Macro economics

Net exports are a country's export of -goods plus its imports of services. -goods and services less its imports of goods and services. -goods less its imports of services. -goods and services plus its imports of goods and services.

goods and services less its imports of goods and services.

Demand-pull inflation occurs when -there is a negative price gap. -prices rise because of an increase in aggregate spending not fully matched by an increase in aggregate output. -there is a negative GDP gap. -there are increases in per-unit costs of production.

prices rise because of an increase in aggregate spending not fully matched by an increase in aggregate output.

An increase in __________ GDP guarantees that more goods and services are being produced by an economy. -real -nominal

real

The more reliable measure for comparing changes in the standard of living over a series of years is -nominal GDP -average GDP -marginal GDP -real GDP

real GDP

If a $50 billion initial increase in spending leads to a $250 billion change in real GDP, how big is the multiplier? -2.5 -5.0 -4.0 -1.0

5.0

An increase in your nominal income and a decrease in your real income might occur simultaneously if -your real income increases at the same rate as the cost of living increases. -your real income increases more than the cost of living increases. -your nominal income increases more than the cost of living increases. -your nominal income increases less than the cost of living increases

your nominal income increases less than the cost of living increases

If foreigners spend $7 billion on U.S. exports in a given year and Americans spend $5 billion on imports from abroad in the same year, what is the value of U.S. net exports? − $2 billion − $12 billion + $12 billion + $2 billion

+ $2 billion

What is the demand factor? -The level of purchases needed to maintain full employment. -The level of output needed to maintain the trade balance.

-The level of purchases needed to maintain full employment

What are the four supply factors of economic growth? -The quality and quantity of natural resources -The stock of capital goods -The quality and quantity of human resources -The number of trading partners -The type of government -The level of technology

-The quality and quantity of natural resources -The stock of capital goods -The quality and quantity of human resources -The level of technology

The benefits of economic growth, particularly as measured by real GDP per capita, include -improved international trade. -higher living standards for the vast majority of people. -greater mental health for the vast majority of people. -improved physical health for the vast majority of people.

-higher living standards for the vast majority of people.

In year 1, Adam earns $1,000 and saves $100. In year 2, Adam gets a $500 raise so that he earns a total of $1,500. Out of that $1,500, he saves $200. What is Adam's MPC out of his $500 raise? -1.00 -0.80 -0.75 -0.50

0.80

Suppose that a country has 9 million people working full-time. It also has 1 million people who are actively seeking work but are currently unemployed, along with 2 million discouraged workers who have given up looking for work and are currently unemployed. What is this country's unemployment rate? -10 percent -15 percent -20 percent -25 percent

10 percent

Assume the following data for a country: CategoryNumber of People, Millions Total population 500 Population under 16 years of age or institutionalized 120 Not in the labor force 150 Unemployed 23 Part-time workers looking for full-time jobs 10 Instructions: Enter your answers as a whole number. a. What is the size of the labor force? b. What is the official unemployment rate?

A. 230 million B. 10%

Net exports might be a negative amount if -Americans spend less on imports than foreign countries spend on American exports. -Americans spend more on imports than foreign countries spend on American exports.

Americans spend more on imports than foreign countries spend on American exports.

Who gains from inflation? -No one benefits from inflation. -Borrowers -Lenders -Those with the most skill.

Borrowers

Which of the following statements is true? -Deflation means that the price level is falling, whereas with inflation overall prices are rising. -Deflation means that the inflation rate is falling, whereas with inflation overall prices are rising. -Deflation means that the price level is falling, whereas with inflation the inflation rate is rising. -Deflation means that the inflation rate is falling, whereas with inflation the inflation rate is rising.

Deflation means that the price level is falling, whereas with inflation overall prices are rising.

When did modern economic growth begin? -In the year 1000. -At the start of the Roman Empire around the year 500 B.C. -In the late 1800s after the railroads were built. -During the Industrial Revolution in the late 1700s.

During the Industrial Revolution in the late 1700s.

