Spiral quiz Chapter 9,11,12
If planned investment spending is $2 trillion and inventories decrease by $0.5 trillion, actual investment spending is: 1.) $1.5 trillion 2.) $2 trillion 3.) $2.5 trillion 4.) $1 trillion
1.) $1.5 trillion
Look at the figure Aggregate Expenditures I. When real GDP is $700 billion, there will be a _________ in unplanned inventory investment. 1.) $125 million increase 2.) $200 million decline 3.) $200 million increase 4.) $125 million decline
1.) $125 million increase
Look at the table Income-Expenditure Equilibrium. If planned investment spending increases by $100, income-expenditure equilibrium occurs at real GDP of: 1.) $2,250 2.) $8,100 3.) $3,600 4.) $4,000
1.) $2,250
Look at the table The Economy of Albernia. What is the income-expenditure equilibrium real GDP? 1.) $2,500 billion 2.) $1,000 billion 3.) $1,500 billion 4.) $2,000 billion
1.) $2,500 billion
Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8 x YD, where C represent consumption and YD represents disposable income. Look at the scenario Aggregate Consumption Equation. If disposable income is $500, autonomous consumption is: 1.) $200 2.) $400 3.) $0 4.) $600
1.) $200
If planned aggregate spending rises by $10 billion and the marginal propensity to consume is 0.75, then equilibrium real GDP changes by: 1.) $40 billion 2.) $10 billion 3.) $7.5 billion 4.) $2.5 billion
1.) $40 billion
Suppose that the consumption function is C = $500 + 0.8 x YD, where YD is disposable income. Look at the scenario Consumption Spending. Autonomous consumption is: 1.) $500 2.) 0 3.) four-fifths of disposable income 4.) $1,300 if disposable income is $1,000
1.) $500
Look at the figure Consumption and Real GDP. If real GDP is $12 trillion, consumption is ________ trillion. 1.) $7 2.) $5 3.) $9 4.) $11
1.) $7
Look at the figure Consumption and Disposable Personal Income. When disposable personal income is $1,200 billion, consumption is ________ billion. 1.) $800 2.) $600 3.) $1,200 4.) $2,000
1.) $800
Suppose that the consumption function is C = $500 + 0.8 x YD, where YD is disposable income. Look at the scenario Consumption Spending. If disposable income is $1,000, savings is: 1.) -$300 2.) $1,300 3.) $300 4.) -$500
1.) -$300
Look at the table Individual Consumption Function for Bob. The marginal propensity to consume and autonomous consumption are __________ and __________, respectively, for Bob. 1.) 0.4; $9,000 2.) 0.6; $9,000 3.) 0.6; $10,000 4.) 0.4; $13,000
1.) 0.4; $9,000
If the multiplier is 4, the marginal propensity to consume is: 1.) 0.75 2.) 3 3.) 0.80 4.) 0.25
1.) 0.75
If MPC = 0.9, the multiplier is: 1.) 10 2.) 1 3.) 9 4.) 90
1.) 10
A typical family in the United States in 1900 had a purchasing power equal to _________ of the real U.S. GDP per capita in 2010. 1.) 13% 2.) 1% 3.) 70% 4.) 136%
1.) 13%
In an economy with no taxes or imports, if disposable income increases by $1,000 and consumption increases by $600, the multiplier is: 1.) 2.5 2.) $600 3.) 0.40 4.) 0.6
1.) 2.5
In an economy with no taxes and no imports, disposable income decreases from $6,000 to $4,000. If consumption decreases from $4,500 to $3,000, the multiplier is: 1.) 4 2.) 0.25 3.) -4 4.) 1.125
1.) 4
If a store has 10,000 CDs at the start of the period and 15,000 CDs at the end, then its inventory investment during the period was ________ CDs: 1.) 5,000 2.) 1.5 3.) -5,000 4.) 0.67
1.) 5,000
In the equation C = A + MPC x YD, _________ represents autonomous consumption. 1.) A 2.) MPC 3.) C 4.) YD
1.) A
Look at the table Individual and Aggregate Consumption Functions. Which of the following represents Andy's individual consumption function? 1.) C = 150 + 0.8YD 2.) C = 0.95YD 3.) C = 150 + 0.5YD 4.) C = 0.15YD
1.) C = 150 + 0.8YD
Real GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. Look at the scenario Income-Expenditure Equilibrium. What is the consumption function? 1.) C = 500 + 0.8 x YD 2.) C = 8,000 + 0.8 x YD 3.) C = 1,700 + 0.2 x YD 4.) C = 8,700 + 0.2 x YD
1.) C = 500 + 0.8 x YD
According to estimates of the aggregate production function, each 1% increase in physical capital, holding human capital and technology constant, raises labor productivity by 0.33% 1.) True 2.) False
1.) True
If an economy doubles its growth rate in per capita GDP over 14 years, then the growth rate in per capita GDP averaged 5% per year. 1.) True 2.) False
1.) True
Suppose the economy is in an inflationary gap so that SRAS1 intersects AD2. The size of the gap is equal to: 1.) Y1 - Yp 2.) Y1 3.) Yp - Y2 4.) Y1 - Y2
1.) Y1 - Yp
Which country had the lowest growth rate of real GDP per capita between 1980 and 2010? 1.) Zimbabwe 2.) Argentina 3.) Ireland 4.) France
1.) Zimbabwe
In general, a change in the price level, all other things unchanged, causes: 1.) a movement along the aggregate demand curve 2.) both a movement along the aggregate demand curve and a shift in the curve 3.) a shift of the aggregate demand curve 4.) no change in the purchasing power of assets
1.) a movement along the aggregate demand curve
The wealth effect suggests: 1.) a negative relationship between the price level and consumption spending 2.) that price level changes do not affect real wealth 3.) a positive relationship between the price level and consumption spending 4.) that when the price level increases, the real value of money increases also
1.) a negative relationship between the price level and consumption spending
Policy can offset the effects of all of the following shocks EXCEPT: 1.) a negative supply shock by increasing money supply 2.) a positive demand shock by decreasing government spending 3.) a positive demand shock by increasing taxes 4.) a negative demand shock by cutting taxes
1.) a negative supply shock by increasing money supply
Look at the figure Inflationary and Recessionary Gaps. In panel (a), an expansionary policy designed to move the economy from Y1 to Yp would attempt to shift the: 1.) aggregate demand curve to the right by increasing aggregate demand 2.) SRAS curve to the left 3.) aggregate demand curve to the left by increasing aggregate demand 4.) LRAS curve to the left
1.) aggregate demand curve to the right by increasing aggregate demand
Look at the table Income-Expenditure Equilibrium. If investment spending deceases in this economy, then the: 1.) aggregate expenditures curve will shift down, decreasing the income-expenditure equilibrium 2.) aggregate expenditures curve will shift up, increasing the income-expenditure equilibrium 3.) economy will move upward along the aggregate expenditures curve, increasing the income-expenditure equilibrium 4.) economy will move downward along the aggregate expenditures curve, decreasing the income-expenditure equilibrium
1.) aggregate expenditures curve will shift down, decreasing the income-expenditure equilibrium
An upward shift in the consumption function can be caused by: 1.) an increase in consumer wealth 2.) a drop in consumer wealth 3.) pessimistic expectations 4.) an increase in disposable personal income
1.) an increase in consumer wealth
An initial change in the desired level of spending by firms, households, or government at a given level of real GDP is a(n): 1.) autonomous change in aggregate spending 2.) endogenous spending 3.) multiplier-induced change in spending 4.) budget surplus
1.) autonomous change in aggregate spending
If other things are equal, expectations of lower disposable income would _________ and shift the consumption function __________. 1.) decrease autonomous consumption; down 2.) increase autonomous consumption; up 3.) increase the marginal propensity to consume; up 4.) decrease the marginal propensity to consume; down
1.) decrease autonomous consumption; down
If the Fed increases the quantity of money in circulation, interest rates ________, investment spending ________, and the aggregate demand curve shifts to the ________. 1.) decrease; increases; right 2.) increase; increases; right 3.) decrease; increases; left 4.) increase; decreases; left
1.) decrease; increases; right
A decrease in the supply of money shifts the aggregate _______ curve to the ________. 1.) demand; left 2.) supply; right 3.) demand; right 4.) supply; left
1.) demand; left
Look at the table The Aggregate Consumption Function and Planned Aggregate Spending. If expected disposable income decreases in this economy, then the: 1.) economy will move downward along the aggregate expenditures curve 2.) aggregate expenditures curve will shift down 3.) economy will move upward along the aggregate expenditures curve 4.) aggregate expenditures curve will shift up
1.) economy will move downward along the aggregate expenditures curve
