Macro 10-15
A Keynesian short-run aggregate supply curve has a flatter portion and a steep portion. How does a decrease in aggregate demand affect the actual real GDP differently across these two portions? a. There is a large decrease in the actual real GDP across the flatter portion and a small decrease in the actual real GDP across the steep portion. b. There is a large increase in the actual real GDP across the flatter portion and a small increase in the actual real GDP across the steep portion. c. There is a small decrease in the actual real GDP across the flatter portion and a large increase in the actual real GDP across the steep portion. d. There is a small increase in the actual real GDP across the flatter portion and a large increase in the actual real GDP across the steep portion.
A
A government wants to establish a minimum wage for workers to raise the standard of living for a large segment of the population. Where should the government set the minimum wage relative to 'We"? a. above "We" b. below "We" c. equal to "We" d. "We" is irrelevant.
A
According to the rule of 70, a nation that has an economic growth rate of 5 percent will double its output in ______ years. a. 14 b. 35 c. 3.5 d. 7
A
According to this graph, what is responsible for the largest share of aggregate expenditure? a. consumption b. government purchases c. net exports d. planned investment
A
All other things being equal, which country is likely to have the slowest economic growth? a. Country A's government does little to enforce the rule of law. b. Country B has a few natural resources within its borders. c. Country C places great emphasis on the importance of education for all its citizens. d. Country D's government invests in its infrastructure and health system.
A
As more capital per worker is added, the curve of the per-worker production function ______. a. becomes flatter b. becomes more curved c. rises sharply d. falls sharply
A
Based on the graph for saving incentives, a tax law change encouraging saving would ______. a. create a higher equilibrium quantity of loanable funds exchanged b. create a lower equilibrium quantity of loanable funds exchanged c. have no influence on the equilibrium quantity of loanable funds exchanged d. drive the equilibrium quantity of loanable funds exchanged to zero
A
Based on the graph showing the effective federal funds rate, the rates in the early 2000s were ______. a. the lowest in over 40 years b. the highest in over 40 years c. about the average for the past 40 years d. the only negative rates in over 40 years
A
Based on the graph showing the effects of a government budget surplus, how would a budget surplus influence the equilibrium quantity of saving and investment? a. It would create a higher equilibrium quantity of saving and investment. b. It would create a lower equilibrium quantity of saving and investment. c. It would have no influence on the equilibrium quantity of saving and investment. d. It would drive the equilibrium quantity of saving and investment to zero.
A
BlueLake, Inc pays a $100,000 a month to use land for a resort. This is an example of a(n) ______. a. factor payment b. transfer payment c. nonfixed payment d. appreciation payment
A
Contrast the sticky wage theory with the sticky price (menu cost) theory in a situation where the overall price level increases. a. Under the sticky wage theory, producers expand production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales increasing because their prices are relatively lower. b. Under the sticky wage theory, producers find their sales increasing because their prices are relatively lower, whereas under the sticky price theory, producers expand production and sales because of lower profit margins. c. Under the sticky wage theory, producers reduce production and sales because of higher profit margins, whereas under the sticky price theory, producers find their sales decreasing because their prices are relatively lower. d. Under the sticky wage theory, producers find their sales decreasing because their prices are relatively lower, whereas under the sticky price theory, producers decrease production and sales because of higher profit margins.
A
Elsa and Moshe have different ideas about how their country should invest its tax revenues. Elsa feels that some of it should be used to fund an ambitious space science program. Moshe feels the money would be better spent on improvements to roads, bridges, and airports. It is likely that Elsa is more interested in ______ than Moshe. a. stimulating innovation b. enhancing natural resources c. boosting population growth d. reducing poverty
A
In 1914, Henry Ford increased his workers' wages from $3 to $5 per day and succeeded in increasing his profits. Which of the following principles was he demonstrating? a. efficiency wage b. relative price c. natural rate of unemployment d. potential output
A
Of the following examples, expenditures on ______ will most likely increase dramatically when the GDP rises. a. HDTVs b. pants c. cough drops d. milk
A
Real gross domestic product (RGDP) differs from gross domestic product (GDP) in that RGDP ______. a. is adjusted for inflation b. reflects current unemployment figures c. reflects a stable price level d. is always smaller than GDP
A
The 2007-2008 recession in the United States appears to have been the product of ______. a. negative shocks to both supply and demand b. positive shocks to both supply and demand c. a negative shock to supply coupled with a positive shock to demand d. a positive shock to supply coupled with a negative shock to demand
A
The aggregate demand curve shifts rightward in response to ______. a. increases in total purchases in the economy b. a fall in consumer confidence c. decreases in total purchases in the economy d. increases in real interest rates
A
What determines the value of goods and services for GDP? a. market prices b. quality of product c. stock rating d. investment
A
When the overall price level decreases, what is the effect on the economy? a. Purchasers demand a higher quantity of final goods and services. b. There is a decrease in the quantity of real GDP demanded. c. Movement occurs along the curve from point A to point B. d. The aggregate demand curve shifts rightward.
