ECON
Net exports are: A.exports less imports B.exports plus imports C.imports less exports D.that portion of consumption and investment goods sent to other countries
A.exports less imports
Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.:
Aggregate Demand curve would shift to the right
A large increase in the value of houses (real estate).
Aggregate Demand shifts OUT
The consumption schedule directly relates:
consumption to the level of disposable income.
APC
consumption/disposable income
The APC is calculated as
consumption/income
Occasionally, rapidly rising prices for basic inputs such as energy result in higher prices for many goods and services. The resulting inflation is best categorized as: cost-pull. cost-push. demand-pull. demand-push
cost-push.
At the deepest point of the Great Depression, most unemployment consisted of: structural unemployment. cyclical unemployment. frictional unemployment. search unemployment.
cyclical unemployment.
The level of aggregate expenditures in the private closed (i.e. 2-sector) economy is determined by the:
expenditures of consumers and businesses.
Which of the following is included in M2 but not M1?
Small-denominated time deposits (less than $100,000
A firm can produce a single unit of output by combining labor and capital in any of the combinations shown in the following table. Labor costs $2 per unit and capital costs $4 per unit. Refer to the table. Which is the most efficient technique for producing the output?
The most efficient technique entails the lowest total cost. The cost of technique A is lowest at $44: 10 workers at $2 each plus 6 machines at $4 each = $44. Using the same procedure, the costs of techniques B, C, and D are found to be $48, $52, and $46, respectively.
Regarding the functional distribution of income in the U.S., which of the following constitutes about 70% of total income? -The top 20% of households -Consumption spending -Business profits -Wages and salaries
Wages and salaries
If unintended increases in business inventories occur, we can expect:
a decline in GDP and rising unemployment
If unintended increases in business inventories occur, we can expect
a decline in GDP and rising unemployment.
Which one of the following will cause a movement down along an economy's consumption schedule
a decrease in disposable income
Which of the following is a correct statement? All else equal
a decrease in the real rate of interest will increase the level of investment
The consumption schedule is
a direct relationship between consumption and disposable income
The consumption schedule is: an inverse relationship between consumption and the price level. a direct relationship between consumption and disposable income. an inverse relationship between consumption and saving. an inverse relationship between consumption and the tax rate.
a direct relationship between consumption and disposable income.
A government agency requires that all agricultural goods entering the country undergo an unduly long inspection process to assure product quality. This is an example of: an export subsidy a tariff a nontariff barrier a quota
a nontariff barrier
What will be the effect of an excess of planned investment over saving in a private closed economy (i.e. 2-sector) with unemployed resources?
a rise in the real GDP
- In a private closed economy (i.e. 2-sector) _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving.
actual; planned
Unanticipated inflation: arbitrarily redistributes income from creditors to debtors. invariably leads to unemployment. reduces the real incomes of all individuals. has the same economic consequences as anticipated inflation.
arbitrarily redistributes income from creditors to debtors
The "full employment rate of unemployment" is: zero percent. around 4% - 5% because of frictional and structural unemployment. around 4% - 5% because of cyclical unemployment. considerably higher recently than it was in the 1930s.
around 4% - 5% because of frictional and structural unemployment.
disposable income
consumption + savings
Disposable income consists of: personal income plus personal taxes. net domestic product minus personal taxes. GDP corrected for inflation. consumption plus saving.
consumption plus saving.
GDP excludes expenditures for: additions to inventories. new housing. government purchases of military equipment. corporate stock.
corporate stock
Following the stock market collapse of 2000, there was a significant drop in the value of household wealth. As a result of the wealth effect
the saving schedule shifted upward
Suppose that last year domestic firms spent $80 billion on final purchases of plant and equipment, of which $15 billion replaced equipment that had worn out during the year. In addition, firms collectively added $10 billion to inventories and new construction totaled $35 billion. In calculating GDP, national income accountants would add gross investment of: $95 billion. $100 billion. $110 billion. $125 billion.
$125 billion.
Answer the next question on the basis of the following information for an open economy: Refer to the table. The equilibrium level of GDP in this economy is: $150. $200. $250. $300.
$200.
Click on the Image icon on the right. For a private closed (i.e. 2-sector) economy, the equilibrium level of GDP is
$300
The purchase of corporate stock is considered: -an economic investment. -a financial investment. -dissaving. -the same as the purchase of new plant and equipment.
- a financial investment.