Look at the figure AD-AS Model I. If the economy is at point X, nominal wages _______, and the _______ curve shifts _______ until the economy reaches long-run equilibrium. 1.) fall; short-run aggregate supply; right 2.) fall; short-run aggregate supply; left 3.) fall; aggregate demand; left 4.) rise; aggregate demand; right
1.) fall; short-run aggregate supply; right
Changes in aggregate demand can be caused by changes in: 1.) government spending 2.) business costs 3.) raw materials costs 4.) wages
1.) government spending
Look at the figure Consumption Functions. An economy's consumption function would shift from curve C to curve C' when there is a(n): 1.) increase in expected disposable income 2.) increase in the unemployment rate 3.) decrease in expected GDP growth estimates 4.) drop in wealth
1.) increase in expected disposable income
When the price level increases, firms in perfectly competitive markets will: 1.) increase output 2.) decrease output 3.) decrease output and increase the price 4.) increase output and decrease the price
1.) increase output
If the price level falls by 10%, the purchasing power of $10,000 will: 1.) increase to $11,000 2.) decrease to $1,000 3.) decrease to $9,000 4.) remain constant
1.) increase to $11,000
An increase in the marginal propensity to consume: 1.) increases the multiplier 2.) decreases the multiplier 3.) shifts the autonomous investment line downward 4.) shifts the autonomous investment line upward
1.) increases the multiplier
The interest rate effect if the tendency for changes in the price level to affect: 1.) interest rates and thus the quantity of investment spending and consumption 2.) the quantity of investment demanded and thus interest rates 3.) real incomes and lead to shifts in potential output 4.) export demand and thus aggregate demand
1.) interest rates and thus the quantity of investment spending and consumption
Long-run growth is sustainable if: 1.) it can continue in the face of limited natural resources and the impact of growth in the environment 2.) energy prices are low 3.) people continue to buy enough goods and services 4.) environment concerns are ignored during global recessions
1.) it can continue in the face of limited natural resources and the impact of growth in the environment
The economic slump in the 1970s looked different from the slump at the beginning of the Great Depression because it was: 1.) largely caused by events in the Middle East that led to sudden cuts in world oil production and soaring prices for oil 2.) the direct result of a contractionary monetary policy 3.) the result of a lack of confidence that led businesses and consumers to spend less 4.) the result of solely of a negative demand shock
1.) largely caused by events in the Middle East that led to sudden cuts in world oil production and soaring prices for oil
In the book The Limits to Growth, The Club of Rome argued that: 1.) limited supplies of natural resources made long-run growth unsustainable 2.) free trade could make world growth sustainable 3.) the convergence hypothesis was invalid 4.) the World Bank needed to establish a global currency
1.) limited supplies of natural resources made long-run growth unsustainable
Look at the figure Policy Alternatives. Assume that the economy depicted in panel (a) is in short-run equilibrium with AD1 and SRAS1. If the economy is left to correct itself: 1.) lower wages will result in a gradual shift from SRAS1 to SRAS2 2.) real interest rates will fall, which will shift SRAS rightward 3.) the aggregate demand curve will shift leftward 4.) long-run equilibrium will be established at Yp and P3
1.) lower wages will result in a gradual shift from SRAS1 to SRAS2
Look at the figure Shifts of the AD-AS Curves. A short-run increase in net exports is illustrated by: 1.) panel (a) 2.) panel (d) 3.) panel (b) 4.) panel (c)
1.) panel (a)
Look at the figure Shifts of the AD-AS Curves. An increase in wages in the short run is illustrated by: 1.) panel (d) 2.) panel (a) 3.) panel (c) 4.) panel (b)
1.) panel (d)
Profit per unit equals: 1.) price per unit minus cost per unit 2.) cost per unit minus price per unit 3.) price per unit minus the nominal wage rate 4.) price per unit divided by cost per unit
1.) price per unit minus cost per unit
The marginal propensity to consumer equals the: 1.) ratio of the change in consumer spending to the change in aggregate disposable income 2.) proportion of consumer spending as a function of aggregate disposable income 3.) change in savings divided by the change in aggregate disposable income 4.) change in savings divided by the change in consumer spending
1.) ratio of the change in consumer spending to the change in aggregate disposable income
The best available measure of the standard of living in a country is: 1.) real GDP per capita 2.) the growth rate of productivity 3.) nominal GDP per capita 4.) the unemployment rate
1.) real GDP per capita
If there is an inflationary gap, nominal wages _______, and the _________ curve shifts ________ until the economy reaches long-run equilibrium. 1.) rise; short-run aggregate supply; left 2.) fall; aggregate demand; left 3.) fall; sort-run aggregate supply; right 4.) rise; aggregate demand; right
1.) rise; short-run aggregate supply; left
If planned investment spending increases, the planned aggregate spending line: 1.) shifts up 2.) shifts down 3.) becomes steeper 4.) becomes flatter
1.) shifts up
If the stock market crashes: 1.) the aggregate consumption function will shift down 2.) the aggregate consumption function will shift up 3.) unplanned inventory investment will be negative 4.) GDP will increase
1.) the aggregate consumption function will shift down
Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _______ adjustment in ________. 1.) upward; nominal wages 2.) downward; nominal wages 3.) downward; production costs 4.) downward; profits per unit of output
1.) upward; nominal wages
Consider a simple economy: MPC=0.75, income=$400 billion, and aggregate consumption spending=$400 billion. Autonomous consumption is: 1.) $300 billion 2.) $100 billion 3.) $200 billion 4.) 0
2.) $100 billion
If real GDP is $1,000 billion and the aggregate expenditure is $850 billion, then the change in inventories will be: 1.) $1,850 million 2.) $150 million 3.) -$1,850 million 4.) -$150 million
2.) $150 million
Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8 YD, where C represents consumption and YD represents disposable income. Look at the scenario Aggregate Consumption Equation. If disposable income increases from $500 to $800, aggregate consumption will increase by: 1.) $200 2.) $240 3.) $0 4.) $440
2.) $240
Look at the table Aggregate Expenditure Curve II. Suppose that the consumption function rises by $100. The equilibrium level of real GDP would rise by: 1.) $100 2.) $250 3.) $200 4.) $50
2.) $250
Suppose that the marginal propensity to consume is 0.8 and investment spending increases by $100 billion. The increase in real GDP is: 1.) $80 billion, composed of $100 billion in investment spending and a decrease in consumption of $20 billion 2.) $500 billion, composed of $100 billion in investment and $400 billion in consumption 3.) $100 billion, the same amount as investment spending 4.) $125 billion, composed of $100 billion in investment spending and $25 billion in consumption
2.) $500 billion, composed of $100 billion in investment and $400 billion in consumption
Real GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. Look at the scenario Income-Expenditure Equilibrium. How much is planned aggregate spending? 1.) $8,000 2.) $7,100 3.) $700 4.) $6,400
2.) $7,100
Real GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. Look at the scenario Income-Expenditure Equilibrium. If real GDP is $3,000, how much is unplanned inventory investment? 1.) $600 2.) -$100 3.) 0 4.) $100
2.) -$100
Look at the figure Aggregate Expenditures Curve I. The slope of the aggregate expenditures curve in this figure is: 1.) 45 degrees 2.) 0.5 3.) 0.25 4.) 1.0
2.) 0.5
If disposable income increase by $1,000 and consumer spending increases by $800, then the marginal propensity to consume is: 1.) 1 2.) 0.8 3.) 0.75 4.) 1.25
2.) 0.8
In an economy with no taxes and no imports, disposable income increases from $2,000 to $3,000. If consumption increases from $1,500 and $2,100, the multiplier is: 1.) 6 2.) 2.5 3.) 0.40 4.) 0.60
2.) 2.5
If the marginal propensity to consume is 0.8, the multiplier is: 1.) 1.25 2.) 5 3.) 0.2 4.) 0.8
2.) 5
If the marginal propensity to save is 0.2, the multiplier is: 1.) 0.2 2.) 5 3.) 0.8 4.) 1.25
2.) 5
Convergence is most likely between: 1.) Brazil and the United Kingdom 2.) France and Germany 3.) Mexico and Ghana 4.) Mexico and Ghana or Brazil and the United Kingdom
2.) France and Germany
