Macro Final Exam Practice 2

Consumption spending will ________ when disposable income ________. A)decrease; increases B)increase; decreases C)increase; increases D)change unpredictably; decreases

C

Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except A)technological advancement in the production of electric car batteries. B)a decrease in the price of lithium, which is used in the electric car batteries. C)an increase in the price of gasoline. D)an increase in the number of manufacturers of electric cars.

C

Expansionary fiscal policy will A)not shift the aggregate demand curve. B)shift the aggregate demand curve to the left. C)shift the aggregate demand curve to the right. D)shift the short-run aggregate supply curve to the left.

C

If the Fed raises the interest rate, this will ________ inflation and ________ real GDP in the short run. A)reduce; raise B)increase; lower C)reduce; lower D)increase; raise

C

Intel is the world's largest semiconductor manufacturer and a major supplier of the microprocessors and memory chips found in most personal computers. During the recession of 2007-2009, Intel's revenues ________ and it ________ the size of its workforce. A)rose; decreased B)rose; increased C)fell; decreased D)fell; increased

C

Monetary policy can A)shift the long-run trade-off between inflation and unemployment through changes in cyclical unemployment. B)shift neither the short-run nor long-run Phillips curve trade-offs between inflation and unemployment. C)shift the short-run trade-off between inflation and unemployment if it affects expected inflation. D)shift both the short-run and long-run trade-offs between inflation and unemployment if changes in policy are credible.

C

The aggregate demand curve shows the relationship between the ________ and ________. A)inflation rate; quantity of real GDP demanded B)nominal interest rate; quantity of real GDP demanded C)price level; quantity of real GDP demanded D)real interest rate: quantity of real GDP supplied

C

The economic growth model predicts that A)GDP per capita of poor countries will never change. B)GDP per capita of rich countries will grow more rapidly than in poor countries. C)GDP per capita of poor countries will grow more rapidly than in rich countries. D)Governments must centrally direct the economy for growth to occur.

C

The leader of the monetarist school and major proponent of a monetary growth rule was A)Ben Bernanke. B)Alan Greenspan. C)Milton Friedman. D)Paul Volcker.

C

The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant. A)capital; labor; real GDP B)labor; real GDP; technology C)capital; real GDP; technology D)labor; capital; real GDP

C

An example of a factor of production is A)a loan granted to an auto manufacturer. B)the automobiles exported by an auto manufacturer. C)a car produced by an auto manufacturer. D)a worker hired by an auto manufacturer.

D

Because of the productivity slowdown in the United States from the mid-1970s through the mid-1990s, A)the standard of living increased in the United States. B)the standard of living did not change. C)real GDP per capita grew more rapidly. D)real GDP per capita grew more slowly

D

During the recession of 2007-2009, the demand for print advertising has ________ and this has________ unemployment in the newspaper industry. A)increased; increases B)declined; reduced C)increased; reduced D)declined; increased

D

If Congress wanted to counteract the effects of a recession it could A)decrease defense spending. B)increase taxes by a fixed amount. C)increase tax rates. D)increase government purchases.

D

M1 includes A)coins, savings account balances, traveler's checks. B)currency in circulation, savings account balances, and checking account deposits in banks. C)currency in circulation, savings account balances, checking account deposits in banks, and holdings of traveler's checks. D)currency in circulation, checking account deposits in banks, and holdings of traveler's checks.

D

One reason Zimbabwe suffered from hyperinflation is that the government had decided to pay for all of its expenses by A)selling its government-run oil company to a private company, which then defaulted on its payment. B)raising interest rates to attract foreign direct investment, then nationalizing the foreign-owned facilities. C)selling Treasury bonds to foreign governments. D)printing more and more money.

D

Suppose that real GDP for 2008 was $10,000 billion and real GDP for 2009 was $11,000 billion.What is the rate of growth of real GDP between 2008 and 2009? A)1% B)2% C)5% D)10%

D

The actual real wage is lower than the expected real wage if A)actual unemployment is less than expected unemployment. B)actual unemployment is less than actual inflation C)actual inflation is less than expected inflation. D)expected inflation is less than actual inflation.

D

The level of real GDP in the long run is called A)short-run GDP. B)frictional GDP. C)low-capacity GDP. D)potential GDP.

D

Which of the following financial securities is most liquid? A)a cashier's check B)a share of stock C)a savings account D)a $20 bill

D

Which of the following is an example of an economic trade-off that a firm has to make? A)deciding what profit margin it desires for its products B)deciding why consumers want its products C)whether or not consumers will buy its products D)whether it is cheaper to produce with more machines or with more workers

D

A bank holds its reserves as ________ and ________. A)vault cash; deposits at the Federal Reserve B)vault cash; loans C)securities; loans D)securities; deposits at the Federal Reserve

A

Autonomous expenditure is a type of expenditure that does not depend on A)GDP. B)wealth. C)rates. D)expectations.

A

By the 2000s, an important market change occurred when investment banks became significant participants in the secondary market for A)mortgages. B)currency. C)corporate bonds D)Treasury securities.

A

Government deficits tend to increase during A)periods of war and recession. B)periods of below- or above-average growth. C)periods of increased financial uncertainty. D)recessions and booms.

A

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called A)macroeconomics. B)normative economics. C)public economics. D)microeconomics.

