EXAM 2 218

The aggregate demand curve displays nominal GDP versus real GDP. the business cycle. GDP demanded at various investment levels. real GDP demanded at various price levels.

real GDP demanded at various price levels.

Scott, who has a PhD in physics, waits on tables for a living. Scott is categorized as unemployed. underemployed. not part of the labor force. a discouraged worker.

underemployed

Suppose the government believes consumers should spend $1 billion more to get the economy out of a recession. The government wants to provide income to households by providing them with jobs and paying them directly. If the marginal propensity to consume is 0.8, the government should increase income by $0.25 billion. $0.8 billion. $1 billion. $.2 billion

$.2 billion

The key to being counted as unemployed by the Bureau of Labor Statistics is to be available for work. passively seeking work out of a job actively seeking work

actively seeking work

When the Bureau of Labor Statistics calculates the consumer price index, it assumes that There is no unemployment consumers overspend. each consumer maximizes his or her utility. consumers do not substitute cheaper goods for goods when prices have risen.

consumers do not substitute cheaper goods for goods when prices have risen.

When the government records a deed showing that ownership of a piece of property has passed from one party to another, it is acting in its role to promote economic growth by ensuring a stable and secure financial system. providing physical and human capital. promoting free and competitive markets. ensuring a stable legal system.

ensuring a stable legal system.

A(n) _____ in productivity and a(n) _____ in taxes will shift short-run aggregate supply to the right. increase; increase increase; decrease decrease; increase decrease; decrease

increase; decrease

The labor force is defined as the total population less the number unemployed. number of workers seeking a paid job. total number of the employed and unemployed. total number of those employed.

total number of the employed and unemployed.

Jennifer received news that she is getting a 5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 7%. Based on the given information, which of these statements is TRUE? Inflation has no impact on purchasing power. Jennifer's purchasing power will rise by 7%. Jennifer's purchasing power will decline by 2%. Jennifer's purchasing power will rise by 2%.

Jennifer's purchasing power will decline by 2%.

_____ unemployment is caused by changes in consumer demands or technology. Frictional Cyclical Seasonal Structural

Structural

The Potbelly Pothole Company is undertaking some investments in its plant. Suppose interest rates fall and new technologies increase the return on investment. What is likely to happen? The company's demand for investments will rise. The company's demand for investments will first fall as interest rates fall and then rise as technology improves. The company's demand for investments will fall. There will be no change in the company's demand for investments.

The company's demand for investments will rise.

_____ is a measure of the change in the average prices paid by consumers for a typical market basket of goods and services. The consumer price index The producer price index The GDP deflator Personal consumption expenditure

The consumer price index

The GDP deflator for the base year is dependent on the quantities of output and the prices at which outputs are sold in the base year. always equal to 100. greater than 100. less than 100.

always equal to 100

Which of these does NOT increase productivity? capital investment research and development an increase in the money supply improvements in labor quality

an increase in the money supply

When the economy is operating at the natural rate of unemployment _____ unemployment is zero. cyclical structural the sum of frictional unemployment and structural frictional

cyclical

If the interest rate increases, investment will decrease. fall to zero. not be affected. increase

decrease

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing hyperinflation. disinflation deflation inflation

deflation

Which term describes a situation in which there is a reduction in the rate of inflation from 4% to 3% per year? hyperinflation deflation inflation disinflation

disinflation

The aggregate demand curve slopes _____ and has _____ on the vertical axis. upward; the price level downward; the price level downward; output upward; output

downward; the price level

The GDP deflator is an index that includes prices of all of these EXCEPT consumer goods. government goods and services. investment goods. imports.

imports

In the Keynesian framework, increments of spending, including investments, government spending, and exports, are known as leakages withdrawals injections infusions

injections

If an economy is on the vertical portion of the aggregate supply curve, then it is in a severe recession. has high unemployment. is at full employment. is overheating.

is at full employment

An increase in physical capital per worker will lead to lower standards of living. reduce the productivity of labor. lead to more output per worker. increase the standard of living only if coupled with an increase in other inputs.

lead to more output per worker.

Developed countries tend to have limited labor supplies but lots of capital. low capital-to-labor ratios. limited amounts of both labor and capital. large amounts of both labor and capital

limited labor supplies but lots of capital.

The _____ curve is vertical at full employment. short-run aggregate demand long-run aggregate supply long-run aggregate demand short-run aggregate supply

long run aggregate supply

The _____ is the change in saving associated with a change in income. average propensity to save average propensity to consume marginal propensity to consume marginal propensity to save

marginal propensity to save

If the British pound sterling appreciates (becomes more valuable) against the U.S. dollar, England buys _____ U.S. goods, causing the U.S. aggregate demand curve to shift to the _____. more; left fewer; left more; right fewer; right

more ; right

In the short run, the aggregate supply curve is _____ because input prices are _____. vertical; not completely flexible vertical; completely flexible positively sloped; not completely flexible positively sloped; completely flexible

positively sloped; not completely flexible

Because of the wealth effect, a rising aggregate price level _____ the purchasing power of wealth and therefore _____ output demanded. reduces; increases increases; reduces increases; increases reduces; reduces

reduces; reduces

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded. left; decrease right; decrease right; increase left; increase

right; increase

Improvements in production capacity will rotate the production possibilities frontier clockwise. shift the production possibilities outward. move the economy along the production possibilities frontier. move the economy up to the production possibilities frontier.

shift the production possibilities outward

During the 1970s, when handheld calculators became popular and replaced slide rules in performing computations, workers in the slide rule industry lost their jobs. These workers' unemployment status is structural. cyclical. natural. frictional.

structural

A decrease in regulation would cause aggregate supply to shift to the left. demand to shift to the left. supply to shift to the right. demand to shift to the right.

supply to shift right

Hyperinflation is usually caused by crop failures. the government printing money to finance budget deficits. supply shocks. excessive consumer demand.

the government printing money to finance budget deficits.

Classical economists claim that _____ is the primary determinant of saving, and Keynes claimed that _____ is the primary determinant of saving. the interest rate; income GDP; disposable income income; the interest rate taxes; government spending

the interest rate; income

If $1,000 of additional spending occurs and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output. 5000 800 1000 8000

5000

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be .15 1.17 6.67 5.1

6.67

What is Mike's new salary if he earned $40,000 last year, the consumer price index increased from 120 to 125, and his salary is adjusted by the rate of inflation annually? $40,125 $51,800 $38,400 $41,667

$41,667

If the marginal propensity to save is 0.25 and income increases by $7,540, what is the increase in consumption? $30,160 $1,885 $10,053 $5,655

$5,655

If disposable income increases from $250 to $300 and saving increases from $40 to $50, how much is the average propensity to save when disposable income is $300? .167 .133 .2

.167

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume? 1.2 2.5 0.6 0.4

.6

The nation of Workovia has a population of 15 million people, of whom 10 million are in the labor force and 9 million are working. Workovia's unemployment rate is 10% 27% 60% 33%

10%

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is 80. 110. 150. 125.

125

If an economy's GDP will double in 25 years, then its growth rate must be about 25%. 28%. 2.5% 2.8%

2.8%

If the growth rate in an economy is 2%, its GDP will double in about 35 years. 70 years. 140 years. 28 years

35 years