Look at the figure Shift of the Aggregate Demand Curve. A movement from point C on AD2 to point A on AD1 may have been the result of: 1.) lower interest rates 2.) an increase in investment spending following optimistic GDP forecasts 2.) a decrease in investment spending following pessimistic GDP forecasts 4.) decreases in the taxes paid by businesses
2.) a decrease in investment spending following pessimistic GDP forecasts
All of the following will increase potential output EXCEPT: 1.) technological innovation 2.) a decrease in the aggregate price level 3.) an increase in human capital 4.) an increase in physical capital
2.) a decrease in the aggregate price level
A recessionary gap occurs when: 1.) potential output is below aggregate output 2.) aggregate output is below potential output 3.) aggregate output is above potential output 4.) potential output is receding
2.) aggregate output is below potential output
A shift to the right of the short-run aggregate supply curve may be caused by: 1.) an increase in the price of inputs 2.) an increase in productivity 3.) an increase in wages 4.) a decrease in productivity
2.) an increase in productivity
Look at the figure Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y1 in panel (b), the economy is in: 1.) a high level of unemployment 2.) an inflationary gap 3.) a recessionary gap 4.) simultaneous short-run and long-run equilibrium
2.) an inflationary gap
As a recessionary gap self-corrects, the equilibrium price level _______ and the equilibrium real output _________. 1.) rises; decreases 2.) falls; increases 3.) rises; increases 4.) falls; decreases
2.) falls; increases
In the late 1970s, the U.S. economy slid to the _______ along the aggregate curve. 1.) left; supply 2.) left; demand 3.) right; demand 4.) right; supply
2.) left; demand
An inflationary gap caused by a demand shock can be addressed by _______ to ________. 1.) raising government spending; lower the unemployment rate 2.) lowering government spending; lower the aggregate price level 3.) lowering taxes; lower the aggregate price level 4.) raising taxes; lower the unemployment rate
2.) lowering government spending; lower the aggregate price level
The aggregate supply curve shows the relationship between the aggregate price level and the aggregate: 1.) money supply 2.) output supplied 3.) employment 4.) unemployment rate
2.) output supplied
Planned investment spending depends on all of the following EXCEPT: 1.) the expected level of real GDP 2.) real GDP 3.) the productive capacity of the economy 4.) the rate of interest
2.) real GDP
A decrease in aggregate demand is seen as a(n) ________ the aggregate demand curve. 1.) shift to the right in 2.) shift to the left in 3.) downward movement along 4.) upward movement along
2.) shift to the left in
The higher the production capacity of the economy: 1.) the higher is actual production 2.) the lower is planned investment spending 3.) the lower is current production 4.) the higher is planned investment spending
2.) the lower is planned investment spending
If the interest rate rises: 1.) excess capacity will increase 2.) the opportunity cost of investment is greater 3.) more investment projects have a rate of return above that of the interest rate 4.) planned investment spending rises
2.) the opportunity cost of investment is greater
If the marginal propensity to save decreases from 0.6 to 0.5: 1.) the vertical axis intercept of the consumption function changes from 0.6 to 0.5 2.) the slope of the consumption function increases from 0.4 to 0.5 3.) the horizontal axis intercept of the consumption function changes from 0.4 to 0.5 4.) the slope of the consumption function decreases from 0.6 to 0.5
2.) the slope of the consumption function increases from 0.4 to 0.5
Look at the table Income and Consumption. When disposable personal income is $400, the level of personal savings is: 1.) -$40 2.) -$20 3.) $20 4.) $0
3.) $20
Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8 YD, where C represents consumption and YD represents disposable income. Look at the scenario Aggregate Consumption Equation. If disposable income increases from $500 to $800, autonomous consumption is: 1.) $440 2.) $240 3.) $200 4.) $0
3.) $200
Look at the table Aggregate Expenditures Curve III. Suppose that the consumption function shifts upward by $100. Equilibrium real GDP will rise by: 1.) $3,200 2.) $100 3.) $400 4.) $800
3.) $400
In 2010, the median U.S. household income was approximately: 1.) $25,000 2.) $16,000 3.) $50,000 4.) $8,000
3.) $50,000
If the multiplier equals 4, then the marginal propensity to save must be equal to: 1.) 0.75 2.) the marginal propensity to consume 3.) 0.25 4.) 0.5
3.) 0.25
In an economy with no taxes and no imports, disposable income decreases from $6,000 to $4,000. If consumption decreases from $4,500 to $3,000, the marginal propensity to save is: 1.) 1.125 2.) -0.25 3.) 0.25 4.) 0.75
3.) 0.25
In an economy with no taxes or imports, if the marginal propensity to consume is 0.7, the marginal propensity to save must be: 1.) 0.21 2.) 1.7 3.) 0.3 4.) 0.7
3.) 0.3
Consider the simple economy of Behr, whose government does not tax its citizens. The consumption function of Behr is given by C = 500 + 0.80Y, where Y is income. The marginal propensity to consume in Behr is: 1.) 500 2.) 1 3.) 0.80 4.) 0.75
3.) 0.80
There are two countries on a peninsula. The first has a per capita annual growth rate of 2%, and its neighbor to the south has an annual growth rate of 5%. How much sooner will the country in the south double its GDP per capita than its neighbor in the north? 1.) 10 years 2.) 15 years 3.) 21 years 4.) 5 years
3.) 21 years
From 2010 to 2011 nation A's real GDP increased from $100 billion to $106 billion and its population grew from 50 million to 51 million. Its annual growth rate in real GDP per capita was approximately: 1.) -3% 2.) 6% 3.) 4% 4.) 1%
3.) 4%
When David has no income, he spends $500. If his income increases to $2,000, he spends $1,900. Which of the following represents his consumption function? 1.) C = 0.95 x YD 2.) C = 1.2 x YD 3.) C = $500 + 0.7 x YD 4.) C = $500 + $1,000 x YD
3.) C = $500 + 0.7 x YD
Which of the following is TRUE with respect to short-run and long-run aggregate supply? 1.) If the economy is on the long-run aggregate supply curve, it cannot also be on the short-run aggregate supply curve 2.) If the economy is on the short-run aggregate supply curve, it cannot also be on the long-run aggregate supply curve 3.) The economy can be on both curves simultaneously 4.) The economy can never rest on both curves simultaneously
3.) The economy can be on both curves simultaneously
The marginal propensity to consume equals: 1.) income divided by consumption 2.) consumption divided by disposable income 3.) a change in consumption divided by a change in disposable income 4.) a change in income divided by a change in consumption
3.) a change in consumption divided by a change in disposable income
Look at the figure Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a) and the government does not intervene, the results will likely be: 1.) no change in AD or SRAS 2.) a shift of AD1 to the left 3.) a shift of SRAS1 to SRAS2 4.) a shift of LRAS to the left
3.) a shift of SRAS1 to SRAS2
Look at the figure Inflationary and Recessionary Gaps. The intersection of AD with SRAS in panel (b) indicates: 1.) a long-run equilibrium 2.) stagflation 3.) a short-run equilibrium 4.) that unemployment is too high
3.) a short-run equilibrium
The economy is in a recession. The desired FISCAL policy is: 1.) a decrease in government transfer payments 2.) a decrease in interest rates 3.) an increase in the government purchases of goods and services 4.) an increase in tax rates
3.) an increase in the government purchases of goods and services
An increase in aggregate demand will generate ________ in real GDP and ________ in the price level in the short run. 1.) an increase; no change 2.) no change; an increase 3.) an increase; an increase 4.) a decrease; no change
3.) an increase; an increase
Real GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. Look at the scenario Income-Expenditure Equilibrium. Given this income-expenditure equilibrium, firms will tend to: 1.) increase output 2.) hire more people 3.) decrease output 4.) raise prices
3.) decrease output
If membership in labor unions falls, production costs will: 1.) increase, and SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level. 2.) not change and AD will shift to the right, increasing equilibrium GDP and aggregate price level. 3.) fall and SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level. 4.) fall, there will be a downward movement along SRAS, equilibrium GDP will increase, and aggregate price level will fall.
