Macroeconomics Exam 2, Ch 5-8

An example of intangible infrastructure is: A) patent laws B) public education facilities C) transportation networks D) power transmission lines

Patent laws

Which of the following sequences is in the correct order according to the business cycle? A) peak; trough; recovery; recession B) peak; recession; trough; recovery C) peak; recession; recovery; trough D) peak; trough; recession; recovery

Peak; recession; trough; recovery

U.S. steelworkers who have lost their jobs to workers receiving lower wages overseas are a part of ___________ unemployment. A) frictional B) cyclical C) seasonal D) structural

Structural

Which of the following would not be included in official GDP measures? A) the value of a country's exports B) the cost of installing environmentally friendly solar panels C) the purchase of books on how to live a healthier life D) the lost wages from taking time off work due to bad air pollution

D

If the cost of a typical market basket is 400 in 2018, 410 in 2019, and 405 in 2020, then during this period the economy is undergoing: A) inflation B) disinflation C) deflation D) hyperinflation

Disinflation

In the formula for GDP; GDP = C + I + G + (X - M), what does M represent? A) exports B) government spending C) personal consumer spending D) imports

Imports

In the Keynesian model, the principal determinant of saving is: A) interest rates B) income C) tax rates D) investments

Income

The twin perils of the modern macro economy are said to be: A) government and the trade deficit B) unemployment and the trade surplus C) inflation and unemployment D) inflation and the trade deficit

Inflation and unemployment

What is the single most important factor influencing economic growth for an economy? A) population growth B) government regulation of big businesses C) reducing the capital-to-labor ratio D) increasing productivity

Increasing productivity

The Index of Economic Freedom uses all of the following categories EXCEPT: A) monetary policy B) fiscal policy C) the size of the government D) international exchange

International exchange

Which of the following marginal propensities to consume results in the flattest consumption line in an aggregate expenditures model? A) 0.4 B) 0.5 C) 0.8 D) 1.0

0.4

Rocky Gap Furniture hires ten employees working eight hours each to produce 100 rocking chairs. What is the productivity of these workers? A) 2.5 chairs per hour B) 1.5 chairs per hour C) 100 chairs D) 50 chairs

1.25 chairs per hour

If the MPS is 0.2, the value of the spending multiplier will be: A) 0.8 B) 1.25 C) 5 D) 8

1/0.2 = 5

U.S. business cycles since 1950 have shown: A) expansions to be just as lengthy as recessions. B) expansions to be longer than recessions. C) expansions to be shorter than recessions. D) stable unemployment rates.

Expansions to be longer than recessions

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will ______ and its real GDP will ______ A) increase; also increase B) decrease; increase C) increase; be unchanged D) decrease, be unchanged

Increase; be unchanged

Robert lost his job and now takes care of his children while his wife works. Robert is not actively seeking work. How is Robert categorized in the unemployment figures? A) Robert is unemployed B) Robert is employed b/c he is providing useful service C) Robert is not part of the labor force D) Robert is underemployed

Robert is not part of the labor force

Janessa was laid off as a photo lab technician because of the lack of customers. She then found a job at a movie rental store, but was laid off again one month later when the store shut down. Janessa's bad luck staying employed is most likely due to: A) frictional unemployment B) structural unemployment C) cyclical unemployment D) the natural rate of unemployment

Structural unemployment

According to Malthus, a fixed quantity of land and a growing human population will eventually produce: A) a stationary state in which the economy grows but at a fixed rate B) accelerating economic growth C) continuous yet variable economic growth D) a stationary state in which growth will cease

a stationary state in which growth will cease

If you spend $100 and the MPC is 0.9, how much spending will this $100 generate in the economy? A) $1,000 B) $500 C) $250 D) $100

$1,000

The World Bank defines extreme poverty as a person living on less than: A) $1.25 per day B) $2 per day C) $16 per day D) $5,763 per year

