Econ201 Exam 3 (Ch. 9,10,&11)

the figure shows the saving schedules for economies 1,2,3, and 4. which economy has the highest marginal propensity to consume

4

the table gives data for a private closed economy. at the $370 billion level of DI, the APS is approximately

4%

The multiplier is useful in determining the

A. Full employment unemployment rate B. level of business inventories C. change in the rate of inflation from a change in the interest-rate D. change in GDP resulting from a change in spending D. change in GDP resulting from a change in spending

supposed to nominal annual interest rate on a two-year loan is 8% and lenders except inflation to be 5% in each of the two years. The annual real rate of interest is

A. 6% B. 8% C. 2% D. 3% D. 3%

if the nominal interest rate is 5% and the real interest rate is 2%, then the inflation premium is

A. 8% B. 5% C. 3% D. 2% C. 3%

The table contains information about the hypothetical economy of Skube. All figures are in millions. The labor force in Scoob is

A. 95 million B. 102 million C. 105 million D. 145 million B. 102 million

which of the following would increase GDP by the greatest amount

A. A $20 billion reduction in taxes B. $20 billion increases in both government spending and taxes C. $20 billion decrease in both government spending and taxes D. A $20 billion increase in government spending D. A $20 billion increase in government spending

other things equal, the slope of the aggregate expenditures schedule will increase as a result of

A. A decline in the size of the inflationary gap B. an increase in the MPC C. an increase in the MPS D. A decline in the general place level B. an increase in the MPC

The consumption schedule shows

A. A direct relationship between aggregate consumption in accumulated wealth B. A direct relationship between aggregate consumption and aggregate income C. an inverse relationship between aggregate consumption and accumulated financial wealth D. an inverse relationship between aggregated consumption in the price level B. A direct relationship between aggregated consumption and aggregated income

refer to the diagram for a private closed economy. the equilibrium GDP is

$180

refer to the given information about a hypothetical economy. the unemployment rate is

12.5%

the table gives data for a private closed economy. the MPS is

3/10

refer to the given data for a hypothetical economy. at the $100 level of income, the adverse propensity to save is

0.10

refer to the given table, which illustrates the multiplier process. the marginal propensity to save is

0.2

if a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is

A. 4 B. 5 C. 3.33 D. 2.5 B. 5

if the MPC is 0.6, the multiplier will be

A. 4.0 B. 6.0 C. 2.5 D. 1.67 C. 2.5

if the MPC in an economy is 0.9, a $1 billion increase in government spending will ultimately increase consumption by

A. $1 billion B. $0.9 billion C. $10 billion D. $9 billion D. $9 billion

if the MPC in an economy is 0.75, a $1 billion increase in taxes will ultimately reduce consumption by

A. $1 billion B. $0.75 billion C. $3 billion D. $4 billion C. $3 billion

assume the MPC is 0.8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by

A. $100 billion B. $90 billion C. $40 billion D. $50 billion C. $40 billion

if actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potentially GDP is

A. $360 billion B. $660 billion C. $320 billion D. $20 billion C. $320 billion

if actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potentially GDP is

A. $510 billion B. $490 billion C. $10 billion D. $990 billion A. $510 billion

If the marginal propensity to consume is 0.9, then the marginal propensity to save must be:

A. 1.0 B. 0.1 C. 1.1 D. 0.9 B. 0.1

The multiplier is

A. 1/MPC B. 1/(1+MPC C. 1/MPS D. 1/(1-MPS) C. 1/MPS

The consumer price index rises from 300 to 333 in a particular year, the rate of information in that year is

A. 11% B. 33% C. 91% D. 10% A. 11%

if the nominal interest rate is 18% and the real interest rate is 6%, the inflation rate is

A. 18% B. 24% C. 12% D. 6% C. 12%

The table contains information about the hypothetical economy of Scoob. All figures are in millions. The unemployment rate in Scoob is