A
Which of the following best characterizes the intersection of Y* and AE*? a. the point toward which the economy moves b. the point away from which the economy moves c. the hypothetical but unattainable point of equilibrium d. the point at which, once reached, the economy remains unchanged
A
Which of the following best describes the relationship between the efficiency wage and the equilibrium wage? a. The efficiency wage is higher. b. The equilibrium wage is higher. c. They are equal. d. The efficiency wage may be either higher or lower.
A
Which of the following best explains why the aggregate expenditure curve gets higher as the price level drops? a. Purchasing power increases. b. The economy moves closer to equilibrium. c. Planned investment decreases. d. Government purchases are falling.
A
Which of the following did John Maynard Keynes believe held the key to understanding fluctuations in investment? a. how people spend their money b. how businesses make predictions c. how inflation affects the economy d. how governments enact policy
A
Which of the following equations represents the expenditure approach? a. GDP = C + I + G + (X - M) b. GDP = C - I - G - (X + M) c. GDP = C + I + G x (X - M) d. GDP = C - I + G x (X + M)
A
Which of the following examples involves a durable good? a. Lotte uses binoculars at a soccer game. b. Sem drinks a soda at a basketball game. c. Sophie eats a hot dog at a baseball game. d. Finn brings a paper bag to put on his head to a football game.
A
Which of the following is a difference between the Keynesian and classical models? a. Price stickiness is considered in the Keynesian model but not in the classical model. b. Input prices are completely flexible in the Keynesian model but are inflexible in the classical model. c. The overall price level can change in the Keynesian model but not in the classical model. d. Input prices adjust quickly to economic changes in the Keynesian model but not in the classical model.
A
Which of the following people owns common stock? a. Lance, who may get a dividend depending upon how a company performs. b. Vivian, who has no ownership in the company she is investing in. c. Marti, who gets paid before anyone else if the company has problems. d. Natasha, who has no voting rights in the company she invested in.
A
Which of the following statements accurately describes the economy with an inflationary gap? a. SRAS intercepts AD3 at ESR. b. RGDP3 is less than RGDPNR. c. SRAS intercepts LRAS at ESR. d. ESR occurs along LRAS.
A
Which of the following types of workers is most likely to face seasonal unemployment? a. carnival game operator b. police officer c. fast food worker d. costume designer
A
Which statement most accurately defines economic growth? a. a sustained increase in a country's production of services and goods b. how much an economy produces at its potential output c. a nation's natural rate of output of goods and services d. the application of new knowledge that creates or improves products
A
Why is the aggregate expenditure model important to economists? a. It helps explain fluctuations in the economy that can cause major disruptions. b. It illuminates methods of fostering long-term growth in the economy. c. It explains why the economy sometimes produces beyond the natural rate of real output. d. It aids economic planning by providing a measure of the level of inflation in the economy.
A
_____ is an effect caused by the production of goods and services. a. An externality b. Depreciation c. Consumption d. An investment
A
10. Economic growth is considered to have occurred whenever real GDP per capita has ______. a. fluctuated b. risen c. fallen d. remained constant
B
15. What determines the ability of these factors to shift the short-run aggregate supply curve, to shift the long-run aggregate supply curve, or to shift both curves? a. whether or not the effects cause changes in the overall price level b. whether the effects are temporary or permanent c. whether or not producers are fooled by the misperception effect d. whether the effects are positive or negative
B
A change in which of the following would change the slope of line C? a. demand b. marginal propensity to consume c. investment d. disposable income
B
Aggregate demand is calculated by which of the following equations? a. C + I + G + (X + M) b. C + I + G + (X - M) c. C + M + X + (G - I) d. C + X + M + (I - G)
B
As inflation increases, purchasing power ______. a. increases b. decreases c. remains constant d. falls to zero
B
Assume an economy moves from E1 to e2 to E3. Which of the following statements accurately describes the situation shown? a. The economy recovers from the recessionary gap by moving from E1 to e2. b. The economy begins and ends in both short-run and long-run equilibrium. c. The economy recovers from the recessionary gap by moving from E3 to e2. d. The economy begins in long-run equilibrium but ends in a recessionary gap.
