Macro Cumulative Final Study
Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income
I (aggregate production) = II (aggregate expenditure) = III (aggregate income)
Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops and offices II. Real GDP rises whenever inflation occurs III. Real GDP does not measure all that is produced
I (real GDP is the value of the total production of the country's farms, factories, shops and offices) and III (real GDP does not measure all that is produced)
Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices II. Real GDP rises whenever inflation occurs III. Real GDP does not measure all that is produced
I and III are correct
Which of the following pieces of information do you need to calculate the labor force participation rate? I. the number of employed persons II. the number of unemployed persons III. the population IV. the working age population
I, II, and IV
Using the official measure of unemployment, which of the following people is considered unemployed? a.) a part-time worker who wishes to work full-time b.) a person who gave up looking for jobs because he or she was discouraged about his or her job prospects c.) a person who has been searching for work, but tons down a job paying a lower wage rate than desired d.) a person who is working but expects to be laid off at the end of the month
c.) a person who has been searching for work, but tons down a job paying a lower wage rate than desired
Using the official measure of unemployment, which of the following people is considered unemployed? a.) a part-time worker who wishes to work full time b.) a person who gave up looking for jobs because he or she was discouraged about his or her job prospects c.) a person who has been searching for work, but turns down a job paying a lower wage rate than desired d.) a person who is working but expects to be laid off at the end of the month
c.) a person who has been searching for work, but turns down a job paying a lower wage rate than desired
If the money wage rate rises relative to the price level, firms ___ the quantity of labor they demand and workers ___ the quantity of labor they supply. a.) increase; increase b.) increase; decrease c.) decrease; increase d.) decrease; decrease
c.) decrease; increase
The decreasing slope of production function reflects a.) rising unemployment b.) decreasing costs c.) diminishing returns d.) increasing aggregate demand
c.) diminishing returns
Which of the following is a final good? a.) the memory chips in your new smart phone b.) a share of IBM stock c.) flour purchased at the store to bake cookies at home d.) flour used by the bakery to bake cookies
c.) flour purchased at the store to bake cookies at home
Unemployment caused by people voluntarily leaving their jobs is classified as a.) part-time unemployment b.) cyclical unemployment c.) frictional unemployment d.) seasonal unemployment
c.) frictional unemployment
The more education that workers have, the ___ is their human capital and the ___ is their productivity. a.) larger; smaller b.) smaller; higher c.) larger; higher d.) smaller; smaller
c.) larger; higher
The ___ interest rate approximately equals the ___ interest rate minus ___. a.) nominal; real; depreciation b.) nominal; real; inflation rate c.) real; nominal; inflation rate d.) real; nominal; depreciation
c.) real; nominal; inflation rate
Pollution is a by-product of some production processes, so on this count real GDP as measured a.) is adjusted downward to take into account the pollution b.) is adjusted upward to take into account the expenditures that will be made in the future to clean up the pollution c.) tends to overstate economic welfare d.) tends to understate economic welfare
c.) tends to overstate economic welfare
The "law of demand" states that changes in a.) demand are related directly to changes in supply b.) the quality demanded of a good are not related to changes in the quantity supplied c.) the quantity demanded of a good are inversely related to changes in its price d.) demand are inversely related to changes in supply
c.) the quantity demanded of a good are inversely related to changes in its price
If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent a.) the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it b.) the purchasing power of your loan has remained constant over the year regardless of the interest rate at which you lent it c.) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan d.) you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan
c.) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan
According to the BLS, the monthly inflation rate in January, 2022 was a.) -0.1% b.) 0.05% c.) 6.6% d.) 0.4%
d.) 0.4%
Suppose there are currently 100 people unemployed, 1500 people employed, and 2000 people in the working age population. The labor force participation rate equals 100 times a.) 100/1500 b.) 100/1600 c.) 1500/2000 d.) 1600/2000
d.) 1600/2000
A loaf of bread purchased by one of your instructors would be best described as a.) an intermediate good b.) a financial asset c.) a used good d.) a final good
d.) a final good
Money is created by a.) banks paying for depositor's insurance b.) government taxation c.) banks taking in deposits d.) banks making loans
d.) banks making loans
