Macro test 2

U.S. gross domestic product (GDP) measures the market value of all goods and services produced by Americans in one year. (A) True (B) False

(B) False

If aggregate expenditures rise by $200 billion and real GDP consequently rises by $500 billion, then the MPC in the economy must be 0.4. (A) True (B) False

(B) False

Which of the following statements is correct? (A) An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP. (B) An increase in exports and an increase in imports will both tend to increase the equilibrium GDP. (C) An increase in exports and an increase in imports will both tend to decrease the equilibrium GDP. (D) An increase in exports will tend to decrease, and an increase in imports will tend to increase, the equilibrium GDP.

(A) An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP.

Consumer spending (personal consumption expenditures) is the largest expenditure component of GDP (A) True (B) False

(A) True

If disposable income is $350 billion and the average propensity to consume is0.80, then personal saving is $70 billion. (A) True (B) False

(A) True

The consumer price index measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers. (A) True (B) False

(A) True

Net exports are negative when (A) a nation's imports of goods and services exceed its exports. (B) the economy's stock of capital goods is declining. (C) depreciation exceeds domestic investment. (D) a nation's exports exceed its imports.

(A) a nation's imports of goods and services exceed its exports

Assume the MPC is 0.8 and the economy is operating at the full-employment output level. If the government cuts spending by $6 billion, then equilibrium GDP will (A) fall $30 billion below the full-employment GDP. (B) fall $4.8 billion below the full-employment GDP. (C) fall $1.2 billion above the full-employment GDP. (D) rise $30 billion above the full-employment GDP.

(A) fall $30 billion below the full-employment GDP

A decline in the real interest rate will (A) increase the amount of investment spending. (B) shift the investment schedule downward. (C) shift the investment demand curve to the right. (D) shift the investment demand curve to the left.

(A) increase the amount of investment spending.

The two common measures of economic growth include (A) increases in real GDP over some time period and increases in real GDP per capita over some time period. (B) increases in nominal GDP over some time period and increases in real GDP per capita over some time period. (C) increases in real GDP over some time period and increases in nominal GDP per capita over some time period. (D) increases in nominal GDP over some time period and increases in nominal GDP per capita over some time period.

(A) increases in real GDP over some time period and increases in real GDP per capita over some time period.

Changes in which of the following would not shift the aggregate demand curve? (A) productivtivity rates (B) foreign-exchange rates (C) real interest rates (D) income tax rates

(A) productivtivity rates

In contrast to consumption, investment tends to be (A) relatively unstable. (B) relatively stable. (C) measurable. (D) unmeasurable.

(A) relatively unstable.

A recessionary expenditure gap is the amount by which (A) the full-employment GDP exceeds the level of aggregate expenditures. (B) equilibrium GDP falls short of the full-employment GDP. (C) investment exceeds saving at the full-employment GDP. (D) aggregate expenditures exceed the full-employment level of GDP.

(A) the full-employment GDP exceeds the level of aggregate expenditures.

Human capital refers to (A) the skills and knowledge that enable a worker to be productive.(B) machinery used by labor in production. (C) the accumulated financial wealth of households. (D) physical capital owned by households rather than businesses.

(A) the skills and knowledge that enable a worker to be productive

If the total population is 200 million, the labor force is 100 million, and 92million workers are employed, then the unemployment rate would be (A) 4 percent. (B) 8 percent. (C) 9.2 percent. (D) 92 percent.

(B) 8 percent.

41) Refer to the diagrams, in which AD1 and AS1 are the "before" curves andAD2 and AS2 are the "after" curves. Cost-push inflation is depicted by (A) A (B) B (C) C (D) B & C

(B) B

Anyone who is not employed is classified as unemployed in the Bureau of Labor Statistics data on the labor force. (A) True (B) False

(B) False

Disposable income measures the before-tax income received by resource suppliers. (A) True (B) False

(B) False

In which of the following cases would real income rise? (A) Nominal income rises by 8 percent, and the price level rises by 10percent. (B) Nominal income rises by 2 percent, and the price level remains unchanged. (C) Nominal income falls by 4 percent, and the price level falls by 2percent. (D) Real income will rise in all of these cases.

(B) Nominal income rises by 2 percent, and the price level remains unchanged

Which of the following would most likely increase aggregate demand (shift the AD curve to the right)? (A) decreasing the supply of money (B) a depreciation of the U.S. dollar (C) decreasing government spending (D) raising consumers' personal taxes

(B) a depreciation of the U.S. dollar

Recurring upswings and downswings in an economy's real GDP over time are called (A) recessions. (B) business cycles. (C) output yo-yos. (D) total product oscillations.

(B) business cycles.

The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will (A) increase the amount of U.S. real output purchased. (B) increase U.S. imports and decrease U.S. exports. (C) increase both U.S. imports and U.S. exports. (D) decrease both U.S. imports and U.S. exports.

(B) increase U.S. imports and decrease U.S. exports.