3.) fall and SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level.
An aggregate output level lower than potential output means there will be: 1.) high interest rates 2.) low unemployment 3.) high unemployment 4.) high inflation
3.) high unemployment
People are likely to save the most __________ according to the life-cycle hypothesis. 1.) in their old age 2.) the older they get 3.) in their peak earnings in years 4.) as they get closer to retirement
3.) in their peak earnings in years
If the multiplier is 4 and autonomous government spending increases by $100 billion, real GDP will: 1.) decrease by $400 billion 2.) increase by $100 billion 3.) increase by $400 billion 4.) increase by $25 billion
3.) increase by $400 billion
A $50 million increase in investment spending will eventually cause equilibrium real GDP to: 1.) decrease by $50 million 2.) increase by less than $50 million 3.) increase by more than $50 million 4.) increase by $50 million
3.) increase by more than $50 million
Look at the figure Policy Alternatives. In panel (b), the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. If the government decides to intervene, it will most likely: 1.) decrease its spending 2.) increase taxes 3.) increase its spending 4.) decrease the quantity of money
3.) increase its spending
The Federal Reserve, the central bank of the United States, has been cutting the interest rate to stimulate the recessionary economy. Interest cuts by the Federal Reserve are supposed to: 1.) lower the savings rate in the economy and stop leakages 2.) increase government spending on the economy infrastructure and thus increase GDP through the multiplier process 3.) increase planned investment spending and thus increase GDP via the multiplier 4.) increase cash holding by the general public, thus lowering their dependence on credit
3.) increase planned investment spending and thus increase GDP via the multiplier
Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising. This is probably the effect of a(n) ________ in aggregate _______. 1.) decrease; demand 2.) increase; supply 3.) increase; demand 4.) decrease; supply
3.) increase; demand
Look at the figure Aggregate Supply. If the economy is at point E, nominal wages will _______, and the short-run aggregate supply curve will shift _______ until actual potential is _________ potential output. 1.) increase; right; greater than 2.) decrease; right; less than 3.) increase; left; equal to 4.) decrease; right; equal to
3.) increase; left; equal to
Suppose that the economy is in long-run macroeconomic equilibrium and aggregate demand increases. As the economy moves to short-run macroeconomic equilibrium, there is a(n) ________ gap with _______. 1.) recessionary; low inflation 2.) recessionary; high inflation 3.) inflationary; low unemployment 4.) inflationary; high unemployment
3.) inflationary; low unemployment
The key factor explaining the poor growth performance in Africa is probably: 1.) the prevalence of military conflicts among neighboring countries 2.) lack of natural resources 3.) lack of domestic political stability 4.) overpopulation
3.) lack of domestic political stability
Suppose that the stock market crashes, which causes a large decrease in the value of many households' financial assets. The most likely outcome is a _________ the aggregate demand curve. 1.) movement up 2.) movement down 3.) left-shift in 4.) right-shift in
3.) left-shift in
The aggregate demand curve would shift to the left for all the following reasons EXCEPT: 1.) a fall in consumers' wealth 2.) a decrease in the amount of money in circulation 3.) lower labor productivity 4.) more pessimistic consumer expectations
3.) lower labor productivity
Look at the figure Consumption and Real GDP. The slope of the consumption function is called the: 1.) marginal consumption increment 2.) average propensity to consume 3.) marginal propensity to consume 4.) marginal propensity to save
3.) marginal propensity to consume
A fall in the market interest rate makes any investment project: 1.) more profitable only if the funds were borrowed 2.) less profitable whether the funds were borrowed or came from retained earnings 3.) more profitable whether the funds were borrowed or came from retained earnings 4.) less profitable if the funds were borrowed and more profitable if it came from retained earnings
3.) more profitable whether the funds were borrowed or came from retained earnings
Whatever planned aggregate spending exceeds real GDP, unplanned inventory investment is: 1.) unpredictable 2.) zero 3.) negative 4.) positive
3.) negative
If the economy is in a recessionary gap: 1.) nominal wages will rise, SRAS will shift to the left, and the economy will eventually restore itself 2.) it will remain in a recession forever without any kind of government intervention 3.) nominal wages will fall and SRAS will shift to the right until the economy is at full employment 4.) AD will shift to the right and prices of goods will rise until the economy goes back to producing potential output
3.) nominal wages will fall and SRAS will shift to the right until the economy is at full employment
The life-cycle hypothesis of consumer spending says that consumers plan their spending: 1.) according to fluctuation in the stock market 2.) based on interest rates 3.) over their lifetime 4.) based only on current disposable income
3.) over their lifetime
An increase in interest rates on business loans will change _________ investment spending. 1.) unplanned 2.) both planned and unplanned 3.) planned 4.) neither planned nor unplanned
3.) planned
Look at the figure Aggregate Expenditures and Real GDP. At a real GDP of $9,000 billion: 1.) planned investment equals actual investment 2.) there will be no unplanned investment 3.) planned investment is less than actual investment 4.) planned investment is greater than actual investment
3.) planned investment is less than actual investment
An economic policy maker would rank a ________ shock as the MOST preferred type. 1.) positive demand 2.) negative demand 3.) positive supply 4.) negative supply
3.) positive supply
A negative short-run supply shock ______ aggregate output and __________ the aggregate price level. 1.) reduces; reduces 2.) increases; increases 3.) reduces; increases 4.) increases; reduces
3.) reduces; increases
Which sector is responsible for most of the growth in the United States during the 1990s? 1.) manufacturing 2.) mining 3.) retail 4.) service
3.) retail
Suppose that consumer expectations improve. The aggregate demand curve will undergo a: 1.) movement upward 2.) movement downward 3.) shift the right 4.) shift to the left
3.) shift the right
Look at the figure Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a), it is in: 1.) full employment 2.) a liquidity trap 3.) stagflation 4.) an inflationary gap
3.) stagflation
The aggregate demand curve is negatively sloped because of: 1.) the elasticity effect of an aggregate price level change 2.) the fiscal policy effect 3.) the wealth effect of an aggregate price level change 4.) the substitution effect of an aggregate price level change
3.) the wealth effect of an aggregate price level change
Look at the figure Aggregate Expenditures Curve I. Suppose that the consumption function in this economy rises by $100. The result would be a shift in the aggregate expenditures curve: 1.) downward by $200 2.) upward by $100 times the multiplier 3.) upward by $100 4.) upward by $200
3.) upward by $100
In a simple economy with no taxes, government spending, exports, or imports, if disposable income increases by $100 and $70 is consumed, _________ is saved. 1.) $170 2.) $100 3.) $70 4.) $30
4.) $30
Look at the table Aggregate Spending. Suppose the economy has no government spending and no foreign trade. With no taxes of transfers, real GDP equals disposable income (YD). If real GDP is $2,500, what is the level of unplanned inventory investment? 1.) $0 2.) $2,700 3.) $200 4.) -$250
4.) -$250
In an economy with no taxes or imports, if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to save is: 1.) 2.5 2.) $400 3.) $600 4.) 0.40
4.) 0.40
If your disposable income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $12,000, your marginal propensity to consume is: 1.) 0.4 2.) 0.2 3.) 0.8 4.) 0.6