When the quantity of money demanded is less than the quantity of money supplied, people ___ bonds and the interest rate ___. a.) sell; rises b.) sell; falls c.) buy; rises d.) buy; falls
d.) buy; falls
When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the a.) federal funds rate b.) loan rate c.) prime rate d.) discount rate
d.) discount rate
The recent accounting graduate from a major business school is searching for a place to begin her career as an accountant. This individual is best considered as a.) structurally unemployed b.) seasonally unemployed c.) cyclically unemployed d.) frictionally unemployed
d.) frictionally unemployed
Suppose that the price level was 100 in 2008, 110 in 2009, and 130 in 2010. Over these three years, a.) deflation occurred at an accelerating rate b.) inflation rate was positive but slowing c.) prices were stable d.) inflation rate was positive and accelerating
d.) inflation rate was positive and accelerating
A discourages worker ___ counted as officially unemployed and ___ counted as in the labor force. a.) is; is b.) is; is not c.) is not; is d.) is not; is not
d.) is not; is not
In the equation, GDP = C + I + G +X - M refers to a.) federal government expenditures plus all transfer payments b.) local, state, and federal government spending for all purposes c.) the taxes and expenditures of all government units d.) local, state, and federal government expenditure on goods and services, but does not included transfer payments
d.) local, state, and federal government expenditure on goods and services, but does not included transfer payments
Gross domestic product (GDP) is the ___ in a given time period. a.) value of personal consumption expenditures, gross private domestic investment, and federal government expenditure b.) sum of wage and salary compensation of employees and corporate profits c.) value of all final and intermediate goods and services produced by the economy excluding those goos exported to foreign nations d.) market value of final goods and services produced by the economy
d.) market value of final goods and services produced by the economy
The aggregate demand curve shows the ___ relationship between the price level and ___. a.) positive; the quantity of real GDP demanded b.) negative; aggregate labor demanded c.) positive; aggregate labor demand d.) negative; the quantity of real GDP demanded
d.) negative; the quantity of real GDP demanded
Equilibrium in the labor market a.) cannot occur if the production function is shifting upward b.) can happen only when actual GDP exceeds potential GDP c.) means that resources are allocated inefficiently d.) occurs when actual GDP is equal to potential GDP
d.) occurs when actual GDP is equal to potential GDP
A relative price is the a.) slope of the demand curve b.) difference between one money price and another c.) slope of the supply curve d.) ratio of one money price to another
d.) ratio of one money price to another
Which of the following is included in government expenditures when measuring GDP? a.) social security payments b.) unemployment compensation payments c.) pension payment made to past presidents d.) the current president's salary
d.) the current president's salary
Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP? a.) the sale of bonds to finance the construction of the assembly plant b.) the purchase of used welding robots to assemble vehicles c.) the purchase of new tires to be installed on the new vehicles d.) the purchase of new machine tools to manufacture the engines
d.) the purchase of new machine tools to manufacture the engines
In the short run, when the Fed increases the quantity of money a.) bond prices fall and the interest rate rises b.) bond prices rise and the interest rate falls c.) the demand for money increases d.) the supply of money curve shifts rightward
d.) the supply of money curve shifts rightward
GDP can be computed as the sum of a.) all sales that have taken place in an economy over a period of time b.) the total expenditures of consumers and business over a period of time c.) the total expenditures of consumptions, investment, and government expenditure on goods and services over a period of time d.) the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time
d.) the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time
Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town is a.) 10 percent b.) 10/70 x 100 c.) 10/80 x 100 d.) there is not enough info provided to calculate the unemployment rate
d.) there is not enough info provided to calculate the unemployment rate
Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town is a.) 10 percent b.) 10/70 x 100 c.) 10/80 x 100 d.) there is not enough information provided to calculate the unemployment rate
d.) there is not enough information provided to calculate the unemployment rate
Which of the following is TRUE regarding the real wage rate? The real wage rate I. measures the quantity of good and services an hour's work can buy II. is always greater than the money wage
only I is TRUE
If the CPI was 122.3 at the end of last year and 124.5 at the end of this year, the inflation rate over these two years was a.) 1.8 percent b.) 2.5 percent c.) 22.5 percent d.) 18.0 percent
a.) 1.8 percent
