Macroeconomics Practice Test 1 (Pics)
B
Because resources are ___________, trade-offs between alternative uses of those resources must be made. A) available B) scarce C) sold in markets D) tangible E) unlimited
A
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B
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C
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D
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E
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D
A headline reads: "Auto sales decline and the steel industry suffers a slump; unemployment rises." This type of unemployment can be best characterizes in economic terms as A) frictional B) structural C) total unemployment D) cyclical E) natural
B
An increase in transportation costs will most likely cause the price level and real GDP to change in which of the following ways? A) price level increase; real GDP increase B) price level increase; real GDP decrease C) price level increase; real GDP no change D) price level decrease; real GDP increase E) price level decrease; real GDP decrease
B
Another way to define GDP is as the market value of A) the resource inputs used on the production of output in an economy B) all final goods and services produced in an economy in a given year C) all final and intermediate goods and services produced in a given year D)national income earned by consumers, producers, and exporters E) national income earned by producers and consumers
A
As Americans increase their purchase of foreign goods and services, the aggregate expenditure relationship to the aggregate demand and supply model would indicate that a A) fall in our aggregate expenditure will cause domestic price level to decrease, aggregate demand to fall, and GP to decline B) fall in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand C) fall in our domestic price levels will decrease our imports and reduce unemployment D) rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand E) rise in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand
C
At the full employment unemployment rate, there is/are only A) cyclical and frictional unemployment B) downward pressure on wage rates C) frictional and structural unemployment D) cyclical unemployment E) undercounted "discouraged workers" unemployment
D
Based on the circular flow model, A) government plays no role in the flow of goods and services B) households are suppliers in the product market and consumers are suppliers in the factor market C) firms purchase goods in the product market D) households expend their income in the product market and earn their income in the factor market E) firms incur costs in the product market
D
Consumers purchase bonds, rather than continuing to hold currency, because they believe that interest rates will decline in the future. Such purchases point to which of the following scenarios? A) There has been an upward shift in consumers' marginal propensity to consume B) Consumers expect little need for cash C) Consumers expect the value of currency to appreciate in the short term D) Consumers speculate that currency will depreciate in the future E) Bonds will drop in value relative to currency
A
If a government raises its expenditure by $25 billion and at the same time levies a lump-sum tax of $25 billion, the net effect on the economy will be to A) increase GDP by $25 billion B) increase GDP by less than $100 billion, because the multiplier is 4 C) increase GDP by more than $50 billion D) increase GDP by $50 billion E) make no change in GDP
D
If a lump-sum tax of $40 billion is levied and the MPS is 0.25, then the saving schedule will shift A) upward by $10 billion B) downward by $160 billion C) upward by $25 billion D) downward by $10 billion E) downward by $25 billion
C
In a closed economy with no government, an increase in autonomous investment of $25 billion increases domestic output from $600 billion to $700 billion. The marginal propensity to continue is A) 0.25 and the multiplier is 4 B) 0.50 and the multiplier is 2 C) 0.75 and the multiplier is 4 D) 0.80 and the multiplier is 5 E) the MPS is 0.75 with a multiplier of 4
B
In a closed private economy, if the interest rate falls, businesses expect expansion of the economy, and as a result the investment demand also rises, then the A) expenditure equilibrium will shift downward and GDP will decline B) investment schedule and aggregate expenditures schedule will shift upward C) investment and aggregate expenditures schedules will shift downward with greater unemployment D) investment schedule will shift upward and the aggregate expenditures schedule will shift downward, and output will decrease E) investment schedule will shift downward and the aggregate expenditures schedule will shift upward
C
In the aggregate expenditures model, the primary determinant of the level of consumption and saving in the economy is the A) inflation rate B) level of investment C) level of income D) level of prices E) interest rate
B
Kevin has lost his job in an automobile plant because the company began using robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is A) frictional B) structural C) educational D) cyclical E) natural
D
Leakages from the income-expenditure stream are A) consumption, saving, and transfers B) investment, spending, and transfer payments C) saving, taxes, and transfers D) saving, taxes, and imports E) imports, taxes, and transfers
B
Other things being equal, if US steel exports fell, the economy would see a(n) A) increase in domestic aggregate expenditures and the equilibrium level of GDP B) decrease in domestic aggregate expenditures and the equilibrium level of GDP C) decrease in government spending and a decrease in GDP D) zero effect on domestic GDP, because imports will offset the change in exports E) decrease in the marginal propensity to balance trade
A
Refer to the graph. If this economy is a closed economy without a government sector, the level of GDP would be A) $1,200 billion B) $200 billion C) $300 billion D) $1,600 billion E) $500 billion
E
Refer to the graph. The size of the multiplier associated with changes in government spending in this economy is A) 2.50 B) 3.00 C) 5.00 D) 6.67 E) 4.00
C
Refer to this diagram. A decrease in total spending in Stage 2 will A) decrease the price level, but not employment and output B) decrease employment and output, but not the price level C) decrease employment, output, and the price level D) increase employment, output, and the price level E) cause unemployment and inflation
D
Refer to this diagram. An increase in total spending in Stage 3 will increase A) output and decrease price levels B) employment and the price level C) output and price level D) the price level, but not output or unemployment E) the price level and decrease the natural rate of unemployment
D
Select the statement most associated with Classical economists that Keynes disagreed with A) A market economy eventually results in monopolies that damage the standard of living. B) Market economies function best when government makes supply decisions. C) Market economies are generally free from price and output cycles. D) A market economy is self-correcting and thus will eventually recover from recession without intervention. E) The factor market underpays workers without minimum wage laws.
A
Suppose two countries are each capable of individually producing two given products. Instead, each specializes by producing the good for which it has a comparative advantage and then trades with the other country. Which of the following is most likely to result? A) Both countries will benefit from increased production of goods B) Unemployment will increase in one country and decrease in the other C) There will be more efficient production in one country but less efficient production in the other D) The two countries will become more independent of each other E) Both countries will be harmed by increased productive inefficiency
D
The economic indicator that measures the price change over time, using a fixed market basket of typical goods and services, is the A) producer price index B) consumer sentiment index C) GDP D) CPI E) national income index
B
Which of the following best describes "efficiency"? A) Spending the least amount of money for an item B) Obtaining the largest possible output from limited resources C) Production of the items that are most in demand D) An equal distribution of scarce resources E) Lowering the price on your goods so that you sell more goods
D
Which of the following is an example of an economic tradeoff? A) A 12% rate of return on an investment B) Reducing unemployment while increasing economic growth C) Increasing the national savings rate while investment spending rises D) Spending less on education programs due to an increase on military spending e) Buying milk and cookies
E
Which of the following would cause the production possibilities curve to shift outward? A) Reopening a cereal plant that had been closed B) Rehiring laid-off cereal workers C) Using machinery for missile production instead of cereal production D) Using machinery for cereal production instead of missile production E) Developing a more efficient cereal-making process