Macro Exam 2 (chapters 5-9)

The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________. A) GDP; GDP B) GNP; GDP C) GDP; GNP D) GNP; GNP

B) GNP; GDP

If inventory investment is higher than firms planned

actual investment is greater than planned investment

We can safely say that total output can increase if there is a(n)

increase in the number of machines per hour

discouraged workers

individuals who would like to work but have given up looking for a job

Households and firms

make up the private sector

The goods and services market is an

output market

the government is the

public sector

Aggregate behavior

the behavior of all households and firms together

In June there are 30,000 people classified as unemployed and the size of the labor force is 600,000. The only change between June and July is that 10,000 of the unemployed give up looking for work. Which of the following is true? A) In June the unemployment rate was 5% and in July the unemployment rate was 3.39%. B) In June the unemployment rate was 3.8% and in July the unemployment rate was 6%. C) In June the unemployment rate was 6% and in July the unemployment rate was 3.8%. D) The unemployment rate in both June and July was 5%.

In June the unemployment rate was 5% and in July the unemployment rate was 3.39%.

In the circular flow diagram, firms ________ labor and households ________ goods and services. A) supply; demand B) supply; supply C) demand; supply D) demand; demand

demand, demand

Labor force =

employed + unemployed

GDP understates the value of output produced by an economy because it A) excludes value added from the underground economy, such as tips taken "under the table." B) includes environmental degradation caused by increased output production .C) includes transactions that do not take place in organized markets, such as home-cooked meals. D) excludes the value of the wages and fringe benefits of government employees.

excludes value added from the underground economy, such as tips taken "under the table."

Stagflation

high inflation and high unemployment

Cheryl graduated from college a month ago and is now without work. She accepted a job that will start next month. Today, Cheryl is

in the labor force

population =

labor force + not in labor force

labor force participation rate

labor force/population

Government policymakers would like to have high ________ and low ________. A) unemployment and output growth; inflation B) output growth; unemployment and inflation C) output growth and inflation; unemployment D) inflation; unemployment and output growth

output growth; unemployment and inflation

MPC is

the change in consumption divided by the change in income

In macroeconomics, equilibrium is defined as that point at which

planned aggregate expenditure equals aggregate output

Consumption is

positively related to household income and wealth and households' expectations about the future, but negatively related to interest rates.

Legalizing all forms of illegal activities would A) reduce both the underground economy and measured GDP. B) increase the size of the underground economy and reduce measured GDP. C) reduce the size of the underground economy and increase measured GDP. D) reduce measured GDP.

reduce the size of the underground economy and increase measured GDP.

Diane lost her job and immediately started looking for another job. As a result the

unemployment rate increases

If the consumption function is of the form [C = 60 + 0.9Y], the MPS equals

.1

if the MPS is .60 , what is MPS?

.40

MPC + MPS =

1 or 100%

Business Cycle

1. expansion 2. peak 3. recession 4. trough

Three major concerns of macroeconomics

1. output growth 2. unemployment 3. inflation and deflation

The equation for GDP using the expenditure approach is A) GDP = C + I + G + EX - IM. B) GDP = C + I + G - EX - IM. C) GDP = C + I + G + EX + IM. D) GDP = C + I + G + (IM - EX).

A) GDP = C + I + G + EX - IM

Which of the following is not a correct statement? A) Shareholders earn dividends but bondholders don't. B) Bondholders earn dividends but shareholders don't. C) Companies can issue shares and issue bonds. D) The government issues bonds but does not issue shares.

B) Bondholders earn dividends but shareholders don't

the rest of the world Is

the foreign sector

the number of people unemployed equals

the labor force minus the number of people employed

Deflation is a decrease in

the overall price level

fiscal policy

the use of government spending and revenue collection to influence the economy

disposable income

total income - net taxes

Unemployment rate =

unemployed / (employed + unemployed)

The ratio of nominal GDP to real GDP multiplied by 100 is the A) GDP deflator. B) national income. C) same as depreciation. D) NNP.

GDP Deflator

expense, expenditure

GDP= C+ I + G +NX

Expenditure Approach to GDP

C + I + G + NX

Which of the following would not be counted in 2016's GDP? A) the commissions earned by a sales associate in selling home theater systems built prior to 2016 B) the 2016 salary of a used furniture salesperson C) the value of a 1976 convertible you purchase from a dealer in 2016 D) the value of a laser printer manufactured in 2016 but not sold in 2016

C) the value of a 1976 convertible you purchase from a dealer in 2016

Which of the following is not a category of fiscal policy? A.) government policies regarding taxation B.) government policies regarding transfer payments and welfare benefits C.) government policies regarding money supply in the economy D.) government policies regarding the purchase of goods and services

C.) government policies regarding money supply in the economy

According to Classical economists, if the quantity of labor demanded exceeds the quantity supplied, there is a A) shortage of labor and wages will fall. B) surplus of labor and wages will rise. C) surplus of labor and wages will fall. D) shortage of labor and wages will rise.

D) shortage of labor and wages will rise.

After government is added to the income-expenditure model, the formula for the aggregate consumption function is A.) C = a - b(T - Y). B.) C = a - b(Y - T). C.) C = a + b(Y - T). D. C = a + b(Y + T).

D.

GDP Deflator

Nominal GDP/Real GDP x 100

Which of the following is not a topic studied in Macroeconomics?A) the unemployment rate B) gross domestic product C) the price of Dell computers D) the inflation rate

Price of dell computers

Sticky prices

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.