According to the Bureau of Economic Analysis, in the second quarter of 2012 personal consumption expendi-tures grew by 1.7 percent, gross private domestic investment grew by 3.0 percent, government expenditure ongoods and services decreased by -0.9 percent, imports grew by 2.9%, and exports grew by 6.0%. Given these data, it is most likely that ___. a.) GDP growth was positive in the 2nd quarter b.) GDP growth was negative in the 2nd quarter c.) economy hit a biz cycle peak d.) economy hit a biz cycle trough
a.) GDP growth was positive in the 2nd quarter
___ gross domestic product is the market value of ___ linked back to the prices of a single year. a.) Real; total production b.) Real; production possibilities c.) Productivity; the consumer price index d.) Nominal; total production
a.) Real; total production
Which of the following explains why the demand for loanable funds in negatively related to the real interest rate? a.) a lower real interest rate makes move investment projects profitable b.) consumers are willing to spend less and hence save more at higher real interest rates c.) interest rate flexibility in financial markets assures an equilibrium in which saving equals investment d.) all of the above are reasons why the demand for loanable funds is negatively related to the real interest rate
a.) a lower real interest rate makes more investment projects profitable
Which of the following shifts the aggregate demand curve leftward? a.) an increase in the tax rate b.) a decrease in the price level c.) an increase in the quantity of money d.) an increase in government spending
a.) an increase in the tax rate
A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of a.) frictional unemployment b.) cyclical unemployment c.) seasonal unemployment d.) structural unemployment
a.) frictional unemployment
If two households have the same disposable income in the current year, the household with the a.) higher expected future income will consume a larger portion of its current income today b.) lower expected future income will consume more today while it has the money c.) lower expected future income will spend a larger portion of its current income on consumption today because it will increase its saving int he future d.) none of the above
a.) higher expected future income will consume a larger portion of its current income today
A depository institution is a firm that takes deposits from ___ and makes loans to ___. a.) households and firms; other households and firms b.) firms only; household only c.) households only; firms only d.) firms only; other firms only
a.) households and firms; other households and firms
Suppose there is a rise in the price level, but no change in the money wage rate. As a result, the quantity of labor demanded a.) increases b.) decreases c.) does not change because there is no change in the real wage rate d.) decreases only if the money wage rate also decreases
a.) increases
An open market purchase of securities by the Fed a.) increases banks' reserves and decreases banks' securities b.) decreases banks' reserves and increases banks' securities c.) decreases banks' total assets d.) involves a bank purchasing government securities from the Fed
a.) increases banks' reserves and decreases banks' securities
If the government begin to run a larger budget deficits, then assuming there is no Ricardo-Barro effect, the demand for loanable funds ___ and the real interest rate ___. a.) increases; rises b.) decreases; falls c.) decreases; rises d.) increases; falls
a.) increases; rises
If unemployment is at the natural rate, then there a.) is no cyclical unemployment b.) is no frictional unemployment c.) will be cyclical and frictional unemployment but not structural unemployment d.) will be only cyclical unemployment
a.) is no cyclical unemployment
In 2008, the financial and housing crisis caused firms to decrease their profits expectations. As a result, there was a ___ in the ___ for loanable funds curve. a.) leftward shift; demand b.) movement upward along; demand c.) leftward shift; supply d.) movement downward along; supply
a.) leftward shift; demand
Monetary policy is conducted a.) only by the Federal Reserve b.) by the Federal Reserve and the Prez of the US c.) by the Federal Reserve, the Prez of the US, and Congress d.) by the Federal Reserve with veto power residing with the Prez of the US
a.) only by the Federal Reserve
If the price of a hot dog is $2 and the price of a hamburger is $4, then the a.) relative price of a hot dog is 1/2 of a hamburger per hot dog b.) money price of a hot dog is 2 hamburgers per hot dog c.) relative price of a hamburger is 1/2 of a hot dog per hamburger d.) money price of a hamburger is 2 hot dogs per hamburger
a.) relative price of a hot dog is 1/2 of a hamburger per hot dog
If the price of a hotdog is $2 and the price of a hamburger is $4, then the a.) relative price of a hotdog is 1/2 of a hamburger per hotdog b.) money price of a hotdog is 2 hamburgers per hotdog c.) relative price of a hamburger is 1/2 of a hotdog per hamburger d.) money price of a hamburger is 2 hotdogs per hamburger
a.) relative price of a hotdog is 1/2 of a hamburger per hotdog
The circular flow shows that the household sector earns its income by a.) selling factors of production b.) buying factors of production c.) selling goods and services d.) selling financial assets
a.) selling factors of production
The circular flow shows that the household sector earns its income by a.) selling factors of production b.) buying factors of production c.) selling goods and services d.) selling financial assets
