macroeconomics unit 2 exam

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are A. military goods and capital goods. B. services and nondurable consumer goods. C. clothing and education. D. capital goods and durable consumer goods.

capital goods and durable consumer goods

The largest component of national income is A. compensation of employees. B. rents. C. interest. D. corporate profits.

compensation of employees

Economic historians identify which invention as a major factor that started the Industrial Revolution in Britain? A. steam engine B. automobile C. telephone D. electric motor

steam engine

Refer to the given data for a hypothetical economy. At the $100 level of income, the average propensity to save is A. 0.10. B. 0.20. C. 0.25. D. 0.90.

0.10

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? A. hyperinflation B. deflation C. rising interest rates D. rising inflation

deflation

The smallest component of aggregate spending in the United States is A. Net exports B. government purchases C. investment D. consumption

net exports

Critics of economic growth A. contend that growth and industrialization reduce pollution. B. argue that economic growth does not resolve socioeconomic problems. Such as an unequal distribution of income and wealth. C. point out that growth results in greater economic security for workers. D. say that its benefits accrue nearly exclusively to white males.

argue that economic growth does not resolve socioeconomic problems C. such as an unequal distribution of income and wealth

Inflation affects A. both the level and the distribution of income. B. neither the level nor the distribution of income. C. the distribution, but not the level, of income. D. the level, but not the distribution, of income.

both the level and the distribution of income

The figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier? A. 1 B. 2 C. 3 D. 4

4

Refer to the accompanying national income data (in billions of dollars). Net domestic product equals A. $1,039 billion. B. $1,044 billion. C. $1,054 billion. D. $1,076 billion.

$1054 billion

Refer to the given table, which illustrates the multiplier process. The total change in income resulting from the initial change in investment will be A. $100. B. $20. C. $80. D. $200.

$100

The table contains data for a hypothetical single-product economy. Real GDP in year 3 is A. $100. B. $450. C. $225. D. $150.

$150

Refer to the accompanying national income data (in billions of dollars). Net private domestic investment is equal to A. $1,793 billion. B. −$424 billion. C. $200 billion. D. $1,643 billion.

$200 billion

U.S. GDP in 2018 was about A. $8 trillion. B. $21 trillion. C. $890 billion. D. $30 trillion.

$21 trillion

Refer to the accompanying data, which is for a specific year in a hypothetical economy for which Okun's law is applicable. The amount of output being forgone by the economy is A. $12 billion. B. $15 billion. C. $18 billion. D. $24 billion

$24 billion

Refer to the accompanying data. All figures are in billions of dollars. The net domestic product is A. $233. B. $255. C. $230. D. $348.

$255

Refer to the accompanying data. All figures are in billions of dollars. The national income is A. $265. B. $223. C. $208. D. $346.

$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? A. $3,250 billion B. $3,263 billion C. $3,237 billion D. $3,290 billion

$3,237 billion

The table illustrates the multiplier process resulting from an autonomous increase in investment by $5. The change in income in round two will be A. $0.94. B. $2.81. C. $3.75. D. $4.00.

$3.75

Refer to the accompanying data. All figures are in billions of dollars. The gross domestic product is A. $326. B. $282. C. $307. D. $300.

$307

Refer to the accompanying data (all figures in billions of dollars). PI is A. $314. B. $346. C. $408. D. $437.

$314

Refer to the accompanying data. All figures are in billions of dollars. Gross domestic product is A. $395 B. $380 C. $375 D. $360

$395

Refer to the accompanying data (all figures in billions of dollars). GDP is A. $390. B. $417. C. $422. D. $492.

$417

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by A. $3 billion. B. $2/3 billion. C. $6 billion. D. $2 billion.

$6 billion

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. At an $800 level of disposable income, the level of saving is A. $180. B. $740. C. $60. D. $18.

$60

Refer to the accompanying national income data. All figures are in billions of dollars. The gross domestic product is A. $328. B. $301. C. $382. D. $333.