B
Assume that U.S. imports remain constant while U.S. exports change, ceteris paribus. Which of the following statements is correct? a. A decrease in U.S. exports increases U.S. net exports. b. An increase in U.S. exports shifts the aggregate demand curve rightward. c. An increase in U.S. exports decreases U.S. net exports. d. A decrease in U.S. exports shifts the aggregate demand curve rightward.
B
Assume that movement from point A to point B represents a 15 percent change in the price of goods and services. What would be the corresponding change in the price of inputs? a. no change b. 15 percent increase c. 15 percent decrease d. 100 percent increase
B
Based on this chart, how much value is added by coffee roasting? a. $.50 b. $.75 c. $1.00 d. $1.25
B
During which of the following periods was the price level most unstable? a. 1960-1965 b. 1970-1975 c. 1990-1995 d. 2000-2005
B
Economists describe the stock market as being a ______. a. wild ride b. random walk c. leisurely stroll d. dead run
B
If the price level rises to $120 trillion, what is the best estimate for RGDP demanded? a. $12 trillion b. $14 trillion c. $16 trillion d. $18 trillion
B
In the United States, controlling inflation is the primary job of ______. a. the Department of Labor b. the Federal Reserve System c. Congress d. the Bureau of Labor Statistics
B
Javier's government has decided to make school attendance a requirement for everyone under the age of 18. What determinant of productivity and economic growth is Javier's government investing in? a. technology b. human capital c. natural resources d. physical capital
B
Keynes believed that prices and wages were rigid or fixed until the economy reaches ______. a. equilibrium b. full employment c. recession d. expansion
B
Large corporations, such as Ford and IBM, are owned by ______. a. a few rich individuals b. millions of different stockholders c. the federal government d. five large banks
B
The population growth rate is 1 percent in Maria's country and 3 percent in Daniel's country? Which statement about their countries is most likely true? a. People in Daniel's country are generally wealthier than people in Maria's country. b. Families in Maria's country have better access to medical care than families in Daniel's country. c. Women in Maria's country have lower opportunity costs associated with raising children than women in Daniel's country. d. Women in Daniel's country are generally better educated than women in Maria's country.
B
The principle of comparative advantage suggests that governments should pursue free trade because it ______. a. equitably distributes human capital worldwide b. enables countries to grow their economies through specialization c. prevents poor countries from pursuing technological advances d. reduces pressure on the economies of countries that have few natural resources
B
The wealth effect, the interest rate effect, and the foreign trade effect are three complementary explanations for the ______ of the aggregate demand curve. a. leftward shift b. negative slope c. rightward shift d. positive slope
B
This curve shows there is a(n) ______ relationship between the quantity of real GDP supplied and the overall price level. a. neutral b. positive c. inverse d. complementary
B
Tyrone is reviewing his income and expenses for the two previous years. He notes that he made $7,200 more in the second year than in the first year and he spent $2,400 more in the second year than in the first year. What is his marginal propensity to consume? a. 7 percent b. 33 percent c. 67 percent d. 333 percent
B
What causes structural unemployment? a. workers searching for suitable jobs and firms looking for suitable workers b. the persistent mismatch of workers' skills and the requirements of jobs c. short-term cyclical fluctuations in the economy d. short-term seasonal fluctuations in the job market
B
What is the best definition of quality bias? a. failure to capture the savings that households enjoy when they change their spending in response to relative price changes b. failure to account for price changes to an item that result from product improvement c. overstating of the prices some buyers actually pay for goods from cheaper retail outlets d. failure to include new products into the Consumer Price Index until they become commonplace
B
What is the opportunity cost of leisure? a. the relaxation a person gets b. the income given up by not working c. the vacation time taken d. the chance to socialize with friends and family
B
What is the value of I - I? a. $0 b. $100 billion c. $175 billion d. $400 billion
B
When workers and employers take time to find the right skills match for a job, what type of unemployment results? a. cyclical b. frictional c. Seasonal d. structural
B
Which country best reinforces the idea that a low real GDP per capita leads to a low life expectancy? a. Pakistan b. Nigeria c. Bangladesh d. Afghanistan
B
Which of the following best describes what W2 represents in the context of a skill-biased technical change? a. the new union wage b. the new equilibrium wage c. the new efficiency wage d. the new minimum wage
B
Which of the following demonstrates how labor markets and markets for goods and services differ? a. Whereas the goods and services market is affected by inflation, the labor market is not usually affected. b. Whereas the goods and services market dictates prices, the labor market does not always determine wages. c. Whereas the goods and services market is bolstered by an increase in demand, the labor market usually experiences a downturn. d. Whereas the goods and services market has an ideal equilibrium state, the labor market does not.
