase in the government's budget surplus decreases overall investment spending. B) where overproduction in the goods market leads to a sharp drop in the aggregate price level. C) where an increase in the government's budget deficit causes overall investment spending to fall. D) where an increase in imports causes the overall domestic production to fall

C

During the 1929-1939 period in the United States: A) both real and nominal GDP declined. B) both real and nominal GDP increased. C) nominal GDP declined but real GDP increased. D) real GDP declined but nominal GDP increase

C

Economists are optimistic that growth can continue in the face of resource scarcity because: A) the level of oil reserves is vastly understated by the oil industry. B) prices of scarce resources fall and provide incentives to use more of those resources. C) prices of scarce resources rise and provide incentives to find alternative energy sources. D) resource scarcity no longer limits economic growth in the twenty-first century.

C

From the standpoint of economic growth, banks are important to: A) fight inflation. B) keep interest rates low. C) channel savings into investment. D) channel investment into saving

C

GDP per capita is: A) a perfect measure of a countries standard of living. B) the only way to measure living standards among different countries. C) an incomplete measure of a country's standard of living. D) used by the U.N. to compare nations based on measures of welfa

C

If your professor wins the lottery: A) GDP goes up. B) GDP goes down. C) GDP is not affected. D) the economy will clearly be better o

C

In the United States, consumer spending accounts for approximately what percentage of GDP? A) 50% B) 60% C) 70% D) 80%

C

Mandatory outlays: a. usually change during the budget process. b. cannot be altered once they are made into law. c. require changes in existing laws if those outlays are to be altered. d. are a minor component of total outlays, and so are usually ignored. e. are another name for discretionary outlays.

C

Scenario: Open Economy S = I In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. 3. (Scenario: Open Economy S = I) How much is private saving? A) $4 trillion B) $2.5 trillion C) $3.5 trillion D) $1.5 trillion

C

Suppose you use your entrepreneurial spirit and economics training to start your own business. In your first year of work, you are able to earn $58,000 in gross income. What is the total amount of social insurance taxes you owe the federal government? a. $4,437.00 b. $7,192.00 c. $8,874.00 d. $3,596.00 e. $8,700.00

C

The Rule of 70 applies: A) only to GDP. B) only to GDP per capita. C) to any growth rate. D) only to developed countries

C

The government saves when it: A) has a balanced budget. B) has a budget deficit. C) has a budget surplus. D) borrows by selling bonds

C

The government withdraws social insurance taxes from the paychecks of workers to: a. discourage people from working. b. pay the salaries of the members of Congress. c. reduce the incidence of elderly poverty d. penalize wealthy workers. e. collect money for international aid

C

The main reason South Korea has grown so rapidly is that because it was so poor: A) it could take advantage of international financial aid for poor countries. B) people left to go to more prosperous countries. C) it could skip forward, or leapfrog, to use new-generation technology as it developed. D) it could import highly trained engineers from other countries

C

When an economy experiences stagflation, it is usually caused by a: A) a negative demand shock. B) a positive supply shock. C) a negative supply shock. D) a positive demand shock.

C

Which of the following is NOT included in investment spending in the national income accounts? A) new residential construction B) the purchase of machinery and other productive physical capital C) the purchase of stocks and bonds by a business D) spending on inventories

C

Which of the following would an economic policy maker rank as the most preferred type of shock? A) positive demand shock B) negative demand shock C) positive supply shock D) negative supply shock

C

16. All other things unchanged, an increase in loanable funds demand would most likely be caused by a(n): A) decrease in the amount of expected business opportunities. B) increase in the market interest rate. C) increase in corporate income tax rates. D) increase in the amount of government borrowi

D

24. If prices are constant, but there is an increase in the value of financial assets: A) aggregate supply shifts to the left. B) aggregate supply shifts to the right. C) aggregate demand shifts to the left D) aggregate demand shifts to the right

D

27. Which of the following is included in GDP? A) the purchase of 100 shares of Microsoft stock B) the purchase of a 1965 Ford Mustang C) Social security payments from the U.S. government to retired people D) the purchase of a ticket to a Rolling Stones concer

D

3. In the country of Sildavia, a market basket of goods and services cost $130 in 2003, $140 in 2004, and $160 in 2005. Based on this information and considering 2003 as the base year, inflation from 2003 to 2005 was: A) 7.14%. B) 7.69%. C) 14.28%. D) 23.07%

D

A loan is: A) a liability for the lender and an asset for the borrower. B) a physical asset that is traded in financial markets. C) a claim on a bank that obliges the bank to provide funds to a lender. D) a liability for the borrower and an asset for the lender