If the natural rate of unemployment is 5.5% and the actual unemployment rate is 6.5%, then, according to Okun's law the GDP gap is: 1%. 3%. -1%. -2%.
-2%.
If the MPC is .63, the multiplier is: 1 / .63. 1 - .37. 1 / .37. .63 / .37.
1 / .37.
If a nation's real GDP is growing at 7% per year, its real output will double in approximately 70 years. 40 years. 10 years. 7 years.
10 years Response Feedback: Using the "rule of 70," divide 70 by the annual growth rate of 7% to find that it will take about 10 years for real GDP to double.
In the U.S., there are:
12 Federal Reserve Districts corresponding to the 12 Federal Reserve Banks
Refer to the following data, which shows output and prices for five years of an economy that produces just one product.If year 3 is the base year, the price index for year 4 is:
120
Click on the Image icon on the right. The MPS is:
3/10
Suppose the total population is 200 million workers, 100 million of whom are in the labor force. 80 million people are employed full time and another 16 million are employed part time; 5 million people are "discouraged workers." The unemployment rate is: 21%. 20%. 11%. 4%.
4%
Suppose the CPI is currently 126, while its value one year previously it was 120. The rate of inflation over the past year was: 5%. 6%. 7%. 8%.
5%.
If the dollar appreciates relative to the South Korean won, then: A.U.S. goods will be more expensive to the South Koreans B.U.S. exports to South Korea will increase C.U.S. imports from South Korea will decrease D.it will be cheaper for South Koreans to travel in the U.S.
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Inflation initiated by increases in wages or other resource prices is labeled: A.cost-push inflation B.demand-pull inflation C.demand-push inflation D.cost-pull inflation
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The primary gain from international trade is: A.increased employment in the domestic export sector B.more goods than would be attainable through domestic production alone C.tariff revenue D.increased employment in the domestic import sector
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The labor force includes: A.employed workers and persons who are officially unemployed B.employed workers, but excludes persons who are officially unemployed C.full-time workers, but excludes part-time workers D.permanent employees, but excludes temporary employees
A.employed workers and persons who are officially unemployed
Which of the following would most likely occur during the peak phase of the business cycle? A.Demand-pull inflation B.Cost-push inflation C.Structural inflation D.Frictional inflation
A.Demand-pull inflation
Which of the following is a final good or service? A.a haircut B.fertilizer purchased by a farm supplier C.diesel fuel bought for a delivery truck D.Chevrolet windows purchased by a General Motors assembly plant
A.a haircut
Which one of the following is not predicted to shift the consumption schedule upwards?
An increase in disposable income
Use the following diagram for this question. Which of the following might have caused the shift from consumption schedule C1 to schedule C2? An increase in disposable income An increase in household wealth An increase in household debt An increase in taxes
An increase in household wealth
Which of the following would most likely shift the aggregate demand curve to the right?
An increase in stock prices that increases consumer wealth
If the CPI is 126, compared to the base year, prices have increased: A.0%B.26%C.100%D.126%
B.26%
The United States' most important trading partner quantitatively is: A.China B.Canada C.Mexico D.Japan
B.Canada
Which of the following statements is most accurate about advanced economies A.Economies experience a positive growth trend over the short run, but experience significant variability in the long run. B.Economies experience a positive growth trend over the long run, but experience significant variability in the short run. C.Economies experience positive and stable growth over both the long run and short run. D.Economies experience little long-run growth in output, but can experience significant growth in the short run.
B.Economies experience a positive growth trend over the long run, but experience significant variability in the short run.
Which of the following is the best example of a positive "externality"? A.Polluted air in a factory town B.Pollinated flowers at the bee keeper's house C.Congested highways in an urban area D.Congested airways in an industrial country
B.Pollinated flowers at the bee keeper's house
n national income accounting, consumption expenditures include purchases of: A.both new and used consumer goods B.automobiles for personal use, but not houses C.consumer durable and nondurable goods, but not services D.consumer nondurable goods and services, but not consumer durable goods
B.automobiles for personal use, but not houses
Recurring upswings and downswings in an economy's real GDP over time are called: A.recessions B.business cycles C.output yo-yos D.total product oscillations
B.business cycles
At the deepest point of the Great Depression, most unemployment consisted of: A.structural unemployment B.cyclical unemployment C.frictional unemployment D.search unemployment
B.cyclical unemployment
During a period of very rapid inflation (hyperinflation): A.creditors gain because their loans are repaid with dollars of higher value B.people tend to hold goods rather than money C.income is redistributed away from borrowers D.the real value of the national currency rises
B.people tend to hold goods rather than money
Refer to the following diagram of a circular flow model of the economy: In the diagram, consumer expenditures are represented by:
Consumers - Product Market- flow 4
The value of bonds held by households declines.
