Macronomics review

1. The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the: a. Council of Economic Advisers b. Bureau of Economic Analysis c. National Bureau of Economic Research d. Bureau of Labor Statistics

. Bureau of Economic Analysis

1. A nation's gross domestic product (GDP): a. is the dollar value of all final output produced within the borders of the nation. b. the dollar value of all final output produced by its citizens, regardless of where they are living. c. can be found by summing C + In + S + Xn. d. is always some amount less than its C + Ig+ G + Xn.

. is the dollar value of all final output produced within the borders of the nation.

Income Consumption 200 205 225 225 250 245 275 265 300 285 1. Refer to the above data. The marginal propensity to consume is: A. .25.B. .75.C. .20.D. .80.

1. D. .80.

Answer the next question on the basis of the following data. All figures are in billions of dollars: Government Purchase 15 Consumption 90 Gross investment 20 Consumption of Fixed Capital 5 Exports 8 Imports 12

1. Refer to the above data the GDP is: .b. $121.

Answer the next question on the basis of the following national income data for the economy. All figures are in billions of dollars. Personal Consumption Expenditure 400 Government Purchase 128 Gross Private Domestic investment 88 Net Exports 7

1. The gross domestic product for the above economy is: d. $623.

1. Suppose Smith pays $100 to Jones. a. We can say with certainty that the GDP has increased by $100. b. We can say with certainty that the GDP has increased, but we cannot determine the amount. c. We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. d. We need more information to determine whether GDP has changed.

1. d. We need more information to determine whether GDP has changed.

Income Savings 0 -10 50 0 100 10 150 20 200 30 1. Refer to the above data. At the $100 level of income, the average propensity to save is: A. 0.10.B. 0.20.C. 0.25.D. 0.90.

A. 0.10.

Income Savings 0 -10 50 0 100 10 150 20 200 30 1. Refer to the above data. The marginal propensity to consume is: A. 0.80.B. 0.75.C. 0.20.D. 0.25.

A. 0.80.

1. With an MPS of .4, the MPC will be: A. 1.0 minus .4. B. .4 minus 1.0. C. the reciprocal of the MPS. D. .4.

A. 1.0 minus .4.

1. If the MPC is .8 and income is $200, then: A. consumption and saving cannot be determined from the information given. B. saving will be $20. C. personal consumption expenditures will be $80. D. saving will be $40.

A. consumption and saving cannot be determined from the information given.

1. 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.

A. employed workers and persons who are officially unemployed.

1. For all levels of income to the left of the intersection of the 45-degree line and the consumption function, the APC is: A. greater than 100 percent.B. less than the APS.C. equal to the MPC.D. equal to 100 percent.

A. greater than 100 percent.

1. In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? A. recovery B. recession C. peak D. trough

A. recovery

1. If Trent's MPC is .80, this means that he will: A. spend eight-tenths of any increase in his disposable income. B. spend eight-tenths of any level of disposable income. C. break even when his disposable income is $8,000. D. save two-tenths of any level of disposable income.

A. spend eight-tenths of any increase in his disposable income.

1. If the equation for the consumption schedule is C = 20 + 0.8Y, where C is consumption and Y is income, then the average propensity to consume is 1 when income is: A. $80. B. $100. C. $120. D. $160.

B. $100.

Income Consumption 200 205 225 225 250 245 275 265 300 285 1. Refer to the above data. If disposable income was $325, we would expect consumption to be: A. $315.B. $305.C. $20.D. $290.

B. $305.

1. Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is: A. 3 percent. B. 6 percent. C. 7 percent. D. 53 percent.

B. 6 percent.

1. John Maynard Keynes created the aggregate expenditures model based primarily on what historical event? A. Bank panic of 1907 B. Great Depression C. Spectacular economic growth during World War II D. Economic expansion of the 1920s.

B. Great Depression

1. The consumption function shows: A. a direct relationship between aggregate consumption and accumulated wealth. B. a direct relationship between aggregate consumption and aggregate income. C. an inverse relationship between aggregate consumption and accumulated financial wealth. D. an inverse relationship between aggregate consumption and aggregate income.

B. a direct relationship between aggregate consumption and aggregate income.

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.

1. The MPC can be defined as that fraction of a: A. change in income that is not spent. B. change in income that is spent. C. given total income that is not consumed. D. given total income that is consumed.

B. change in income that is spent.

1. The APC is calculated as: A. change in consumption / change in income. B. consumption / income. C. change in income / change in consumption. D. income / consumption.

B. consumption / income.

Income Consumption 200 205 225 225 250 245 275 265 300 285 1. Refer to the above data. At the $200 level of disposable income: A. the marginal propensity to save is 2½ percent. B. dissaving is $5. C. the average propensity to save is .20. D. the average propensity to consume is .80.

B. dissaving is $5.

1. Refer to the above data. At an $800 level of income, the level of saving is: A. $180.B. $740.C. $60.D. $18.

C. $60.

1. Suppose a family's consumption exceeds its income. This means that its: A. MPC is greater than 1. B. MPS is negative. C. APC is greater than 1. D. APS is positive.

C. APC is greater than 1.

1. If Carol's income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A. save is three-fifths. B. consume is one-half. C. consume is three-fifths. D. consume is one-sixth.

C. consume is three-fifths.

1. A decline in income: A. increases consumption by moving upward along a specific consumption schedule. B. decreases consumption because it shifts the consumption schedule downward. C. decreases consumption by moving downward along a specific consumption schedule. D. increases consumption because it shifts the consumption schedule upward.

C. decreases consumption by moving downward along a specific consumption schedule.

1. The size of the MPC is assumed to be: A. less than zero. B. greater than one. C. greater than zero, but less than one. D. two or more.

