ECON 2020 CH 5 & 8

A surplus of labor is eliminated by ______ in the real wage rate and the shortage of labor is eliminated by _______ in the real wage rate. a. an increase; an increase b. an increase; a decrease c. a decrease; an increase d. a decrease; a decrease

a decrease; an increase

Diminishing returns means that a. each additional unit of labor produces successively less real GDP b. hiring more labor results in less real GDP c. each extra unit of real GDP produced requires less labor d. each additional unit of labor

each additional unit of labor produces successively less real GDP.

As an economic expansion approaches its peak, it is very likely that real GDP will a. exceed nominal GDP b. exceed potential GDP c. equal nominal GDP but not potential GDP d. be less than potential GDP

exceed potential GDP

Investment is defined as a. the purchase of a stock or bond. b. financial capital. c. what consumers do with their savings. d. the purchase of new capital goods by firms.

the purchase of new capital goods by firms.

According to the Keynesian macroeconomic model, which of the following was responsible for starting the Great Depression?

Too little private spending

The table above has information about an economy. Using this information, GDP equals Wages: $5,000 + Interest, rent, and profit: $1,500 + Investment: $1,200 a. $6,500 billion. b. $7,800 billion. c. $7,000 billion. d. $8,500 billion

$7,800 billion.

The table above shows the labor demand and labor supply schedules for a nation. The equilibrium real wage rate is ________ , the equilibrium quantity of labor is ________ billions of hours per year and the potential GDP is_______.

$15; 400; 4.8 trillion of dollars

In the circular flow, how are the "value of production," "income," and "expenditures" related? a. They have no relationship to each other. b. Once tax payments are subtracted at each stage, they are equal. c. Expenditures on GDP equals the value of production which equals income. d. Once net exports of goods and services are subtracted from GDP, all three are equal.

Expenditures on GDP equals the value of production which equals income.

In one year, a firm increases its production by $9 million and increases sales by $8 million. All other things in the economy remaining the same, which of the following is true? a. GDP increases by $8 million and inventory investment decreases by $1 million. b. GDP increases by $9 million and inventory investment increases by $1 million. c. Inventory investment decreases by $1 million. d. GDP increases by $8 million and investment increases by $1 million.

GDP increases by $9 million and inventory investment increases by $1 million.

The Bubby Gum factory produces bubble gum. Joanne is one of the employees, and she produces 10 packs of bubble gum per hour. Joanne's one wage rate is $12per hour. If a packet of bubble gum sells for $1.00, then a. Joanne is creating a $2.00 per hour loss for the firm b. Joanne is creating a $2.00 per hour profit for the firm c. the Bubby Gum company should decrease the price of the bubble gum so it sells more and makes a larger profit. d. the Bubby Gum company pay Joanne more

Joanne is creating a $2.00 per hour loss for the firm

The table gives a nation's production function. Which if the following is NOT an attainable combination of real GDP and labor? a. Real GDP of $4.0 trillion and labor of 9- billion hours per year. b. Real GDP of $4.7 trillion and labor of 110 billion hours per year c. Real GDP of 4.0 trillion and labor of 70 billion hours per year. d. Real GDP of $5.2 trillion and labor of 90 billion hours per year

Real GDP of $5.2 billion and labor of 90 billion hours per year

Job rationing occurs when the real wage rate is ___ the equilibrium level and there is a ____ in labor. A) above; shortage B) above; surplus C) below; shortage D) below; surplus

above; shortage

Spending on financial assets ________ counted as part of GDP ________. a. are; because the cash exchanged represents an expenditure b. are not; because their purchase is not spending on goods or services c. are; as long as their purchase produces income d. are not; because interest must be paid on them

are not; because their purchase is not spending on goods or services

If the government raises income taxes, then the equilibrium amount of employment ________ and potential GDP ________. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases

decreases; decreases

An increase in the real wage rate _____ the quantity of labor demanded and ______ the quantity of labor supplied. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases

decreases; increases

If New Zealand is operating at potential GDP, which of the following is true? i. New Zealand only has frictional and structural unemployment. ii. There is no inflation in New Zealand. iii. New Zealand has positive net exports a. i, ii, and iii b. i only c. i and ii d. i and iii

i only: New Zealand only has frictional and structural unemployment.

The amount of real GDP produced at any one time depends on i. a fixed amount of capital ii. a fixed level of technology iii. decisions people make about leisure versus working a. ii only b. ii and iii c. i and ii d. i, ii, and iii

i, ii, and iii a fixed amount of capital a fixed level of technology decisions people make about leisure versus working

Which of the following is included in Germany's GDP? i. BMWs produced in a German-owned factory in South Carolina ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange iii. china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany a. i and iii b. ii only c. iii only d. i and ii

iii only

When an American college student in Davis, California spends $200 on a pair of Louis Vuitton jeans (a famous French brand), U.S. consumption ________, U.S. net exports ________, and U.S. GDP ________. a. does not change; increases by $200; increases by $200 b. increases by $200; decreases by $200; does not change c. increases by $200; does not change; increases by $200 d. does not change; does not change; does not change

increases by $200; decreases by $200; does not change

Gross Domestic Product measures the a. quantity of the goods and services produced in a given year, listed item by item, within a country. b. income of the business sector within a country. c. market value of the final goods and services produced in a given year within a country. d. measures the market value of the domestic labor in a given year within a country.

market value of the final goods and services produced in a given year within a country.

Suppose Germany's economy is experiencing full employment. This means that, in Germany, a. the unemployment rate is equal to zero b. real GDP is equal to potential GDP c. real GDP is greater than potential GDP d. potential GDP is greater than real GDP

real GDP is equal to potential GDP

Potential GDP is the level of a. GDP that is impossible to achieve b. real GDP that the economy could produce at full employment c. nominal GDP that is smaller than the real GDP d. GDP that fluctuates around actual GDP

real GDP that the economy could produce at full employment

In 2009 in the United States, consumption expenditure was $9,996 billion, investment was $1,559 billion, government expenditures on goods and services were $2,927 billion, and total exports were $1,492 billion. GDP equaled a. $12,641 billion. b. $10,120 billion. c. $11,488 billion d. some amount, but there is not enough information given to calculate GDP.

some amount, but there is not enough information given to calculate GDP.

The production function is a relationship between the amount of labor employed and a. the maximum quantity of real GDP that can be produced b. the maximum quantity of nominal GDP that can be produced c. the wage rate paid to workers d. all other resources at different level of employment

the maximum quantity of real GDP that can be produced