. $301

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 A. 0.1. B. 0.72. C. 0.8. D. 0.9.

. 0.1

In a closed private economy, income is $50 billion and consumption is $40 billion. When income rises by 10 percent, consumption rises by 9 percent. The MPS over the relevant income range is A. 0.11 and the multiplier is 9.09. B. 0.28 and the multiplier is 3.57. C. 0.62 and the multiplier is 1.61. D. 0.72 and the multiplier is 3.57.

0.28 and the multiplier is 3.57

Refer to the given data. The marginal propensity to consume is A. 0.25. B. 0.75. C. 0.20. D. 0.80.

0.80

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. The MPC is A. 0.45. B. 0.20. C. 0.50. D. 0.90.

0.90

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Which set of items in the accompanying list would shift an economy's production possibilities curve outward? A. 2, 5, and 6 only B. 2, 4, 5, and 6 only C. 1, 2, 5, and 6 only D. 1, 3, and 4 only

1, 2, 5, and 6 only

The multiplier can be calculated as A. 1/(MPS + MPC). B. MPC/MPS. C. 1/(1 − MPC). D. 1 − MPC = MPS.

1/(1 − MPC)

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6 percent. But if the rate of inflation was anticipated to be 4 percent, the bank would most likely charge the firm an annual interest rate of A. 2 percent. B. 4 percent. C. 6 percent. D. 10 percent.

10 percent

Assume an economy that is producing only one product. Output and price data for a three-year period are shown in the table. If year 2 is chosen as the base year, the price index for year 1 is A. 80. B. 100. C. 120. D. 20.

100

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 A. 100.0. B. 103.9. C. 105.2. D. 106.3.

106.3

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. The expected rate of return on this machine is A. 7.5 percent. B. 10 percent. C. 15 percent. D. 20 percent.

15 percent

If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was A. 20 percent higher than the average price in the base period 1982-84. B. about $120 per basket of consumer goods and services. C. 120 percent higher than the average price in the base period 1982-84. D. 20 percent higher than the average price of the preceding year.

20 percent higher than the average price in the base period 1982-84

The economy has an annual inflation rate of 3.5 percent. It will take approximately how many years for the price level to double? A. 10 years B. 20 years C. 25 years D. 30 years

20 years

Consider two scenarios for a nation's economic growth. Scenario A has real GDP growing at an average annual rate of 3.5 percent; scenario B has an average annual growth of 4.5 percent. The nation's real GDP would double in about A. 20 years under scenario A, versus 30 years under scenario B. B. 20 years under scenario A, versus 16 years under scenario B. C. 12 years under scenario A, versus 16 years under scenario B. D. 16 years under scenario A, versus 30 years under scenario B.

20 years under scenario A, versus 16 years under scenario B

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 A. 11 percent. B. 20 percent. C. 25 percent. D. 80 percent.

25 percent

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 A. 6 percent. B. 8 percent. C. 2 percent. D. 3 percent.

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? A. 1.1 percent B. 2.5 percent C. 5.0 percent D. 3.4 percent

3.4 percent

An $18 billion increase in spending creates $18 billion of new income in the first round of the multiplier process and $13.5 billion in the second round. The multiplier in the economy is A. 2. B. 3. C. 4. D. 5.

4.

Refer to the table. Between years 1 and 2, real GDP grew by __________ percent in Alta. A. 3 B. 4 C. 5 D. 10

5

Increasing returns would be a situation where a firm increases its workforce and other inputs by A. 8 percent and its output increases by 5 percent. B. 5 percent and its output increase by 8 percent. C. 8 percent and its output increases by 8 percent. D. 12 percent and its output increases by 10 percent.

5 percent and its output increase by 8 percent

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate? A. 4 percent B. 6 percent C. 9 percent D. 27 percent

6 percent

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about A. 8 to 9 years. B. 10 to 11 years. C. 5 to 6 years. D. 19 to 20 years.

