Macro exam 2

Refer to the accompanying national income data for the economy. All figures are in billions of dollars. Disposable income

cannot be determined from the data given.

The largest component of national income is

compensation of employees.

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

deflation

The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All figures are in billions of dollars. The marginal propensity to save in this economy is

0.1

Refer to the given data for a hypothetical economy. At the $100 level of income, the average propensity to save is

0.10

Refer to the accompanying figures, with consumption schedules in figure (A) and saving schedules in figure (B), which correspond to each other across different levels of disposable income. If, in figure (A), consumption shifts from A2 to A3 because of a change in taxes, then in figure (B) line

b2 will shift to b3

A business buys $5,000 worth of inputs from other firms in order to produce a product. The business makes 100 units of the product and each of them sells for $65. The value added by the business to these products is

$1,500

Gross Investment$18 National Income 100 Net Exports 2 Personal Income 85 Personal Consumption Expenditures70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy0 Refer to the accompanying data (all figures in billions of dollars). The gross domestic product for this economy is

$110

Personal Taxes $23 Net Private Domestic Investment 33 Net Exports 6 National Income 278 U.S. Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietors' Income 45 Net Foreign Factor Income 0 Statistical Discrepancy0 Refer to the accompanying national income data. All figures are in billions of dollars. U.S. imports are

$14

The table contains data for a hypothetical single-product economy. Real GDP in year 3 is

$150.

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is

$200,000

Refer to the accompanying data. All figures are in billions of dollars. The national income is

$265.

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2,460), and government purchases ($470). What is GDP in this economy?

$3,237

Personal Taxes $23 Net Private Domestic Investment 33 Net Exports6National Income 278 U.S. Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietors' Income 45 Net Foreign Factor Income 0 Statistical Discrepancy0 Refer to the accompanying national income data. All figures are in billions of dollars. The gross domestic product is

$301

Refer to the accompanying data, using year 1 as the base year. All dollars are in billions. Real GDP increased from year 3 to year 4 by approximately

$68 billion.

Refer to the accompanying national income data (in billions of dollars). Which items need to be accounted for in going from national income to GDP?

1, 12, and 13

The multiplier can be calculated as

1/(1 − MPC).

Consumption of Fixed Capital $25 Government Purchases 315 US imports 260 Personal Taxes 45 Transfer Payments 247 US Exports 249 Personal Consumption Expenditures 475 Net Foreign Factor Income 5 Gross Private Domestic Investment 300 Taxes on Production and Imports 245 Undistributed Corporate Profits 60 Social Security Contributions 240 Corporate Income Taxes 65 Statistical Discrepancy 40 Refer to the accompanying national income data (in billions of dollars). Net domestic product equals

1054 billion

Consumers in an economy buy only three general types of products, A, B, and C. Changes in the prices of these items over a period are shown in the table. Using year 1 as the base year, the country's price index in year 2 is

106.3

If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately

14 years

You are given the following information about the economy: the nominal interest rate = 8 percent, and the real rate of interest = 6 percent. The inflation premium is

2 percent

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is

22 percent

Suppose that new computer software for accounting and analysis at a business has a useful life of only one year and costs $200,000 before it needs to be upgraded to a new version. The revenue generated by this software is expected to be $250,000. The expected rate of return from this new computer software is

25 percent

Personal Taxes $40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 U.S. Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 U.S. Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital (depreciation) 25 Net Foreign Factor Income 10 Statistical Discrepancy 0 Refer to the accompanying data (all figures in billions of dollars). DI is

274

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

3 percent

A nation's real GDP was $250 billion last year and $265 billion this year. Its population was 122 million last year and 125 million this year. What is the growth rate of real GDP per capita in this year?

3.4 percent

In 2018, what approximate percentage of adults in the U.S. were college graduates or higher?

35 percent

What has been the range for the duration in months of U.S. recessions between 1950 and 2009?

6 months to 18 months

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point

D

Which of the following arguments is not made by critics of growth policies?

Growth may have given us the good life, but we cannot better it anymore.

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

Prices are sticky in the short run.

Suppose Smith pays $100 to Jones.

We need more information to determine whether GDP has changed.

An MPC value of less than 1.0 indicates that as income increases,

consumption also increases, though not as much as income.

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

cyclical unemployment

Refer to the accompanying diagram. If the production possibilities of an economy are shown by curve AB but the economy is operating at point 4, the reasons are most likely to be because of

demand and efficiency factors.

The main cause for the vast differences in per capita GDP levels seen across the globe today is the

different starting dates of modern economic growth in different parts of the world.

The amount of consumption in an economy correlates

directly with the level of disposable income.

The labor force includes

employed workers and persons who are officially unemployed.

Which of the following is best considered a demand factor in economic growth?

expanded purchases of goods and services

A college graduate using the summer following graduation to search for a job would best be classified as

frictionally unemployed.

Unanticipated inflation arbitrarily

harms those who receive fixed money incomes.

Network effects are

increases in the value of a product to each user, including existing users, as the total number of users rises.

The relationship between the real interest rate and investment is shown by the

investment demand schedule

In November of year 1, Econland Motors produced an automobile that was delivered to a local dealership in December that same year. The auto was then sold to Sharon Smith for personal use the next year in February, year 2. Following national income accounting practices, this auto would be counted as part of

investment in year 1 and negative investment in year 2.

Refer to the diagram. The base year used in determining the price indices for this economy

is 2000

The natural rate of unemployment

is equal to the total of frictional and structural unemployment.

Growth is advantageous to a nation because it

lessens the burden of scarcity.

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the

level of total spending.

Refer to the given consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Suppose that consumption decreased by $2 billion at each level of DI in each of the three countries. We can conclude that the

marginal propensity to consume will remain unchanged in each of the three countries.

If real GDP rises and the GDP price index has increased,

nominal GDP must have increased.

Demand-pull inflation

occurs when total spending in the economy is excessive.

The simple multiplier 1/MPS

overstates the actual multiplier because it excludes leakages in domestic spending from the purchase of imports or the paying of taxes.

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3?

ower expected rates of return on investment

GDP can be calculated by summing

personal consumption, investment, government purchases, and net exports.

A nation's infrastructure refers to

public capital goods such as highways and sanitation systems.

During the 2007-2009 recession

real GO fell by roughly twice the amount that real GDP fell.

The size of the multiplier is equal to the

reciprocal of the slope of the saving schedule.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will

rise by about 15 percent

If businesses feel more optimistic about the state of the economy, then this change is likely to

shift the investment demand curve to the right.

At the economy's natural rate of unemployment,

the economy achieves its potential output.

Inflation is a rise in

the general level of prices over time.

"Net foreign factor income" in the national income accounts refers to the difference between

the income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.

When we draw an investment demand curve, we hold constant all of the following except

the interest rate.

All of the following are sources of increasing returns and economies of scale except

the multiplier effect

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result,

the official unemployment rate will remain unchanged.

GDP tends to overstate economic well-being because it takes into account

total spending to deal with the adverse health effects of some products.

One labor market quirk that helps explain why unemployment goes up so much in a recession is that

wages are flexible upward but "sticky" downward.

If the Consumer Price Index was 125 in one year and 120 in the following year, then the rate of inflation was approximately

−4.0 percent.