Macro-Economics: Quiz

Imports are subtracted in the expenditure approach to calculating GDP; because

consumption, investment, and government spending are overstated as these include expenditures on both domestic and foreign goods

Expansionary fiscal policy is used by the government to

create new jobs in the economy

Nominal outputs is measured in___ dollars and real output is measured in___ dollars

current; base year

Suppose that households in Hawaii begin to buy more pineapples. This change will ____ the supply of pineapples.

have no direct affect on

Which of the following would be included in US gross national product (GNP)?

The production of a Ford Transit Connect in the US company's Craiova, Romania plant.

Explain whether each of the following statements describes a change in demand or a change in quantity demanded, and specify whether each change represents and increase or a decrease. An increase in the federal minimum wage results in a decline in sales of fast food (assume fast food is an inferior good).

The quantity demanded of fast food decreases.

The supply of pineapples in Hawaii increases, causing pineapple prices to fall. Lower Prices mean that Hawaiian households will increase what?

The quantity of pineapples demanded.

Toyota, a Japan-based company manufactures a Camry automobile in Kentucky, USA and sells it in Japan. This transaction is included in

US GDP under exports

All of the following changes shift the consumption function except:

an increase in income

What are the two equivalent formulas for investment multiplier?

1/MPS and 1/1-MPC

If the required reserve ratio is 5 percent, the money multiplier is

20

How do economists define the law of demand?

A negative, or inverse, relationship between demand

Which of the following changes will unambiguously increase consumption expenditure at every level of income and shift the consumption function upward?

A reduction in interest rate and expectations of higher income in the future

Which of the following statements is true?

A: All price increase constitute inflation B: The consumer price index accounts for customers' substitution away from high priced goods, and therefore has a tendency to underestimate the rate of inflation. C: The producer price index is the most widely followed measure of inflation D: *None of the above*

The fundamental decision-making units in a market economy are:

A: firms- the primary producing units in the economy B: households- the consuming units in the economy C: government- the primary authority in the economy D: All of the above E: *A and B only*

An effective price floor is set___ the market equilibrium price and results in a ___.

Above; surplus

On the Forbes 2015 list of the World's Billionaires, Bill Gates ranks at the top with a net worth of $79.2 billion. Does this "richest man in the world" face scarcity, or does scarcity only affect those with more limited incomes and lower net worth?

Bill Gates faces scarcity because resources are limited.

Which of the following is not one of the types of unemployment?

Discouraged unemployment, which is unemployment from people not finding jobs.

The interest rate banks are changed to borrow reserves from other banks is called the

Federal funds rate

Household consumption is affected by which of the following?

Future expectations Wealth Interest Rate *All of the Above*

Ford Motor Co. produces a Focus automobile in its factory in Germany and sells it in India . This transaction is added to

German GDP under exports

In a laissez-faire economic system

Government's role is limited to protecting and enforcing property rights and providing public goods.

If government purchases increased by $200 billion but GDP remained the same, which of the following could have occurred if everything else remains unchanged?

Gross private domestic investment decreased by $200 billion

Which of the following best describes the relationship between aggregate expenditure and real GDP?

If aggregate expenditure falls short of real GDP, inventories will accumulate and real GDP and aggregate income will fall in future

Which of the following statements is true?

If the Fed makes an open market purchase of $1 million, then the money supply will increase by exactly $1 million. The Fed is a completely independent agency authorized by Congress to buy and sell all US government securities on the open market A bank can make loans from its deposits if it is meeting the reserve requirement *All of the above*

Which of the following are generally not counted in GDP?

Increases in leisure time

As a measure of the money supply, M1 differs from M2 in that

M2 includes M1 plus savings accounts, money market accounts, and other near monies.

For a firm that wishes to maximize profits, its decision about what quantity of output to supply depends on all of the following except

The demand for the product

Established in 1903 under the will of Cecil Rhodes, the Rhodes Scholarship is considered to be the world's most prestigious scholarship. It is an international, postgraduate award for selected foreign students to study at the University of Oxford. A Rhodes Scholarship covers all university and college fees as well as a personal stipend and airfare for a round trip to Oxford. Suppose you are selected as one of the recipients of the scholarship in 2017, what would be the opportunity cost to you to attend the program?

The opportunity cost would be the highest-valued alternative that you must give up to join the program.

If the world price for oil is below the equilibrium price for the US oil market and the US oil market and the US government imposes a tariff on imported oil, U.S domestic production of oil would ___ and domestic consumption of oil would ___ as a result of the tariff.

increase; decrease

In the base year, nominal GDP

is always equal to real GDP

Producer surplus

is the difference between the current market price and the cost of production for the firm.

Consumer surplus

is the difference between the maximum amount a person is willing to pay for a good and its current market price

The economy is beginning to slip into a recession. Further, the data indicate that inflation is low. The Fed will most likely respond to this state of the economy by

purchasing government securities to lower the interest rate

Recession is a period during which

real GDP declines for at least two consecutive quarters.

If the Fed wants to decrease the money supply, it could

sell treasury securities

The total labor force in an economy is

the number of people employed plus the number of unemployed