8 to 9 years

Refer to the diagram. Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Which of the lines on the diagram represents these data? A. A B. B C. C D. D

B

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 A. B2 will shift to B3. B. B1 will shift to B2. C. B2 will shift to B1. D. B3 will shift to B2.

B2 will shift to B3

. Refer to the accompanying national income data for the economy. All figures are in billions of dollars. Disposable income A. cannot be determined from the data given. B. is $484. C. is $416. D. is $502.

Cannot be determined

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point A. A. B. C. C. D. D. G.

D

Refer to the accompanying data. All figures are in billions of dollars. The economy characterized by the data is A. Experiencing inflation because disposable income exceeds personal income B. Experiencing declining production capacity because net investment is negative C. In a depression because personal income exceeds disposable income D. Experiencing expanding production capacity because net private domestic investment is positive

Experiencing declining production capacity because net investment is negative

Which of the following arguments is not made by critics of growth policies? A. Growth has resulted in resource degradation and pollution. B. Sociological problems like poverty have not been solved by growth. C. Growth may have given us the good life, but we cannot better it anymore. D. Rapid growth is not sustainable in the long term due to resource limitations.

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

What is an advantage of mild inflation according to some economists? A. It helps to close the GDP gap. B. It reduces the inflation premium. C. It makes it easier for firms to adjust real wages downward as demand for their products falls. D. It reduces frictional, structural, and cyclical unemployment in the economy to make the economy more productive.

It makes it easier for firms to adjust real wages downward as demand for their products falls

Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the A. MPC is greater in B than in A. B. APC at any given income level is greater in B than in A. C. MPS is smaller in B than in A. D. MPC is greater in A than in B.

MPC is greater in A than in B

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is frictionally unemployed? A. Mollie B. George C. Jeanette D. Ricardo

Mollie

If depreciation exceeds gross domestic investment, we can conclude that A. Nominal GDP is rising but real GDP is declining B. Net investment is negative C. The economy is importing more than it exports D. The economy's production capacity is expanding

Net investment is negative

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.

Prices are sticky in the short run

Tom Atoe grows fruits and vegetables for home consumption. This activity is: A. excluded from GDP in order to avoid double counting B. excluded from GDP because an intermediate good is involved C. productive but is excluded from GDP because no market transaction occurs D. included in GDP because it reflects production

Productive but is excluded from GDP because no market transaction occurs

Which of the following trends have we not seen in the U.S. in the past six decades or so? A. The average length of the workweek remained relatively constant. B. The size of the labor force expanded. C. Rising birthrates kept the native-born population growing at a steady rate. D. Women's labor-force participation rate surged.

Rising birthrates kept the native-born population growing at a steady rate

Corporate profits are found by A. Summing corporate income taxes, dividends, and undistributed corporate profits B. Adding corporate income taxes and dividends and subtracting undistributed corporate profits C. Subtracting corporate income taxes from atheism sum of dividends and undistributed corporate profits D. Summing dividends, undistributed corporate profits, and proprietors income

Summing corporate income taxes, dividends, and undistributed corporate profits

Which of the countries below ranked highest in the World Economic Forum's Global Competitiveness Ranking in 2017-2018? A. Japan B. Switzerland C. Germany D. the United States

Switzerland

Which of the following statements is correct? A. The U.S. population has increased more rapidly than real GDP in recent decades. B. Improved education and training of labor is the most important source of U.S. productivity growth. C. The average American factory worker has about 16 years of formal education. D. The amount of real capital used per worker has increased historically in the United States.

The amount of real capital used per worker has increased historically in the United States

Other things equal, which of the following would increase labor productivity the most? A. The stock of real capital and inputs of labor increase proportionately. B. The increase in the stock of real capital exceeds the increase in inputs of labor. C. The increase in inputs of labor exceeds the increase in the stock of real capital. D. Inputs of labor increase and the stock of real capital remains constant.