Consumption shifts IN
A new administration raises fears that inflation will increase
Consumption shifts OUT
Consumers paid off most of their debt in the recent past
Consumption shifts OUT
Investors believe dot com business prospects are bright and drive up the stock market.
Consumption shifts OUT
Population growth increases.
Consumption shifts OUT
Borrowers will most likely benefit when there is an: A.anticipated increase in the CPI B.anticipated decrease in the CPI C.unanticipated increase in the CPI D.unanticipated decrease in the CPI
C.unanticipated increase in the CPI
Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of: A.2 percent B.3 percent C.5 percent D.7 percent
D.7 percent
The group responsible for setting policy on buying and selling government securities (bills, notes, and bonds) is the:
Federal Open Market Committee
If inventories are declining unexpectedly at the current level of GDP: GDP exceeds the level of current expenditures. GDP is at its equilibrium level. current expenditures exceed the level of GDP and GDP will fall. GDP is below its equilibrium level.
GDP is below its equilibrium level.
John Maynard Keynes created the aggregate expenditures model based primarily on what historical event?
Great Depression
Refer to the following production possibilities diagram: Production of which of the points in the diagram is currently unattainable given the economy's resources?
Point D - it is outside of the curve. The production possibilities curve shows the greatest attainable combinations of goods and services given available resources. Point D lies outside this boundary and is therefore unattainable.
f a change in consumer preferences results in many more consumers registering their "dollar votes" in favor of peaches, which of the following will most likely follow?
Profits of peach growers will rise and peach production will rise
Suppose a factory minimizes its average costs by producing 50 metal bars per week. It can produce this output profitably at an expected price of $4 each, corresponding to expected demand of DM. With flexible prices, which of the following is the most likely initial consequence of a change in demand? Production will drop to 35 bars per week if demand unexpectedly falls to DL Production will rise to 65 bars per week if demand predictably rises to DH -Profits will rise if demand unexpectedly rises to DH The price will rise to $6 and production will rise to 65 bars per week if demand unexpectedly rises to DH
Profits will rise if demand unexpectedly rises to DH
The MPC can be defined as that fraction of a:
change in income that is spent
Which of the following most accurately describes the primary cause of the 2007-2008 U.S. financial crisis?
Widespread defaults on home mortgages precipitated by banks' lax lending practices
A decrease in Aggregate Demand may be caused by
a decrease in government spending
Click on the Image icon on the right. For a private closed (i.e. 2-sector) economy, at the $300 level of GDP
aggregate expenditures and GDP are equal.
A decline in disposable income:
decreases consumption by moving downward along a specific consumption schedule.
All else equal, if domestic consumers begin to spend a greater fraction of their consumption expenditures on foreign-produced goods: aggregate expenditures and GDP will both increase. aggregate expenditures and GDP will both decrease. exports will also rise, offsetting the increase in imports. the multiplier will increase.
aggregate expenditures and GDP will both decrease.
When planned injections of investment, government spending, and exports equal leakages of saving, taxes, and imports: aggregate expenditures will equal GDP. consumption plus injections will be greater than aggregate expenditures. net exports will be zero. output will be below its equilibrium level.
aggregate expenditures will equal GDP.
The 45-degree line on a graph relating consumption and income shows:
all points at which consumption and income are equal.
As disposable income increases, consumption:
and saving both increase
The investment demand curve will shift to the left if: the interest rate decreases. the interest rate increases. expected returns on investment increase. business taxes increase.
business taxes increase.
Suppose an economy moves from a point inside of its production possibilities curve to a point on the curve. The most likely source of this economic growth is: supply factors. demand and efficiency factors. increases in the quality of inputs. technological change.
demand and efficiency factors.
The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the
determinants of aggregate demand
The vast differences in worldwide living standards owes primarily to: differences in patent law and enforcement. leader countries growing at a much faster rate than follower countries over the past 100 years. different starting dates for modern economic growth. cultural differences in labor force participation and hours of work.
different starting dates for modern economic growth.