C. greater than zero, but less than one.

1. The consumption function is drawn on the assumption that as income increases consumption will: A. be unaffected. B. increase absolutely, but remain constant as a percentage of income. C. increase absolutely, but decline as a percentage of income. D. increase both absolutely and as a percentage of income.

C. increase absolutely, but decline as a percentage of income.

1. In the United States, business cycles have occurred against a backdrop of a long-run trend of: A. declining unemployment. B. stagnant productivity growth. C. rising real GDP. D. rising inflation.

C. rising real GDP.

1. The consumption function is such that: A. both the APC and the MPC increase as income rises. B. the APC is constant and the MPC declines as income rises. C. the MPC is constant and the APC declines as income rises. D. the MPC and APC must be equal at all levels of income.

C. the MPC is constant and the APC declines as income rises.

Income Savings 0 -10 50 0 100 10 150 20 200 30 1. Refer to the above data. If plotted on a graph, the slope of the saving schedule would be: A. 0.80.B. 0.10.C.0.20.D. 0.15.

C.0.20.

a. Frank recently lost his job as the computer manufacturing company he works for recently downsized after poor sales and poor performance of the economy during the last year.

Cyclically Unemployed

1. Refer to the above data. The MPC is: A. .45.B. .20.C. .50.D. .90.

D. .90.

1. 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. a part of structural unemployment. C. a part of cyclical unemployment. D. a part of frictional unemployment.

D. a part of frictional unemployment.

1. The most important determinant of consumer spending is: A. the level of household borrowing. B. consumer expectations. C. the stock of wealth. D. the level of income.

D. the level of income.

. Susan recently left her marketing job at a local bank because she found that finance interests her more. She is currently looking for a job as a financial consultant.

Frictionally Unemployed

1. Suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that: a. GDP in 2008 is $450 billion. b. NDP in 2008 is $450 billion. c. GDP in 2008 is $500 billion. d. inventories in 2008 fell by $50 billion.

GDP in 2008 is $500 billion.

Year GDP in Chained Dollars (Billions of $) Population 2008 14369.1 304093966 2009 14119 306771529 2010 14657.8 309330219 1. Calculate real GDP growth and real GDP per capita growth in 2009 and 2010.

Growth rate of real GDP 2009 = -1.7% Growth rate of real GDP 2010 = 3.8% Growth rate of real GDP per capita 2009 = -2.6% Growth rate of real GDP per capita 2010 = 3.0%

b. Julie just recently graduated from college and is spending the summer traveling before she begins a job with a consulting firm in the fall.

Julie is not in the labor force

Personal Taxes 40 Social Security Contributions 15 Taxes on Production 20 Corporate Income Taxes 40 Transfer Payments 22 US Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 US Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factor Income 10 Statistical Discrepancy 0

Refer to the above data the GDP is: a. $417.

c. Tom recently lost his job as the steel manufacturing firm he worked for moved their plant overseas. The other steel plants in the nation have been also been following this trend.

Tom is Structurally Unemployed

1. 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. a nation's imports exceed its exports.

1. Marginal productivity of labor is a. change is total production due to an extra change in labor b. total production divided by labor c. total production minus number of labor d. none of the above

a. change is total production due to an extra change in labor

1. Production possibility curve has a shape of a. convex to the origin b. straight line c. positive slope d. concave to the origin

a. concave to the origin

1. Microeconomics a. describes decision making of specific economic units b. describes the economy as a whole c. describes the subdivision of the economy d. describes the aggregate variables of the economy

a. describes decision making of specific economic units

1. An auto mechanic who fixes his own car at home will be a. included in GDP b. excluded from GDP c. included in GNP d. excluded from GNP

a. excluded from GDP

1. In positive Economics a. facts and cause-and-effect relationships b. value judgement c. particular policy actions should be recommended to achieve a desirable goal d. support for particular economic policies

a. facts and cause-and-effect relationships

1. The purchase of a tractor in 2018 but made in 2017 will be a. included in 2018 GDP b. included in 2017 GDP c. included in 2018 GNP d. included in 2017 GNP

a. included in 2017 GDP

1. Point inside production possibility curve represents a. unavailability b. efficiency c. inefficiency d. no of the above

a. inefficiency

1. Individual's economic problem is to a. maximize utility with unlimited income b. maximize utility with limited income c. maximize income with limited resources d. maximize income with unlimited resources

a. maximize utility with limited income

1. Gross private investment is a. net investment plus change in inventories b. net investment plus inventories c. net investment minus change in inventories d. net investment minus inventories

a. net investment plus change in inventories

1. Outward shift of production possibility curve shows a. positive growth b. negative growth c. zero growth d. none of the above

a. positive growth

1. If convergence exists a. the fitted line will be positively sloped b. the fitted line will be horizontal c. the fitted line will be vertical d. the fitted line will be negatively sloped

a. the fitted line will be negatively sloped

1. Suppose that inventories were $40 billion in 2007 and $50 billion in 2008. In 2008, accountants would: a. add $10 billion to other elements of investment in calculating total investment.b. subtract $10 billion from other elements of investments in calculating total investment.c. add $45 billion (= $90/2) to other elements of investment in calculating total investment.d. subtract $45 billion (= $90/2) from other elements of investment in calculating total investment.

add $10 billion to other elements of investment in calculating total investment.

1. Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. Kyle will be considered as: A. cyclically unemployed. B. frictionally unemployed. C. secularly unemployed. D. employed.

frictionally unemployed.

1. A private closed economy includes: A. households, businesses, and government, but not international trade. B. households, businesses, and international trade, but not government. C. households and businesses, but not government or international trade. D. households only.

households and businesses, but not government or international trade.

1. Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is: A. unemployed. B. employed. C. not in the labor force. D. in the labor force.

not in the labor force.

1. Tom Atoe grows tomatoes 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