a.) selling factors of production
Depository institutions do all of the following EXCEPT a.) set the required reserve ratio b.) create liquidity c.) pool risks d.) minimize the cost of obtaining funds
a.) set the required reserve ratio
Depository institutions are good at minimizing a.) the costs of monitoring borrowers b) risky borrowers c.) liquidity d.) all of the above
a.) the costs of monitoring borrowers
A fall in the unemployment rate could be caused by a.) unemployed workers giving up looking for a job b.) full-time workers becoming part-time workers c.) part-time workers becoming full-time workers d.) discouraged workers starting to look for jobs again
a.) unemployed workers giving up looking for a job
In September 2014, the labor force participation rate fell from 62.8 percent to 62.7 percent. This change could have been caused by a.) unemployed workers giving up looking for a job b.) full-time workers becoming part-time workers c.) unemployed workers getting full-time jobs d.) discouraged workers starting to look for jobs again
a.) unemployed workers giving up looking for a job
The economy is at full employment when a.) there are no unemployed workers b.) all unemployment is frictional or structural c.) there are fewer unemployed workers than available jobs d.) all unemployment is cyclical
b.) all unemployment is frictional or structural
Which of the following is consistent with the law of demand? a.) an increase in the price of a DVD causes an increase in the quantity of DVD's demanded b.) an increase in the price of soda causes a decrease in the quantity of soda demanded c.) a decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded d.) a decrease in the price of juice causes no change in the quantity of juice demanded
b.) an increase in the price of soda causes a decrease in the quantity of soda demanded
Depository institutions create liquidity when they a.) buy asses that are liquid b.) borrow short and lend long c.) have liabilities that are illiquid d.) borrow long and lend short
b.) borrow short and lend long
The consumer price index (CPI) a.) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of good typically consumed in period 2 b.) compares the cost in the current period to the cost in the reference base period of a basket of goods typically consumed in the base period c.) measures the increase in the prices of the goods included in GDP d.) is the ratio of the average price of a typical basket of goods to the cost of producing those goods
b.) compares the cost in the current period to the cost in the reference base period of a basket of goods typically consumed in the base period
The quantity demanded of a good or service is the amount that a.) a consumer would like to buy but might not be able to afford b.) consumers plan to buy at a given price c.) firms are willing to sell at a given price
b.) consumers plan to buy at a given price
During a recession, people drop out of the labor force because they are unable to find a job. All else the same, this a.) increases the official U-3 unemployment rate b.) decreases the official U-3 unemployment rate c.) does not change the official U-3 unemployment rate d.) increases the official U-3 unemployment rate and the labor force participation rate
b.) decreases the official U-3 unemployment rate
A decrease in the government budget deficit decreases the ___ loanable funds and an increase in the government budget surplus increases the ___ loanable funds. a.) demand for; demand for b.) demand for; supply of c.) supply of; demand for d.) supply of; supply of
b.) demand for; supply of
When the price level rises, the long-run aggregate supply curve a.) shifts rightward b.) does not shift c.) slopes upwards d.) shifts leftward
b.) does not shift
Liquidity is the a.) degree to which an asset acts as money without a loss of value b.) ease with which an asset can be converted into a means of payment with little or no loss of value c.) degree to which money can be converted into an asset with little or no loss of value d.) ease with which a means of payment can be converted into an asset with little or no loss of value
b.) ease with which an asset can be converted into a means of payment with little or no loss of value
Which of the following most likely would decrease frictional unemployment? a.) a decrease in the number of high school and college graduates b.) effective Internet-based employment services and job registries c.) an expansion of unemployment compensation benefits d.) all of the above would decrease frictional unemployment
b.) effective Internet-based employment services and job registries
Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1000 to $1250, then the interest rate on the bond a.) falls from 10% to 6% b.) falls from 10% to 8% c.) rises from 8% to 10% d.) does not change because it is not affected by the price of the bond
b.) falls from 10% to 8%
Suppose a firm has an investment project which will cost $200,000 and result in $30,000 profit. The firm will not undertake the project if the interest rate is a.) greater than 10 percent b.) greater than 15 percent c.) greater than 5 percent d.) positive
b.) greater than 15 percent
A worker's stock knowledge is known as a.) monetary capital b.) human capital c.) physical capital d.) financial capital