The investment demand slopes downward and to the right because lower real interest rates:
enable more investment projects to be undertaken profitably.
The level of aggregate expenditures in the private closed (i.e. 2-sector) economy is determined by the
expenditures of consumers and businesses
The determinants of aggregate demand:
explain shifts in the aggregate demand curve.
"The market value of all final goods and services produced within a nation in a given year." This best describes: net domestic product. gross domestic product. national income. personal income.
gross domestic product.
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:
increase aggregate demand
Other things equal, a reduction in personal and business taxes can be expected to:
increase both aggregate demand and aggregate supply
A decrease in Aggregate Supply might be caused by a(n):
increase in the prices of imported resources
Other things equal, a dramatic decrease in the money supply would:
increase the purchasing power of each dollar.
Over the past several years, the volume of world trade has: -decreased because of increased government regulation of trade through tariffs and quotas -decreased because of the decline in incomes brought on by global recession -increased because of increased government regulation of trade through tariffs and quotas -increased because of improvements in communications and transportation
increased because of improvements in communications and transportation
The relationship between the real interest rate and investment is shown by the:
investment demand schedule.
The purchasing power of the dollar:
is inversely related to the price level.
A firm will earn a positive economic profit if
its total sales revenue exceeds the sum of all its costs
The change in GDP associated with a change in government spending is: equal to the change in government spending. smaller than—and opposite in sign to—that associated with an equal change in taxes. smaller than—and of the same sign as—that associated with an equal change in net exports. larger than—and opposite in sign to—that associated with an equal change in taxes.
larger than—and opposite in sign to—that associated with an equal change in taxes.
Writing a check to purchase a new computer is an example of using money primarily as a:
medium of exchange
Economics is primarily the study of:
the problem of scarce resources relative to human wants
Margaret decides to stay home and study for her exam rather than going out to a movie with her friends. Her dilemma is an example of
opportunity cost.
The aggregate supply curve (short-run) is upsloping because:
per-unit production costs rise as the economy moves toward and beyond its full-employment real output
All else equal, if the interest rate rises: planned investment spending will decrease. the investment demand curve will shift upward. the investment demand curve will shift to the left. the investment demand curve will shift to the right.
planned investment spending will decrease.
The market system is characterized by:
private property rights
A tariff: -raises the price of imported goods, increasing the demand for domestic substitutes -lowers the cost of producing domestic goods -offsets the effect of a quota -raises the price of domestic goods, lowering the demand for them
raises the price of imported goods, increasing the demand for domestic substitutes
The equilibrium level of Aggregate Demand and Aggregate Supply show the current level of
real GDP and the Price Level
An increase in the price level will:
reduce the purchasing power of household wealth and reduce consumption
If the MPC is .75, government could eliminate a $60 recessionary expenditure gap by: increasing government spending by $240. reducing lump-sum taxes by $80. reducing lump-sum taxes by $60. balancing its budget.
reducing lump-sum taxes by $80.
In contrast to investment, consumption is:
relatively stable
At the point where the consumption schedule intersects the 45-degree line:
saving equals income
If consumption and disposable income are equal at a particular level of income
saving must be zero at this point
If consumption and disposable income are equal at a particular level of income: the MPC must be one at this point. the MPS must be zero at this point. the APC must be less than one at this point. saving must be zero at this point
saving must be zero at this point
In a corporation, one primary principal-agent relationship is exemplified by: -owner-stockholder -stockholder-manager -hourly worker-salaried employee -bond holder-stockholder
stockholder-manager
Whenever the Jones family receives change from a purchase, it goes into a jar to be used in the summer as spending money for the family vacation. The primary function served by the money in the jar is:
store of value.
Dissaving means:
that households are spending more than their current incomes.
The Aggregate Demand curve shows:
that more real output is bought at lower price levels
If the slope of the consumption line is .8: the MPC is .8. the MPS is .8. the MPC is 1/.2. the MPC is 1/.2.
the MPC is .8.
Click on the 'Image' icon on the right. Based on the information shown
the MPC remains the same but the APC is lower at every level of income
Along a particular saving schedule, each change in disposable income of $15 billion generates an additional $3 billion in saving. Therefore: the MPS is .3. the MPS is .2. the APC is .8. the slope of the consumption schedule is .7.
the MPS is .2.
