First Exam Macroeconomics

When calculating GDP, exports are ________ and imports are ________.

added; subtracted

Refer to the graph below. The shift in the production function is the result of: Point B: Small curve Point C: Large curve

adding more capital

When economists say that capital is subject to diminishing marginal returns, they mean that:

additional units of capital result in higher output, but the marginal increases in output are ever decreasing.

If the value of net exports is negative, then

imports exceed exports.

A final good is one that

is purchased by its final user.

The period between a business cycle peak and a business cycle trough is called

recession.

Fill in the blank. In the neoclassical model of growth, ___________ is the portion of output that turns into capital.

saving

Fill in the blanks. Capital accumulation increases with ______________, but decreases with ___________.

saving; depreciation

Which component of consumption spending is the greatest in a typical economy?

services

Which of the following are not considered part of government purchases?

welfare benefits

Which of the following are the two main factors affecting the standard of living?

Capital accumulation and total factor productivity.

A key discovery in economics concerning economic growth is that:

Capital accumulation must be accompanied by technological change.

Dilusion occurs when

Capital remains constant while labor increases, so the capital-labor ratio decreases.

Which of the following is the expression for real GDP per capita?

(Real GDP)/(Population)

Which of the following is the expression for labor productivity?

(Real GDP)/(Workers)

The relationship between real GDP per capita and labor productivity is as follows. Real GDP per capita equals:

(Real GDP)/(Workers) x (Workers)/(Population)

If productivity growth is 2% and the growth of capital per hour of work is 2.33%, the the growth rate of technology is closer to:

1.3%

Nominal GDP = 14441 Real GDP = 13312 Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2013 equals

108.5.

If real GDP per capita grows at a rate of 5% per year, how long will it take for real GDP per capita to double?

14 years

If disposable personal income is $400 billion and personal saving is $8 billion, the personal saving rate is

2%

If real GDP in 2009 was $12,703 billion, and $13,088 billion in 2010, the growth of real GDP in 2010 equals:

3%.

Refer to the figure below. Which of the following points is called the "dismal outcome"? Point A: On curve, above line Point B: On curve, on line Point C: Above curve, on line

B

In the catch up line, a country lying at the top left of the line is:

a country with a low initial level of real GDP per capita, growing rapidly.

Refer to the figure below. In an early theory of demographics and economic growth, Malthus would have predicted that, at point A, Point A: On curve, above line Point B: On curve, on line Point C: Above curve, on line

a surplus of output will cause the population and the labor force to increase.

During the expansion phase of the business cycle, which of the following eventually increases?

all of the above

In the value added approach to counting GDP, as seen in the firm-level example, the cumulative value of sales is equal to:

all of the above

Which of the following would increase gross private domestic investment in an economy?

an increase in the level of Apple's inventory

Government spending ________ is included in gross domestic product.

at federal, state, and local levels of government

The period of expansion ends with a ________ and the period of recession ends with a ________.

business cycle peak; business cycle trough

A central idea of the neoclassical growth model is that:

depreciation must be countered with additional investment.

In the circular flow model, the value of total income for an economy ________ the value of total production.

equals

In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.

equals

Saving rates tend to ________ during boom times and ________ during recession periods.

fall; rise

Net investment is

gross investment minus depreciation.

The total value of all capital goods newly produced in a given period is

gross investment..

In the neoclassical model of growth:

households supply the savings needed for investment.

In the circular flow diagram, ________ supply the factors of production, and ________ goods and services.

households; buy

This is a blank card to create 1 card set

ignore this

Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.

increase; decrease

As the economy nears the end of a recession, which of the following do we typically see?

increased spending on capital goods by firms

When the economy enters a recessionary phase of the business cycle, unemployment tends to

increased spending on capital goods by firms

During the recession phase of the business cycle

interest rates are usually falling.

In the growth accounting formula, which of the following are the main determinants of long-run economic growth?

labor productivity, increases in capital per hour of work, and technological change.

Evidence suggests that:

low-income industrial countries have been catching up to higher income industrial countries.

In the early theories of growth, which of the following is a successful strategy to achieve sustained economic growth.

neither a nor b above.

Consumption expenditures do not include household purchases of

new houses.

What is the name of the organization that defines business cycle peaks and troughs in the United States?

the National Bureau of Economic Research

Personal income is national income minus

the amount of national income not going to households.