B
Which of the following equations represents investment spending in a closed economy? a. I = Y + C - G b. I = Y - C - G c. I = Y - C + G d. I = Y/ (C - G)
B
Which of the following is an accurate statement about the underground economy? a. It is given a penalty tax in addition to a standard tax. b. It can account for more than one-third of the GDP in developing countries. c. It often includes everyday activities, such as housework and gardening. d. It is reported to the U.S. government through official channels.
B
Which of the following statements accurately describes the economy with a recessionary gap? a. SRAS intercepts AD1 at RGDPNR. b. RGDP1 is less than RGDPNR. c. ESR occurs along LRAS. d. SRAS intercepts LRAS at ESR.
B
Which statement best describes what will happen if a poor country with little capital and a rich country with a lot of capital each add a single unit of capital? a. The rich country will experience a relatively large increase in production, while the poor country will experience a relatively small increase in production. b. The poor country will experience a relatively large increase in production, while the rich country will experience a relatively small increase in production. c. The poor country will experience a relatively small increase in production, and the rich country will experience a relatively small increase in production. d. The poor country will experience a relatively large increase in production, and the rich country will experience a relatively large increase in production.
B
Why are government transfer payments not included in the GDP? a. It is spending that is too small to count in the GDP. b. It is spending that disperses income among the citizens. c. It is spending used to buy goods and services. d. It is spending used to broker international agreements.
B
Why were many loans in the early 2000s referred to as subprime? a. The interest rate on them was lower than the prime rate. b. The borrowers who used them had less than prime credit. c. The houses they were used to buy cost less than prime real estate. d. The loan officers who made them received less than a prime commission.
B
Zero-down mortgages meant that borrowers were ______. a. more motivated to find a way to pay their mortgage b. more likely to default and walk away from their mortgage c. less able to borrow more than they could afford d. more able to build equity quick
B
______ is the measure of economic performance based on the value of all final goods and services produced within a nation during a given period. a. GNP b. GDP c. NI d. PI
B
the real interest rate is 1 percent and the nominal interest rate is 2 percent, what is the rate of inflation? a. 0 percent. b. 1 percent. c. 2 percent. d. 3 percent.
B
Based on the circular flow diagram, what two entities pay wages to households? a. rest of the world and financial markets b. government and financial markets c. firms and government d. firms and financial markets
C
Beth would like to invest in the stock market, but she has a low income. She would have to purchase shares of stock in just one or two companies, and she fears that is too risky. Which financial intermediary could best help her buy stocks in many companies with her limited assets? a. a bank b. a savings and loan c. a mutual fund d. an insurance company
C
Bipartisan legislation passed in 2018 to deal with the banking industry ______. a. extended the Dodd-Frank Act to cover smaller banks b. required banks of all sizes to face annual stress tests. c. removed the Dodd-Frank Act restrictions for many smaller banks d. increased federal oversight of banks of all sizes
C
Budget deficits lead to ______ interest rates and ______ amounts of saving and investment. a. lower; smaller b. lower; larger c. higher; smaller d. higher; larger
C
Business cycles are short-term fluctuations in the economy relative to the long-term trend in ______. a. interest rates b. inflation c. output d. employment
C
Focusing on real GDP per capita allows economists to control for how ______ impacts economic growth. a. annual percentage change b. the standard of living c. population growth d. international changes
C
Georgie's country is working to increase its economic growth rate by providing incentives for companies to build new factories. Georgie's country is focused on increasing economic growth by improving its ______. a. natural resources b. human capital c. physical capital d. technology
C
Household spending on goods and services amounts for what percentage of GDP? a. 30 b. 50 c. 70 d. 90
C
How do most people respond when their disposable income increases? a. They spend all of the increase. b. They save all of the increase. c. They save some and spend some. d. They neither spend nor save.