The increase in the stock of real capital exceeds the increase in inputs of labor

Which statement about inflation is correct? A. Families are always hurt by inflation. B. Inflation "subsidizes" those who receive relatively fixed money income. C. The redistributive effects of inflation are arbitrary with respect to people and groups in society. D. Inflation will decrease the real value of property assets and increase the real value of fixed-value assets.

The redistributive effects of inflation are arbitrary with respect to people and groups in society

Which of the following is correct? A. Total output = labor productivity/worker-hours. B. Labor productivity = worker-hours/total output. C. Total output = worker-hours × labor productivity. D. Worker-hours = labor productivity × total output.

Total output = worker-hours × labor productivity

Which of the following would shift the saving schedule upward? A. a decrease in wealth B. a decrease in real interest rates C. consumer expectations of rising prices of products D. increased optimism about future incomes

a decrease in wealth

The period in the U.S. economy from 1995 to 2010 is characterized by A. a higher trend rate of saving. B. a higher natural rate of unemployment. C. a higher trend rate of productivity growth. D. the end of the business cycle.

a higher trend rate of productivity growth

Net exports are negative when A. a nation's imports 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 nation's imports exceed its exports

If for some reason households become increasingly thrifty, we could show this by A. a downshift of the saving schedule. B. an upward shift of the consumption schedule. C. an upward shift of the saving schedule. D. a movement down along a stable consumption function.

an upward shift of the saving schedule

As disposable income increases, consumption A. and saving both increase B. and saving both decreases C. decreases and saving increases. D. increases and saving decreases.

and saving both increase

national income accountants define investment to include A. any increase in business inventories B. the addition of cash to a savings account C. the purchase of common or preferred stock D. the purchase of any durable good, for example, an automobile or a refrigerator

any increase in business inventories

If the economy's real GDP doubles in 18 years, we can A. not say anything about the average annual rate of growth. B. conclude that its average annual rate of growth is about 5.5 percent. C. conclude that its average annual rate of growth is about 2.4 percent. D. conclude that its average annual rate of growth is about 3.9 percent.

conclude that its average annual rate of growth is about 3.9 percent

An MPC value of less than 1.0 indicates that as income increases, A. consumption also increases, and by more than the increase in income. B. consumption also increases, and at the same rate as the increase in income. C. consumption will go in the opposite direction and decrease. D. consumption also increases, though not as much as income.

consumption also increases, though not as much as income

Rising per-unit production costs are most directly associated with A. frictional unemployment. B. structural unemployment. C. demand-pull inflation. D. cost-push inflation.

cost-push inflation

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services? A. search unemployment B. wait unemployment C. cyclical unemployment D. frictional unemployment

cyclical unemployment

The following factors tend to make the real GDP growth rate understate the growth of economic well-being, except A. improved product quality. B. added leisure. C. debasement of the environment. D. a lower-stress lifestyle.

debasement of the environment

Given the expected rate of return on all possible investment opportunities in the economy, a(n) A. increase in the real rate of interest will tend to increase the level of investment. B. decrease in the real rate of interest will tend to increase the level of investment. C. decrease in the real rate of interest will tend to decrease the level of investment. D. change in the real interest rate will have no impact on the level of investment.

decrease in the real rate of interest will tend to increase the level of investment

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 A. supply and environmental factors. B. demand and efficiency factors. C. labor inputs and labor productivity. D. technological progress.

demand and efficiency factors

The consumption of fixed capital in each years production is called A. indirect business taxes B. inventory reduction C. depreciation D. net investment

depreciation

The amount of consumption in an economy correlates A. inversely with the level of disposable income. B. directly with the level of disposable income. C. directly with the level of saving. D. directly with the rate of interest.