In the aggregate expenditures model, technological progress will shift the investment schedule
upward and increase aggregate expenditures
In the aggregate expenditures model, technological progress will shift the investment schedule
upward and increase aggregate expenditures.
The negative slope of the production possibilities curve illustrates that:
when resources are fully employed, an economy can produce more of one thing only by producing less of something else
If aggregate demand increases and aggregate supply decreases, the price level:
will increase, but real output may increase, decrease, or remain unchanged
The largest component of federal spending is: A.income security B.national defense C.health and education D.interest on the public debt
A.income security
The market value of all final goods and services produced within a nation in a given year." This best describes: A.net domestic product B.gross domestic product C.national income D.personal income
B.gross domestic product
National income accountants can avoid multiple counting by: A.including transfer payments in their calculations B.only counting final goods C.counting both intermediate and final goods D.only counting intermediate goods
B.only counting final goods
The most important source of local tax revenue is: A.sales and excise taxes B.property taxes C.personal and corporate income taxes D.estate and inheritance taxes
B.property taxes
Nominal GDP is: A.the sum of all monetary transactions that occur in the economy in a year B.the sum of all monetary transactions involving final goods and services that occur in the economy in a year C.the amount of production that occurs when the economy is operating at full employment D.money GDP adjusted for inflation
B.the sum of all monetary transactions involving final goods and services that occur in the economy in a year
The GDP gap measures the difference between: A.NDP and GDP B.NI and PI C.actual GDP and potential GDP D.nominal GDP and real GDP
C.actual GDP and potential GDP
The "G" term in C + Ig + G + Xn includes all of the following except: state government purchases of new computers. Social Security checks received by retirees. salaries received by members of the military. local government expenditures for building new roads.
Social Security checks received by retirees.
U.S. exports: average 4-6 percent of GDP, as do imports average 18-20 percent of GDP, while imports average 10-12 percent average 10-12 percent of GDP, while imports average 15-17 percent average 1-2 percent of GDP, while imports average 4-6 percent
average 10-12 percent of GDP, while imports average 15-17 percent
The command systems of the Soviet Union and eastern Europe failed in part because:
central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and businesses.
In calculating GDP: both exports and imports are added. neither exports nor imports are added. exports are added and imports are subtracted. imports are added and exports are subtracted.
exports are added and imports are subtracted.
One major outcome of the North American Free Trade Agreement is: massive investment by Asian companies in Mexico to exploit reduced tariffs increased unemployment in Mexico higher average living standards in Canada, Mexico, and the U.S. educed exports from the U.S. to Mexico and Canada
higher average living standards in Canada, Mexico, and the U.S.
A microeconomist would most likely study
how consumers respond to a change in gasoline prices
You should decide to study an extra hour tonight
if the marginal benefit of studying an extra hour exceeds its marginal cost.
Answer the next question on the basis of the data given in the following production possibilities table: The data in the table indicate that increasing production of capital goods requires:
increasing sacrifices of consumer goods
The fundamental problem of economics implies that:
individuals and communities must make choices among competing alternatives.
Suppose you have a $20 iTunes gift card with which you can buy (download) songs or videos. Songs cost $1.00 each and videos cost $2.00 each. The opportunity cost of one video:
is constant and equal to 2 songs
The competitive market system encourages innovation and technological advance, primarily through:
profitable returns to innovative firms.
Suppose that for the entire economy, no investment projects will yield an expected real return of more than 12%. However, $10 billion worth of projects will yield expected real returns of 9.1% to 12%, an additional $10 billion will yield expected real returns of 6.1% to 9%, an additional $10 billion will yield expected real returns of 3.1% to 6%, and an additional $10 billion will yield expected real returns of 0% to 3%. If the real rate of interest is 6%, desired investment spending will be: $0 billion $10 billion. $20 billion. $30 billion
$20 billion.
Click on the Image icon on the right. In a private closed (i.e. 2-sector) economy, if gross investment is $12 billion, the equilibrium level of GDP will be:
$360
If the MPC is .75 and the economy has a recessionary expenditure gap of $10 billion, then equilibrium GDP is: $10 billion below full-employment GDP. $10 billion above full-employment GDP. $40 billion below full-employment GDP. $40 billion above full-employment GDP.
$40 billion below full-employment GDP.