A. 2.5% B. 3.2% C. 5% D. 6.9% D. 6.9%

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about

A. 2.8% B. 3.4% C. 1.6% D. 4.1% C. 1.6%

in a private closed economy, when aggregated expenditures exceed GDP,

A. GDP will decline B. Business inventories will rise C. saving will decline D. Business inventories will fall D. Business inventories will fall

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP then will a $1 decline in taxes because

A. Government spending us more employment intensive than is either consumption or investment spending B. Government spending increases the money supply and a tax reduction does not C. A portion of a tax cut will be saved D. taxes vary directly with income C. A portion of a tax cut will be saved

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 phrase " too much money chasing too few goods" best describes

A. The GDP gap B. demand-pull inflation C. The inflation premium D. cost push inflation B. demand-pull inflation

at the point where the consumption schedule intersects the 45° line

A. The MPC is 1.00 B. The APC is 1.00 C. saving is equal to consumption D. The economy is in equilibrium B. the APC is 1.00

at the economy's natural rate of unemployment

A. The economy achieves as potential output B. there's only a relatively small amount of cyclical unemployment C. only frictional unemployment exist D. only structural unemployment exist A. The economy achieves its potential output

if the dollar appreciates relative to foreign currencies, we would expect

A. The multiplier to decrease B. a countries countries exports and imports to both fall C. a countries net exports to rise D. a countries net exports to fall D. a countries net exports to fall

The phase of the business cycle in which real GDP declines is called:

A. The peak B. an expansion C. recession D. the trough C. recession

if unintended increases in business inventories occur, we can expect

A. a decline in GDP and rising unemployment B. inflation C. an increase in consumption D. an offsetting increase in planned investment A. A decline in GDP and rising unemployment

A private closed economy will expand when

A. actual GDP is less than potential GDP B. unplanned decreases in inventories occur C. aggregate expenditures are less than GDP D. unplanned increase in inventories occur B. unplanned decreases in inventories occur

Inflation means that:

A. all prices are rising, but at different rates B. all prices are rising at approximately 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 aggregate cost of unemployment can be measured by

A. amount by which actual GDP exceeds potential GDP B. amount by which potential GDP exceeds actual GDP C. excess of real GDP over nominal GDP D. excess of nominal GDP over real GDP B. amount by which potential GDP exceeds actual GDP

The equilibrium level of GDP is associated with

A. an excess planned investment over saving B. no unintended changes in inventories C. an unintended decrease in business inventories D. an unintended increase in business inventories B. no unintended changes in inventories

A rightwardshift of the investment demand curve might be caused by

A. an increase in the price level B. A decline in real interest rate C. businesses planning to increase their stock of inventories D. an increase in business taxes C. Business planning to increase their stock inventories

Given the expected rate of return on all possible investment opportunities in the economy:

A. an increase in the real rate of interest will reduce the level of investment B. A decrease in the real rate of interest will reduce the level of investment C. A change in the real interest rate will have no impact on the level of investment D. an increase in the real interest rate will increase the level of investment A. an increase in the real rate of interest will reduce the level of investment

as disposable income goes up, the

A. average propensity to consume falls B. average propensity to save falls C. volume of consumption declines absolutely D. volume of investment diminishes A. average propensity to consume falls

According to the Bureau of Labor Statistics, to be officially unemployed a person must:

A. be in the labor force B. be 21 years of age or older C. have lost a job D. be waiting to be called back from a layoff A. be in a labor force

unintended changes in inventories

A. cause the economy to move away from the equilibrium GDP B. are treated as components of consumption C. Bring actual investment and saving into equality only at the equilibrium level of GDP D. Bring actual investment and saving into equality at all levels of GDP D. Bring actual investment and saving into equality at all levels of GDP

the MPC can be defined as that fraction of a

A. change in income that is not spent B. change in income that is spent C. given total income that is not consumed D. given total income that is consumed B. change in income that is spent

