Macro Econ Exam #2 Chapters 9-12

Inventories refer to a) Goods which have been presold before they are produced. b) Goods that have been produced but not yet sold. c) Goods that have been planned but not yet produced. d) Goods that have been produced and sold in the same year.

Goods that have been produced but not yet sold.

If the marginal propensity to consume is 0.75, the marginal propensity to save is a) 0.25 b) 0.5 c) 1 d) 3

a) 0.25

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is a) 0.9 b) 0.8 c) 0.5 d) 0.6

a) 0.9

Under which of the following circumstances would the government be running a deficit? a) G=$5 trillion T=$5 trillion TR=$1 trillion b) G= $5 trillion T =$7 trillion TR=$1 trillion c) G=$7 trillion T=$7 trillion TR $0 d) G=$7 trillion T=$10 trillion TR=$3 trillion

a) G=$5 trillion T=$5 trillion TR=$1 trillion

Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $27 million, what unplanned changes in inventories occurred? a) There was an unplanned increase in inventories equal to $2 million. b) There was no unplanned change in inventories. c) There was an unplanned decrease in inventories equal to $2 million. d) There was an unplanned decrease in inventories equal to $19 million.

a) There was an unplanned increase in inventories equal to $2 million.

In a closed economy, which of the following equations reflects investment? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers) a) Y-C-G b) Y-C-T c) Y-T+TR d) C+G-T

a) Y-C-G

If consumers decide to be more frugal and save more out of their income, then this will cause a) a shift in the supply curve for loanable funds to the right. b) a shift in the supply curve for loanable funds to the left. c) a movement to the right along the supply curve for loanable funds. d) a movement to the left along the supply curve for loanable funds.

a) a shift in the supply curve for loanable funds to the right.

The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. a) aggregate demand curve b) savings line c) 45-degree line d) consumption function

a) aggregate demand curve

The purchase or building by a corporation of a facility in a foreign country is called a) foreign direct investment. b) foreign portfolio investment. c) foreign capital depreciation. d) globally-directed investment.

a) foreign direct investment.

Which of the following policies is designed specifically to directly promote technological change in an economy? a) government subsidization of research and development b) tax incentives to promote investment in 401K plans c) laws to strengthen property rights d) a vaccination program to combat infectious diseases

a) government subsidization of research and development

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey a) is based on actual payrolls, rather than on unverified answers. b) includes the number of self-employed persons. c) includes persons employed at newly opened firms d) provides an estimate of the number of persons unemployed

a) is based on actual payrolls, rather than on unverified answers.

The slope of the consumption function is equal to a) the change in consumption divided by the change in disposable income. b) the change in consumption divided by the change in personal income. c) the change in disposable income divided by the change in consumption. d) the change in national income divided by the change in consumption.

a) the change in consumption divided by the change in disposable income.

If cyclical unemployment is eliminated in the economy, then a) the economy is considered to be at full employment b) the unemployment rate is below the natural rate of unemployment. c) the unemployment rate is above the natural rate of unemployment. d) the economy is at less than full employment

a) the economy is considered to be at full employment

Geoff has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Geoff started looking for a new job a) the unemployment rate increased b) the labor force participation rate decreased c) the unemployment rate decreased d) the working-age population increased

a) the unemployment rate increased

Jack lost his job six months ago, and he's been actively looking for a new job ever since. The Bureau of Labor Statistics would classify Jack as a) unemployed. b) out of the labor force c) a discouraged worker d) all of these

a) unemployed.

If inventories decline by more than analysts predict they will decline, this implies that a) actual investment spending was greater than planned investment spending. b) actual investment spending was less than planned investment spending. c) actual investment spending was equal to planned investment spending d) there is no relationship between actual investment spending and planned investment spending.

actual investment spending was less than planned investment spending.

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010? a) $45,977 b) $66, 565 c) $87,200 d) $143,486

b) $66, 565

In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford? a) It became flatter. b) It shifted up. c) It shifted down. d) It became linear.

b) It shifted up.

