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