C
How is the value added for each firm calculated? a. by multiplying the product value for the previous firm with the product value for the current firm b. by dividing the product value for the current firm by the product value for the next firm c. by subtracting the product value for the previous firm from the product value for the current firm d. by adding the product value for the current firm to the product value for the next firm
C
In 2006, Jan and Lou bought a house for $100,000. After a year, they still owed $98,000, but the home was worth $220,000, so they used it as collateral to get a $90,000 loan to buy a boat. What have they done? a. taken out a hybrid loan b. bought a mortgage-backed security c. borrowed against their equity d. entered a subprime mortgage
C
In August 2018, the U.S. unemployment rate was 3.9% and the civilian labor force was estimated to be 161,776,000. About how many unemployed workers were there in the United States? a. 63.1 million b. 41.5 million c. 6.3 million d. 3.9 million
C
In the twentieth century what policies helped Taiwan, Singapore, and South Korea grow faster than more developed nations? a. investment in natural resources b. low levels of saving and high levels of consumption c. investment in human resources and technology d. lax enforcement of property rights
C
Individuals who have not actively sought work for four weeks because they cannot find a job are called ______. a. job losers b. job leavers c. discouraged workers d. seasonal workers
C
Kaleo's government is working to protect forest lands and thereby preserve the health of its nation's watersheds. What is Kaleo's government investing in? a. physical capital b. technology c. natural resources d. human capital
C
Li is delivering a business presentation. Which of the following is evidence she could present in support of the efficiency wage model? a. "Our new on-the-job training program increased productivity by 28 percent." b. "We pay above the minimum wage because we care about our employees." c. Increasing wages by just $0.75 per hour translates to a productivity increase of 12 percent." d. "Our new initiative to hire high-performing college graduates has increased productivity threefold."
C
Malmud wants to know how much the economy of his country has grown since he was born 30 years ago. First, he compares the GDP from 30 years ago to today's GDP and finds that the economy grew by over 300 percent. This seems wrong to Malmud, because he does not believe his country is vastly wealthier than it was when he was young. Then he realizes that he has not considered how much the population of his country has grown over that same period. To get a better picture of how much the country's economy has grown, he should look at the change in ______. a. average incomes b. physical capital c. real GDP per capita d. diminishing returns
C
Marta's country has advanced technology and highly educated workers. In Jin's country, workers are also highly educated and have access to the same advanced technology available in Marta's country. However, the workers in Jin's country produce more output. What is the most likely cause of this difference? a. Jin's country has a smaller population. b. Marta's country has more people splitting the work. c. Jin's country has more and better-quality tools, machinery, and factories. d. Marta's country has better laws protecting property and investments.
C
Read the following passage and then answer the question that follows. Since 1995, the Bureau of Labor Statistics (BLS) has been eliminating or reducing biases in the Consumer Price Index (CPI). Many economists believe that the BLS improvements have cut inflationary bias in half, and it is now estimated to be less than 1 percentage point per year. What is the best definition of "inflationary bias" in this context? a. the tendency to believe that inflation is beneficial to the economy b. the tendency to promote policies that cause a positive inflation rate c. the tendency to overstate the rate of inflation d. the tendency of the members of an economy to push prices up
C
Suppose a business is paying less than WE to its employees. How would this affect unemployment? a. There would be no unemployment because demand would exceed supply, meaning all workers would have a job. b. There would be no unemployment because lower wages would mean that there are more positions open. c. There would still be unemployment because many workers would refuse to work for such a low wage. d. There would still be unemployment because there would not be enough jobs for all of the available workers.
C
The aggregate demand curve is a function of ______. a. real aggregate expenditure and real GDP b. price level and real aggregate expenditure c. price level and real GDP d. real aggregate expenditure and real aggregate demand
C
The government in Katrina's country does little to enforce property rights. Which statement about this situation is most likely true? a. The government is encouraging economic growth. b. People in Katrina's country are saving most of their incomes. c. People in Katrina's country are unwilling or unable to invest. d. The economy is growing too rapidly for the government to keep up.
C
To calculate real GDP, an index number of ______ is assigned to some base year. a. 25 b. 50 c. 100 d. 150
C
What concept does the following formula express? S/DY a. autonomous change in consumption spending b. marginal propensity to consume c. marginal propensity to save d. equilibrium in the aggregate expenditure model
C
What is the most volatile category of GDP? a. net exports b. consumption c. investment d. government purchases
C
Where does the point of equilibrium fall on this graph? a. at Y1 on the line marked Y = AE b. at Y2 on the line marked AE = C + I + G + NX c. at Y* where the two lines intersect d. nowhere
C
Which of the following accurately contrasts AD2 and AD3? a. AD2 shows an increase in price level; AD3 shows a decrease in price level. b. AD2 shows a decrease in price level; AD3 shows an increase in price level. c. AD2 shows an increase in real GDP demanded; AD3 shows a decrease in real GDP demanded. d. AD2 shows a decrease in real GDP demanded; AD3 shows an increase in real GDP demanded.
C
Which of the following does a price index typically measure? a. the change in the money supply b. the change in price of a good or service c. the change in the price of a bundle of goods and services d. the change in relative price of a good or service
C
Which of the following examples belong to the most significant type of nonmarket transaction excluded from the GDP? a. Lorenzo talks to a friend on a beach. b. Leonard trades three baseball cards for a baseball. c. Monica cleans the kitchen in her house. d. Alessia does charity work for her church.