Which of the following can give an early warning of future increases in the price level? a) Consumer price index b) Producer price index c) GDP deflator d) All of the above

b) Producer price index

If property rights are not enforced in a country, then a) the market system will still work smoothly. b) entrepreneurs are unlikely to risk their own funds investing in such an economy. c) that country's growth rate will not be affected. d) that country will grow more rapidly because of the reduction of law suits.

b) entrepreneurs are unlikely to risk their own funds investing in such an economy.

A decrease in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending. a) increase; decrease b) increase; increase c) decrease; decrease d) decrease; increase

b) increase; increase

The period between a business cycle peak and a business cycle trough is called a) expansion b) recession c) diffusion d) differentiation

b) recession

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid? a) 16 percent b) 12 percent c) 8 percent d) 6 percent

c) 8 percent

In a closed economy, the values for GDP, consumption spending, investment spending, transfer payments, and taxes are as follows: Y = $12 trillion C = $9 trillion I = $3 trillion TR= $3 trillion T = $3 trillion Using the information above, what is the value of private saving and public saving? a)Private saving equals $2 trillion and public saving equals $1 trillion. b)Private saving equals $9 trillion and public saving equals $3 trillion. c)Private saving equals $3 trillion and public saving equals $9 trillion. d)Private saving equals $1 trillion and public saving equals $2 trillion.

c) Private saving equals $3 trillion and public saving equals $9 trillion.

Which of the following is not a reason why low-income countries might experience low economic growth? a) The country has endured extended periods of war. b) The country fails to enforce a rule of law. c) The country has a good education system. d) The country has a low rate of saving and investment.

c) The country has a good education system.

Which of the following will raise consumer expenditures? a) an increase in interest rates. b) a general decline in housing prices c) an increase in expected future income d) an increase in the price level

c) an increase in expected future income

Which of the following price indices comes closest to measuring the cost of living of the typical household? a) GDP deflator b) producer price index c) consumer price index d) household price index

c) consumer price index

The true cost of borrowing and lending is best measured by a) the three-month U.S. Treasury bill rate. b) the nominal interest rate. c) the real interest rate. d) the inflation rate.

c) the real interest rate.

Suppose the working-age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not have employment, but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate as calculated by the U.S. Bureau of Labor would equal a) (20/60) x 100 b) (20/80) x 100 c) (30/80) x 100 d) (20/100) x 100

d) (20/100) x 100

If national income increases by $20 million and consumption increases by $5 million, the marginal propensity to consume is a) 4 b) 0.75 c) 0.5 d) 0.25

d) 0.25

If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size? a) 60 years b) 43 years c) 36 years d) 28 years

d) 28 years

of the following contribute(s) to shorter recessions, longer expansions, and less sever fluctuations in real GDP? a) Monetary policy b) Social Security benefits c) A service-based economy d) All of the above e) A and C only

d) All of the above

Which of the following policies would reduce frictional unemployment? a) A decrease in the minimum wage b) A job retraining program c) Implementing an unemployment insurance policy d) Building an online job database that helps workers find jobs

d) Building an online job database that helps workers find jobs

What effect do labor unions have on the unemployment rate? a) Labor unions can significantly increase the unemployment rate when members go on strike b) By increasing the wage above market equilibrium, labor unions considerably decrease the unemployment rate. c) By increasing the wage above market equilibrium, labor unions considerably increasing the unemployment rate. d) Since few non-government workers are unionized, there is no significant effect on the unemployment rate.

d) Since few non-government workers are unionized, there is no significant effect on the unemployment rate.

Cyclical unemployment is the result of A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. B) the search process of matching workers with jobs. C) the ups and downs in inflation D) a slowdown in the economy

d) a slowdown in the economy

When the economy is at full employment, a) the unemployment rate is greater than zero b) all remaining unemployment is either frictional or structural c) the natural rate of unemployment prevails d) all of the above

d) all of the above

Policies to promote growth by increasing saving and investment work through a) decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. b) increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital. c) increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital. d) increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.

d) increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.

During an expansion, how do inflation and unemployment typically change? a) inflation and unemployment both rise. b) inflation and unemployment both fall. c) inflation falls and unemployment rises. d) inflation rises and unemployment falls.

d) inflation rises and unemployment falls.

Potential GDP a) measures the maximum that a firm is capable of producing b) increases over time as technological change occurs c) increases over time as the labor force grows. d) All of the above e) B and C only

e) B and C only