Macro Exam 1
In a closed economy, if Y, C, and T remained the same, a decrease in G would A. reduce private saving and public saving. B. increase private saving but not public saving. C. increase public saving but not private saving. D. increase neither private nor public saving.
C
A statistical discrepancy A. exists because data sources are not perfect, so measures of expenditures and income are not equal. B. insures that GDP will approximately equal GNP. C. explains the close association between GDP and quality of life measures such as literacy and life expectancy. D. explains the inadequacy of GDP in capturing the value of leisure and the value of a clean environment.
A
In the GDP accounts production equals A. income. B. income + saving. C. income − government expenditures. D. income − imports.
A
In the simple circular-flow diagram, with households and firms, GDP can be computed as the A. income received by households, in the form of wages, rent and profit. B. income received by households in the form of wages. C. payments made by firms for labor. D. profits received by households.
A
Industrial machinery is an example of A. a factor of production that in the past was an output from the production process. B. technological knowledge. C. a production function. D. an item which always has the property called constant returns to scale.
A
Other things the same, a country that increases its savings rate will have A. higher future capital and higher future real GDP per person. B. higher future capital but not higher future real GDP per person. C. higher future real GDP per person but not higher future capital. D. neither higher future capital nor higher future real GDP per person.
A
Other things the same, which of the following would increase productivity? A. An increase in either human or physical capital B. An increase in human capital but not an increase in physical capital C. An increase in physical capital but not an increase in human capital D. Neither an increase in human capital nor an increase in physical capital
A
The following table presents information about a closed economy whose market for loanable funds is in equilibrium. GDP $7.3 trillion Consumer Spending $5.2 trillion Taxes Minus Transfers $1.1 trillion Government Purchases $0.7 trillion The quantity of loanable funds demanded is A. $1.4 trillion. B. $1 trillion. C. $2.1 trillion. D. $6.2 trillion.
A
The following table reports nominal and real GDP for the U.S. from 1929 to 1932. Year Nominal GDP (Billions of dollars) Real GDP (Billions of dollars) 1929 103.6 977 1930 91.2 892.8 1931 76.5 834.9 1932 58.7 725.8 What was the growth rate of real GDP for 1930? A. 8.62%. Real GDP is a better gauge of economic well-being than nominal GDP. B. 8.62%. Nominal GDP is a better gauge of economic well-being than real GDP. C. 9.43%. Real GDP is a better gauge of economic well-being than nominal GDP. D. 9.43%. Nominal GDP is a better gauge of economic well-being than real GDP.
A
The rate of real economic growth is A. underestimated using measures of income growth. You Answered B. overestimated using measures of income growth. C. underestimated using measures of technological growth. D. overestimated using measures of technological growth.
A
Which of the following is included in the calculation of GDP? A. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country. B. The purchase of a new edition of a foreign textbook that was produced in a different nation. C. The purchase of ink and paper supplies by a textbook company for the production of new textbooks. D. The purchase of a used textbook from a friend who took the same class last year.
A
Which of the following provide benefits to society at large and not just to the person(s) who pursues it? A. Both technological knowledge that is a public good and education B. Technological knowledge that is a public good, but not education C. Education, but not technological knowledge that is a public good D. Neither education, nor technological knowledge that is a public good
A
In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the A. GDP deflator rises much more than does the consumer price index. B. consumer price index rises much more than does the GDP deflator. C. GDP deflator and the consumer price index rise by about the same amount. D. consumer price index rises slightly more than does the GDP deflator.
B
Indexation refers to A. a process of adjusting the nominal interest rate so that it is equal to the real interest rate. B. using a law or contract to automatically correct a dollar amount for the effects of inflation. C. using a price index to deflate dollar values. D. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.
B
Over the last century, U.S. real GDP per person grew at a rate of about A. 2 percent per year, so that it is now 2 times as high as it was a century ago. B. 2 percent per year, so that it is now 8 times as high as it was a century ago. C. 4 percent per year, so that it is now 2 times as high as it was a century ago. D. 4 percent per year, so that it is now 8 times as high as it was a century ago.
B
Which of the following statements is correct? A. A large, well-known corporation such as Proctor and Gamble would generally use financial intermediation to finance expansion of its factories. B. On average, index funds outperform managed funds. C. Unlike corporate bonds and stocks, checking accounts are a store of value. D. Financial intermediaries are institutions through which savers can directly provide funds to borrowers.
B
Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were A. public goods and proprietary knowledge. B. public goods but not proprietary knowledge. C. private goods and proprietary knowledge. D. private goods but not proprietary knowledge.
C
As an alternative to selling shares of stock as a means of raising funds, a large company could, instead, A. invest in physical capital. B. use equity finance. C. sell bonds. D. purchase bonds.
C
GDP per person tells us the income and expenditure of the A. richest person in the economy. B. poorest person in the economy. C. average person in the economy. D. entire economy.