Solow's residual is also known as:

total factor productivity.

Typically, as an economy begins to emerge from a recessionary phase of the business cycle

unemployment continues to rise.

Which of the following is the best definition of Gross Domestic Product?

GDP

Which of the following equations correctly measures GDP in an economy?

GDP = C + I + G + (X - M)

Which of the following measures includes the value of output produced by foreign firms within a country?

Gross Domestic Product.

If you wanted to count U.S. output produced by U.S. firms in the U.S. and U.S. firms abroad, you would use:

Gross National Product.

GDP measures the value of production:

In the current year only.

In the theory of economic growth, the "catch up" line has these variables in its horizontal and vertical axes, respectively:

Initial level of real GDP per capita. and growth in real GDP per capita over time.

A business affiliate needs to know the implications of a skyrocketing inflation rate in Venezuela.

Macroeconomics

A change in economic policy that alters interest rates could affect my decision to borrow and spend.

Macroeconomics

A recession in the economy could directly affect my business.

Macroeconomics

My business plan may be affected by the fact that the economy of China is growing faster than the economy of the United States.

Macroeconomics

Now that the value of the U.S. dollar has risen in global currency markets, I may consider opportunities for investing abroad.

Macroeconomics

A large competitor has decided to enter the same market where I have my business.

Microeconomics

Amazon's technology and distribution networks have revolutionized the way business in done in America.

Microeconomics

Local governments and businesses in the United States are analyzing the implications of marijuana legalization, and making policy and business plans and decisions accordingly.

Microeconomics

The U.S. government is drafting policies for reducing obesity and smoking.

Microeconomics

There may be profit opportunities right now in finding the most efficient way to reduce air pollution.

Microeconomics

Which specific government policies are supported by economists to encourage the production and dissemination of new knowledge?

Patents and copyrights, subsidies for education, and competitive grants for basic research.

Durable Goods = 800 Nonresidential investment = 400 Federal Purchases of goods = 300 Exports = 400 State and local purchases of goods = 200 Residential investment = 50 Services = 500 Imports = 250 Change in business inventories = -25 Nondurable goods = 700

Personal consumption expenditures in billions of dollars are

________ is/are the payment for the factor of production ________.

Profit; entrepreneurship

A controversial idea in macroeconomics is that an aggregate measure would behave in a similar manner as the same measure but less aggregated. This controversy is known as:

The aggregation problem

An example of an intermediate good would be

The bread that goes into a sub sandwich that is sold by Quiznos.

The year used in counting GDP is called:

The fiscal year.

The production of goods and services is best represented by:

The market value of all final goods and services produced within an economy during one year

The personal saving rate is

The percentage of disposable personal income that is saved.

Which of the following is a final good?

The tractor used by a farmer to cultivate his fields.

If the relationship between capital and output is expressed as Y = A√K , the term A represents:

technology.

Stage of Production Seller Buyer Price 1 Steel mill Auto manufacturer $10,000 2 Auto manufacturer Auto dealer 18,000 3 Auto dealer Consumer 25,000 Consider the table above showing three stages of production of an automobile. The value added by the automobile dealer equals

$7,000

Which of the following are the main determinants of total factor productivity?

All of the above.

The marginal contribution of a unit of capital is likely to be greater and yield a higher return in a region where:

capital is scarce.

Investment spending includes spending on

changes in business inventories.

The largest income component of GDP is

compensation of employees

The largest component of spending in GDP is

consumption spending.

The total income of households is

personal income.

In the catch-up theory of growth,

poor countries grow fast and should catch up to rich countries.

Which of the following is subtracted from national income to get to personal income?

retained earnings

As the economy nears the end of an expansion, which of the following do we typically see?

rising interest rates

Which of the following expressions represents the stable state of the economy?

sY = δK

In which of the following situations is the capital stock likely to grow?

sY > δK

Proprietors' income is

the income of unincorporated businesses.

All else the same, the economy reaches the stable state when:

the rate of saving equals the rate of depreciation.

Total factor income equals:

the sum of rent, wages, interest and profit.

Total income in an economy is equal to

the sum of​ wages, interest,​ rent, and profit.

Value added by one firm equals

the value of sales minus the cost of intermediate goods.

The circular flow diagram shows that

the value of total income is equal to the total value of expenditures on final goods and services..