Macro Exam 2

If the APS is −0.2, the APC is

1.2

Approximately what percentage of GDP is consumption?

69%

If the APC is 0.9, we consume

90 percent of our income

Which is not counted in GDP?

A Social Security check sent to a retired person

At the core of the American trade problem is that

America Spends too much money on trade

Which of the following statements is true? Multiple Choice A) Both proprietorships and partnerships have disadvantages. B) Neither proprietorships nor partnerships have disadvantages. C)Only proprietorships have disadvantages D).Only partnerships have disadvantages.

Both proprietorships are partnerships

Suppose California and Wisconsin produce wine and cheese. Making a bottle of wine costs $3 in California, but $12 in Wisconsin. On the other hand, making a pound of cheese costs $8 in California, and $4 in Wisconsin. Under these conditions

California should export wine and Wisconsin should export cheese.

Investment will tend to be low when the

Capacity rate is low and the interest rate is high

The worlds largest exporter is

China

Most economists

Consider tariffs less of an evil than quotas

autonomous income

Consumption occurs even when disposable income is zero. Ex: Paying utilities, Morgage payments, groceries, etc.

A business firm with limited liability would be a

Corporation

An increase in depreciation will do which of the following?

Decrease NDP and leave GDP unchanged

Gross investment will equal net investment when

Depreciation is zero

Net exports are equal to

Exports-Imports

If U.S. imports of goods and services exceed exports

GDP in the US will be less than the sum of consumption, investment, and government purchases

Assume that the size of the "underground economy" increases both absolutely and relatively over time. As a result

GDP will tend to increasingly understate the level of output through time.

The largest source of federal tax revenue comes from

Individual Income Tax

Which of the following statements about the Social Security tax is NOT true?

It is imposed of employees only

The main advantage to incorporating is A)you are your own boss. B)limited liability. C) a corporation cannot be sued. D) there is no fee to apply for a corporate charter.

Limited Liability

The property tax is the most important source of _____ government revenue.

Local

Which of these equations is correct? Multiple Choice APC − APS = 1 MPC + APS = 1 MPC + MPS = 1 1 + MPC = MPS

MPC + MPS =1

Which of these relations is correct? APC − APS = 1 MPC + MPS = 1 APC + MPC = 1 1 + MPC = MPS

MPC+ MPS=1

The NAFTA agreement affects our trade with

North America

Which statement is true? A) Stockholders and bondholders are both owners of a corporation. B)Neither stockholders or bondholders are owners of a corporation. C)Only stockholders are owners of a corporation. D) Only bondholders are owners of a corporation.

Only Stockholders are owners of a corporation.

Each of the following is a basic economic role of the government EXCEPT

Owning most of the means of production

If gross investment is greater than depreciation, then net investment is _____ and the economy is _____.

Positive and expanding

Most business firms in the U.S. are

Proprietorships

One thing we can do to reduce trade imbalance in the U.S. would be to

Push down the value of the dollar relative to other currencies

If GDP rose from $4 trillion to $6 trillion, and prices rose by 50 percent, over this period

Real GDP stayed the same

The most important source of state tax revenue is the _____ tax.

Sales

Which one of these would NOT constitute a business investment? A.Someone buys 100 shares of Exxon-Mobil B.Exxon-Mobil purchases 20 new oil rigs. C. General Motors builds a new assembly plant. D. Macy's remodels its stores.

Someone buys 100 shares of Exxon-Mobil

Each of the following could be considered a determinant of the level of investment EXCEPT A)Stock prices. B) the capacity utilization rate.the interest rate. C) the expected profit rate D).the sales outlook.

Stock Prices

A corporation is owned by its

Stockholders

When the APC is greater than one,

The APS is negative

We have run merchandise trade deficits since

The mid 70s

Which statement is true? A)Defense spending as a percent of the federal budget has steadily fallen since 1990. B)Today we spend as much on defense than the rest of the world combined. C) The largest federal government purchase is education D).State and local government spending has been declining since the mid-1980s.

Today we spend as much on defense than the rest of the world combined

NAFTA includes which countries

US, Canada, Mexico

The reason U.S. workers were better paid than foreign workers during the 1950s and 1960s is

We had more Captial per worker.

In the treatment of American exports and imports, national income accountants

add exports but subtracts imports in calculating GDP

Excise taxes

aimed at a specific good or service

A tariff can best be described as

an excise tax on an imported good

As disposable income grows,

autonomous C stays the same and induced C rises.

The APS in the U.S. is generally. APS= Average Propensity to save

between .01 and .07.

The MPC is equal to ______ divided by ______. MPS= Marginal Prosperity to Consume

change in consumption/change in income

Each of the following is an indirect tax except the _____ tax. Multiple Choice gasoline telephone corporate income excise

corporate income - because its a direct tax

We run a trade ______ on goods and a trade ______ on services.

deficit, surplus

The difference between GDP and NDP is

depreciation

The expected rate of profit is calculated by

expected profits/money invested.

During recessions the capacity utilization rate tends to

fall

GDP includes

final but not intermediate goods

Gross domestic product is the total market value of all

final goods and services produced in a year within a country.

Under the principle of comparative advantage total output is greatest when each product is made by the country that

has the lowest opportunity cost.

People tend to spend more money the ______ the amount of credit available and the ______ the stock of liquid assets in the hands of consumers.

higher, higher

A balance-of-trade surplus exists

if the dollar value of exports exceeds the dollar value of imports.

A person earning $300,000 would pay Social Security tax on

less than half of their income

An import quota is

limits the amount of a good that can be imported

If more international tourists visited the U.S., this would

lower the U.S. overall trade imbalance.

Xn

net exports

Americans generally spend over ______ of their income on consumption.

nine-tenths

Most poor families pay-

no

Autonomous consumption is always

positive

increase in capital we need to

save more and consume less

The basis for international trade is

specialization

The principle of comparative advantage

states that total output is greatest when each product is made by the country that has the lowest opportunity cost.

A tariff shifts the _____ curve to the _____.

supply; left

When there is dissaving

the APC is positive and the APS is negative.

Net exports are

the smallest component of the GDP

Real GDP is the

value of production of final output in one year after adjusting for changes in prices during the same period

The GDP is the value of all final goods and services produced

within a nations boundaries

At the point where C line crosses the 45-degree line, saving is

zero