macroeconomics test 2

Total income households have after paying taxes and receiving government transfers is called: A. private savings. B. disposable income. C. investment. D. aggregate spending.

B. disposable income

In general, expansions are characterized by: A. increasing unemployment. B. falling unemployment C. decreasing employment. D. constant employment.

B. falling unemployment

Last week Stephanie quit her job as a copy-writer at an advertising agency. She has spent the past few days browsing the help-wanted ads, but hasn't found anything that matches her skills. Stephanie is best classified as: A. structurally unemployed. B. frictionally unemployed. C. a discouraged worker. D. out of the labor force.

B. frictionally unemployed

Due to the presence of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will: A. decrease output by less than a factor of two. B. increase output by less than a factor of two. C. increase output by exactly a factor of two. D. increase output by more than a factor of two.

B. increase output by less than a factor of two

Investment in human capital shifts the aggregate production function: A. downward. B. leftward. C. upward. D. rightward.

C. upward

You read in the newspaper that the CPI in 2010 was 120, you will conclude that a typical market basket in 2010 would have cost: A. 20 percent more than the same market basket purchased in the base year. B. 20 percent more than the same market basket purchased in 2009. C. 120 percent more than the same market basket purchased in 2009. D. 120 percent more than the same market basket purchased in the base year.

A. 20 percent more than the same market basket purchased in the base year

In the country of Sildavia, a market basket of goods and services cost $130 in 2003, $140 in 2004, and $160 in 2005. Based on this information and considering 2003 as the base year, inflation from 2003 to 2005 was: A. 23.07%. B. 7.14%. C. 7.69%. D. 14.28%.

A. 23.07%

An inward shift in the U.S. economy's production possibility frontier could represent which of the following? A. U.S. workers moving to Canada B. U.S. economic growth C. U.S. economic growth as workers move to different states D. U.S. workers moving from New Jersey to Massachusetts

A. US workers moving to Canada

Diminishing returns to physical capital means that, when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to: A. a smaller increase in productivity. B. a decrease in productivity. C. negative productivity. D. losses for stockholders.

A. a smaller increase in productivity

An increase in government spending on health care is likely to shift the: A. aggregate demand curve to the right. B. aggregate demand curve to the left. C. short-run aggregate supply curve to the left. D. short-run aggregate supply curve to the right.

A. aggregate demand curve to the right

Real GDP is nominal GDP adjusted for: A. changes in prices. B. double counting. C. imports. D. population.

A. changes in price

The aggregate production function exhibits: A. diminishing returns to physical capital. B. constant returns to physical capital. C. increasing returns to physical capital. D. negative returns to physical capital.

A. diminishing returns to physical capital

A person who spends time looking for work is: A. engaged in job search. B. counted as employed. C. counted as out of the labor force. D. usually counted as a discouraged worker.

A. engaged in job search

People who are in the process of changing jobs are accounted for in the category of: A. frictional unemployment. B. involuntary unemployment. C. structural unemployment. D. cyclical unemployment.

A. frictional unemployment

Unemployment that is due to the time workers spend in job search is considered: A. frictional unemployment. B. structural unemployment. C. cyclical unemployment. D. natural unemployment.

A. frictional unemployment

Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is currently interviewing with several different hospitals in Boston. Anna is currently: A. frictionally unemployed. B. structurally unemployed. C. cyclically unemployed. D. counted as employed since she is likely to receive a job offer soon.

A. frictionally unemployed

Suppose that nominal GDP is $1000 in 2006 and nominal GDP is $1500 in 2007. If the overall price level ____ between 2006 and 2007, we could say that real GDP _____. A. increased by 50%; stayed constant. B. increased by more than 50%; increased. C. increased by 50%; increased. D. increased by less than 50%; decreased.

A. increased by 50%; stayed constant

A country's exports minus its imports during a period are: A. net exports. B. gross imports. C. gross exports. D. net imports.

A. net exports

Among people counted as unemployed by the government are: A. people without a job who are actively seeking a job. B. discouraged workers. C. workers who are underemployed. D. people without a job who are actively seeking a job, discouraged workers, and workers who are underemployed.

A. people without a job who are actively seeking a job

GDP is the sum of: A. personal consumption, investment, government purchases, and net exports. B. personal consumption, investment, government purchases, exports and imports. C. value added, net imports, and government purchases. D. personal consumption, investment, government purchases, and net imports.

A. personal consumption, investment, government purchases, and net exports

The aggregate demand curve shows the relationship between the aggregate price level and: A. the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world. B. the aggregate quantity of output demanded by businesses only. C. aggregate productivity. D. the aggregate unemployment rate.

A. the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world

Structural unemployment is: A. unemployment that results when there are more people seeking jobs than there are jobs available at the current wage rate. B. unemployment experienced by those entering the labor force for the first time. C. zero when the economy is in full employment. D. caused by short run economic fluctuations.