The APC can be defined as the fraction of a

A. change in income that is not spent B. change in income that is spent C. specific level of total income that is not consumed D. specific level of total income that is consumed D. specific level of total income that is consumed

The investment demand curve suggest that

A. changes in the real interest rate will not affect the amount invested B. there is an inverse relationship between the real rate of interest and the level of investment spending C. an increase in business taxes will tend to stimulate investment spending D. there is a direct relationship between the real rate of interest and the level of investment spending B. there is an inverse relationship between the real rate of interest and the level of investment spending

Inflation initiated by increases in wages or other resource prices is labeled:

A. demand-pull inflation B. demand-push inflation C. cost-push inflation D. cost-pull inflation C. cost-push inflation

when investment remains the same at each level of GDP in a private closed economy, the slope of the aggregated expenditures schedule

A. exceeds the MPC B. is less than the MPC C. equals the MPS D. equals the MPC D. equals the MPC

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

A. expansion B. recession C. peak D. trough A. expansion

the immediate determinants of investment spending are the

A. expected rate of return on capital goods and the real interest rate B. level of saving and the real interest rate C. marginal propensity to consume and the real interest-rate D. interest-rate and the expected price level A. expected rate of return on capital goods and the real interest rate

The level of aggregate expenditures in the private closed economy is determined by the

A. expenditures of consumers and businesses B. intersection of the saving schedule in the 45° line C. equality of the MPC and MPS D. intersection of saving and consumption schedules A. expenditures of consumers and businesses

imports have the same affect on the current size of GDP as

A. exports B. investment C. consumption D. saving D. saving

which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

A. fictional and cyclical unemployment B. structural and frictional unemployment C. cyclical and structural unemployment D. frictional, structural, and cyclical unemployment B. structural and frictional unemployment

The type of unemployment associated with recession is called

A. frictional unemployment B. structural unemployment C. cyclical unemployment D. seasonal unemployment C. cyclical unemployment

rising per unit production cost are most directly associated with

A. frictional unemployment B. structural unemployment C. demand-pull inflation D. cost-push inflation D. cost-push inflation

An unexpected increase in total spending will cause an increase in GDP:

A. if prices are sticky B. if prices are fully flexible C. regardless of whether prices are sticky or fully flexible D. only if prices are stuck in the long term A. if prices are sticky

an increase in taxes will have a greater effect on the equilibrium GDP

A. if the tax revenues are redistributed through transfer payments B. The larger the MPS C. The smaller the MPC D. The larger the MPC D. The larger the MPC

Dissaving occurs when

A. income exceeds consumption B. saving exceeds consumption C. consumption exceeds income D. saving exceeds income C. consumption exceeds income

if the multiplier in an economy is five, $20 billion increase in net exports will

A. increase GDP by $100 billion B. reduce GDP by $4 billion C. decrease GDP by $100 billion D. increase GDP by $20 billion A. increase GDP by $100 billion

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

A. increase by $10 billion B. increase by $2.10 billion C. decrease by $4.29 billion D. increase by $4.29 billion A. increase by $10 billion

if government increases its purchases by $15 billion and the MPC is 2/3, when would we expect the equilibrium GDP to

A. increased by $30 billion B. increase by $45 billion C. decrease by $35 billion D. increase by $50 billion B. increased by $45 billion

A decline in disposable income:

A. increases consumption by moving consumption schedule B. decrease his consumption because it shows the consumption schedule downward C. decrease his consumption by moving downward along a specific consumption schedule D. increases consumption because it shifts the consumption schedule upward C. decrease consumption by moving downward along a specific consumption schedule

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

A. inflation of 4% B. inflation of 3.33% C. deflation of 3.33% D. deflation of 4% C. deflation of 3.33%

Okun's Law

A. measures the trade-off between the rate of inflation and the rate of unemployment B. indicates a 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

The industries or sectors of the economy in which business cycle fluctuation tends to affect output most are