directly with the level of disposable income

In the accompanying diagram, the straight line E drawn through the wavy lines would provide an estimate of the A. recession fluctuation. B. economic growth trend. C. natural rate of unemployment. D. recovery trend.

economic growth trend

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as A. structurally unemployed. B. frictionally unemployed. C. not in the labor force. D. employed.

employed

The labor force includes A. employed workers and persons who are officially unemployed. B. employed workers but excludes persons who are officially unemployed. C. full-time workers but excludes part-time workers. D. permanent employees but excludes temporary employees.

employed workers and persons who are officially unemployed

In the expansion phase of a business cycle, A. the inflation rate decreases, but productive capacity increases. B. the inflation rate and productive capacity decrease. C. employment increases, but output decreases. D. employment and output increase.

employment and output increase

Which of the following is best considered a demand factor in economic growth? A. the quantity of human resources B. the quality of natural resources C. the stock of capital goods D. expanded purchases of goods and services

expanded purchases of goods and services

One major aspect of the socio-cultural-political environment of the United States which has generally been conducive to economic growth is the A. enforcement of contracts by the market. B. denial of the rights of property ownership. C. favorable attitude toward work and risk-taking. D. strict social regulation of production and progress.

favorable attitude toward work and risk-taking

A college graduate using the summer following graduation to search for a job would best be classified as A. not officially a member of the labor force. B. structurally unemployed. C. cyclically unemployed. D. frictionally unemployed.

frictionally unemployed

The natural rate of unemployment is the A. unemployment rate experienced at the depth of a depression. B. full-employment unemployment rate. C. unemployment rate experienced by the least-skilled workers in the economy. D. unemployment rate experienced by the most-skilled workers in the economy.

full-employment unemployment rate

Unanticipated inflation arbitrarily A. helps those who are minimum wageworkers. B. harms those who receive fixed money incomes. C. harms those who borrow money. D. helps those who save money.

harms those who receive fixed money incomes

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID2? A. a lower interest rate B. lower expected rates of return on investment C. a higher interest rate D. higher expected rates of return on investment

higher expected rates of return on investment

Suppose nominal GDP was $360 billion in year 1 and $450 billion in year 2. The price index was 120 in year 1 and 125 in year 2. Between year 1 and year 2, real GDP A. increased by $60 billion. B. decreased by $32 billion. C. increased by $100 billion. D. increased by $117 billion.

increased by $60 billion

If a person's nominal income increases by 5 percent while the price level increases by 2 percent, then that person's real income A. increases by 3 percent. B. increases by 5 percent. C. decreases by 7 percent. D. decreases by 2 percent.

increases by 3 percent

Which of the following is a measure of economic growth that is most useful for measuring geopolitical preeminence or military potential? A. growth in nominal GDP B. decreases in the rate of unemployment C. increases in real GDP per capita D. increases in real GDP

increases in real GDP

The relationship between the real interest rate and investment is shown by the A. investment demand schedule. B. consumption of fixed capital schedule. C. saving schedule. D. aggregate supply curve.

investment demand schedule

Refer to the diagram. The base year used in determining the price indices for this economy A. cannot be determined from the information given. B. is some year before 2000. C. is more recent than 2000. D. is 2000.

is 2000

The natural rate of unemployment A. means that the economy will always operate at that rate. B. means that the economy will always realize its potential output. C. is equal to the total of frictional and structural unemployment. D. is a fixed unemployment rate that does not change over time.

is equal to the total of frictional and structural unemployment

Refer to the given consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. At an income level of $40 billion, the average propensity to consume A. is highest in economy (1). B. is highest in economy (2). C. is highest in economy (3). D. cannot be determined from the data given.

is highest in economy (2)

Suppose total output (real GDP) is $10,000 and worker-hours are 20,000. We can conclude that A. real GDP per capita must be $200,000. B. the price-level index must be less than 100. C. labor productivity must be $0.50. D. nominal GDP must be between $10,000 and $20,000.