C
Which of the following general principles does the following graph demonstrate? a. With a few exceptions, the U.S. unemployment rate remains relatively constant over the course of any given decade. b. The U.S. unemployment rate remains around 5 percent except during periods of economic contraction. c. The U.S. unemployment rate almost always rises during periods of economic contraction. d. Although there have been some fluctuations, the U.S. unemployment rate has generally risen between 1900 and 2017.
C
Which of the following is an accurate statement concerning the definition of GDP? a. The term given period refers to a three-year period of time. b. The term given period refers to a six month period of time. c. The word final means a good is ready to be used in the ultimate way that has been planned. d. The word final means a good is ready to be packaged and shipped to retail stores.
C
Which of the following is an example of a positive supply shock? a. an unexpected labor strike b. a major widespread forest fire c. an unexpected price cut in imported oil d. a decrease in the overall price level
C
Which of the following is an example of double counting in regards to GDP? a. counting the value of two products often bought together, such as chips and dip b. counting the value of sweaters that are inferior quality c. counting the value of plastic used to make model kits as well as the final kit itself d. counting the value of products that have two or more components such a TV with a remote control
C
Which of the following purchases would most likely be classified as an investment? a. sun block used to prevent sunburn b. a paper hat used for a birthday celebration c. a robot used to make computers d. chocolate chip cookies used for a lunch
C
Which of these statements about the productivity of resources is true? a. While labor can become more productive, natural resources cannot. b. Less productive resources result in more sustainable economic growth. c. Capital, labor, and natural resources can all become more productive. d. It is not possible to make a resource more productive.
C
Which statement about population growth and economic growth is true? a. Population growth means more workers, which ultimately means an increase in the standard of living for the average citizen. b. Population growth will inevitably lead to slower economic growth because the quantity and quality of available land is fixed. c. Population growth can result in more scientists, engineers, and entrepreneurs whose contributions can lead to greater economic growth. d. Population growth generally has little to no impact on economic growth because it is one factor among many.
C
Why did rising housing prices from 2001 to 2006 encourage lenders to give mortgages even to people they thought would default? a. Lenders felt the government would pay for any losses they suffered from defaults. b. Lenders felt credit was so easy to obtain that customers in default could easily get more financing. c. Lenders felt that if borrowers defaulted that would leave the lenders with houses that were worth more than they had been owed. d. Lenders felt that regulations would soon change to help people facing foreclosure and prevent defaults.
C
Why were the low rates on adjustable-rate mortgages in the early 2000s considered to be teaser rates? a. because they were very hard to qualify for b. because they were very easy to qualify for c. because they were likely to increase after a brief time d. because they were likely to decrease after a brief time
C
______ is achieved when depreciation is subtracted from gross national product. a. Personal income b. National income c. Net national product d. National domestic product
C
A certain investment involves ownership in a single company, pays a set dividend, and guarantees that its owners get paid before some investors, but after others. What type of investment is this? a. a mutual fund b. a bond c. common stock d. preferred stock
D
A country can shift the production possibilities curve outward by ______. a. discouraging entrepreneurial activity b. decreasing its population growth rate c. raising the standard of living d. improving and increasing its capital
D
Assume that movement from point A to point B represents a 25 percent change in the price level. What would be the corresponding short-run change in the price of inputs? a. 100 percent b. 50 percent c. 25 percent d. no change
D
At which of the following points has the multiplier process been completed? a. B b. C c. E d. Z
D
Based on the graph showing how the subprime share of home mortgages grew rapidly before the big decline, at the peak of the use of subprime loans in 2005, the gap between the share of subprime mortgages and adjustable mortgage rates was ______ the typical historical difference. a. perfectly in line with b. slightly smaller than c. slightly greater than d. dramatically greater than
D
Based on the graph showing the effects of an investment tax credit or a technological change, a technological change that increases demand for loanable funds would lead to ______. a. a shift in the demand curve for loanable funds to the left b. a shift in the supply curve for loanable funds to the left c. a decrease in loanable funds from Q2 to Q1 d. an increase in loanable funds from Q1 to Q2
D
Based on the graph showing the run-up of nominal home prices, if a person had wanted to buy a house, hold it for one year, and then sell it for a profit, which of the following years would have been the worst to make the purchase in? a. 1922 b. 1966 c. 1992 d. 2006
D
During the housing bust that began in 2006, the fewest foreclosures were among people with ______ mortgages. a. subprime b. zero-down c. adjustable-rate d. fixed-rate
D
Economists usually use real GDP per capita to measure ______. a. the distribution of income b. per worker output c. the standard of living d. economic growth
D
Fannie Mae and Freddie Mac are the______. a. largest brokerages services to be bought out during the 2008 financial crisis b. senators who sponsored a bill to reform subprime lending practices c. largest investment banking firms in the United States d. government-sponsored organizations that back most mortgages in the United States
D
From 2006 to 2008, ______ fell by $350 billion. a. mortgage-backed security valuations b. individual foreclosures c. subprime mortgage originations d. housing construction
D
How did the entry of women and baby boomers into the U.S. labor force during the 1960s affect the nation's short-run aggregate supply (SRAS) curve and long-run aggregate supply (LRAS) curve? a. The SRAS curve and LRAS curve both shifted to the left. b. The SRAS curve shifted rightward, and the LRAS curve shifted leftward. c. The SRAS curve shifted leftward, and the LRAS curve shifted rightward. d. The SRAS curve and LRAS curve both shifted to the right.