$1.25 per day

In the following aggregate expenditures graph, to raise in come from $4,400 to $4,800 government spending (G) must increase by _______ ; this corresponds with the MPC of _____ A) $200, 0.5 B) $200, 0.75 C) $100, 0.4 D) $100, 0.75

$100, 0.75

What is your new salary if you earned $40,000 last year, the consumer price index increased from 120 to 125, and your salary is adjusted by the rate of inflation annually? A) $38,400 B) $41,600 C) $41,666.67 D) $40,125

$41,666.67

The capital-to-labor ratio measures: A) the average number of hours worked B) the financial resources of a company divided by the number of employees C) the rate of technological improvements D) the amount of economic capital per worker

The amount of economic capital per worker

The relationship between economic freedom and per capita GDP is: A) negative B) positive C) negative for advanced economies and positive for developing economies D) positive for advanced economies and negative for developing economies

positive

A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. Each guitar that is produced contributes ______ to U.S. GDP. A) $100 B) $200 C) $300

$300

Suppose in 2010 the cost of purchasing a basket of goods was $100. That same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is: A) 100 B) 50 C) 250 D) 150

150 / 100 * 100 = 150

If the growth rate in an economy is 2%, its GDP will double in about A) 70 yrs B) 140 yrs C) 35 yrs D) 28 yrs

70 / 2 = 35 yrs

With everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered to be structurally unemployed increased by 5%, the natural rate of unemployment: A) increases by 10% B) equals the unemployment rate C) does not change D) decreases by 10%

Does not change

A depression economy has considerable slack, therefore: A) unemployment is high B) there is no excess plant capacity C) all resources are being used efficiently D) there is an increase in aggregate price levels

unemployment is high

Which of the following groups benefits from an unanticipated rise in the inflation rate? A) elderly people living on fixed incomes B) creditors or lenders C) workers on contracts without escalator clauses D) homeowners with fixed-rate mortgages

Homeowners with fixed-rate mortgages

The concept of diminishing returns to capital would suggest that an additional unit of capital would be most productive in which of the following countries? A) Canada, which has 100 units of capital per worker B) Brazil, which has 50 units of capital per worker C) Honduras, which has 20 units of capital per worker D) The additional unit of capital would be equally productive in all three countries

Honduras, which has 20 units of capital per worker

Which of the following is NOT an example of an intellectual property right? A) patent B) copyright C) trademark D) land deed

Land deed

Economic growth is most accurately measured using: A) GDP B) GDP per capita C) Genuine Progress Indicator per capita D) real GDP per capita

Real GDP per capita

Look at the table (Macroeconomic Data for Econoland); what stage of the business cycle would the NBER declare Econoland to be in during the 4th quarter of 2014? (Unemployment is rising, which is bad which leads to a.....) A) recession B) trough C) expansion D) peak

Recession

A stable financial system is important for all of the following reasons EXCEPT: A) keeping the purchasing power of the currency stable B) tax rate stabiility C) facilitating transactions D) permitting credit institutions to arise

Tax rate stability

Which effect best explains why Ethiopia (a poor country) is able to achieve a high growth rate while Japan (a rich country) struggles with low growth? A) technology effect B) capital effect C) labor effect D) catch-up effect

catch-up effect

Which if the best measure of economic growth and standards of living in a country? A) nominal GDP B) nominal GDP per capita C) real GDP D) real GDP per capita

real GDP per capita

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was: A) 0.625% B) 2.5% C) 7.5% D) 10%

0.625%

The three types of consumption are: A) compulsive, impulsive, and deliberate B) durables, nondurables, and services C) investments, nondurables, and services D) investments, durables, and services

Durables, nondurables, and services

As a general rule, the more capital employed with workers, the _________ their productivity and the ________ their earnings. A) lower; higher B) lower; lower C) higher; higher D) higher; lower

Higher; higher

Which of the following components is not used to measure GDP using the income approach? A) Corporate profits B) Rental income C) net interest D) net exports