A. military goods and capital goods B. services and nondurable consumer goods C. clothing and education D. Capital goods and durable consumer goods D. Capital goods and durable consumer goods

One can determine the amount of any level of total income that is consumed by

A. multiplying total income by the slope of the consumption schedule B. multiplying total income by the APC C. subtracting the MPS from total income D. multiplying total income by the MPC B. multiplying total income by the APC

at the equilibrium GDP for a private open economy

A. net exports may be either positive or negative B. imports will always exceed exports C. exports will always exceed imports D. exports and imports will be equal A. net exports may be either positive or negative

An upward shift of the saving schedule suggests:

A. nothing with respect to changes in the APC and APS, only that the APS has changed B. that the APC and APS have both decreased at each GDP level C. that the APC and APS have both increased at each GDP level D. that the APC has decreased and the APS has increased at each GDP level D. that the APC has decreased and the APS has increased at each GDP level

demand-pull inflation

A. occurs when prices of resources rise, pushing up cost and the price level B. occurs when total spending exceeds the economies ability to provide output at the existing price level C. occurs only when the economy has reached its absolute production capacity D. it's also called cost push inflation B. occurs when total spending exceeds the economies ability to provide output at the existing price level

Recurring up swings and down swings in an economy is real GDP overtime are called

A. recession B. business cycle C. output yo-yos D. total product oscillations B. business cycles

In contrast to investment, consumption is:

A. relatively unstable B. relatively stable C. measurable D. unmeasurable B. relatively stable

if Carlos disposable income increases from $2100 to $1700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

A. save is 3/5 B. consume is 1/2 C. consume is 3/5 D. consume is 2/5 C. consume is 3/5

which of the following statements is correct for a private closed economy

A. savings equals planned investment only at the equilibrium level of GDP B. all levels of GDP where a planned investment exceeds saving will be too high for equilibrium C. planned an actual investments are identical at all possible levels of GDP D. saving equals actual investment only at equilibrium equilibrium level of GDP A. saving equals planned investment only at the equilibrium level of GDP

Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with:

A. seasonal unemployment B. cyclical unemployment C. structural unemployment D. frictional unemployment C. structural unemployment

The wealth effect is shown graphically as a

A. shift to the consumption schedule B. movement along an existing consumption schedule C. shift to the investment schedule D. movement along an existing investment schedule A. shift to the consumption schedule

if Trent's MPC is 0.80, this means that he will

A. spend 8/10 of any increase in his disposable income B. spend 8/10 of any level of disposable income C. Break even when his disposable income is $8000 D. save 2/10 of any level of disposable income A. spend 8/10 of any increase in his disposable income

The table contains information about the hypothetical economy of Scoob. All figures are in millions. If the natural rate of unemployment in Scoob is 5%, then

A. structural unemployment is about 3% B. frictional unemployment is about 2% C. cyclical unemployment is about 2% D. Hidden unemployment is about 5% C. cyclical unemployment is about 2%

The phase of the business cycle in which real GDP is at a minimum is called:

A. the peak B. recession C. the trough D. the underside C. the trough

innovations such as the microchip and the Internet lead to business cycle variations because

A. they cause prices to be sticky B. significant innovations occur irregularly and unexpectedly C. The central bank will often change the money supply in response D. they cause prices to be flexible B. significant innovations occur irregularly and unexpectedly

refer to the diagram. the average propensity to consume

is greater than 1 at all levels of disposable income below $100

refers to the given diagram. At income level F, the volume of saving is

CD

refer to the given graph. a shift of the consumption schedule from C2 to C1 might be caused by an

reverse wealth effects, caused by a decrease in stock market prices

refer to the diagram for a private closed economy. at the $300 level of GDP

aggregated expenditures and GDP are equal

refer to the given diagram. consumption will be raquel to income at

an income of E

refer to the diagram for a private closed economy. At the $200 level of GDP

consumption is $200 and planned investment is $50, so aggregated expenditures are $250