D
In Kejana's country, the population is growing at a rate of 3.5 percent per year. Due to environmental factors, the country has a limited supply of land on which to grow food, and food output is increasing at a rate of 2.75 percent per year. The population growth rate in Kejana's country is ______ the per capita output. a. having minimal impact on b. positively affecting c. operating separately from d. negatively affecting
D
In the following equation, what does the symbol denote? AE C + I + G + (X - M) a. The equation is an estimate. b. The equation is absolute. c. The equation is just a suggestion. d. The equation is just a definition.
D
In this graph, which of the following is assumed to be changing? a. autonomous consumption b. investment c. government purchases d. the price index
D
Jermaine's country is relatively small and does not have many natural resources. Nonetheless, it has enjoyed strong economic growth and has become one of the 20 wealthiest countries in the world. How is this possible? a. Abundant natural resources are often more harmful than helpful to economic growth. b. A lack of natural resources poses no barrier to economic growth. c. Economic growth is unrelated to the availability of natural resources. d. Natural resources are important, but sustained growth depends on other factors.
D
Keynes argued that ______ prevents the market solution from working rapidly enough to avert a(n) ______. a. wage inflexibility; increase in the price level b. disinflation; prolonged inflationary gap c. low demand; unexpected positive shock d. wage inflexibility; prolonged recession
D
Most people living in Country Y have no more than a ninth-grade education. In contrast, about half of the adult population of Country Z has a college degree. Based on this information, which statement about these two countries is most likely true? a. Country Z does not have many natural resources available. b. Country Y has a higher rate of economic growth than Country Z. c. There are more people living in Country Y than in Country Z. d. The per capita output of Country Z is higher than that of Country Y.
D
Prior to the housing crisis of 2008, the federal government had been trying to ______ lending standards for low income people to ______ home ownership. a. raise; decrease b. raise; increase c. lower; decrease d. lower; increase
D
The United States was officially in a recession in ______. a. January 2004 b. January 2005 c. December 2006 d. December 2007
D
The largest single component of aggregate demand is ______. a. investment spending b. exports c. disposable income d. consumption
D
The long-run aggregate supply curve ______. a. has the same slope as the short-run aggregate supply curve b. has the same slope as the short-run aggregate demand curve c. is perfectly horizontal at the minimum price level in the economy d. is perfectly vertical at the natural rate of output in an economy
D
The official policy of Lolita's government is that while some consumption is good, a significant percentage of a person's earnings should be saved. Why is this policy good for economic growth? a. It prevents money from leaving the country. b. It reduces consumption of scarce natural resources. c. Saving is a form of human capital. d. Saving leads to more investment and capital formation
D
What measure of economic well-being is most often used? a. gross domestic product b. gross domestic product per capita c. nominal gross domestic product per capita d. real gross domestic product per capita
D
What point on the graph represents maximum consumer confidence? a. A b. B c. C0 d. D
D
Which of the following U.S. economic periods was characterized by a negative expenditure multiplier? a. the period following World War II b. the period following the introduction of Reaganomics c. the dot-com boom d. the period following the financial crisis of 2008
D
Which of the following best describes how the U.S. Department of Labor treats discouraged workers in its calculations? a. They are counted as unemployed members of the labor force. b. They are counted as unemployed but not as members of the labor force. c. They are not counted as unemployed but are counted as members of the labor force. d. They are not counted as unemployed or as members of the labor force.
D
Which of the following best explains what is happening when disposable income equals zero? a. All consumption has ceased. b. Income is positive but stagnant. c. All money is being saved instead of spent. d. Savings or credit is being used to pay for necessities.