Net exports

Improvement in production technology will: A) rotate the PPF clockwise B) move the economy up the PPF C) Move the economy along the PPF D) shift the PPF outward

Shift the PPF outward

What is the main claim of the aggregate expenditures model? A) The rich get richer and the poor get poorer B) Spending will generate income, which allows for more spending C) Lower taxes for businesses will "trickle-down" to consumers D) Spending is harmful while saving is helpful to an economy

Spending will generate income, which allows for more spending

Which factor of production enhances the productive capacity of all other resources in the production function? A) physical capital B) technology C) labor D) natural resources

Technology

Whispering Valley Furniture hires five employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires 10 employees working eight hours each to produce 160 rocking chairs, Which company's workers are more productive? A) Whispering Valley Furniture's workers are more productive B) Rocky Gap Furniture's workers are more productive C) The two companies' workers are equally productive D) It is not possible to determine which workers are more productive

The two companies' workers are equally productive

A business cycle recovery that doesn't reach its long-term trend can lead to: A) hyperinflation B) lower cyclical unemployment C) its natural unemployment rate D) a double-dip recession

a double-dip recession

Which of the following reasons does not contribute to a higher level of unemployment? A) the existence of efficiency wages B) a reduction in economic activity due to a recession C) a lack of labor mobility as people choose to remain in their hometown D) a reduction in union bargaining activities

a reduction in union bargaining activities

Which of the following is NOT considered an example of one of the four main factors of production? A) mineral deposits B) internship programs C) construction cranes D) cash bonds

cash bonds

Which type of unemployment do economists attempt to resolve using economic policy A) frictional unemployment B) structural unemployment C) cyclical unemployment D) frictional and cyclical

cyclical unemployment

When the government records a deed showing that ownership of a piece of property has passed from one party to another, it is acting in its role to promote economic growth by: A) ensuring a stable legal system B) providing physical and human capital C) ensuring a stable and secure financial system D) promoting free and competitive markets

ensuring a stable legal system

Improvements in technology A) explain most of the economic growth in recent decades B) caused the last recession C) are relatively unimportant for today's standards of living D) have slowed in the past 100 years

explain most of the economic growth in recent decades

Which of the following combinations would result in the most economic freedom? A) strong trade protection, competitive markets, and many regulations B)strong trade protection, competitive markets, and limited regulations C) free trade, market power, and moderate regulations, D) free trade, competitive markets, and limited regulations

free trade, competitive markets and limited regulations

Generally, which group of people has the highest marginal propensity to consume? A) the richest 1% B) wealthy people C) middle-class people D) low-income people

low income people

Which of the following factors would be captured in total factor productivity? A) the impact of a hurricane B) an increase in infrastructure spending C) increased extraction of natural resources D) greater education attainment

the impact of a hurricane

Which of the following is NOT an effective tool used by government to promote economic growth? A) a strong legal system to enforce contracts B) trade barriers to protect domestic industries C) a stable currency and financial system D) investing in infrastructure and human capital

trade barriers to protect domestic industries

The GDP deflator for the base year is: A) less than 100 B) always equal to 100 C) greater than 100 D) dependent on the quantities of output and the prices at which outputs are sold in the base year

Always equal to 100

If MPC is 0.6, what is the spending multiplier? A) 6 B) 4 C) 2.5 D) 1.66

2.5

If output equals A × (5K + 2L), what is output if A equals 2,000, capital equals 10, and labor equals 100? A) 500,000 B) 120,000 C) 50,000 D) 12,000

2000 x [5(10) + 2(100)] = 2000 x (250) = 500,000

Developing countries can achieve higher productivity per unit of capital because they can use technologies developed by other countries. This is known as the: A) increasing returns to capital effect B) copycat effect C) catch-up effect D) productivity effect

Catch-up effect

Over the past 150 years, the U.S. economy has endured a recession on average about every: A) one to two years B) four to five years C) 10 to 50 years D) 50 Years

Four to five years

The natural gas deposits found in the United States over the past decade are an example of an increase in: A) land and natural resources B) Labor C) physical capital D) entrepreneurial ability, technology and ideas