labor productivity must be $0.50

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect A. present consumption to rise. B. future consumption to fall. C. a lower rate of growth of real GDP. D. labor productivity to rise.

labor productivity to rise

When the economy goes into a recession and firms require less labor, managers tend to A. reduce wages to reflect the lower demand for labor. B. avoid cutting wages, for fear of drops in worker productivity. C. lay off workers and keep wages of the remaining workers constant. D. keep all of their workers by spreading work more thinly.

lay off workers and keep wages of the remaining workers constant

Growth is advantageous to a nation because it A. promotes faster population growth. B. lessens the burden of scarcity. C. eliminates the economizing problem. D. slows the growth of wants.

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 A. level of total spending. B. rate of unemployment. C. rate of inflation. D. stock market price indexes.

level of total spending

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3? A. a lower interest rate B. lower expected rates of return on investment C. a higher interest rate D. higher expected rates of return on investment

lower expected rates of return on investment

The following are examples of final goods in national income accounting, except A. lumber and steel beams purchased by a construction company. B. a tractor purchased by a construction company. C. a laptop computer purchased by an executive for personal use. D. a desktop computer purchased by an executive for business use.

lumber and steel beams purchased by a construction company

The practical significance of the multiplier is that it A. equates the real interest rate and the expected rate of return on investment. B. magnifies initial changes in spending into larger changes in GDP. C. keeps inflation within tolerable limits. D. helps to stabilize the economy.

magnifies initial changes in spending into larger changes in GDP

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 A. marginal propensity to consume will remain unchanged in each of the three countries. B. marginal propensity to consume will decline in each of the three countries. C. average propensity to save will fall at each level of DI in each of the three countries. D. marginal propensity to save will rise in each of the three countries.

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

The gross domestic product concept accounts for society's valuation of the relative worth of goods and services by using A. a measure of physical weight B. a measure of volume C. a utility measure D. a monetary measure

monetary measure

Other things equal, a decrease in the real interest rate will A. shift the investment demand curve to the right. B. shift the investment demand curve to the left. C. move the economy upward along its existing investment demand curve. D. move the economy downward along its existing investment demand curve.

move the economy downward along its existing investment demand curve

The system that measures the economy's overall performance is formally known as A. national income accounting. B. business cycle measurement. C. GDP assessment. D. final output and income statistics.

national income accounting

If real GDP rises and the GDP price index has increased, A. the percentage increase in nominal GDP must have been less than the percentage increase in the price level. B. nominal GDP may have either increased or decreased. C. nominal GDP must have increased. D. nominal GDP must have fallen.

nominal GDP must have increased

Full-time homemakers and retirees are classified in the BLS data as A. employed. B. unemployed. C. part of the labor force. D. not in the labor force.

not in the labor force

Demand-pull inflation A. occurs when total spending in the economy is excessive. B. is measured differently than cost-push inflation. C. can be present even during an economic depression. D. is also called "hyperinflation."

occurs when total spending in the economy is excessive

The size of the labor force depends on the size of the working-age population and the A. participation rate. B. employment rate. C. unemployment rate. D. inflation rate.

participation rate

GDP can be calculated by summing A. personal consumption, investment, government purchases, exports and imports B. personal consumption, investment, government purchases, and net exports C. personal consumption, investment, wages, and rents D. personal consumption, investment, government purchases, and imports

personal consumption, investment, government purchases, and net exports

Given the consumption schedule, it is possible to graph the relevant saving schedule by A. subtracting the MPC from 1 at each level of income. B. subtracting investment from consumption at each level of GDP. C. plotting the horizontal differences between the consumption schedule and the 45-degree line. D. plotting the vertical differences between the consumption schedule and the 45-degree line.

plotting the vertical differences between the consumption schedule and the 45-degree line

Factors that contributed to the higher U.S. labor productivity growth in 1995-2010 relative to the earlier period include the following, except A. microchip and information technologies. B. new start-up firms and increasing returns. C. global competition. D. population growth.