D
Which of the following can prolong the duration of a recessionary gap? a. an increase in aggregate demand b. lowering of interest rates c. an increase in consumer confidence d. the downward stickiness of prices and wages
D
Which of the following changes could have shifted AE1 to AE2? a. an overall increase in income b. an overall decrease in income c. in increase in the interest rate d. an increase in consumer confidence
D
Which of the following does the aggregate expenditure model help explain? a. price-level changes b. stagflation c. shifts in the aggregate supply curve d. short-run business cycles
D
Which of the following is an example of shoe-leather cost? a. Diane has to shut down her supermarket for a day in order to change the prices on everything. b. Viktor has to pay a value added tax on raw materials that he is manufacturing into goods for resale. c. Zara has to calculate the depreciation of each of the goods in her office each year. d. Ishmael goes to the ATM twice a week because consumer prices have been fluctuating so rapidly.
D
Which of the following is the best description of the effect of firms' perceptions of the future on planned investment? a. It is chaotic and hard to analyze. b. It has an inverse relationship. c. It has no relationship. d. It compounds over time.
D
Which of the following would be subtracted from the GDP to determine the GNP? a. the profits a Chinese company earns in China b. the profits a U.S. company earns in the United States c. the profits a U.S. company earns in China d. the profits a Chinese company earns in the United States
D
Which sequence of events accurately captures the wealth effect of a change in the price level? a. Price level changes, interest rate changes, and quantity of real GDP demanded changes. b. Consumer spending changes, price level changes, and net exports change. c. Investment changes, interest rate changes, and net exports change. d. Price level changes, consumer spending changes, and quantity of real GDP demanded changes.
D
A country that is increasing its rate of consumption is reducing its level of production. True/False
False
A larger population means a larger labor force, greater production, and higher standards of living for the average worker. True/False
False
Both the supply and the demand curves of loanable funds are negatively sloped. True/False
False
GDP includes the value of new goods as well as used goods. True/False
False
If a government collects more taxes than it spends, there is a budget deficit. True/False
False
In economics, an investment involves trading money for stock certificates. True /False
False
On average, societies where saving some of one's income is favored over spending it grow at a slower rate than other societies. True/False
False
The Consumer Price Index (CPI) and GDP deflator often show opposite trends. True/False
False
The GDP often reflects important changes in the improvements in the quality of goods. True/False
False
The true expenditure multiplier is usually larger than the calculated multiplier. True/False
False
1. Stockholders are the people who own corporations. True/False
True
A fall in incomes abroad can reduce U.S. net exports and cause a leftward shift in the U.S. aggregate demand curve. True/False
True
Aggregate expenditures have historically been especially important to the economy in the short run. True/False
True
As aggregate expenditure increases, the aggregate demand curve shifts right. True/False
True
Between 2000 and 2006, many mortgage-backed securities were given AAA ratings. True/False
True
Certain types of unemployment are unavoidable. True/False
True
Changes in the stock of capital will alter the amount of goods and services the economy can produce. True/False
True
Early in the twenty-first century, it was common for people to get mortgages with no down payment and minimal documentation. True/False
True
Economists agree that setting a minimum wage causes some unemployment. True/False
True
Economists continue to debate the actual shape of the short-run aggregate supply curve. True/False
True
Equilibrium in the aggregate expenditure model requires that aggregate expenditure equals income. True/False
True
For the economy as a whole, expenditures must equal income. True/False
True
It is possible for the number of unemployed workers in an economy to equal the number of job vacancies. True/False
True
It is rare that actual and potential real GDP are equal. True/False
True
Lagging economic indicators follow economic activity. True/False
True
Marginal propensity to consume refers to how much you tend to spend on consumer goods and services out of your additional disposable income. True/False
True
Optimistic consumer expectations can cause changes to several of the autonomous components of aggregate expenditure. True/False
True
Retained earnings means a corporation puts profits back into the company instead of paying them as dividends. True/False
True
Services is one of the three categories that consumption is divided into. True/False
True
The four factors that determine productivity and economic growth are natural resources, human capital, physical capital, and technology. True/False
True
The law of diminishing marginal returns means that population growth can result in workers with insufficient capital. True/False
True
The main problem in calculating accurate GDP statistics happens when comparing the GDP over time. True/False
True
The misperception effect involves a false perception about relative prices. True/False
True
The prices of some goods and services can fall during inflation. True/False
True
The short-run equilibrium level of real output and the price level are given by the intersection of the aggregate demand curve and the short-run aggregate supply curve. True/False
True
While some economists believe that improvements in infrastructure can increase productivity, other economists believe that increased productivity leads to better infrastructure. True/False
True