Macroeconomics Final

Per capita real gross domestic product (GDP) is higher in the United States than in Mexico. Based on that, we could predict the United States to have a higher rate of ________ and a lower rate of ________.

Internet users; infant mortality

Suppose that an increase in the price level reduces the value of real wealth, which then causes a reduction in consumption but no change in saving. In this case, there is

a wealth effect but no interest rate effect.

It is reasonable to expect that as the amount of physical capital is increased, the amount of output produced will

increase at a diminishing rate

In a population, the size of the labor force shrinks but a greater percentage of the labor force has a college degree. We can expect the human capital input to

increase or decrease depending on which change has a larger impact.

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will ________ and aggregate demand today will ________.

increase; increase

You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will ________ and aggregate demand will ________.

increase; increase

If people expect higher incomes in the future, then spending today ________ and aggregate demand ________.

increases; increases

If prices fall, then real wealth ________ and the quantity of aggregate demand ________.

increases; increases

When median home prices rise, the value of real wealth ________ and aggregate demand ________.

increases; increases

According to modern growth theory, the key to economic growth is

institutions.

When a change in the price level leads to a change in the interest rate and thus a change in the quantity of aggregate demand, it is called the ________ effect.

interest rate

When firms invest less because people are saving less, it is called the ________ effect.

interest rate

When a change in the price level leads to a change in the quantity of net exports demanded, it is called the ________ effect.

international trade

When firms buy new capital, it is called

investment

Countercyclical fiscal policy

is fiscal policy that seeks to counteract business-cycle fluctuations

An impact lag happens because

it takes time for the complete effects of monetary and fiscal policy to materialize.

Money does NOT function as a(n)

item to barter

If the production function in the Solow growth model is given by q f(human capital, physical capital), then in this model

labor is represented by the human capital variable

The largest portion of the federal budget is dedicated to

mandatory outlays.

The portion of additional income that is spent on consumption is

marginal propensity to consume (MPC).

What function of money is highlighted when Sally pays her cell phone bill with cash?

medium of exchange

An example of physical capital is

paved roads

Human capital relates to ________ and physical capital relates to ________

people; buildings

Economic growth equals the percent change in nominal gross domestic product (GDP) minus the

percent change in prices and the rate of population growth.

The main focus of the Solow growth model is

physical capital

The aggregate production function describes the relationship between the total output in the economy and

physical capital, human capital, and natural resources

The graphical relationship between real gross domestic product (GDP) and capital is called the

production function

Economic growth is defined as the percent change of

real per capita gross domestic product (GDP)

Unemployment rises and real gross domestic product (GDP) growth slows during the ________ business cycle

recession phase of a

Mandatory outlays

require changes in existing laws if those outlays are to be altered.

Economic growth is determined by

resources, technology, and institutions

Which of the following is NOT a revenue source for the U.S. federal government?

sales taxes

Excise taxes are levied on

specific goods or commodities.

What function of money is highlighted if someone puts cash under his or her mattress to have on hand for unexpected emergencies?

store of value

Economic growth theory is based on

the Solow growth model

The production function describes the relationship between

the firm's inputs and outputs.

If the unemployment rate falls below the natural rate of unemployment (u*),

the government will want to conduct contractionary fiscal policy.

Average world income began to rapidly rise during the Industrial Revolution because

the pace of technological innovation outpaced population growth

The percent change in nominal gross domestic product (GDP) minus the percent change in prices and the rate of population growth equals

the percent change in per capita real GDP

A marginal tax rate is

the tax rate paid on a worker's next dollar of income.

Recognition lag, implementation lag, and impact lag are all examples of

time lags that accompany policy decisions.

Three issues that arise in the application of activist fiscal policy are

time lags, crowding-out, and savings shifts.

The value of one's accumulated assets is best defined as

wealth

Consider the wealth effect, interest rate effect, and international trade effect. Of these, the ________ effect is the most significant and the ________ effect is the least significant.

wealth; international trade

During which of the following situations would the government most likely have an expansionary fiscal policy?

when the curent unemployment rate is above the natural rate of unemployment

An increase in taxes or a decrease in spending during an economic expansion can

work to decrease the budget deficit and pay off some of the government debt.

The United States has a ________ income tax system.

Progressive

A progressive income tax system is one in which

income tax rates increase as earned income increases.

In 2011, per capita real gross domestic product (GDP) in Mexico was roughly $10,100. If Mexico experienced economic growth of 4.8 percent in 2012, per capita real GDP would increase to

$10,585.

Using the table, what is the total federal income tax bill for someone who makes $67,000 per year?

$12,780 (8700 x 0.10 = 870) + (26.650 x 0.15 =3.997,5) + (31.650 x 0.25 = 7.912,50) =

Annual real per capita gross domestic product (GDP) in India was roughly $2,900 in 2000. If it grew by 8 percent the following year, by 2001 the annual real per capita GDP would be

$3,132

If your marginal propensity to consume is 0.75 and you get an additional $400 in income, you would spend ________ on consumption.

$300.00 (400 x 0.75)

Annual real per capita gross domestic product (GDP) in the United States was roughly $44,000 in 2010. If it grew by 3 percent the following year, by 2011 the annual real per capita GDP would be

$45,320.

Annual real per capita gross domestic product (GDP) in China was roughly $5,200 in 2000. If it grew by 10 percent the following year, by 2001 the annual real per capita GDP would be

$5,720

In 2014, U.S. gross domestic product (GDP) was roughly $17.4 trillion. Given that the U.S. population was roughly 319 million people, per capita GDP in the United States in 2014 was roughly

$54,545.