A. unemployment that results when there are more people seeking jobs than there are jobs available at the current wage rate

Which of the following would NOT be a part of GDP? A. used car sales B. telephone service purchased for a home C. new residential construction D. a new truck purchased by a building contractor

A. used car sales

Most households derive the bulk of their income from which of the following sources? A. wages B. rent C. interest D. profit

A. wages

Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is: A. $100. B. $1,300. C. $300 D. $700.

B. $1,300

Consider an economy that only produces two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is: A. $100. B. $700. C. $1,100. D. $900.

B. $700

If a price index in Year 1 is 146 and in Year 2 is 163, the rate of inflation between Year 1 and Year 2 is _____. A. 15.0% B. 11.64% C. 8.2% D. 10.43%

B. 11.64%

The components of aggregate demand are: A. C (consumption), I (investment) expenditures, and X - IM (net exports). B. C (consumption), I (investment), G (government) expenditures, and X - IM (net exports). C. C (consumption) and I (investment) expenditures. D. C (consumption), I (investment), and G (government) expenditures.

B. C (consumption), I (investment), G (government) expenditures, and X - IM (net exports)

If the production possibility frontier is a straight line, which of the following is true? A. The firm faces increasing costs. B. Opportunity costs are constant. C. The resources used to produce two goods are different. D. Opportunity costs are constant and the resources used to produce two goods are different.

B. Opportunity costs are constant

The relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, the government, and the rest of the world is called: A. surplus demand. B. aggregate demand. C. simple demand. D. market demand.

B. aggregate demand

Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available is considered: A. frictional unemployment. B. structural unemployment. C. cyclical unemployment. D. natural unemployment.

B. structural unemployment

Inflation can be measured by: A. the absolute change in the GDP deflator. B. the percentage change in the CPI. C. the absolute change in the CPI. D. the percentage change in GDP.

B. the percentage change in the CPI

Real GDP is: A. calculated by adding up only the real number of all items sold in the U.S. regardless of their prices. B. the value of the production of all final goods and services adjusted for price changes. C. the value of the production of all final goods and services measured in current prices. D. the projected future value of GDP.

B. the value of the production of all final goods and services adjusted for price changes

A person without a job who is actively seeking and available for work is considered: A. employed. B. unemployed. C. underemployed. D. marginally attached.

B. unemployed

A transfer payment is a payment for: A. being transferred to a different city by your employer. B. which no services were rendered during the current year. C. transfer of a debt to a different person. D. a military transfer to a war-zone.

B. which no services were rendered during the current year

Diminishing returns to physical capital means that as more and more physical capital is combined with a fixed amount of human capital with a fixed technology, eventually: A. aggregate output or real GDP declines. B. aggregate output or real GDP grows. C. additions to aggregate output or real GDP declines. D. additions to aggregate output or real GDP increases.

C. additions to aggregate output or real GDP declines

Raising taxes shifts the: A. aggregate demand curve to the right. B. short-run aggregate supply curve to the left. C. aggregate demand curve to the left. D. long-run aggregate supply curve to the left.

C. aggregate demand curve to the left

Suppose that a presidential candidate who promised large personal income tax cuts is elected. Which of the following is most likely to occur? A. a decrease in aggregate demand B. an increase in short-run aggregate supply C. an increase in aggregate demand D. a decrease in short-run aggregate supply

C. an increase in aggregate demand

If there is a tremendous natural disaster, the effect can be shown by: A. an outward expansion of the production possibility frontier. B. a point interior to the production possibility frontier. C. an inward contraction of the production possibility frontier. D. a movement from one point to another along the production possibility frontier.

C. an inward contraction of the production possibility frontier

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n): A. increasing, negative slope. B. zero slope. C. constant, negative slope. D. decreasing, negative slope.

C. constant, negative slope

Private savings is: A. wealth plus government transfer payments. B. disposable income less taxes. C. disposable income less consumption. D. wealth.

C. disposable income less consumption

The labor demand curve is negatively sloped because: A. more people are willing to work at lower wages than at higher wages. B. more people are willing to work at higher wages than at lower wages. C. employers are willing to hire more people at lower wages. D. employers are willing to hire more people at higher wages.

C. employers are willing to hire more people at lower wages

If the consumer price index changes from 120 to 125 between December 2007 and December 2008, the: A. deflation rate for 2008 is -4.2%. B. inflation rate for 2008 is 5%. C. inflation rate for 2008 is 4.2%. D. deflation rate for 2008 is 5%.

C. inflation rate for 2008 is 4.2%

In calculating the unemployment rate, discouraged workers are: A. included in the employment statistics. B. included in the labor force. C. not included in the labor force. D. treated just like the underemployed.

C. not included in the labor force

Investment spending represents spending on: A. mutual funds. B. corporate bonds. C. productive physical capital. D. stocks.

C. productive physical capital

The CPI is used for calculating payments from the U.S. government to individuals. To the extent it is biased upward, this index: A. lowers government expenditures. B. leads to lower benefits than would be the case if it weren't biased upward. C. raises government expenditures. D. leads to lower benefits than would be the case if it weren't biased upward and raises government expenditures.