b.) human capital
Which of the following explains why supply curves slope upward? a.) prices and income b.) increasing marginal cost c.) resources and technoogy
b.) increasing marginal cost
If a new and better good replaced an older and less expensive good, then the price level measured by the CPI a.) is lower then the actual price level b.) is higher than the actual price level c.) might be either higher or lower then the actual price d.) is the same as the actual price level because it measures the prices of the actual goods
b.) is higher than the actual price level
If there is a surplus of a good, then the quantity demanded ___ the quantity supplied and the price will ___. a.) is less than; rise b.) is less than; fall c.) is greater than; rise d.) is greater than; fall
b.) is less than; fall
Modern U.S. commercial banks perform all of the following functions EXCEPT a.) accept checking deposits b.) issue (print) paper currency c.) make loans to household and business firms d.) accept savings deposits
b.) issue (print) paper currency
Which population category equals the sum of employed and unemployed people? a.) working-age population b.) labor force c.) young and institutionalized d.) not in the labor force
b.) labor force
Normally in the United States the relationship between nominal and real GDP for a given year is a.) real GDP is greater than nominal GDP because of price increases b.) nominal GDP is greater than real GDP because of price increases c.) nominal GDO equals real GDP d.) nominal GDP is greater than GDP because of price decreases
b.) nominal GDP is greater than real GDP because of price increases
Frictional unemployment is the result of a.) technological change or foreign competition b.) normal labor market turnover c.) a lowborn in the rate of economic expansion d.) irresponsible workers with poor work habits
b.) normal labor market turnover
The currently used method for calculating the CPI a.) accounts for people increasing consumption of a good that falls in relative price b.) probably overstates inflation c.) has no effect on government expenditures d.) none of the above answers are correct
b.) probably overstates inflation
In the United States, GDP is typically measured a.) monthly b.) quarterly c.) daily d.) weekly
b.) quarterly
An advance in technology that results in increased productivity results in a a.) rightward shift of the labor supply curve b.) rightward shift of the labor demand curve c.) rightward shift of both the labor supply and labor demand curves d.) no change to the production function
b.) rightward shift of the labor demand curve
When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing a.) frictional unemployment b.) structural unemployment c.) frictional and cyclical unemployment d.) cyclical unemployment
b.) structural unemployment
Substitution bias in the CPI refers to the fact that the CPI a.) takes into account the substation of goods by consumers when relative prices change b.) takes no account of the substitution of goods by consumers when relative prices change c.) substitutes quality changes whenever they occur without taking account of the cost of the quality changes d.) substitutes relative prices for absolute prices of goods
b.) takes no account of the substitution of goods by consumers when relative prices change
Assume the inflation rate falls from 4 percent to 2 percent. This means that a.) the price level has fallen b.) the price level is increasing more slowly c.) the economy is experiencing deflation d.) real GDP is decreasing
b.) the price level is increasing more slowly
Reported GDP increases when, in fact, total production in unchanged when i. there is a shift from household production to market production ii. a previously illegal activity is legalized
both i and ii
Suppose that the total labor force is 100 individuals with 10 unemployed. The unemployment rate is ___. Now assume that 10 people drop out of the labor force and that 10 remain unemployed. The new unemployment rate is ___. a.) 9%; 10% b.) 10%; 9% c.) 10%; 11% d.) 11%; 10%
c.) 10%; 11%
Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor forceparticipation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed? a.) 100 million people b.) 25 million people c.) 20 million people d.) 5 million people
c.) 20 million people
In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million are of working age. How many people are not in the labor force? a.) 19 percent b.) 9 million c.) 5 million d.) 4 million
c.) 5 million
Suppose the last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years? a.) 30.7 percent b.) 6.7 percent c.) 5.4 percent d.) 5.1 percent
c.) 5.4 percent
Suppose there are 100 million in the labor force, and 6 million unemployed people. During the next month, 200,000 people loss their jobs and 300,000 find jobs. The new total of employed persons is ___ and the new unemployment rate is ___. a.) 100.1 million; 5.8 percent b.) 100 million; 6.1 percent c.) 94.1 million; 5.9 percent d.) 93.9 million; 6.1 percent
c.) 94.1 million; 5.9 percent
Which of the following shifts the demand for loanable funds curve leftward? a.) a fall in the real interest rate b.) a rise in the real interest rate c.) a decrease in the expected profit d.) a decrease in the taxes paid by the business
c.) a decrease in the expected profit