Econ Exam 3
If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent.
False
People who work part time but desire to work full time are considered to be officially unemployed.
False
Which is best considered a demand factor in economic growth?
The level of spending by households, business, and government.
Which of the following is a major measure of economic growth.
Changes in Real GDP
GDP is the market value of:
all final goods and services produced in an economy in a given year.
A supply factor in economic growth would be:
an increase in the quantity of labor.
Shocks to the economy:
are unexpected changes in aggregate demand or aggregate supply.
Critics of economic growth:
argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.
An example of a final good in national income accounts would be a new:
automobile purchased by a travel agency.
The recurrent ups and downs in the level of economic activity extending over several years are a description of a:
business cycle.
GDP excludes expenditures by:
consumers on used automobiles.
Inflation caused by a rise in per-unit production costs is referred to as:
cost-push inflation.
When the federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are designed to be:
countercyclical.
When unanticipated inflation occurs:
creditors are hurt, but debtors benefit.
Periods of extreme hyperinflation are the result of:
excessive monetary expansions by government.
Demand-pull inflation is associated with a(n):
increase in aggregate demand.
The shift of labor out of agriculture to industry in the United States has tended to:
increase labor productivity.
The labels for the axes of the aggregate demand graph should be:
real domestic output on the horizontal axis and the price level on the vertical axis.
Which of the following formulas is correct? Percentage change in:
real income approximates percentage change in nominal income minus percentage change in price level.
The single most important source of productivity for economic growth for the United States has been:
technological advance.
The total volume of business sales in our economy is several times as large as the GDP because:
the GDP excludes intermediate transactions.
The long-run aggregate supply curve is:
vertical.
Wage contracts, menu costs, and the minimum wage are explanations for why:
wages tend to be inflexible downward.
The economy is in at equilibrium when ad and as intersect
when ad and as intersect
The following data about a hypothetical economy are in billions of dollars. Personal Consumption Expenditures $4,500 Consumption of Fixed Capital 150 Gross Private Domestic Investment 800 Government Purchases 950 Exports 65 Imports 85 Refer to the above data. GDP in this economy is:
$6230 billion.
The table shows the aggregate demand and aggregate supply schedule for a hypothetical economy. Real Domestic Output Demanded (in Billions) Price Level (Index Value) Real Domestic Output Supplied (in Billions) $3,000 350 $9,000 4,000 300 8,000 5,000 250 7,000 6,000 200 6,000 7,000 150 5,000 8,000 100 4,000 Refer to the above table. The equilibrium price level and quantity of real domestic output will be:
200 and $6000.
If the Consumer Price Index was 165 in one year and 175 in the next year, then the rate of inflation from one year to the next was approximately:
6.1 percent.
Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:
7 percent.
Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is:
8 percent.
Refer to the above graph. Which factor will shift AD1 to AD3?
A decrease in consumer wealth.
Which would most likely increase aggregate supply?
A decrease in the price of resources
Refer to the above graph. Which factor will shift AS1 to AS2?
A reduction in business taxes.
Which is not a supply factor in economic growth?
An efficient allocation of resources.
Which would increase aggregate supply?
An increase in business subsidies.
Which of the following will lead to an increase in aggregate demand?
An increase in national incomes abroad.
When the federal government takes action to change taxes and spending to stimulate the economy, such policy is:
Discretionary.
In the expansion phase of a business cycle:
Employment and output increase
A recession is a decline in:
GDP that lasts six months or longer.
Which combination of fiscal policy actions would be most contractionary for an economy experiencing severe demand-pull inflation?
Increase in taxes and decrease in government spending
Which is the single most important source of U.S. economic growth?
Increases in labor productivity.
What real or potential economic problem is posed by the public debt and its growth?
It may crowd out investment in new capital goods.
When changes to taxes and spending occur in the economy without explicit action by the federal government, such policy is:
Nondiscretionary.
Which is an important problem associated with the public debt?
Payment of interest on the debt held by foreigners transfers real resources abroad.
Which of the following do economists consider to be the main way to improve living standards for workers?
Productivity growth.
Which phase of the business cycle would be most closely associated with an economic contraction?
Recession
Which would be considered an investment according to economists?
The construction of a new computer chip factory by Intel.
which measures the change in the price of a "market basket" of some 300 goods and services purchased by typical urban consumers?
The consumer price index
Which is best considered a supply factor for long-run economic growth?
The stock of capital goods.
A graph of the long-run aggregate supply curve is:
Vertical, and a graph of the short-run aggregate supply is upsloping
A sharp rise in the real value of stock prices, which is independent of a change in the price level, would affect aggregate demand due to:
a change in real value of consumer wealth.