Land and natural resources

In general, the higher the capital-to-labor ratio: A) the higher the wages B) the lower the wages C) the lower the productivity D) the lower the rate of investment

The higher the wages

National income and product accounts came about in the U.S. during the 1930s as a result of... A) the theories of John Maynard Keynes B) a lack of reliable economic data C) the work of the Council of Economic Advisers D) the work of the Federal Reserve

The lack of reliable economic data

Unemployment tends to be highest during the _____ stage of the business cycle while there is a greater risk of high demand leading to inflation during the ________ stage of the business cycle. A) recession; expansion B) trough; peak C) peak; trough D) recession; peak

Trough, peak

An economy has a population of 226,500, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full time. This economy's unemployment rate is: A) 6.5% B) 21.0% C) 5.5% D) 21.1%

Unemployed / Labor force *100= 12500 / 191500 *100 = 6.5%

Which of the following items would NOT be included in "Investment" in the GDP calculation? A) a new home purchase B) equipment for a factory C) a company's unsold inventory D) 100 shares of a company stock

100 shares of a company stock

If an economy is growing at 10% how long will it take for $1,000 to turn into $4,000 A) 7 yrs B) 14 yrs C) 21 yrs D) 28 yrs

14 years

Frictional unemployment is: A) short-term unemployment associated with people who are switching jobs B) long-term unemployment caused by changes in consumer demand or technology C) the unemployment that arises due to downturns in the business cycle D) equivalent to the natural rate of unemployment

short-term unemployment associated with people who are switching jobs

If the nominal GDP is $13 trillion for a given year and the GDP deflator for that year is 115, then the real GDP is A) $11.3 trillion B) $14.95 trillion C) $12.0 trillion D) $13.0 trillion

$11.3 trillion

If the marginal propensity to save is .25 and income increases by $7,540, what is the increase in consumption? A) $5,655 B) $1,885 C) $10,053 D) $30,160

$5,655

If the price index is 200, how much did a $12 pizza (today) cost in the base year? A) $1.20 B) $3.00 C) $6.00 D) $24.00

$6.00

If the consumption increases from $500 billion to $575 billion and income increases from $600 billion to $700 billion, the MPS is: A) 0.2 B) 0.25 C) 0.75 D) Not enough information to answer this question

0.25

If income rises from $10,000 to $20,000 and consumption increases from $9,000 to $16,000, then the marginal propensity to consume is: A) 0.10 B) 0.30 C) 0.70 D) 0.80

0.70

If real GDP increased from $10 billion to $11 billion from the first quarter of 2016 to the first quarter of 2017, but has increased by 4% from the fourth quarter of 2016 to the first quarter of 2017, the BEA would report first quarter of 2017 GDP growth as ______ using the year-over-year method and _____ using the annualized method A) 10%, 4% B) 10%, 16% C) 40%, 4% D) 40%, 16%

10%, 16%

Suppose the town of Treeville has a population of 200, of which 120 are in the labor force. Of those in the LF, 100 are employed and 20 are unemployed. The employment rate of Treeville is: A) 10% B) 17% C) 20% D) 60%

20/120 x 100 = 16.67= 17%

What are the components of aggregate expenditures? A) C + I B) C + I + G C) C + I + G + (X + M) D) C + I + G + (X - M)

C + I + G + (X - M)

What is the unemployment rate? Population = 210 Military = 30 Employed = 100 Unemployed seeking work = 30 Discouraged workers = 20 Unpaid family members working 15+hrs = 10 Retired = 20 A) 14.29% B) 30.0% C) 20.0% D) 21.43%

30 people = unemployed / 100+30+10 = 140 (Labor Force) * 100 = 21.43%

Use the production function output: A x (L + K + H + N) If there are two units of land, two units of human capital, three units of natural resources, five units of physical capital, and technology value of three, what is the output that can be produced? A) 12 B) 15 C) 36 D) 50