Unanticipated inflation: A.arbitrarily redistributes income from creditors to debtors B.invariably leads to unemployment C.reduces the real incomes of all individuals D.has the same economic consequences as anticipated inflation
A.arbitrarily redistributes income from creditors to debtors
Demand-pull inflation: A.occurs when total spending exceeds the economy's ability to provide output at the existing price level B.occurs when prices of resources rise, pushing up costs and the price level C.occurs only when the economy has reached its absolute production capacity D.is also called cost-push inflation
A.occurs when total spending exceeds the economy's ability to provide output at the existing price level
The term 'recession' describes a situation where: A.output and living standards decline. B.inflation rates exceed normal levels C.an economy's ability to produce is destroyed D.government takes a less active role in economic matters
A.output and living standards decline.
If intermediate goods and services were included in GDP: A.the GDP would be overstated B.the GDP would then have to be deflated for changes in the price level C.nominal GDP would exceed real G DPD.the GDP would be understated
A.the GDP would be overstated
A new President and Congress increase personal income taxes.
Aggregate Demand shifts IN
A widespread fear of depression on the part of the consumers.
Aggregate Demand shifts IN
A financial crisis in Asia reduces demand for U.S. exports.
Aggregate Demand shifts OUT
The Fed sets lower interest rate at each price level
Aggregate Demand shifts OUT
The Japanese economy recovers from a long recession.
Aggregate Demand shifts OUT
Crude oil prices triple.
Aggregate Supply shifts IN
New information technologies reduce business costs.
Aggregate Supply shifts OUT
Solar power becomes cheaper and competitive with oil and gas for electric power.
Aggregate Supply shifts OUT
The development of a cheaper method of manufacturing computer chips.
Aggregate Supply shifts OUT
lick on the 'Image' icon on the right. Which of the following might have caused the shift from consumption schedule C1 to schedule C2?
An increase in household wealth
For a market system, which of the following best answers the question, "What goods and services will be produced?"
Any good that returns its producers sufficient revenue to cover its total costs
The investment demand curve portrays an inverse (negative) relationship between:
the real interest rate and investment
The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the: A.International Monetary Fund (IMF) B.International Trade Commission (ITC) C.World Trade Organization (WTO) D.Common Market Organization (CMO)
C.World Trade Organization (WTO)
In national income accounting, consumption expenditures include: A.purchases of both new and used consumer goods B.consumer durable goods and consumer nondurable goods, but not services C.consumer durable goods, consumer nondurable goods, and services D.changes in business inventories
C.consumer durable goods, consumer nondurable goods, and services
The largest component of total expenditures in the United States is: A.net exports B.government purchases C.consumption D.gross investment
C.consumption
The unemployment rate is the: A.ratio of unemployed to employed workers B.number of employed workers minus the number of workers who are not in the labor force C.percentage of the labor force that is unemployed D.percentage of the total population that is unemployed
C.percentage of the labor force that is unemployed
Inflation means that: A.all prices are rising, but at different rates B.all prices are rising and at the same rate C.prices on average are rising, although some particular prices may be falling D.real incomes are rising
C.prices on average are rising, although some particular prices may be falling
The growth of GDP may understate changes in the economy's economic well-being over time if the: A.distribution of income becomes increasingly unequal B.environment deteriorates because of pollution C.quality of products and services improves D.amount of leisure decreases
C.quality of products and services improves
In 2010, Maxine's nominal income increased by 3% while the price level rose by 1%. Consequently, Maxine's real income: A.rose by approximately 4% B.fell by approximately 1% C.rose by approximately 2% D.fell by approximately 2%
C.rose by approximately 2%
In the U.S., most businesses are _____, while most sales are accounted for by _____. A.sole proprietorships; partnerships B.partnerships; corporations C.sole proprietorships; corporations D.corporations; sole proprietorships
C.sole proprietorships; corporations
Nominal GDP is adjusted for price changes through the use of: A.the Consumer Price Index (CPI) B.the Producer Price Index (PPI) C.the GDP price index D.exchange rates
C.the GDP price index
Which of the following is an intermediate good? A.the purchase of gasoline for a ski trip to Colorado B.the purchase of a pizza by a college student C.the purchase of baseball uniforms by a professional baseball team D.the purchase of jogging shoes by a professor
C.the purchase of baseball uniforms by a professional baseball team
Investors believe dot com business prospects are gloomy and drive down the stock market
Consumption shifts IN
The use of capital goods: A. is often less efficient than more direct production methods B. leads directly to geographic specialization C. is the same as the 'division of labor' D. is a major element in raising the nation's standard of living
D. is a major element in raising the nation's standard of living
Why are high rates of unemployment of concern to economists?: A.Higher rates of unemployment are linked to higher crime rates and other social problems. B.A larger fraction of the nation's labor resource is going unutilized. C.There is lost output that could have been produced if the unemployed had been working. D.All of the above are reasons why economists are concerned about high unemployment rates.
