Macro test 2

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

5.0

Refer to the figure and assume that price is fixed at $37,000 and that Buzzer Auto needs 5 workers for every 1 automobile produced. If demand is DM and Buzzer wants to perfectly match its output and sales, how many cars will Buzzer produce and how many workers will it hire?

900 cars and 4,500 workers

Which of the following transactions are counted in GDP?

A Kerry buys a new sweater to wear this winter

Economists agree that __________ inflation reduces real output.

A cost push Inflation

If total spending is just sufficient to purchase an economy's output, then the economy is in:

equilibrium

Net exports are

exports less imports

If real GDP grows at 7 percent per year, then real GDP will double in approximately _________ years.

10

A country's current unemployment rate is 11 percent. Economists estimate that its natural rate of unemployment is 6 percent. About how large is this economy's negative GDP gap?

10 percent

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 economy's unemployment rate?

10%

If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase by:

2 billion

Which of the following will increase and shift the aggregate supply curve?

A new networking technology increases productivity all over the economy

Gross Domestic Product may be calculated as the sum of

Consumption, investment, government purchases, and net exports.

Unemployment due to economic downturn and low demand is called

Cyclical Unemployment

If the MPS rises, then the MPC will?

Fall

If the demand for a firm's output unexpectedly decreases and prices are sticky, you would expect its inventory to:

Increase

Place the phases of the business cycle in order, starting with highest level of gdp

Peak, Recession, Trough, Expansion

Which of the following scenarios will shift the investment demand curve right?

The expected return on capital increases

Which of the following will reduce and shift the aggregate demand curve?

The government reduces personal income taxes

Most economists agree that the immediate cause of the large majority of cyclical changes in the levels of real output and employment is unexpected changes in ___________________.

The level of Total Spending

The unemployment rate that is consistent with full employment is _______________.

The natural rate of unemployment

Transfer payments are excluded when calculating the GDP because:

They do not reflect current production

Cost-of-living adjustment clauses (COLAs):

Tie wage increases to changes in the price level

Frictional and structural unemployment is inevitable in dynamic economy

True

Larger MPCs imply larger multipliers

true

Suppose that the CPI was 110 last year and is 108 this year. What is this called?

deflation

During periods of hyperinflation

people tend to hold goods rather than money

An increase in _______ GDP guarantees that more goods and services are being produced by an economy.

real

Cost-push inflation occurs in the presence of

rising per unit production costs

Full employment is when every worker is employed

true

Irving owns a chain of movie theaters. He is considering whether he should build a new theater downtown. The expected rate of return is 15 percent per year. He can borrow money at a 12 percent interest rate to finance the project. Should Irving proceed with this project?

yes