C. raises government expenditures

Many economists believe that the CPI overstates inflation because: A. people use it to bargain for wage increases. B. innovation forces consumers to pay more for most goods and services. C. the CPI market basket doesn't reflect the fact that consumers shift consumption away from more expensive goods. D. the Bureau of Labor Statistics collects data on the prices of only a few goods and services.

C. the CPI market basket doesn't reflect the fact that consumers shift consumption away from more expensive goods

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates: A. economic growth. B. resource underutilization. C. the law of increasing opportunity cost. D. technical efficiency.

C. the law of increasing opportunity cost

Gross domestic product or GDP is: A. the total dollar value intermediate goods and services produced in the economy in a given time period. B. the total dollar value of wages paid to producing workers in a given time period. C. the total dollar value of final goods and services produced in the economy in a given time period. D. the total dollar value of government production in a given time period.

C. the total dollar value of final goods and services produced in the economy in a given time period

The aggregate demand curve is negatively sloped in part because of the impact of: A. the stickiness of nominal wages and salaries. B. the flexibility of nominal wages and salaries. C. the wealth effect on consumption. D. a changing exchange rate on potential output.

C. the wealth effect on consumption

GDP is the: A. dollar amount of all sales made in the economy in one year. B. total accumulated wealth of an economy. C. total market value of all final goods and services produced in one year. D. volume of all dollar transactions made in an economy in one year.

C. total market value of all final goods and services produced in one year

The percentage of the labor force who are unemployed is the: A. labor force. B. employment ratio. C. unemployment rate. D. natural employment rate.

C. unemployment rate

A worker classified as frictionally unemployed is one who is: A. let go during a recession. B. discouraged and drops out of the labor force. C. voluntarily looking for work, somewhere a job exists that demands his or her skills. D. works part-time but would prefer to work full-time.

C. voluntarily looking for work, somewhere a job exists that demands his or her skills

Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Nominal GDP this year is: A. $700. B. $500 C. $100. D. $650.

D. $650

If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____. A. 20% B. 10% C. 50% D. 25%

D. 25%

Which one of the following transactions is included in a current year's GDP as investment spending? A. ABC company purchased 10,000 shares of IBM stock. B. Ronnie bought a new BMW. C. Anton purchased his friend's condo. D. Maggie bought a play-gym set for her day-care business.

D. Maggie bought a play-gym set for her day-care business

A graphical representation of the relationship between the total quantity of goods and services demanded and the price level is the: A. average price level. B. circular flow model. C. GDP curve. D. aggregate demand curve.

D. aggregate demand curve

Gross domestic product is defined as: A. consumer spending + government purchases + financial spending + exports - imports. B. consumer spending + government transfers + investment spending + exports - imports. C. disposable income + taxes + investment spending + exports + imports. D. consumer spending + government purchases + investment spending + exports - imports.

D. consumer spending + government purchases + investment spending + exports - imports

Goods and services sold to people in other countries are known as: A. imports. B. transfer payments. C. investments. D. exports.

D. exports

When a recent college graduate with a major in Economics attends a job fair, it is an example of a: A. structurally unemployed worker. B. seasonally unemployed worker. C. cyclically unemployed worker. D. frictionally unemployed worker.

D. frictionally unemployed worker

Dividing real GDP by the population: A. results in nominal GDP per person. B. will result in consumption per capita. C. is a measure of happiness. D. gives real GDP per capita.

D. gives real GDP per capita

An intermediate good would be: A. payments to military personnel. B. a professor's salary. C. a new boat purchased by a professor to be used on vacation. D. lumber used in building a house.

D. lumber used in building a house

In general, a change in the price level, all other things unchanged, causes: A. both a movement along the aggregate demand curve and a shift in the curve. B. no change in the purchasing power of assets. C. a shift of the aggregate demand curve. D. a movement along the aggregate demand curve.

D. movement along the aggregate demand curve

One of the controversies surrounding America's energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if: A. pollution is eliminated. B. resources used to create clean air and energy are not being fully utilized. C. the price of energy is relatively low. D. resources used to create clean air and energy are being fully utilized.

D. resources used to create clean air and energy are being fully utilized

The aggregate demand curve: A. is horizontal at potential output. B. is vertical at potential output. C. slopes upward. D. slopes downward.

D. slopes downward

Sam, who is 55 years old and has been a steel worker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is experiencing: A. cyclical unemployment. B. permanent unemployment. C. frictional unemployment. D. structural unemployment.

D. structural unemployment

The intermediate goods are not counted in the calculation of GDP, because: A. these goods involve financial transactions. B. these goods are not produced for the market. C. these are produced in the underground economy. D. that involves double-counting.

D. that involves double-counting

The market(s) that channel excess savings of households into investment spending by firms is(are) known as: A. the international market. B. the bond market. C. the stock market. D. the financial markets.

D. the financial markets