D

According to the U.S. Federal Tax Rates chart from the textbook (Figure 15.6), a person earning $100,000 in a given year is in the 28% tax bracket. How much will this individual owe in taxes for that year? a. $0 b. $28,000 c. more than $28,000 d. less than $28,000 but greater than $15,000 e. greater than $0 but less than $15,000

D

All of the following are reasons the average worker in the United States today produces more than her or his counterpart a century ago EXCEPT that: A) the modern worker is better educated. B) the modern worker has more physical capital to work with. C) the modern worker has better technology to work with. D) the modern worker works longer hours

D

Computers started to become more common in the 1970s in America. From this time until the mid-1990s: A) the economy started to grow rapidly. B) real GDP per person increased quickly and then slowed down. C) nominal GDP per person increased quickly. D) very little happened to productivity

D

If the labor unions lose memberships and become less popular, then: A) production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level. B) production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall. C) production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level. D) production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level

D

In the long-run if all prices, including the nominal wage, rate doubled, then aggregate output supplied would: A) double. B) rise. C) fall. D) remain unchanged

D

In the short run, a positive demand shock: A) reduces aggregate output and increases the aggregate price level. B) increases aggregate output and reduces the aggregate price level. C) reduces aggregate output and the aggregate price level. D) increases aggregate output and the aggregate price level

D

It took India more than 40 years to exhibit high economic growth after it gained independence from British rule in 1947. This faster rate of growth resulted from: A) a more stable government. B) better infrastructure. C) higher investment in human capital D) a reduction in the burden of corruption.

D

Natural resources are: A) more important determinants of productivity today than ever before. B) the reason behind the fast development of countries like Japan. C) the reason behind the slow development of countries like Nigeria. D) less reliable indicators of productivity today than they were a century ago

D

Sweden has a real GDP per capita of $50,000, while Chile has a real GDP per capita of $250,000. If real GDP per capita in Sweden grows at a 2% rate and Chile's real GDP per capita grows at a 4% rate, how long will it take for real GDP per capita in the two nations to converge? A) 10 years B) 20 years C) 25 years D) 35 years

D

The Human Development Index is: A) a perfect measure of a countries standard of living. B) the only way to measure living standards between different countries. C) an incomplete measure of a countries standard of living. D) used by the U.N. to compare nations by measures other than real GDP per capital

D

The aggregate demand curve would shift to the left for all the following reasons EXCEPT: A) a fall in consumers' wealth. B) a decrease in the amount of money in circulation. C) more pessimistic consumer expectations. D) lower labor productivity

D

The convergence hypothesis fits the data only when the factors that affect growth are held equal across countries. These factors include all of the following EXCEPT: A) education. B) infrastructure. C) favorable policies and institutions. D) GDP per capita

D

The poorest 40% of households in the United States: a. do not contribute their fair share of income taxes. b. contribute the vast majority of all income taxes. c. are forced to pay too much income tax despite their low incomes. d. pay negative income taxes because of tax credits and income assistance. e. contribute an amount of income taxes proportionate to what they consume in government services

D

The rate of return on a business project is equal to: A) (Cost of project / revenue from project) × 100 B) (Revenue from project / cost of project) × 100 C) (Revenue from project × cost of project) × 100 D) (Revenue from project - cost of project)/ Cost of project) × 10

D

The rule of 70 is most useful in: A) identifying the causes of economic growth. B) identifying the sources of economic growth. C) estimating the productivity of labor. D) estimating the doubling time of real GDP for a given growth rate

D

The total current tax rate for Social Security and Medicare is: a. 3.9%. b. 6.2%. c. 12.4%. d. 15.3%. e. 16.5%

D

Which federal budget category's portion of total government outlays has decreased since 1960? a. Social Security b. Medicare c. Medicaid d. defense e. food stamp

D

Which of the following index includes smaller companies, often in the technology sector? A) the Dow Jones Industrial Average B) the producer price index C) the S&P 500 D) the NASDA

D

Monetary policy is conducted by the Federal Reserve. Fiscal policy is: a. also conducted by the Federal Reserve. b. conducted by Congress and the president. c. conducted by the Supreme Court. d. conducted by the Department of Defense. e. conducted only at the state level

E

Some people argue that social insurance taxes should be increased to remedy the fiscal problems faced by Social Security. What is a potential unintended consequence of this proposed solution? a. Federal tax revenues may increase. b. The tax burden of the average worker may increase. c. The disposable income of workers may decrease. d. The elderly poverty rate may decrease. e. The unemployment rate may increase

E

Why do Social Security and Medicare pose problems for the federal government budget? a. The worker-to-retiree ratio is increasing. b. Payroll taxes are capped and cannot be raised. c. The number of retirees is decreasing. d. The number of sick people is rising too quickly. e. Life expectancy of retirees is increasing

E