population growth

Inflation means that A. all prices are rising, but at different rates. B. all prices are rising at approximately the same rate. C. prices on average are rising, although some particular prices may be falling. D. real incomes are rising.

prices on average are rising, although some particular prices may be falling

Growth-promoting institutional structures include the following, except A. patents and copyrights. B. efficient financial institutions. C. protection of domestic firms from foreign rivals. D. a stable political system.

protection of domestic firms from foreign rivals

A nation's infrastructure refers to A. its ability to realize economies of scale. B. its stock of technological knowledge. C. public capital goods such as highways and sanitation systems. D. the productivity of its labor force.

public capital goods such as highways and sanitation systems

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when A. r falls. B. i is greater than r. C. r is greater than i. D. i rises.

r is greater than i

During the 2007-2009 recession, A. real GO and real GDP fell by roughly the same amount. B. real GDP fell by roughly twice the amount that real GO fell. C. real GDP fell, while real GO remained unchanged. D. real GO fell by roughly twice the amount that real GDP fell.

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

The size of the multiplier is equal to the A. slope of the consumption schedule. B. reciprocal of the slope of the consumption schedule. C. slope of the saving schedule. D. reciprocal of the slope of the saving schedule.

reciprocal of the slope of the saving schedule

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will A. remain constant. B. fall by 6 percent. C. rise by 6 percent. D. fall by 12 percent.

remain constant

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will A. fall by about 1 percent. B. remain constant. C. rise by about 4 percent. D. rise by about 1 percent.

rise by about 1 percent

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 A. fall by about 20 percent. B. fall by about 2 percent C. rise by about 15 percent. D. rise by about 25 percent.

rise by about 15 percent

A major effect of the rise in the rate of productivity growth in the United States is a(n) A. rise in the rate of inflation. B. rise in the growth of living standards. C. increase in the relative prices of U.S. goods in foreign markets. D. increase in the competitiveness of U.S. goods in foreign markets.

rise in the growth of living standards

The percentage of U.S. adults with a high school education has A. remained constant since the 1960s. B. risen from 8 percent in 1960 to 35 percent in 2018. C. risen to 100 percent in the 21st century. D. risen from 44 percent in 1960 to 90 percent in 2018.

risen from 44 percent in 1960 to 90 percent in 2018

Last year, Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. We can conclude that last year Tatum's real income A. may have either increased or decreased. B. rose by approximately 6.2 percent. C. rose by approximately 3 percent. D. fell by approximately 13 percent.

rose by approximately 3 percent

Efficient financial institutions foster the flow of A. saving and investment. B. spending and income. C. resources and products. D. inventions and ideas.

saving and investment

Assume a nation's current production possibilities are represented by the curve AB in the accompanying diagram. Economic growth would best be indicated by a A. shift in the curve from AB to CD. B. shift in the curve from AB to EF. C. movement from point 1 to point 2. D. movement from point 3 to point 4.

shift in the curve from AB to CD

Refer to the diagram. Increases in the quantity and quality of human resources and capital are best represented by a A. shift in the production possibilities curve from AB to CD. B. move from Y on CD to X on AB. C. shift in the production possibilities curve from CD to AB. D. move from X to Z along AB.

shift in the production possibilities curve from AB to CD

If businesses feel more optimistic about the state of the economy, then this change is likely to A. cause a movement up the investment demand curve. B. cause a movement down the investment demand curve. C. shift the investment demand curve to the left. D. shift the investment demand curve to the right.

shift the investment demand curve to the right

The value of U.S. imports is A. added to exports when calculating GDP because imports reflect spending by Americans. B. subtracted from exports when calculating GDP because imports do not constitute spending by Americans. C. subtracted from exports when calculating GDP because imports do not constitute production in the United States. D. added when calculating GDP because imports do not constitute production in the United States.

subtracted from exports when calculating GDP because imports do not constitute production in the United States

Which factor explains the variability of investment? A. the regularity of innovation B. the durability of capital goods C. the constancy of expectations D. the constancy of profits

the durability of capital goods

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

the general level of prices over time

"Net foreign factor income" in the national income accounts refers to the difference between A. the income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S. B. the value of products sold by Americans to other nations and the value of products bought by Americans from other nations. C. the value of investments that Americans made abroad and the value of investments made by foreigners in the U.S. D. the income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.

