Exam 2 Review Macro

If the government raises taxes, what will this do to the AD curve?

AD shifts left.

_____ will most likely increase the economy's long-run aggregate supply.

Advances in technology

What does the 45-degree line in the Aggregate Expenditures model represent?

All consumption and no savings

As a country's economy grows and real GDP per capita rises, citizens often do not feel proportionately better off. Which of the following provides a logical explanation for this?

As incomes rise, households may use the extra income to buy services and good that they used to produce for themselves; thus, even though GDP is higher, how much they actually consume is not higher.

According to the table, the number of people in the labor force is: Population- 210 Military- 30 Employed- 100 Unemployed Seeking work- 30 Discouraged Workers- 20 Unpaid family members working 15 plus hours- 10 Retired- 20

140

If the marginal propensity to save is 0.2 and income rises by $5,000, how much of this $5,000 will be consumed?

4,000 dollars

How much faster does it take for a $10,000 investment to increase to $20,000 if the average annual growth rate is 14% compared to 7%?

5 years faster

Which of the following is NOT a concern regarding GDP as a measure of economic activity?

The value of investments in the stock and bond market

In the circular flow diagram, the counterclockwise direction shows the flow of _____, where households supply _____ and businesses supply _______.

money; labor; good and services

Business cycles:

vary in duration and magnitude.

Price stickiness refers to:

when prices are slow to adjust to economic shocks.

______ unemployment includes workers who voluntarily quit their jobs to search for better positions.

Frictional

Which of the following statements is (are) true? I. If cyclical unemployment is 0%, then the unemployment rate equals the natural rate of unemployment. II. The unemployment rate consists of only frictional or structural unemployment. III. An unemployment rate of zero percent is generally considered the equivalent of full employment.

I. Only

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _______ and its real GDP will ______

Increase; be unchanged

Changes in government spending and changes in net exports have _____ multiplier effects compared to changes in investment spending.

Larger

A criticism of GDP per capita is that it:

Might not fully reflect the standard of living of a typical citizen.

Reducing government spending, reducing transfer payments, or raising taxes describes which policy?

contractionary fiscal policy

The U.S. gross domestic product is equal to the total market value of all:

final goods and services produced by resources in the United States.

Which of the following groups benefits from an unanticipated rise in the inflation rate?

homeowners with fixed-rate mortgages

We are most likely to see a recession if interest rates on long bonds are:

lower than interests rates on short-term bonds.

IKEA (a Swedish home furnishings company) produces desks that are made in Poland. The value of these of these imported desks sold at an IKEA store in the United States counts toward:

neither GDP nor GNP

If you spend $100 and the MPC is 0.9, how much spending will this $100 generate in the economy?

$1,000 dollars

If frictional unemployment is 2%, structural unemployment is 3%, and cyclical unemployment is 4%, the natural rate of unemployment is:

5%

Which of the following would NOT shift the AD curve?

An increase in market power occurs in the airline industry.

Which of the following would likely NOT cause inflation?

Consumer confidence falls due to global economic concerns.

Which type of unemployment do economists attempt to resolve using economic policy?

Cyclical unemployment

With everything else held constant, if society increased the efficiency of matching people to jobs that need their skills, the natural rate of unemployment would likely:

Decrease

Suppose an economy has historically grown at a rate of 2.25%. The economy is growing at a rate 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the ______ stage of the business cycle.

Expansion

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

GDP falls as a result of this change.

Which of the following statements describe(s) the unemployment rate? I. The unemployment rate includes those people who do not have a job and have ended their job search. II. The unemployment rate counts as employed those people who may be only working part-time. III. The unemployment rate is the percentage of the entire U.S. population that does not have a job but is searching for one.

II only

Output increases if aggregate demand _____ and aggregate supply _______.

Increases; Increases

Which of the following is not true regarding the informal economy?

Informal market activities do not contribute to the standard of living of citizens.

If the government of Econia raises minimum wage, what impact will this have on the average price level and output level of the country?

It will shift the short-run aggregate supply curve to the left, leading to a higher price level and lower output.

In an AD/AS model, if the economy is below its long-run output, what will happen in the long run if the markets are left alone?

SRAS will shift right.

What event was a major influence on the development of macroeconomics?

The Great Depression

Which of the following persons is considered to be unemployed?

Tiffany, who is going on job interviews, hoping to get a job

Which effect best explains why Ethiopia (a poor country) is able to achieve a high growth rate while Japan (a rich country) struggles with low growth?

catch-up effect

Which are the determinants of short-run aggregate supply?

changes input prices, taxes, and business inflationary expectations.

If a government collects $550 billion in taxes and spends $700 billion, it would have a:

deficit of $150 billion.