A

The short-run aggregate supply curve has a A)positive slope. B)slope equal to infinity. C)negative slope. D)slope equal to zero.

A

What can the Federal Reserve do to reduce the natural rate of unemployment? A)nothing B)follow expansionary monetary policy that will reduce inflation C)follow expansionary monetary policy that will increase inflation D)follow contractionary monetary policy that will increase inflation

A

Which of the following would be considered an active fiscal policy? A)A tax cut is designed to stimulate spending passed during a recession. B)Tax incentives are offered to encourage the purchase of fuel efficient cars. C)The Fed increases the money supply. D)Spending on the war in Afghanistan is increased to promote homeland security.

A

A decrease in aggregate demand causes a decrease in ________ only in the short run, but causes a decrease in ________ in both the short run and the long run. A)real GDP; real GDP B)real GDP; the price level C)the price level; the price level D)the price level; real GDP

B

A period of expansion in the business cycle ends when A)the business cycle reaches its trough. B)the business cycle reaches its peak. C)real GDP is equal to potential GDP. D)real GDP is less than potential GDP.

B

Federal Reserve Board Chairmen Paul Volcker, Alan Greenspan, and Ben Bernanke all have focused on which of the following as their main goal of monetary policy? A)economic growth B)price stability C)high employment D)stability of financial markets

B

Gross domestic product in the economy is measured by the A)total number of goods and services produced in the economy. B)dollar value of all final goods and services produced in the economy. C)total number of services produced in the economy. D)total number of goods produced in the economy.

B

If the economy is growing beyond potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in A)the money supply and a decrease in interest rates. B)taxes. C)oil prices. D)government purchases.

B

If you are considering buying either a can of Red Bull or a can of Monster Energy, and you choose Monster only because the price is lower, then you consider A)Red Bull to be a normal good and Monster to be an inferior good. B)Red Bull and Monster to be substitutes. C)Red Bull to be an inferior good and Monster to be a normal good. D)Red Bull and Monster to be complements.

B

In August 1979, President Jimmy Carter appointed ________ as chairman of the Board of the Federal Reserve System. A)G. William Miller B)Paul Volcker C)Ben Bernanke D)Alan Greenspan

B

It is ________ difficult to effectively time fiscal policy than monetary policy because ________. A)less; monetary policy takes longer to implement B)more; fiscal policy takes longer to implement C)less; monetary policy takes longer to decide and change D)more; fiscal policy can be quickly decided and changed

B

The CPI in 1990 was 131, and the CPI in 2008 was 215. If you earned a salary of $40,000 in 1990,what would be a salary with equivalent purchasing power in 2008? A)$52,400 B)$65,649 C)$86,000 D)$105,649

B

The measure of production that values production using current prices is called A)underground GDP. B)nominal GDP. C)value-added GDP. D)real GDP.

B

The quantity theory of money assumes that A)the velocity of money is zero. B)the velocity of money is constant C)the velocity of money fluctuates unpredictably. D)the velocity of money is negative.

B

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring? A)Incomes are growing at a slower rate than the population. B)Real GDP per capita is rising C)Living standards are falling. D)Real GDP is falling.

B

Which of the following accurately describes an effect of hurricane Katrina on GDP? A)GDP would decrease reflecting the costs of cleanup. B)GDP would increase reflecting the costs of cleanup. C)GDP would increase well-being. D)GDP would increase reflecting the decrease in production that occurred during the storm and the productive capacity lost in the storm.

B

Which of the following is a positive economic statement? A)People should not buy imported fruits and vegetables. B)The minimum wage law causes unemployment. C)The government should subsidize solar power for homeowners. D)The number of work visas should not be limited by the government.

B

________ exists because unlimited wants exceed the limited resources available to fulfill those wants. A)Economic growth B)Scarcity C)Productive efficiency D)The command economy

B

A supply curve A)is the relationship between the supply of a good and the cost of producing the good. B)is a table that shows the relationship between the price of a product and the quantity of the product supplied. C)is a curve that shows the relationship between the price of a product and the quantity of the product supplied. D)is a curve that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange.

C

According to the ________ Phillips curve, the unemployment rate and the inflation rate are negatively related. A)long-run B)long-run and short-run C)short-run D)rational expectations

C

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called A)frictional unemployment. B)unnatural unemployment. C)structural unemployment. D)cyclical unemployment. E)seasonal unemployment.

C

When the Fed embarked on a policy known as quantitative easing, they A)they reduced the required reserve ration by one-quarter point per month for 12 months. B)opened up lending to primary dealers, commercial banks, and investment banks. C)bought longer-term securities than are usually bought in open market operations. D)slowly lowered the federal funds rate target until it was equal to zero.

C

Which of the following accurately describes economic growth and standards of living between 1,000,000 B.C. and 1300 A.D.? A)Significant economic growth took place between 1,000,000 B.C. and 1300 A.D. B)Standards of living in 1300 A.D. were substantially better than what they were in 1,000,000B.C.. C)No sustained economic growth occurred between 1,000,000 B.C. and 1300 A.D. D)Standards of living substantially declined from 1,000,000 B.C. to 1300 A.D.

C

Which of the following is not a major function of the Federal Reserve System? A)controlling the money supply B)clearing checks between banks C)setting income tax rates D)lender of last resort

C