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment (also known as "full employment")? (A) frictional 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 investment demand curve suggests 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.

3) Refer to the table below showing national income data (in billions of dollars). The expenditures approach to GDP calculation can be done by adding (A) 1 through 7. (B) 2 through 7. (C) 8 through 11. (D) 8 through 13.

(C) 8 through 11

40) Refer to the diagram below and identify the graph that depicts an increase in investment spending, ceteris paribus. (A) A (B) B (C) C (D) D

(C) C

Which of the following relations is not correct? (A) 1 − MPC = MPS. (B) APS + APC = 1. (C) MPS = MPC + 1. (D) MPC + MPS = 1.

(C) MPS = MPC + 1.

What is the primary reason that changes in total spending lead to cyclical changes in output and employment? (A) Government is unable to respond by changing the amount of money in circulation. (B) Changes in total spending cause supply shocks that cause cyclical variation. (C) Prices are sticky in the short run. (D) Prices are flexible in the long run.

(C) Prices are sticky in the short run

Assume the economy's consumption and saving levels fall. This must be the result of (A) an increase in disposable income. (B) an increase in household wealth. (C) an increase in personal taxes. (D) the expectation of a recession.

(C) an increase in personal taxes.

The type of unemployment associated with recessions is called (A) frictional unemployment. (B) structural unemployment. (C) cyclical unemployment. (D) seasonal unemployment.

(C) cyclical unemployment.

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the (A) real-balances, interest-rate, and foreign purchases effects. (B) determinants of aggregate supply. (C) determinants of aggregate demand. (D) sole determinants of the equilibrium price level and the equilibrium real output.

(C) determinants of aggregate demand.

The number of years required for real GDP to double can be found by (A) dividing the annual growth rate by 0.07. (B) multiplying the annual growth rate by 70. (C) dividing 70 by the annual growth rate. (D) adding 14 to annual growth rate.

(C) dividing 70 by the annual growth rate.

If the multiplier in an economy is 3, a $30 billion increase in net exports will (A) reduce GDP by $10 billion. (B) decrease GDP by $90 billion. (C) increase GDP by $90 billion. (D) increase GDP by $10 billion.

(C) increase GDP by $90 billion.

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.

Inflation is a rise in (A) the standard of living over time. (B) unemployment over time. (C) the general level of prices over time. (D) real GDP over time.

(C) the general level of prices over time.

If disposable income increases from $100 to $150, consumption increases from$75 to $95, and savings increase from $25 to $55, then the marginal propensity (A) to save is 0.05 and the marginal propensity to consume is 0.05. (B) to consume is 0.80 and the marginal propensity to save is 0.02. (C) to consume is 0.40 and the marginal propensity to save is 0.60. (D) to save is 0.25 and the marginal propensity to consume 0.75

(C) to consume is 0.40 and the marginal propensity to save is 0.60.

In which of the following sets of circumstances can we confidently expect prices to fall? (A) Aggregate supply and aggregate demand both increase. (B) Aggregate supply and aggregate demand both decrease. (C) Aggregate supply decreases and/or aggregate demand increases. (D) Aggregate supply increases and/or aggregate demand decreases.

(D) Aggregate supply increases and/or aggregate demand decreases.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? (A) Nominal and real GDP would both rise. (B) Nominal and real GDP would both be unchanged. (C) Real GDP would rise, but nominal GDP would be unchanged. (D) Nominal GDP would rise, but real GDP would be unchanged.

(D) Nominal GDP would rise, but real GDP would be unchanged

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? (A)Nominal and real GDP would both rise. (B) Nominal and real GDP would both be unchanged. (C) Real GDP would rise, but nominal GDP would be unchanged. (D) Nominal GDP would rise, but real GDP would be unchanged.

(D) Nominal GDP would rise, but real GDP would be unchanged.

The interest-rate effect suggests that (A) an increase in the supply of money will decrease interest rates and raise interest-sensitive consumption and investment spending. (B) a decrease in the price level will decrease the demand for money, raise interest rates, and increase consumption and investment spending. (C) a decrease in the price level will increase the demand for money, raise interest rates, and decrease consumption and investment spending. (D) a decrease in the price level will decrease the demand for money, decrease interest rates, and increase investment spending

(D) a decrease in the price level will decrease the demand for money, decrease interest rates, and increase investment spending

If actual GDP is less than potential GDP, (A) the actual unemployment rate will be lower than the natural unemployment rate. (B) the economy is experiencing only cyclical unemployment. (C) the rate of full employment has fallen. (D) the actual unemployment rate will be higher than the natural unemployment rate.

(D) the actual unemployment rate will be higher than the natural unemployment rate.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP? (A) Nominal and real GDP would both rise. (B) Nominal and real GDP would both be unchanged. (C) Real GDP would rise, but nominal GDP would be unchanged.(D)Nominal GDP would rise, but real GDP would be unchanged.

(D)Nominal GDP would rise, but real GDP would be unchanged