Macroeconomics Test Ch 5-7

Developing countries can achieve higher productivity per unit of capital because they can use technologies developed by other countries. This is known as the:

catch-up effect.

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the:

circular flow diagram.

The largest component of GDP is:

consumption expenditure.

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%:

creditors gain at the expense of debtors.

What event was a major influence on the development of macroeconomics?

the Great Depression

Which organization determines the beginning and end dates of a recession?

the National Bureau of Economic Research

A business cycle is:

the periodic fluctuation of economic activity.

If a country's population increases at a higher rate than the growth in its real GDP:

the standard of living in the country has declined.

People who are considered unemployed include:

None of those listed is considered unemployed.

Which one of the following would NOT lead to higher prices?

an increase in the supply of food

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing:

deflation.

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:

fell by 1%.

Core inflation is found by removing _____ from the consumer price index.

food and energy

Which of the following items is NOT included in the GDP deflator?

imported mangoes

The GDP deflator is an index that includes prices of all of the following EXCEPT:

imports.

If your salary was $50,000 last year, and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be this year assuming the CPI has risen from 110 to 114?

$51,818

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was:

0.625%.

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is:

125.

If the current year's consumer price index is 214 and last year's consumer price index was 209, then the rate of inflation is:

2.4%.

If an economy's GDP will double in 25 years, then its growth rate must be about:

2.8%.

The recent global financial instability: slowed down economic growth. caused severe credit crunches. All of the answers are correct. harmed standards of living.

All of the answers are correct.

_____ is a reduction in the rate of inflation.

Disinflation

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

GDP falls as a result of this change.

Which of the following describes the informal economy?

It is largely unmeasured.

The classical form of the production function states that:

Output = f(L, K)

Which is NOT an example of infrastructure?

Walmart stores

According to Malthus, a fixed quantity of land and a growing human population will eventually produce:

a stationary state in which growth will cease.

Which of the following factors is NOT generally viewed by economists as critical to economic growth?

access to large amounts of natural resources

Simon Kuznets:

devised the gross national product as a way of measuring a nation's economic output

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as:

discouraged workers.

The government decides to subsidize the development of a new communications network. It is acting in its role to promote economic growth by:

enhancing physical and human capital.

The ability to use physical resources in creative ways to produce goods and services is known as:

entrepreneurial ability, technology, and ideas.

U.S. business cycles since 1950 have shown:

expansions to be longer than recessions.

The U.S. gross domestic product is equal to the total market value of all:

final goods and services produced by resources in the United States.

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

gross; net exports

According to the classical model, which of the following developments does NOT contribute to economic growth?

higher interest rates

The twin perils of the modern macro economy are said to be:

inflation and unemployment.

If actual unemployment is at its natural rate:

inflation is very low.

The value of cars that the Ford Motor Company produces in a German plant:

is a part of U.S. GNP.

Developed nations tend to have:

limited labor supplies but lots of capital.

We are most likely to see a recession if interest rates on long-term bonds are:

lower than interest rates on short-term bonds.

Which of the following items would be included in the GDP accounts?

paying $50 consultation fee over the phone with a psychic adviser

The relationship between economic freedom and per capita GDP is:

positive.

Which of the following is NOT included in gross private domestic investment?

purchases of common stock by investors

Over the past century, when worker productivity rose:

real wages rose.

A production function:

shows the output that is produced using different combinations of inputs combined with existing technology.

GDP can be found either by adding up all of the _____ or all of the _____ in the economy.

spending; income

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing:

structural unemployment.

Which of the following would promote long-run economic growth?

technological advancement

What is the primary explanation for the rapid growth of the U.S. economy over the last century?

technological progress

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

trough