Has economic output always grown faster than the population? -No, rapid and sustained economic growth is a modern phenomenon. -Yes, rapid and sustained economic growth has been occurring since the beginning of the human inhabitation of the earth. -No, population has always grown faster than output. -This is impossible to know.

No, rapid and sustained economic growth is a modern phenomenon.

Which of the following statements is true? -Real GDP is nominal GDP added to the price index. -Real GDP is nominal GDP subtracted from the price index. -Real GDP is nominal GDP divided by the price index. -Real GDP is nominal GDP multiplied by the price index.

Real GDP is nominal GDP divided by the price index

Who measures the labor force, and how is it defined? -The U.S. Bureau of Labor Statistics (BLS) measures the labor force as people over 18 years of age who are employed and those who are actively seeking work. -The U.S. Bureau of Labor Statistics (BLS) measures the labor force as people over 16 years of age who are employed and those who are actively seeking work. -The U.S. Labor Commission (USLC) measures the labor force as people over 18 years of age who are employed and those who are actively seeking work. -The U.S. Bureau of Employment (USBE) measures the labor force as people over 16 years of age who are employed and those who are actively seeking work.

The U.S. Bureau of Labor Statistics (BLS) measures the labor force as people over 16 years of age who are employed and those who are actively seeking work.

What is the efficiency factor? -The level of purchases needed to maintain full employment. -The level of economic efficiency and full employment needed to reach full production potential.

The level of economic efficiency and full employment needed to reach full production potential.

The losers from inflation are those with -incomes rising as fast as the rate of inflation. -fixed incomes in nominal terms. -no savings. -significant debt.

fixed incomes in nominal terms

The GDP price index is - a measure of nominal GDP adjusted for inflation. - computed for each industry sector. - a measure of the price of a specified collection of goods and services compared to the average of the prices of a highly similar collection of goods and services for the last 10 years. - a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year.

a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year.

Identify each of the following situations as something that either promotes growth or inhibits growth. a. Increasing corruption allows government officials to steal people's homes: b. A nation introduces patent laws for the first time c. A court order shuts down all banks permanently d. A poor country extends free public schooling from 8 years to 12 years e. A nation adopts a free-trade policy f. A formerly communist country adopts free markets

a. Increasing corruption allows government officials to steal people's homes: b. A nation introduces patent laws for the first time: c. A court order shuts down all banks permanently: d. A poor country extends free public schooling from 8 years to 12 years e. A nation adopts a free-trade policy f. A formerly communist country adopts free markets

Label each of the following scenarios as either frictional unemployment, structural unemployment, or cyclical unemployment. a. Tim just graduated from college and is looking for a job. b. A recession causes a local factory to lay off 30 workers. c. Thousands of bus and truck drivers permanently lose their jobs to self-driving vehicles. d. Hundreds of New York legal jobs permanently disappear when a lot of legal work gets outsourced to lawyers in India.

a. Tim just graduated from college and is looking for a job. Frictional unemployment b. A recession causes a local factory to lay off 30 workers. Cyclical unemployment c. Thousands of bus and truck drivers permanently lose their jobs to self-driving vehicles. Structural unemployment d. Hundreds of New York legal jobs permanently disappear when a lot of legal work gets outsourced to lawyers in India. Structural unemployment

The Consumer Price Index (CPI) is determined each month by - estimating the prices of goods and services in the economy at the same rate as the cost of living increases. - averaging all the prices of goods and services in the economy. - comparing the value of a market basket of goods that consumers typically purchase to the value of the basket in a base year. -comparing the value of a market basket of goods that consumers typically purchase to the value of the basket in cities around the country.

comparing the value of a market basket of goods that consumers typically purchase to the value of the basket in a base year.

The type of inflation that is more likely to be associated with a negative GDP gap is -international inflation. -cost-push inflation. -output inflation. -demand-pull inflation.

cost-push inflation

If there is an increase in the unemployment rate, the size of the labor force -could increase or decrease. -must increase. -will not change. -must decrease.

could increase or decrease.