If your income increases by $1,500 and you only consume $900 of it, your marginal propensity to consume would be equal to

0.60. (900 /1500 = 0.6 x100)

From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8 percent. Given that prices increased by 1 percent and per capita real GDP grew by 1.8 percent, we know that the population grew by

1.0 percent.

From 2013 to 2014, U.S. real gross domestic product (GDP) increased by 2.4 percent and the U.S. population grew by 0.7 percent. Therefore, per capita real GDP in the United States increased by

1.7 percent.

From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8 percent. Given that prices increased by 1 percent and the population grew by 1 percent, we know that per capita real GDP grew by

1.8 percent

Using the table, what is the average tax rate for someone who makes $67,000 per year?

19.1 percent (12.780 ÷ 67000) x 100

Using the table, what is the marginal income tax rate of a $5,000 raise for someone who currently makes $67,000 per year?

25 percent

Using the table, what is the marginal income tax rate of a $5,000 raise for someone who currently makes $85,650 per year?

28 percent

In 2010, real gross domestic product (GDP) in the United States was roughly $14.6 trillion. In 2011, real GDP in the United States was roughly $15.1 trillion. Therefore, between 2010 and 2011, real GDP grew by

3.4 percent. (15.1-14,6= (0.5 / 14.6 )x100

If the marginal propensity to consume is equal to 0.75, the spending multiplier is equal to

4.0.

In 2010, per capita real gross domestic product (GDP) in the United States was roughly $46,000. In 2011, per capita real GDP in the United States was roughly $48,400. Therefore, between 2010 and 2011, the rate of economic growth in the United States was

5.2 percent.

________ would be considered a mandatory outlay in one's monthly budget.

A student loan payment

The aggregate demand curve is best represented by which of the following equations?

AD= C+I+G+NX

Which of the following statements best describes the average standard of living for much of human history, prior to the Industrial Revolution

Average income around the world was basically unchanged for centuries

If the government were to print more money, which of the following would occur?

Both M1 and M2 would increase.

The term "________ cycle" is a popular way to describe the recession-expansion pattern followed by the economy.

Business

Access to lifesaving medicine is very limited in parts of Africa; as a result, over 10 percent of children do not reach the age of five. What effect would an increase in medical aid to African children have on overall economic growth for the continent?

Economic growth would increase because the health and productivity of the labor supply would increase.

Assuming all of the following are in your personal monthly budget, your ________ payment is considered a discretionary outlay.

Grocery bill

If Brian were to give cash to his mother for her birthday and she kept the cash under her mattress, which of the following changes would take place?

M1 and M2 would remain unchanged.

If an economy experiences economic growth, does that mean that everyone in that economy will be better off?

No, it means that the average person is better off

Which of the following is true?

Real-world observations motivate economists to formulate theories about how economic growth evolves, and these theories are then used and reevaluated as new data become available

Which of the following would be the theoretical outcome of expansionary fiscal policy in the following aggregate demand-aggregate supply model?

The aggregate demand (AD) curve would shift from AD2 to AD1.

In economic terms, how would Gina state what has happened when her neighbor says he is unwilling to help her mow her lawn because Gina is unwilling to help him teach his kids how to speak with a British accent?

The double coincidence of wants was not satisfied.

Which of the following events could cause inflation in the United States—a country that uses fiat money?

The government decides to print more money.

Sasha is about to leave on a trip and she has used cash to buy traveler's checks. Which of the following changes have occurred?

There have been no changes to M1 or M2.

Country X has a higher growth rate of real investment than country Y. You might expect country X to have

a higher growth rate of real gross domestic product (GDP).

A budget is

a plan for spending and earning money.

The wealth effect, interest rate effect, and international trade effect all explain why the

aggregate demand (AD) curve has a negative slope.

The model used to study business cycles is the ________ model.

aggregate demand-aggregate supply

The goal of contractionary fiscal policy is to shift the ________ curve to the ________.

aggregate demand; left

The goal of expansionary fiscal policy is to shift the ________ curve to the ________

aggregate demand; right

Which of the following is NOT a characteristic of fiat money?

always backed by something of high intrinsic value

Real per capita gross domestic product (GDP) is defined as the

average level of income in a country

If you earn a subsistence-level income, much of your time is spent acquiring

basic necessities such as food, clothing, and shelter

Money serves as a store of value when it

can be used to purchase approximately the same amount of goods over time.

The marginal product of an input is defined as the

change in output divided by the change in input.

Input prices affect the firm's ________, and output prices affect the firm's ________.

costs; revenue

An increase in the price level that reduces the real value of wealth is likely to ________ consumption and ________ saving.

decrease; decrease

When U.S. goods become more expensive relative to foreign goods, exports will ________ and imports will ________.

decrease; increase

When an economy experiences inflation, the value of money

decreases.

Diminishing marginal product is also known as

diminishing returns

As additional units of an input are employed, the marginal product of the input is

eventually decreasing

If the economy begins to fall into a recession, one would expect Congress and the president to conduct ________ policy.

expansionary fiscal

Business-cycle theory focuses on time horizons of less than

five years.

There are diminishing returns to

human capital, physical capital, natural resources

An implementation lag happens because

in most nations, one or more governing bodies must approve government spending or new tax policies.