C
Keira is a farmer. Which of the following are included in her human capital? A. Her seed drill and what she's learned from experience B. Her seed drill but not what she's learned from experience C. What she's learned from experience but not her seed drill D. Neither her seed drill nor what she's learned from experience
C
One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called A. price-change neglect. B. unmeasured quality change. C. substitution bias. D. relative bias.
C
Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct? A. The newspaper editorial is correct under all circumstances. B. The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI. C. The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI D. The newspaper editorial is incorrect under all circumstances.
C
When ranking movies by nominal box office receipts, what important fact is overlooked? A. More people go to movies now than in the past. B. There are no good substitutes for movies currently. C. Prices, including those for movie tickets, have been rising over time. Do Movies and DVD are complements.
C
When the government's budget deficit increases the government is borrowing A. less and public savings falls. B. less and public savings increases. C. more and public savings falls. D. more and public savings increases.
C
In a simple circular-flow diagram, total income and total expenditure are A. never equal because total income always exceeds total expenditure. B. seldom equal because of the ongoing changes in an economy's unemployment rate. C. equal only when the government purchases no goods or services. D. always equal because every transaction has a buyer and a seller.
D
It is claimed that a secondary advantage of mutual funds is that A. an investor can avoid investment charges and fees. B. they give ordinary people access to loanable funds for investing. C. they usually outperform stock market indexes. D. they give ordinary people access to the skills of professional money managers.
D
Most goods and services produced at home A. and most goods and services produced illegally are included in GDP. B. are included in GDP while most goods and services produced illegally are excluded from GDP. C. are excluded from GDP while most goods and services produced illegally are included in GDP D. and most goods and services produced illegally are excluded from GDP.
D
One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI A. fails to account for consumer spending on housing. B. accounts only for consumer spending on food, clothing, and energy. C. fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. D. fails to account for the introduction of new goods.
D
Suppose private saving in a closed economy is $21b and investment is $8b. A. National saving must equal $21b. B. Public saving must equal $13b. C. The government budget surplus must equal $13b. D. The government budget deficit must equal $13b.
D
Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that A. GDP will increase in 2019. B. the producer price index will increase by more than 1.5 percent in 2019. C. interest rates will decrease in the future. D. the consumer price index will increase in the future.
D
Two of the economy's most important financial intermediaries are A. suppliers of funds and demanders of funds. B. banks and the bond market. C. the stock market and the bond market. D. banks and mutual funds.
D
Which of the following statements about the term of a bond is correct? A. Term refers to the various characteristics of a bond, including its interest rate and tax treatment. B. The term of a bond is determined entirely by its credit risk. C. The term of a bond is determined entirely by how much sales commission the buyer of the bond pays when he or she purchases the bond. D. Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
D
Recessions are associated with lower incomes, rising unemployment, and falling profits. True/False
True
If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent. True/False
True
Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time. True/False
True
Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds. True/False
True
The output of goods and services produced in the United States has grown on average 3 percent per year since 1965. True/False
True
To state that national saving is equal to investment, for a closed economy, is to state an accounting identity. True/False
True
As long as prices are rising over time, then A. the nominal interest rate exceeds the real interest rate. B. the real interest rate exceeds the nominal interest rate. C. the real interest rate is positive. D. the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time.
A
Changes in real GDP reflect A. only changes in prices. B. only changes in the amounts being produced. C. both changes in prices and changes in the amounts being produced. D. neither changes in prices nor changes in the amounts being produced.
B
During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person A. grew by more than 12 percent. B. grew, but by less than 12 percent. C. was unchanged. D. decreased.
B
In determining living standards, productivity plays a key role for A. individuals, but not for nations. B. nations, but not for individuals. C. both nations and individuals. D. neither nations nor individuals.
C
Which of the following statements is correct about the relationship between inflation and interest rates? A. There is no relationship between inflation and interest rates. B. The interest rate is determined by the rate of inflation. C. In order to fully understand inflation, we need to know how to correct for the effects of interest rates. D. In order to fully understand interest rates, we need to know how to correct for the effects of inflation.
D
An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services. True/False
False
An increase in the saving rate permanently increases the growth rate of real GDP per person. True/False
False
Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds. True/False
False
Economists generally agree on the role the government should play in promoting productivity and economic growth. True/False
False
If real GDP is higher in one country than in another, then we can be sure that the standard of living is higher in the country with the higher real GDP. True/False
False
If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent. True/False
False
If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006. True/False
False
If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation. True/False
False
Most entrepreneurs finance their purchases of real capital using their past saving. True/False
False
The government computes measures of income other than GDP because these other measures usually tell different stories about overall economic conditions. True/False
False
When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stock. True/False
False
An increase in a country's saving rate permanently raises its productivity. True/False
True
Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience. True/False
True
If a rich country reduced subsidies to domestic producers of goods that poor countries have a comparative advantage producing, the standard of living in these poor countries would likely rise. True/False
True