The type of inflation that is more likely to be associated with a positive GDP gap is -output inflation. -international inflation. -demand-pull inflation. -cost-push inflation.

demand-pull inflation.

Gross domestic product does not include the value of the stocks and bonds bought and sold because these transactions are considered -economic investment and should not be counted as production of final goods and services. -consumption expenditures, but should be counted as production of final goods and services. -economic investment, but should be counted as production of final goods and services. -consumption expenditures and should not be counted as production of final goods and services.

economic investment and should not be counted as production of final goods and services

Suppose that just by doubling the amount of output that it produces each year, a firm's per-unit production costs fall by 30 percent. This result is an example of: -the demand factor. -technological advance. -improved resource allocation. -economies of scale

economies of scale

if the MPS rises, then the MPC will: -stay the same. -fall. -rise

fall

Economists include only final goods and services when measuring GDP because -if intermediate goods were counted, then prices would be overstated. -if intermediate goods were not counted, then multiple counting would occur. -if intermediate goods were not counted, then prices would be overstated. -if intermediate goods were counted, then multiple counting would occur.

if intermediate goods were counted, then multiple counting would occur.

If the demand for a firm's output unexpectedly decreases, you would expect its inventory to: - remain the same. - decrease. - increase. - increase or remain the same, depending on whether or not prices are sticky.

increase or remain the same, depending on whether or not prices are sticky.

A cost of economic growth is -economic growth may cause international disruptions. -it has not solved sociological problems such as poverty, homelessness, and discrimination. -economic growth may not benefit all. -economic growth may limit international trade.

it has not solved sociological problems such as poverty, homelessness, and discrimination.

The nominal interest rate -minus nominal income is the inflation rate. -plus the real interest rate is the inflation rate. -plus the inflation rate is the real interest rate. -minus the inflation rate is the real interest rate.

minus the inflation rate is the real interest rate.

Inflation -reduces the purchasing power of the dollar. -reduces the export power of the dollar. -lowers interest rates. -increases the purchasing power of the dollar.

reduces the purchasing power of the dollar.

The Bureau of Labor Statistics (BLS) calculates the inflation rate from one year to the next by -adding the CPI of the previous year to the CPI of the most recent year, and then dividing by 2. -adding the CPI of the previous year to the CPI of the most recent year, and then dividing by the average of both years. -subtracting the CPI of the previous year from the CPI of the most recent year, and then dividing by the CPI of the most recent year. -subtracting the CPI of the previous year from the CPI of the most recent year, and then dividing by the CPI of the previous year.

subtracting the CPI of the previous year from the CPI of the most recent year, and then dividing by the CPI of the previous year.

Nominal GDP is -adjusted for inflation, whereas real GDP is the market or money value of all final goods and services produced by the economy in a given year. -the sum of intermediate and final goods and services, whereas real GDP is the sum of final goods and services only. -determined in the market, whereas real GDP is computed by a government agency. -the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation

the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation

The unemployment rate that is consistent with full employment is __________. -Okun's rate of unemployment -cyclical unemployment -the status quo rate of unemployment -the unnatural rate of unemployment -the natural rate of unemployment

the natural rate of unemployment

The unemployment rate is defined as -the number of unemployed persons divided by the labor force. -the number of adults divided by the labor force. -the proportion of the adult population looking for work. -the ratio of the number of adults who are working divided by the adult population.

the number of unemployed persons divided by the labor force.

When measuring GDP, economists don't include the value of the used furniture bought and sold because -the value of used furniture needs to be averaged over a specified number of years. -used furniture is a durable good. -this value was already counted in GDP in some previous year. -the value of used furniture is not reported anywhere.

this value was already counted in GDP in some previous year.

A positive unemployment rate—more than zero percent—is fully compatible with full employment because at full employment, -there is usually some unemployment due to the business cycle. -unemployment includes seasonal unemployment, which is usually positive because people are transitioning to new jobs. -the economy is producing at capacity. -unemployment includes frictional unemployment, which is always positive because people are transitioning to new jobs

unemployment includes frictional unemployment, which is always positive because people are transitioning to new jobs