4.) 0.6
Look at the table Aggregate Expenditures Curve II. The slope of the aggregate expenditures curve is: 1.) 0.5 2.) 0.25 3.) 45 degrees 4.) 0.6
4.) 0.6
If disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume equals: 1.) 9 2.) 1.25 3.) 20 4.) 0.8
4.) 0.8
The marginal propensity to consumer in the aggregate consumption function is:; 1.) 0.9 2.) 0.5 3.) 0.7 4.) 0.8
4.) 0.8
As a result of a sharp decrease in aggregate demand between 1929 and 1933, the unemployment rate changes from ________ in 1929 to _________ in 1933. 1.) 25%; 0% 2.) 40%; 5% 3.) 0%; 3% 4.) 3%; 25%
4.) 3%; 25%
If real GDP grows at an annual rate of 1%, it will double in approximately _______ years. 1.) 23 2.) 11 3.) 35 4.) 70
4.) 70
_________ will shift the aggregate demand curve. 1.) An interest rate effect of an aggregate price level change 2.) A demand expectation 3.) A wealth effect of an aggregate price level change 4.) A demand shock
4.) A demand shock
Look at the figure The Multiplier. If this economy is at Y1 and investment spending increases: 1.) AD1 will shift to the left, reflating a multiplied decrease in real GDP at every price level 2.) a downward movement along the AD1 will take place, reflecting a decrease in the price level 3.) an upward movement along the AD1 will take place, reflecting an increase in the price level 4.) AD1 will shift to the right, reflecting a multiplied increase in real GDP at every price level.
4.) AD1 will shift to the right, reflecting a multiplied increase in real GDP at every price level.
Income-expenditures equilibrium real GDP is the level of real GDP at which: 1.) autonomous consumption equals planned inventory investment 2.) there is no savings 3.) the unemployment rate is zero 4.) GDP equals planned aggregate spending
4.) GDP equals planned aggregate spending
In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of: 1.) potential output and LRAS 2.) LRAS and aggregate demand 3.) LRAS and SRAS 4.) SRAS and aggregate demand
4.) SRAS and aggregate demand
Look at the figure AD-AS Model II. If nominal wages fall, in the short run the _______ curve will shift to the _______. 1.) LRAS; right 2.) SRAS; left 3.) AD; right 4.) SRAS; right
4.) SRAS; right
Suppose that the U.S. economy is in a severe recession. Most households are trying to save more of their income than before. This increase in private savings will lead to: 1.) no change in real GDP, because there is no savings multiplier 2.) an increase in real GDP, as an increase in savings will make people wealthier 3.) an increase in real GDP, as more savings means more funds for business investment 4.) a fall in real GDP, as more savings means people will spend less
4.) a fall in real GDP, as more savings means people will spend less
Look at the figure Policy Alternatives. If the economy is in equilibrium at Y1 in panel (b), it is in: 1.) an inflationary gap 2.) full employment 3.) simultaneous short-run and long-run equilibrium 4.) a recessionary gap
4.) a recessionary gap
Diminishing returns to physical capital implies that when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _______ productivity. 1.) a larger increase in 2.) negative 3.) a decrease in 4.) a smaller increase in
4.) a smaller increase in
Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from an increase in foreign investment spending? 1.) A to B 2.) B to C 3.) B to A 4.) both A to B and B to C
4.) both A to B and B to C
Which of the following is a government policy to promote economic growth? 1.) implementing a monetary policy that increases inflation 2.) implementing a fiscal policy that increases inflation 3.) increasing the interest rate charged on student loans 4.) building infrastructure and providing public goods
4.) building infrastructure and providing public goods
Rising inventories usually indicate an: 1.) unexpected spurt in sales 2.) economy that grows unexpectedly 3.) inflationary cycle 4.) economy that slows unexpectedly
4.) economy that slows unexpectedly
A recessionary gap can be closed by _________ wages that shift the ________. 1.) falling; LRAS curve rightward 2.) falling; SRAS curve leftward 3.) rising; SRAS curve rightward 4.) falling; SRAS curve rightward
4.) falling; SRAS curve rightward
The three consequences of the decline in demand during the Great Depression were ______ prices, _______ output, and a surge in unemployment. 1.) rising; increasing 2.) rising; declining 3.) falling; increasing 4.) falling; declining
4.) falling; declining
Large technological gains often result: 1.) only if the innovation is broad and monumental 2.) in immediate growth of an economy 3.) from deliberate attempts at specific types of innovation 4.) from modest as well as large innovations
4.) from modest as well as large innovations
Rising high school graduation rates are an example of an increase in: 1.) fertility rates 2.) technological progress 3.) population stock 4.) human capital
4.) human capital
If actual GDP is less than potential output, then the economy is: 1.) in an inflationary gap 2.) at full employment 3.) in a long-run equilibrium 4.) in a recessionary gap
4.) in a recessionary gap
Using monetary policy to address a recessionary gap caused by a supply shock involves ________ to ________. 1.) increasing interest rates; decrease investment spending 2.) decreasing interest rates; lower the aggregate price level 3.) decreasing the money supply; lower the aggregate price level 4.) increasing the money supply; lower the unemployment rate
4.) increasing the money supply; lower the unemployment rate
Aggregate demand will increase in all of the following cases EXCEPT when: 1.) government purchases of goods rise 2.) household wealth rises but prices are constant 3.) the quantity of money increases 4.) interest rates increases
4.) interest rates increases
In the consumption function, an individual household's consumer spending: 1.) is determined by the accelerator principle 2.) is negatively related to its autonomous consumption and its marginal propensity to consumer 3.) is positively related to the interest rate 4.) is positively related to its current disposable income
4.) is positively related to its current disposable income
A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the: 1.) right if the cost per unit of output rises 2.) left if the cost per unit of output falls 3.) right if the rise in nominal wages is larger than the rise in productivity 4.) left if the rise in nominal wages is larger than the rise in productivity
4.) left if the rise in nominal wages is larger than the rise in productivity
During the Great Depression, the United States moved to the ________ along its ________ curve. 1.) left; aggregate demand 2.) right; aggregate demand 3.) right; short-run aggregate supply 4.) left; short-run aggregate supply
4.) left; short-run aggregate supply
The planned aggregate spending line has a slope: 1.) less than 0 2.) greater than 1 3.) equal to 1 4.) less than 1
4.) less than 1
According to the convergence hypothesis, differencesin GDP per capita among countries tends to narrow over time because countries that start with a ________ real GDP per capita tend to have _________ growth rates 1.) lower; lower 2.) higher; higher 3.) higher; negative 4.) lower; higher
4.) lower; higher
The formula for the rule of 70, where n is number of years and r is growth rate, is expressed as: 1.) n / r = 70 2.) r / n = 70 3.) n x 70 = r 4.) n x r = 70
4.) n x r = 70
The convergence hypothesis is: 1.) wrong, because Latin American and African countries have not been able to grow. 2.) not wrong, but because poorer nations are involved in so many destabilizing incidents like wars, disease, and famines, they will never be able to catch up with the rest of the world. 3.) wrong, because poorer nations' income seems to get worse over time and the richer nations' income get better 4.) not wrong, but education, infrastructure, and the rule of law are not equal among nations
4.) not wrong, but education, infrastructure, and the rule of law are not equal among nations
