Econ 1 test 2
Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?
an appreciation of the U.S. dollar
The interest-rate effect suggests that
an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
The long-run lasts
as long as all output and input prices stay fully flexible.
Higher interest rates may cause
both A and B.
The aggregate-demand curve
shows the amount of real output that will be purchased at each possible price level.
The aggregate supply curve (short-run)
slopes upward and to the right.
If consumers expect their future real income to rise, they will
tend to spend more of their current incomes now.
Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?
the child-care services provided by stay-at-home parents
If depreciation exceeds gross investment,
the economy's stock of capital is shrinking.
GDP excludes
the market value of unpaid work in the home.
Real GDP
todays prod at base year price
Real GDP refers to
GDP data that have been adjusted for changes in the price level.
Suppose the total monetary value of all final goods and services produced in a particular country in a year is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that Multiple Choice
GDP that year is $500 billion.
Which of the following transactions would be included in GDP?
Henry buys a newly constructed house.
Real GDP measures
current output at base-year prices.
The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the
determinants of aggregate demand.
The aggregate demand curve is
downward-sloping because of the interest-rate, real-balances, and foreign purchases effects.
Net exports are
exports minus imports.
Government purchases include
federal, state, and local government expenditures.
Which of the following is included in GDP?
fees received by stockbrokers
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?
goods and services produced in the underground economy
Final goods and services refers to
goods and services purchased by ultimate users, rather than for resale or further processing.
Government purchases include government spending on
government consumption goods and public capital goods.
Net =
gross - depreciation
When an economy's production capacity is expanding,
gross domestic investment exceeds depreciation.
Depreciation =
gross-net
Gross domestic product (GDP) measures and reports output
in dollar amounts.
The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will
increase U.S. exports and decrease U.S. imports.
The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will
increase U.S. imports and decrease U.S. exports.
In an effort to avoid a recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to
increase aggregate demand.
The largest component of total expenditures in the United States is
personal consumption expenditures.
GDP can be calculated by summing
personal consumption, investment, government purchases, and net exports.
Tom Atoe grows fruits and vegetables for home consumption. This activity is
productive but is excluded from GDP because no market transaction occurs.
The amount of real output that could be purchased at current prices if all of our assets were liquidated (turned to cash) and the money used to purchase goods and services is the
real-balances effect.
The value of U.S. imports is
subtracted from exports when calculating GDP because imports do not constitute production in the United States.
The value added of a firm is the market value of
The value added of a firm is the market value of
Suppose Smith pays $100 to Jones.
We need more information to determine whether GDP has changed.
Why slope is negative
Wealth effect Interest rate effect Government purchases effect Foreign effect
The economy's long-run AS curve assumes that wages and other resource prices
eventually rise and fall to match changes in the price level.
Gross>Dep
expanding eco
The determinants of aggregate demand
explain shifts in the aggregate demand curve.
If the dollar is strong will the US import
export less because they pay more to get our products
IPO
initial public offer
A nation's gross domestic product (GDP)
is the dollar value of all final output produced within the borders of the nation during a specific period of time.
The economy's LRAS (long-run aggregate supply curve)
is vertical.
If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that
net investment is negative.
Gross =
net+ depreciation
Deflator
nominal/real x 100
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are
not counted.
National income accountants can avoid multiple counting by
only counting final goods.
To avoid multiple counting in national income accounts,
only final goods and services should be counted.
How do you calculate GDP
output, input, expenditure approach
The reason the long-run aggregate supply curve is vertical is
when both input prices and output prices are flexible, profit levels always adjust to give firms exactly the right profit incentive to produce the full-employment output level.
The real-balances, interest-rate, and foreign purchases effects all help explain
why the aggregate demand curve is downward-sloping.
Environmental pollution is accounted for in
None of the answers are correct.
Which of the following is a private transfer payment?
a check for $250 sent by a parent to a daughter at college
Buying new furniture for your home would increase
consumer durable goods and therefore personal consumption expenditures.
Which of the following is an intermediate good?
the purchase of gasoline for a ski trip to Colorado
Nominal GDP is
the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
In national income accounting, the personal consumption expenditures category includes purchases of
consumer durable goods, consumer nondurable goods, and services.
Which of the following will NOT be included in U.S. GDP?
the value of avocados grown in Mexico and shipped to your local grocery store
Which of the following will be included in U.S. GDP?
the value of the cars produced at a Japanese-owned Toyota factory in Ohio
If intermediate goods and services were included in GDP,
then GDP would be overstated.
Nom GDP
todays prod at todays price
A large underground economy results in an
understated GDP.
Alejandro owns a store specializing in soccer jerseys. One year, he purchased $150,000 worth of jerseys from manufacturers and later that year, sold the jerseys for $280,000. Based on this information, what was the value added at Alejandro's store?
$130,000
A business buys $1,000 worth of inputs from other firms in order to produce a product. The business makes 500 units of the product and each of them sells for $3. The value added by the business to these products is
$500.
Full emp
3-4%
Exports are subtracted from imports in calculating U.S. GDP because exports are not available for domestic consumption.
False
Gross private domestic investment exceeds depreciation in an economy that experiences expanding production capacity.
False
Gross>Net
Declining eco
DI =
Disposable income
Economy on the right of LRAS means economy is in
Economic boom
Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Based on this information, positive net investment is occurring in
Economy C only.
Tight money
MS (Down) Y(down) AD(down)
Loose money (easy)
MS^ Y^ AD^
The system that measures the economy's overall performance is formally known as
National income accounting
Base year is the year where
Nominal GDP =Real GDP
Economy on left of LRAS means economy is in
Recession
Gross=net
Static/flat
Which one of the following would not shift the aggregate demand curve?
a change in the price level
Which of the following is a final good or service?
a haircut purchased by a father for his 12-year-old son
The real-balances effect indicates that
a higher price level will decrease the real value of many financial assets and therefore reduce spending.
Net exports are negative when
a nation's imports exceed its exports.
Veterans' payments are excluded from GDP calculations because they are
a public transfer payment.
Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.
aggregate demand curve would shift to the right.
Adding the market value of all final and intermediate goods and services in an economy in a given year would result in
an amount greater than GDP for that year.
A nation's gross domestic product (GDP)
can be found by summing C + I + G + Ex.
The largest component of national income is
compensation of employees.
Transfer payments are not included in government purchases because
such payments generate no production.
In 1933, net private domestic investment was a minus $6.0 billion. This means that
the production of 1933's GDP used up more capital goods than were produced that year.
Which of the following is not economic investment?
the purchase of 100 shares of Boeing stock by a retired business executive
Which of the following do national income accountants consider to be investment?
the purchase of a new house