36

The following table shows data for four countries: Country A: 100 workers $4,000 Capital Stock Country B: 50 workers $500 CS C: 200 workers $1,000 CS D: 150 workers $150 CS The country with the most productive workers is:

4000/100 = 40 500/50 = 10 1000/200 = 5 150/150= 1 Country A is the most productive

If frictional unemployment is 2% and structural unemployment is 3%, and cyclical unemployment is 4% the natural rate of unemployment is: A) 2% B) 5% C) 7% D) 9%

5%

In the following PPF, between which two points would long-run growth be represented? A) A to B B) A to C C) B to C D) C to D

C to D

John Maynard Keynes focused on ______ to explain how the economy reaches short-term equilibrium employment, output, and income A) aggregate spending B) investment C) the interest rate D) property rights

Aggregate spending

What does the 45 degree line in the Aggregate Expenditures model represent? A) all savings and no consumption B) all consumption and no savings C) no consumption and no saving D) maximum consumption and maximum savings

All consumption and no savings

How does the spending multiplier compare between a $1,000 increase in government spending and a $1,000 decrease in taxes collected?

An increase in government spending has a greater spending multiplier than an equivalent tax decrease

The official unemployment rate as commonly reported by the Department of Labor each month does not include people who: A) are actively seeking work B) are underemployed C) have not searched for work in the past week D) are underemployed or have not searched for work in the past week

Are underemployed

Which of the following would likely NOT cause inflation? A) Government prints money to finance its budget shortfall B) Consumer confidence falls due to global concerns C) The housing market recovers and home sales rise D) Poor weather patterns lead to a supply shock in the farming industry

Consumer confidence falls due to global concerns

Measuring changes in a fixed basket of goods to assess changes in price is a method A) cost-of-goods index B) cost-of-living index C) cost-of-production D) utility maximization

Cost-of-goods index

For which of the following situations would the yield curve most likely predict that a recession would occur? A) short-term interest rate = 2% long-term = 4% B) short-term interest rate = 0% long-term = 5% C) short-term interest rate = 3% long term = 3% D) short-term interest rate = 4% long-term = 3%

D, 4%, 3%

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to 1.5 in November. Which of the following is the best interpretation of this finding? A) The economy grew at a rate of 0.25% for a few months, but economic growth actually decreased 1.5% in November B) The rate of economic growth slowed in November, but the economy did not move into a recession. C) The economy was in an expansion in October but moved into a recession in November D) Economic activity was above the historical trend rate of growth, but it is likely that the economy moved into a recession in November.

Economic activity was above the historical trend rate of growth, but it is likely that the economy moved into a recession in November.

Which of the following persons is considered unemployed? A) Guy in college B) Lady taking three months of maternity leave from her job C) Emily has not worked for two months but applies for jobs every week D) All are unemployed

Emily has not worked for two months but applies for jobs every week

If Chuck gets laid off from a high paying job and temporarily works as an Uber driver, he is considered: A) not in the labor force B) a discouraged worker C) unemployed D) employed

Employed

Government funding of Los Alamos National Labs is an example of government acting in its role to promote economic growth by: A) ensuring a stable legal system B) enhancing physical and human capital C) ensuring a stable and secure financial system D) promoting free and competitive markets

Enhancing physical and human capital

The U.S. gross domestic product is equal to the total market value of all: A) intermediate goods and services produced by resources in the U.S. B) final goods and services produced by resources in the U.S. C) final goods and services produced by U.S. citizens in the U.S. D) intermediate goods and services produced by citizens in the U.S.

Final goods and services produced by resources in the U.S.

Which of the following is true about hyperinflation? A) Financial assets in a hyperinflated currency quickly become worthless B) there have been no cases of hyperinflation in the world in the last two decades C) Hyperinflation occurs when the inflation rate exceeds 1,000% per year D) Hyperinflation can be stopped by printing larger denominations of paper currency.