The changes in the economy of Ft. Meyers, Florida, between 2003 and 2010 provide an example of: 1.) the benefits of government budget surpluses 2.) the risk associated with an agricultural economy 3.) how public assistance programs can stimulate the economy 4.) positive and negative multiplier effects
4.) positive and negative multiplier effects
The aggregate demand curve shows the relationship between the aggregate price level and (the) aggregate: 1.) productivity 2.) quantity of output demanded by businesses only 3.) unemployment rate 4.) quantity of output demanded by households, businesses, the government, and the rest of the world
4.) quantity of output demanded by households, businesses, the government, and the rest of the world
A general decrease in wages will result primarily in the ________ curve shifting to the _______. 1.) aggregate demand; right 2.) aggregate demand; left 3.) short-run aggregate supply; left 4.) short-run aggregate supply; right
4.) short-run aggregate supply; right
Potential output is the level of real GDP that: 1.) occurs when the economy has only cyclical unemployment 2.) occurs when the actual rate of unemployment is zero 3.) the economy would produce if all prices, including nominal wages, were sticky 4.) the economy would produce if all prices, including nominal wages, were fully flexible
4.) the economy would produce if all prices, including nominal wages, were fully flexible
The biggest global environment issue is: 1.) how to determine who has the property rights to wind power 2.) how to extract oil from Canadian tar sands 3.) the availability of coal 4.) the impact of fossil-fuel consumption on the world's climate
4.) the impact of fossil-fuel consumption on the world's climate
Suppose the marginal propensity to consume changes from 0.75 to 0.9. How will this affect the consumption function? 1.) autonomous consumption will increase 2.) the slope will get steeper and autonomous consumption will increase 3.) the function will shift downward 4.) the slop will get steeper
4.) the slop will get steeper
Which of the following will shift the aggregate consumption function UPWARD? 1.) disposable income falls 2.) disposable income rises 3.) consumer expectations turn more pessimistic 4.) the stock market is strong and wealth is rising
4.) the stock market is strong and wealth is rising
The long-run supply curve illustrates how the aggregate output supplied is _________ the aggregate price level. 1.) a one-to-one correspondence with 2.) positively related to 3.) negatively related to 4.) unrelated to
4.) unrelated to
_____ would likely shift the short-run aggregate supply curve to the left.
An increase in the price of oil
Which of the following will shift the short-run aggregate supply curve to the RIGHT?
a widespread decrease in commodity prices
According to the short-run aggregate supply curve, when the _____ rises, the quantity of aggregate output _____ rises.
aggregate price level; supplied
Changes in short-run aggregate supply can be caused by changes in:
commodity prices.
Suppose the economy is operating in long-run equilibrium and a positive demand shock hits. We expect a short-run increase in real GDP and the price level and in long-run a_____ real GDP and _____ the price level.
decrease; increase
In the long run, as the economy self-corrects, a decrease in aggregate demand, all other things unchanged, will cause the price level to _____ and potential output to _____.
fall; remain stable
Changes in aggregate demand can be caused by changes in:
government spending.
All of the following are examples of fiscal policy EXCEPT:
reducing the interest rate by increasing the money supply.
When short-run aggregate supply increases, it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.
right; increases
In the long run, the economy is:
self-correcting, as prices of goods that are sticky in the short run become very flexible in the long run and thus move the economy to full employment.
In 2008 the Federal Reserve was facing:
stagflation
According to the long-run aggregate supply curve, when _____, the quantity of aggregate output supplied _____.
the aggregate price level rises; does not change
The wealth effect is reflected in:
the downward slope in aggregate demand.
Aggregate demand will increase if:
the public becomes more optimistic.
Nominal wages are sticky because:
wages are slow to rise when there are labor shortages and slow to fall even when the level of unemployment is significant.
If output is growing at 5% annually, how many years will it take for output to quadruple? 1.) 28 years 2.) 10 years 3.) 20 years 4.) 14 years
1.) 28 years
Real GDP per capita in the United States increased almost ________ times between 1900 and 2010. 1.) 8 2.) 2 3.) 3 4.) 10
1.) 8
Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Look at the scenario Growth Rates. According to the rule of 70, how large will China's real GDP per capita be in 20 years? 1.) $16,000 2.) $8,000 3.) $5,6000 4.) $28,000
1.) $16,000
Holding the human capital per worker and technology unchanged, the estimated aggregate production function in Jamaica is Y / L = 50 x K / L, where Y = real output, L = number of workers, and K = quantity of physical capital. Look at the scenario The Aggregate Production Function. If real GDP per worker equals $3,200, physical capital per worker equals: 1.) $64 2.) $49 3.) $100 4.) $81
1.) $64
Suppose a panel of economists predicts that a nation's real GDP per capita will double in approximately 20 years. According to the rule of 70, what must be the predicted annual growth rate of real GDP per capita? 1.) 3.5% 2.) 14% 3.) 140% 5.) 2.85%
1.) 3.5%
Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from the deterioration of the nation's infrastructure over time? 1.) B to A 2.) C to B 3.) B to C 4.) A to B
1.) B to A
More than 50% of the world's population lives in countries whose population is poorer than the United States population was a century ago. 1.) True 2.) False
1.) True
An increase in the amount of physical capital per worker _________, while technological progress ________. 1.) moves up the economy along the aggregate production function; shifts up the aggregate production function 2.) shifts up the aggregate production function; moves the economy along the aggregate production function 3.) makes the aggregate production function steeper; makes the aggregate production function flatter 4.) makes the aggregate production function steeper; changes the slope of the aggregate production function
1.) moves up the economy along the aggregate production function; shifts up the aggregate production function
The convergence hypothesis: 1.) seems to hold only when other things such as education and infrastructure are held equal 2.) suggests that relatively poor countries will continue to be poor regardless of their level of saving 3.) apparently applies only to wealth countries 4.) states that countries' growth depends upon the amount of government intervention in the marketplace.
1.) seems to hold only when other things such as education and infrastructure are held equal
Look at the figure An Increase in Aggregate Demand. Assume that the economy is initially in long-run equilibrium at Yp and P1. Now suppose that there is an increase in the level of government purchases at each price level. This will: 1.) shift the aggregate demand curve from AD1 to AD2 2.) lead to increased output and a decrease in the price level 3.) shift the aggregate demand curve from AD2 to AD1 4.) lead to decreased output and a decreased price level
1.) shift the aggregate demand curve from AD1 to AD2
Based on historical economic growth, economists have noted that the estimated aggregate production function: 1.) shows that when holding the amount of human capital and the state of technology fixed, successive increases in the amount of physical capital per worker lead to smaller increases in productivity. 2.) depends primarily on physical capital and technology advances 3.) exhibits constant returns to physical capital 4.) shows the negative relationship between physical capital and productivity
1.) shows that when holding the amount of human capital and the state of technology fixed, successive increases in the amount of physical capital per worker lead to smaller increases in productivity.