D.All of the above are reasons why economists are concerned about high unemployment rates.
A college graduate using the summer following graduation to search for a job would best be classified as: A.not officially a member of the labor force B.a part of structural unemployment C.a part of cyclical unemployment D.a part of frictional unemployment
D.a part of frictional unemployment
Cost-push inflation may be caused by: A.an increase in output per worker B.a decrease in wage rates C.an increase in resource availability D.a supply shock
D.a supply shock
Rising per-unit production costs are most directly associated with: A.frictional unemployment B.structural unemployment C.demand-pull inflation D.cost-push inflation
D.cost-push inflation
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production? A.the services of health care workers B.the services of military personnel C.the construction of new buildings D.goods and services produced in the underground economy
D.goods and services produced in the underground economy
GDP includes A.all government spending at all levels B.all government spending at all levels except the local level C.government purchases at all levels plus federal spending on transfer payments D.government purchases at all levels, which excludes transfer payments
D.government purchases at all levels, which excludes transfer payments
Okun's law: A.measures the tradeoff between the rate of inflation and the rate of unemployment B.indicates the number of years it will take for a constant rate of inflation to double the price level C.quantifies the relationship between nominal and real incomes D.shows the relationship between the unemployment rate and the size of the negative GDP gap
D.shows the relationship between the unemployment rate and the size of the negative GDP gap
Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called: A.frictional unemployment B.cyclical unemployment C.compositional unemployment D.structural unemployment
D.structural unemployment
Official unemployment statistics: A.understate unemployment because individuals receiving unemployment compensation are counted as employed B.include cyclical and structural unemployment, but not frictional unemployment C.overstate unemployment because workers who are involuntarily working part time are counted as being employed D.understate unemployment because discouraged workers are not counted as unemployed
D.understate unemployment because discouraged workers are not counted as unemployed
Delta [DI]
DI yeas 2 - DI year 1
Which of the following sources of economic growth is a demand-side factor? Higher spending on rising output Improved technology Utilizing resources in the least costly way Increases in the quantity of human resources
Higher spending on rising output
A new administration decides to tax capital investments to pay off the national debt.
Investment shifts IN
A new administration encourages the formation of labor unions
Investment shifts IN
A recession has left substantial underutilized capacity.
Investment shifts IN
A trade embargo raises the price of steel.
Investment shifts IN
A cheaper way to make memory chips is developed.
Investment shifts OUT
A limited war that would reduce consumer durables appears likely.
Investment shifts OUT
A new administration decides to reduce taxes on capital investment
Investment shifts OUT
An international trade agreement lowers import taxes on machine tools.
Investment shifts OUT
The economy is enjoying rapid growth and most existing capacity is fully utilized.
Investment shifts OUT
Assume the MPC is 2/3. If government spending decreases by $6 billion, equilibrium GDP will: fall by $2 billion. fall by $18 billion. fall by $6 billion. fall by $4 billion.
fall by $18 billion.
Suppose the MPC is ¾. If investment spending falls by $10 billion, the level of GDP will: fall by $40 billion. fall by $30 billion. fall by $10 billion. fall by $7.5 billion.
fall by $40 billion.
Orlando has just finished school and is searching for his first job. Orlando is considered to be: structurally unemployed. frictionally unemployed. cyclically unemployed. employed.
frictionally unemployed.
Bees from a keeper's hive can pollinate fruit trees for many surrounding orchards. Therefore, the production of honey: -generates a positive externality and should be encouraged through subsidies -generates a positive externality, however resources are correctly allocated in this market -generates a negative externality and should be discouraged through taxes -needs no government interaction. Beekeepers reap all private benefits
generates a positive externality and should be encouraged through subsidies
Compared to the rest of the world, In the U.S. since 1960i both the average educational level and the relative quality of education have increased. both the average educational level and the relative quality of education have declined. the average educational level has increased but the relative quality of education has declined. the average educational level has declined but the relative quality of education has improved.
he average educational level has increased but the relative quality of education has declined.