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 A. the expected rate of return on the investment. B. business taxes. C. the interest rate. D. the present stock of capital goods.

the interest rate

All of the following are sources of increasing returns and economies of scale except A. network effects. B. the multiplier effect. C. learning by doing. D. simultaneous consumption.

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, A. the official unemployment rate will fall. B. the official unemployment rate will rise. C. the official unemployment rate will remain unchanged. D. the size of the labor force will increase.

the official unemployment rate will remain unchanged

Which of the following is not economic investment? A. the purchase of a new drill press by the Ajax Manufacturing Company B. the purchase of 100 shares of AT&T by a retired business executive C. construction of a suburban housing project D. the piling up of inventories on a grocer's shelf

the purchase of 100 shares of AT&T by a retired business executive

An antigrowth view would be that there may be a significant trade-off between productivity and A. education. B. employment. C. economies of scale. D. the quality of life.

the quality of life

GDP tends to overstate economic well-being because it takes into account A. all of the illegal activities conducted by organized crime in the economy. B. spending on intermediate goods that are used to produce final goods. C. total spending to deal with the adverse health effects of some products. D. the personal labor time that car owners spend working on car repairs and maintenance of their vehicles.

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

GDP tends to A. overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives. B. understate economic welfare because it includes expenditures undertaken to offset or correct pollution. C. understate economic welfare because it does not take into account increases in leisure. D. overstate economic welfare because it does not reflect improvements in product quality.

understate economic welfare because it does not take into account increases in leisure

The nominal rate of interest is 8.5 percent, and the real rate is 5 percent. The expected rate of return on an investment is 8 percent. The firm should A. not undertake the investment, because the expected rate of return of 8 percent is less than the nominal interest rate. B. not undertake the investment, because the expected rate of return of 8 percent is less than the nominal plus the real interest rate. C. undertake the investment because the expected rate of return of 8 percent is greater than the difference between the nominal and real interest rates. D. undertake the investment because the expected rate of return of 8 percent is greater than the real rate of interest.

undertake the investment because the expected rate of return of 8 percent is greater than the real rate of interest

Which of the following institutional arrangements is most likely to promote growth? A. patents and copyrights that expire quickly and are loosely enforced B. strong government control over resource allocation decisions C. unrestricted trade between nations D. all of these

unrestricted trade between nations

Refer to the figure. The consumption schedule indicates that A. consumers will maximize their satisfaction where the consumption schedule and 45° line intersect. B. up to a point, consumption exceeds income but then falls below income. C. the MPC falls as income increases. D. households consume as much as they earn.

up to a point, consumption exceeds income but then falls below income

Other things equal, if the real interest rate falls and business taxes rise, A. investment will rise until it is equal to saving. B. we will be uncertain as to the resulting change in investment. C. we can be certain that investment will rise. D. we can be certain that investment will fall.

we will be uncertain as to the resulting change in investment

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule A. will not shift. B. may shift either upward or downward. C. will shift downward. D. will also shift upward.

will shift downward

GDP in an economy is $11,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports must be A. +$53 billion. B. −$47 billion. C. −$84 billion. D. −$161 billion.

−$84 billion

If the Consumer Price Index was 125 in one year and 120 in the following year, then the rate of inflation was approximately A. 4.0 percent. B. 4.2 percent. C. −4.0 percent. D. −4.2 percent.

−4.0 percent