In the 1960s, Japan was the fastest-growing major economy and it also: 1.) spent a larger share of its GDP on investment goods than did other major economies 2.) spent more of its GDP on national defense than any other country except for China 3.) spent a smaller share of its GDP on investment goods than did other major economies 4.) was the first Asian country to join the European Union
1.) spent a larger share of its GDP on investment goods than did other major economies
In general, the growth in real GDP per capita: 1.) was greater than the growth of per capita oil consumption after 1973 2. fluctuated above and below the growth of per capita oil consumption before 1973 3.) was smaller than the growth of per capita oil consumption before 1973 4.) was smaller than the growth of per capita oil consumption after oil prices began to increase in 2004
1.) was greater than the growth of per capita oil consumption after 1973
India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. Look at the scenario Growth Rates in Two Countries. About how much will U.S. real GDP per capita be in 14 years? 1.) $224,000 2.) $71,000 3.) $112,000 4.) $28,000
2.) $71,000
Look at the table Kenya's Economy in 2010. Aggregate output per capita at the beginning of 2010 was: 1.) $5,000 2.) $775 3.) $10,000 4.) $7,750
2.) $775
If real GDP doubles in 35 years, its average annual growth rate is approximately: 1.) 1% 2.) 2% 3.) 4% 4.) 3%
2.) 2%
Look at the figure Aggregate Supply Movements. Which statement is CORRECT? 1.) An increase in the price level is responsible for pushing the curve to the right 2.) Short-run aggregate supply has increased 3.) Short-run aggregate supply has decreased 4.) A decrease in the price level is responsible for pushing the short-run aggregate supply curve to the right
2.) Short-run aggregate supply has increased
Ireland's recent economy growth and improving living standard are due primarily to its investment in all of the following types of physical and human infrastructure EXCEPT: 1.) airports 2.) a more open election process 3.) telecommunications 4.) a good education system
2.) a more open election process
According to the rule of 70, if real GDP per capita is growing at 2% a year, in 100 years it will have increased by: 1.) almost 60 times 2.) about 7 times 3.) about 4 times 4.) almost 30 times
2.) about 7 times
Which of the following will NOT increase the productivity of labor? 1.) technological improvements 2.) an increase in the size of the labor force 3.) an increase in the capital stock 4.) improvements in education
2.) an increase in the size of the labor force
One of the most important types of infrastructure that a government can provide is: 1.) more intervention in the market mechanism 2.) basic health measures such as clean water and disease control 3.) the kind that private companies would provide if they were allowed to 4.) a good tax system
2.) basic health measures such as clean water and disease control
From the standpoint of economic growth, banks are important to: 1.) fight inflation 2.) channel savings into investment 3.) keep interest rates low 4.) channel investment into savings
2.) channel savings into investment
The idea the relatively poor nations should have higher rates of growth of real GDP per capita than relatively rich nations is known as the: 1.) East Asian miracle 2.) convergence hypothesis 3.) Industrial Revolution 4.) sustainable development hypothesis
2.) convergence hypothesis
A positive demand shock leads to: 1.) higher prices and lower output 2.) higher prices and higher employment 3.) lower prices and lower output 4.) higher prices and higher unemployment
2.) higher prices and higher employment
The short-run aggregate supply curve slopes upward because a ________ aggregate price level leads to ________. 1.) lower; higher profit and higher productivity. 2.) higher; higher output, since most production costs are fixed in the short run 3.) higher; lower output as costs of production increase 4.) lower; higher output, since production costs tend to fall in the short run
2.) higher; higher output, since most production costs are fixed in the short run
The term human capital describes improvement: 1.) in the technology available to the work force 2.) in a worker's skills made possible by education, training, and knowledge 3.) made possible by better machines and equipment 4.) in the robotics technology that can substitute for a human worker
2.) in a worker's skills made possible by education, training, and knowledge
Look at the figure Shift of the Aggregate Demand Curve. A movement from point A on AD1 to point C on AD2 could have resulted from a(n): 1.) higher price level 2.) increase in the total quantity of consumer goods and services demanded 3.) significant decrease in the consumers' income 4.) lower price level
2.) increase in the total quantity of consumer goods and services demanded
Because of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _______ output by _______ a factor of two. 1.) increase; exactly 2.) increase; less than 3.) increase; more than 4.) decrease; less than
2.) increase; less than
The main source of Kuwait's wealth is ________, while the main source of Germany's wealth is _________. 1.) manufacturing; oil 2.) oil; manufacturing 3.) tourism; manufacturing 4.) information technology; tourism
2.) oil; manufacturing
Among the public goods important for economic growth is (are): 1.) public regulation of businesses 2.) political stability 3.) publicly held companies like Ford 4.) low taxes
2.) political stability
Look at the figure An Increase in Aggregate Demand. Because of the pressures of the short-run equilibrium at Y2 and P2: 1.) unemployment will decrease 2.) the SRAS curve will shift to the left 3.) LRAS will shift to the right 4.) the SRAS will shift to the right
2.) the SRAS curve will shift to the left
Workers today are more productive than workers in the past because: 1.) they are paid more 2.) they now have more physical capital embodying better technology 3.) they now are physically stronger on average 4.) more of them use the same number of machines as in the past
2.) they now have more physical capital embodying better technology
Look at the table Kenya's Economy in 2010. The population at the end of 2010 was about: 1.) 14 million 2.) 401 million 3.) 41 million 4.) 400 million
3.) 41 million
Look at the figure Technological Progress and Productivity Growth. If there is an increase in physical capital per worker (all other factors remaining unchanged), it is best indicated by a move from: 1.) B to A 2.) C to B 3.) A to B 4.) B to C
3.) A to B
Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from an increase in the quality (as well as quantity) of public health measures? 1.) A to B 2.) C to B 3.) B to C 4.) B to A
3.) B to C
The convergence hypothesis fits the data only when the factors that affect growth are held equal across countries. These factors include all of the following EXCEPT: 1.) infrastructure 2.) favorable policies and institutions 3.) GDP per capita 4.) education
3.) GDP per capita
It took India more than 40 years to exhibit high economic growth after it gained independence from British rule in 1947. This faster rate of growth resulted from: 1.) a more stable government 2.) better infrastructure 3.) a reduction in the burden of corruption 4.) higher investment in human capital
3.) a reduction in the burden of corruption
Stagflation may result from: 1.) a decrease in the price of oil 2.) a decrease in the supply of money 3.) an increase in the price of oil 4.) an increase in the supply of money
3.) an increase in the price of oil
Natural resources: 1.) are the only factor the consistently shows a positive effect on productivity for wealthy countries 2.) are still the most important factor in determining the productivity of human or physical capital for all countries 3.) are a less significant source of productivity growth in most countries today than in earlier times 4.) can be used to explain the differences in productivity growth among countries
3.) are a less significant source of productivity growth in most countries today than in earlier times
The short-run aggregate supply curve will shift to the left if: 1.) the aggregate price level falls 2.) tax revenues fall 3.) commodity prices rise 4.) productivity increases
3.) commodity prices rise
Economists believe that the best way to stimulate investment in physical capital is to encourage: 1.) the conservation of natural resources 2.) higher rates of investment in human capital 3.) higher rates of national saving 4.) more spending on infrastructure
3.) higher rates of national saving
The short run in macroeconomic analysis is a period: 1.) in which interest rates are fixed 2.) in which wages become fully flexible 3.) in which many production costs can be taken as fixed 4.) of two months, and the long run is more than 12 months