Financial assets in a hyperinflated currency quickly become worthless

Which of the following is not true regarding the informal economy? A) Informal market activities tend to be paid under the table. B) Informal market activities are not reported to the government for tax purposes C) Informal market activities do not contribute to the standard of living of citizens D) Countries with large informal economies have total output that is less than their official GDP statistics

Informal market activities do not contribute to the standard of living of citizens

The National Bureau of Economic Research: A) Is a government agency that dates business cycles in the U.S. B) Is a nonprofit research organization that dates business cycles in the U.S. C) consists of elected officials from the U.S. Senate. D) is a nonprofit research organization that only determines when recessions begin

Is a nonprofit research organization that dates business cycles in the U.S.

What information does the National Bureau of Economic Research use to declare that a recession has begun? A) increases in the unemployment rate B) changes in major stock market indices C) turning points in key economic indicators D) devaluations in the national currency relative to other countries

It focuses on turning points in key economic indicators

Which of the following persons is considered part of the labor force? A) Joe, a senior in high school who works part-time on weekends at the ice cream shop. B) Mary, who works as a librarian in prison because she poisoned her cheating boyfriend C) Jamal, who graduated from college and is backpacking in Europe for six months D) Tessa, an 8-year old who sells lemonade on the sidewalk for 50 cents a glass

Joe, a senior in high school who works part-time on weekends at the ice cream shop.

A legal system that enforces property rights is important to economic growth because: A) legal protection of ideas and technologies gives people who innovate the ability to protect their work B) the legal system can help the government with tax collection C) strong laws demonstrate commitment by legislators to economic growth D) bankruptcy laws encourage lending

Legal protection of ideas and technologies gives people who innovate the ability to protect their work

According to the table: Real per Capita GDP & Growth, which country will have the higher real per capita GDP in 17.5 years? Econia: real GDP per capita per year $5,000 Growth Rate of real GDP per capita 10% Macroland Real GDP... $8,000 Growth rate 7% Nomicia Real GDP $12,000 Growth rate 4% Zaria Real GDP $15,000 Growth rate 1% A) Econia because its growth rate is higher B) Nomicia because it has a higher starting GDP in the current year C) Econia because its real GDP per capita will have time to double and then almost double again D) Nomicia because its real GDP per capita will double and Econia's will still lag behind even though it is growing at a faster rate

Nomicia because its real GDP per capita will double and Econia's will still lag behind even though it is growing at a faster rate

If the nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is: A) 80 B) 110 C) 125 D) 150

Nominal / Real * 100 = 125

Most economists believe that the consumer price index ________ the rate of inflation A) understates B) overstates C) accurately states D) dis-inflates

Overstates

Roughly half of unemployment normally consists of: A) People who lost their jobs B) People who were job leavers C) People reentering the job market D) people who are new to the job market

People who lost their jobs

An example of a less tangible component of a country's infrastructure is: A) a new highway B) refurbished airports C) property rights D) high-speed rail tracks

Property rights

The Leading Economic Index is produced by: A) the National Bureau of Economic Research B) the Federal Reserve Bank of Chicago C) the U.S. Treasury D) the Conference Board

The Conference Board

The single largest consumer of goods and services in the United States is A) personal consumption B) businesses C) the government D) industries

The government

Which of the following factors is NOT generally viewed by economists as critical for economic growth? A) strong and fair legal system B) stable monetary system C) access to large amounts of natural resources D) economic freedom

access to large amounts of natural resources

What does the "paradox of thrift" say? A) people who consume too much will go broke B) Businesses that are greedy will make the most profit C) an economy that saves too much can end up with lower total savings D) people who save too little are harming the economy

an economy that saves too much can end up with lower total savings

When the increase in price goes from 5% to 2%, this is referred to as: A) deflation B) disinflation C) inflation D) hyperinflation

disinflation

Which of the following did classical economists believe would happen if the economy experienced a downturn? A) prices would rise B) interest rates would rise C) the economy would self-correct D) the government would fix the inefficiencies

the economy would self-correct