Macro exam 2
The labor force includes
employed workers and persons who are officially unemployed
According classical economists Say's Law is invalid
false
According the Keynes, the government can best eliminate a recession by decreasing government spending and raising taxes
false
According to Classical economists wages and prices are inflexible downward
false
According to Keynes, during inflationary period it is appropriate for government to pursue policies which stimulate aggregate demand
false
Assume the MPC is 2/3: if investment spending increases by $2 billion, the level of GDP will increase by $4 billion
false
Fiscal policy involves the use of government spending, but its primary focus is on controlling the availability of money and credit
false
If the dollar appreciates relative to foreign currencies, we would expect a country's net exports to rise
false
If the marginal propensity to consume is 0.80 in a private closed economy, a $20 billion decline in investment spending will decrease GDP by $80 billion
false
Investment and government expenditures both represent leakages from the circular flow
false
Keyens argued that efficient aggregate demand might originate with inadequate consumer spending but never from inadequate business investment
false
Other things equal, if a change in the tastes of America consumers can cause them to purchase more foreign goods at each level of U.S. GDP, U.S. GDP will rise
false
Other things equal, increased imports and increased saving both have an expansionary effect on the current size of GDP
false
Te Classical approach to the business cycle was for government to pursue an active fiscal and monetary policy
false
The Employment Act of 1946 committed the government to a policy of Laissez Faire with respect to the macroeconomic performance of the US economy
false
The increase income that results from an increase in investment spending would be greater the larger the MPS
false
The interaction of market forces necessarily establishes full employment GDP in Keynesian economics analysis
false
The simple multiplier is smaller than the complex multiplier because it embodies more leakages
false
Assuming that Hernandez is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. Hernandez will be considered as
frictionally unemployed
Kimberly voluntarily quit her job as an insurance agent to return school full time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kimberly presently is
frictionally unemployed
Structural unemployment
may involve a locational mismatch between unemployed workers and job openings
Ane Kasperson works in her home as a full time caretaker and homemaker. Officially she is
not in the labor force
If the US unemployment rate is 9 percent, we can infer that
potential GDP is an excess of actual GDP
Official unemployment statistics
understate unemployment because "discouraged workers" are not counted as unemployed
Assume that the natural rate of unemployment in the US economy is 5 percent and the actual rate of unemployment - percent. According to Okun's Law, the GDP gap is
10 percent
In the depth of the Great Depression, the unemployment rate in the United States was about
25 percent
Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are unemployed, the unemployment rate is
6 percent
A college graduate using the summer following graduation to look for a job would be best classified as
a part of frictional unemployment
If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the
cyclical unemployment rate is 4
Which of the following constitute the unemployment occurring at the natural rate of unemployment ?
structural and frictional unemployment
Cyclical unemployment results from
a deficiency in aggregate spending
the simple multiplier is: 1(1/-MPC), as well as 1/(MPS)
true
Say's Law and classical macroeconomics were disputed by John Maynard Keynes
True
The United States's economy is considered to be at "full employment" when
about 5 percent of the labor force is unemployed
The GDP gap measures the
amount by which potential GDP exceeds actual GDP
To be officially unemployed a person must
be in the labor force
The type of unemployment associated with recessions is called
cyclical unemployment
Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them will become discouraged over their job prospects and cease to look for work. As a result of this, the official unemployment rate will
decline
Part-time workers are counted as
fully employed, and therefore the official unemployment rate may understate the level of unemployment
The presence of discourage workers
reduces the size of the labor force, but does not affect the unemployment rate
Eckstein has lost her job in a Massachusetts textile plant because of import competition. She intends to take a short course in electronics and move to California where she anticipates that her new job will be available. We can say that Eckstein is faced with
structural unemployment
Unemployment involving a mismatch of the skills of the unemployed workers and the skills required for available jobs is called
structural unemployment
The unemployment rate is
the percentage of the labor force which is out of work
Suppose there are 10 million part-time workers and 90 million full-time workers in the economy. Five million of the part-time workers switch to full-time work. As a result
the unemployment rate will remain unchanged
A Keynesian prescription for ending a recession would increase government spending and let the multiplier work
true
A cornerstone for Classical thought is flexible wages and prices
true
According to Keynes, greater government spending and lower taxes are necessary for achieving greater fiscal stimulus even if it initially worsens the deficit
true
Classical and macroeconomics was dealt severe blows by the Great Depression and Keyne's macroeconomic theory
true
Estimates by economists of the complex multiplier are generally below 2
true
Flexible wages are inherent in the Classical view of self adjusting economy
true
If net exports are positive, aggregate expenditures are greater at each level of GDP than when net exports are zero or negative
true
In the General Theory of Employment, Interest, and Money John Maynard Keynes attacked the classical economists contention that recession and depression will automatically cure itself
true
Keyes viewed the economy as inherently unstable and suggested that during an economic downturn policy makers should cut taxes or increase government spending
true
Other thing equal, increased exports and increased investment both have an expansionary effect on the current size of GDP
true
Other things equal, an increase in an economy's exports will increase it's domestic aggregate expenditures and therefore increase its equilibrium GDP
true
Other things equal, serious recession in the economics of US trading partners will depress real output and employment in the US economy
true
Say's Law states that "supply creates it's pwn demand"
true
Say's law indicates that supply creates it's own demand
true
Suppose the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.50. Aggregate expenditures must have increased by $50 billion
true
Texas represents a leakage of purchasing power from the circular flow, like saving
true
That the economy will "self-adjust" if we left it alone characterizes classical economists view of the economy
true
The multiplier effect magnifies small changes in spending into larger changes in output and income
true
The multiplier effect means that a small increase in investment can cause GDP to change by a larger amount
true
The multiplier is defined as a change in GDP divided by the initial change in spending
true
The practical significance of the multiplier is that it magnifies relatively small initial changes in spending into larger changes in GDP
true