3.) in which many production costs can be taken as fixed
In the long run, an increase in saving will generally: 1.) leave the rate of economic growth unchanged 2.) reduce the rate of economic growth 3.) increase the rate of economic growth 4.) increase consumption simultaneously
3.) increase the rate of economic growth
According to the wealth effect, when prices decrease, the purchasing power of assets _______ and consumer spending ________. 1.) increases; decreases 2.) decreases; decreases 3.) increases; increases 4.) decreases; increases
3.) increases; increases
Which of the following contributes to economic development? 1.) a command socialist economic system 2.) low saving and investment rates 3.) investment in infrastructure 4.) complete absence of government involvement
3.) investment in infrastructure
A negative externality: 1.) is an unavoidable consequence of budget deficits 2.) is not as costly as a positive externality 3.) is a cost that individuals or firms impose on others without having to offer compensation 4.) is immune to economic incentives
3.) is a cost that individuals or firms impose on others without having to offer compensation
Education's effect on productivity: 1.) depends on the wealth of the country 2.) is believed to be less important than the amount of physical capital a worker has available 3.) is even more important than increases in physical capital 4.) has fallen in the past century in the United States
3.) is even more important than increases in physical capital
Look at the figure Inflationary and Recessionary Gaps. Yp in panel (b): 1.) indicates a recessionary gap 2.) indicates a decrease in aggregate demand 3.) is potential output 4.) is associated with considerable unemployment
3.) is potential output
Government spending is like investment in each of the following cases EXCEPT when: 1.) it is used for public health measures 2.) it goes to help pay for education 3.) it is used for a personal income tax rebate 4.) it helps provide infrastructure for the economy
3.) it is used for a personal income tax rebate
In 1820, Mexico had a higher real GDP per capita than Japan. Yet now Japan is one of the richest countries in the world and Mexico is poor. Japan's high rate of economic growth can be explained by all of the following EXCEPT a high: 1.) investment in human capital 2.) investment in physical capital 3.) level of government interference 4.) investment in technological progress
3.) level of government interference
The fundamental argument in the Essay on the Principle of Population was that improvements in technology or increases in physical capital would lead to only temporary improvements in productivity because they would always be offset by: 1.) rising human capital demands 2.) falling birthrates 3.) the pressure of rising population and more workers on the supply of land 4.) falling land values
3.) the pressure of rising population and more workers on the supply of land
Investment in human capital shifts the aggregate production function: 1.) rightward 2.) leftward 3.) upward 4.) downward
3.) upward
If technology advances: 1.) physical capital is less productive 2.) GDP per capita declines 3.) workers can produce more with fixed amounts of physical and human capital 4.) human capital is less useful
3.) workers can produce more with fixed amounts of physical and human capital
According to the rule of 70, if a country's real GDP per capita grows at an annual rate of 2% instead of 3%, it will take _________ additional years for that country to double its level of real GDP per capita. 1.) 23.3 2.) 35 3.) 30 4.) 11.67
4.) 11.67
Look at the table Kenya's Economy in 2010. During 2010, assuming no changes in the price level, aggregate output per capita in Kenya grew at a rate of: 1.) 7.8% 2.) 5.2% 3.) 0.6% 4.) 2.6%
4.) 2.6%
Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Look at the scenario Growth Rates. How long will it take real GDP per capita of the United States to double? 1.) 50 years 2.) 2.25 years 3.) 14 years 4.) 35 years
4.) 35 years
Sweden has real GDP per capita of $50,000, while Chile has real GDP per capita of $25,000. If real GDP per capita in Sweden grows at 2% and Chile's real GDP per capita grows at 4%, how long will it take for real GDP per capita in the two nations to converge? 1.) 20 years 2.) 25 years 3.) 10 years 4.) 35 years
4.) 35 years
Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Look at the scenario Growth Rates. How many years will it take for China's real GDP per capita to be larger than real GDP per capita in the United States? 1.) 15 to 20 years 2.) 5 to 10 years 3.) 70 to 75 years 4.) 40 to 45 years
4.) 40 to 45 years
Look at the figure AD-AS Model II. If there is a significant increase in government spending, in the short run the ________ curve will shift to the ________. 1.) AD; left 2.) SRAS; right 3.) SRAS; left 4.) AD; right
4.) AD; right
Which of the following are sources of funds for investment spending? I. domestic savings II. foreign savings III. consumption 1.) I only 2.) I, II, and III 3.) II only 4.) I and II
4.) I and II
Which of the following factors have contributed to the lack of economic growth in Latin America? I. low rates of savings and investment II. low value on education III. political instability 1.) II only 2.) I only 3.) III only 4.) I, II, and III
4.) I, II, and III
Look at the figure AD-AS Model II. Which of the following will raise the price level? 1.) SRAS curve shifts to the right 2.) The economy moves down the aggregate demand curve 3.) AD curve shifts to the left 4.) SRAS curve shifts to the left
4.) SRAS curve shifts to the left
Written in 1972, the book that argued that long-run economic growth was not sustainable because of limited supplies of natural resources was called: 1.) An Essay on the Principle of Population 2.) The Wealth of Nations 3.) Aftershock: the Next Economy and America's Future 4.) The Limits to Growth
4.) The Limits to Growth
An example of physical capital is: 1.) a truck a company purchases for work, a worker who physically learns to work on a truck his company buys, or a truck a worker buys for personal use 2.) a truck a worker buys for personal use 3.) a worker who physically learns to work on a truck his company buys 4.) a truck a company purchases for deliveries
4.) a truck a company purchases for deliveries
A rise in labor productivity will most likely result in: 1.) an increase in aggregate demand 2.) a decrease in aggregate supply 3.) a decrease in aggregate demand 4.) an increase in aggregate supply
4.) an increase in aggregate supply
Economists use real GDP per capita to measure economic growth: 1.) because poor nations have a large population and the population of richer nations is declining 2.) because it ignores the effect of price changes 3.) even though nominal GDP per capita is a far superior measure of economic growth 4.) because it is the inflation-adjusted value of a country's production of goods and services corrected for the change in a country's population
4.) because it is the inflation-adjusted value of a country's production of goods and services corrected for the change in a country's population
Between 1980 and 1994, real per capita GDP in sub-Saharan Africa: 1.) increased by 7% per year 2.) fell by 50% 3.) increased by 10% 4.) fell by 13%
4.) fell by 13%
Which of the following is one reason for Latin America's lack of economic growth since 1920? 1.) overspending on education 2.) inability to compete with imported products 3.) very poor natural resources 4.) low savings and investment spending because government policies led to inflation bank failures, and other disruptions
4.) low savings and investment spending because government policies led to inflation bank failures, and other disruptions
A key input for measuring economic growth is: 1.) the size of the government's budget 2.) the Dow Jones stock market index 3.) life expectancy 4.) real GDP per capita
4.) real GDP per capita
Technological progress is advanced through: 1.) consumption 2.) infrastructure 3.) government regulation 4.) research and development
4.) research and development
All else equal, a nation that has a high rate of ________ will have a high rate of _______ an therefore a high growth rate of ________ capital. 1.) investment; savings; human 2.) savings; consumption; physical 3.) savings; investment; natural 4.) savings; investment; physical
4.) savings; investment; physical
An increase in the minimum wage would likely: 1.) shift the short-run aggregate supply curve to the right 2.) cause a movement down the short-run aggregate supply curve from right to left 3.) cause a movement up the short-run aggregate supply curve from left to right 4.) shift the short-run aggregate supply curve to the left
4.) shift the short-run aggregate supply curve to the left