Net exports is a positive number when:
a nation's exports of goods and services exceed its imports.
Balin recently lost his job as a dog trainer because of a recession. He is seeking a new job, but his prospects appear dim until the economy recovers. Based on this description, Balin is best described as:
cyclically unemployed.
A decrease in government spending will cause a(n):
decrease aggregate demand
A decrease in net exports will cause a(n):
decrease in aggregate demand.
An increase in personal income tax rates will cause a(n):
decrease in aggregate demand.
Inflation caused by an increase in aggregate spending is referred to as:
demand-pull inflation.
Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:
demand-pull inflation.
A trough in the business cycle occurs when:
employment and output reach their lowest levels.
One of the main arguments against further growth for industrialized nations focuses on the issue of:
environmental quality.
The unemployment rate that would be consistent with full employment is:
equal to zero.
One major aspect of the sociocultural-political environment of the United States that has generally been conducive to economic growth is the:
favorable attitude toward work and risk-taking.
To avoid multiple counting in national income accounts, only:
final goods and services should be counted.
Parker recently quit his job to find one that pays better and better fits his skills. He has had multiple interviews and anticipates securing a new position soon. Based on this description, Parker is best described as:
frictionally unemployed.
Rosa recently completed her college degree and is looking for her first job. She has had a few interviews and prospects look good for her to land a new job in the next couple of weeks. Based on this description, Rosa is best described as:
frictionally unemployed.
Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:
government regulation.
One of the basic defenses of economic growth rests on the conclusion that:
growth makes the gap between unlimited wants and scarce resources less acute.
An increase in expected future income will:
increase aggregate demand
If personal income taxes and business taxes decrease, then this will:
increase aggregate demand and decrease aggregate supply.
An increase in productivity will:
increase aggregate supply
The aggregate demand curve shows the:
inverse relationship between the price level and real GDP purchased.
Money spent on the purchase of a new house is included in the GDP as a part of:
investment.
The gross domestic product provides an estimate of society's evaluation of the relative worth of goods and services because it:
is a monetary measure.
A peak in the business cycle:
is a temporary maximum point.
Contractionary fiscal policy is so named because it:
is aimed at reducing aggregate demand and thus achieving price stability.
The best example of a "frictionally unemployed" worker is one who:
is in the process of voluntarily switching jobs.
One important consequence of the public debt in the United States is that:
it transfers a portion of real output to foreign nations.
A major argument for economic growth is that it:
leads to a higher standard of living.
GDP measured using current prices is called:
nominal GDP.
Tony left his job three months ago to go back to school full time. He will complete his degree in about three years and then seek a new job. Based on this description, Tony is best described as:
not in the labor force.
Proponents of economic growth say that pollution:
occurs not because of growth, but because common properties are treated as free goods.
Economists fear deflation because:
of all these reasons.
An expansionary fiscal policy may be:
partially offset by the crowding-out effect.
Unanticipated inflation tends to penalize:
people who save money in financial institutions.
The largest component of GDP is:
personal consumption expenditures.
Gross domestic product (GDP) is equal to personal consumption expenditures:
plus gross private domestic investment, plus government purchases, and plus net exports.
An aggregate supply curve represents the relationship between the:
price level and the production of real domestic output.
Recessions have contributed to the public debt by:
reducing national income and therefore tax revenues.
Alyssa lost her job six years ago because of a recession. She continues to seek new employment and many people have returned to that industry as the economy has recovered, but because of her extended bout of unemployment, her workplace skills have deteriorated and she is unable to secure a job or even get interviews. In her current situation, Alyssa is best described as:
structurally unemployed.
Indy worked for a major automobile manufacturer before the company relocated its factory to Malaysia, putting Indy out of a job. Indy continues to seek new employment, but will likely have to retrain or relocate to find a job. Based on this description, Indy is best described as:
structurally unemployed.
When the economy is at its potential output:
the labor force is fully employed.
A movement along the aggregate demand curve would be caused by a change in:
the price level.
An antigrowth view states that there may be a significant trade-off between productivity and:
the quality of life.
An increase in aggregate demand would be most likely caused by a decrease in:
the tax rates on household income.
GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:
the underground economy.
Proponents of economic growth make all of the following arguments except:
there is a direct relationship between a growing real GDP and rising pollution.
One timing problem with fiscal policy to counter a recession is an "operational lag" that occurs between the:
time fiscal action is taken and the time that the action has its effect on the economy.
One timing problem with fiscal policy to counter a recession is an "administrative lag" that occurs between the:
time the need for the fiscal action is recognized and the time that the action is taken.
The economy is said to be fully employed when there is no:
unemployment.
A worker would be hurt least by inflation when the:
worker is protected by a cost-of-living adjustment clause in an employment contract.