Economic profits and losses:
help determine which industries survive or fail.
Net exports will be positive: at the equilibrium level of GDP. whenever GDP is below its equilibrium level. whenever GDP exceeds its equilibrium level. if exports exceed imports.
if exports exceed imports.
Suppose nominal GDP in the base year was $380 billion. Five years later, nominal GDP was $480 and the GDP price index was 120. Over those five years, real GDP: increased by $20 billion. increased by $96 billion. increased by $80 billion. did not change.
increased by $20 billion.
Human specialization, or the division of labor:
increases output by enabling workers to take advantage of differences in their skills
An unexpected drop in consumer spending would be classified as a: negative demand shock. negative supply shock. positive demand shock. positive supply shock.
negative demand shock.
A typical household uses the largest share of its total income for: -personal consumption expenditures -combined income, payroll, sales, and property taxes -personal saving -food
personal consumption expenditures
Living standards in ancient Rome remained relatively constant for 1000 years because: -population increased at approximately the same rate as output, leaving output per person unchanged. -average family sizes increased at the same rate as output per person. -constant wars reduced the size of the population at the same rate as output was falling, leaving output per person unchanged. -constant wars depleted the economy's capital stock, resulting in little or no growth of total output.
population increased at approximately the same rate as output, leaving output per person unchanged.
Inflation always: reduces both the purchasing power of the dollar and real income. reduces the purchasing power of the dollar and increases real income. reduces the purchasing power of the dollar but may have no impact on real income. ncreases the purchasing power of the dollar and reduces real income.
reduces the purchasing power of the dollar but may have no impact on real income.
An unexpected reduction in demand for a firm's product would result in: -rising inventories followed by cuts in production. -falling inventories followed by cuts in production. -immediate increase in both production and desired inventory levels. -rising inventories followed by increased employment of resources.
rising inventories followed by cuts in production
In 2010, Maxine's nominal income increased by 3% while the price level rose by 1%. Consequently, Maxine's real income: rose by approximately 4%. fell by approximately 1%. rose by approximately 2%. fell by approximately 2%.
rose by approximately 2%.
APS
savings/disposable income
Assume the level of investment is independent of the level of GDP. If the interest rate rises, the investment schedule will: shift to the right. shift to the left. shift downward. shift upward.
shift downward.
Consider the problem Marsha faces of how to allocate her weekly allowance between books and videos. An increase in Marsha's allowance will:
shift her budget line to the right
Other things equal, an improvement in productivity will
shift the Aggregate Supply curve to the right
Immediately prior to the second Iraq war in 2003, there was a drop in both consumer and firm optimism about the future of the economy. This change likely
shifted the consumption schedule down and shifted the investment demand curve to the left
immediately prior to the second Iraq war in 2003, there was a drop in both consumer and firm optimism about the future of the economy. This change likely:
shifted the consumption schedule down and shifted the investment demand curve to the left
The aggregate demand curve
shows the amount of real output that will be purchased at each possible price level
The aggregate supply curve:
shows the various amounts of real output that businesses will produce at each price level
The Aggregate Demand curve
slopes down and to the right
The aggregate supply curve (short-run)
slopes upward and to the right
The income approach to GDP sums the total income earned by resource suppliers and: adds net transfer payments and personal taxes. adds net investment and depreciation. -subtracts net foreign factor income but adds depreciation and taxes on production and imports. net transfer payments, depreciation, and net foreign factor income.
subtracts net foreign factor income but adds depreciation and taxes on production and imports.
A household's disposable income increases from $50,000 to $60,000 and its consumption increases from $45,000 to $52,000. Consequently, we can conclude
the MPS is .3
The U.S. money supply is "backed" by:
the ability of the government to maintain its value
The equilibrium price level and level of real output occur where:
the aggregate demand and supply curves intersect
Considering average state-level spending and revenue: most spending is for police and fire protection most spending is for health care and hospital administration the largest source of revenue is taxes on income the largest sources of revenue are sales and excise taxes
the largest sources of revenue are sales and excise taxes
The most important determinant of consumer spending is:
the level of income.
The change in real GDP is not an accurate measure of the change in economic welfare because, for example: improvements in product quality are overstated. expenditures for personal services are excluded. the price level never changes over time. the price level changes over time
the price level changes over time. Response Feedback: Price Level changes inflate/deflate the actual level of economic performance.