Macro Final
A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes
A positive contribution both to investment and to GDP
If the economy begins in long-run equilibrium, a decrease in investment causes the price level to _____ in the short run and ______ in the long run
decrease; decrease further
If expected inflation rises, the long-run Phillips curve will
not be affected
if expected inflation rises, the long-run Phillips curve will
not be affected
Transfer payments are
not included in GDP because they are not expenditures on currently produced goods or services
When a firm sells a good or a service, the sale contributes to U.S. GDP, as measured by the expenditure method
only if the good or service was produced within the U.S
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force
A negative supply shock will cause
the SRAS curve to shift left
Which of the following explanations of a country's poverty is not consistent with the environmental approach to development
the country;s leadership is corrupt and inefficient
When the aggregate demand curve and the short-run aggregate supply curve intersect
the economy is in short-run macroeconomic equilibrium
Jeffrey Sachs' article, "Institutions Matter, but Not for Everything," is a summary statement of which approach to economic development
the environmental approach
the long run aggregate supply curve is __________, while the long run phillips curve is ________
vertical; also vertical
A steel company sells some steel to a bicycle company for $100. The bicycle company uses the steel to produce a bicycle, which it sells for $200. Taken together, these two transactions contribute
$200 to GDP
The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?
$66,565
If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate
-3%
The GDP deflator is 320 in one year and 360 in the next year. What was the inflation rate?
12.5 percent
if the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from
23.3 years to 17.5 years
If the GDP is growing at 5%, and population is growing at 2%, what is the (approximate) growth rate of per capita GDP
3%
A paperback book in the U.S. costs $6. In Chile it costs 4 pesos. If the nominal exchange rate is 1/2 peso per dollar, what is the real exchange rate based on the book prices
3/4
The nominal exchange rate is about 1.8 Aruban florin per dollar. If a basket of goods in the United States cost $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold
72 florin
If the number of employed is 190 million, the number of unemployed is 10 million, and the working-age population is 150 million, then the labor force participation rate is
80%
The model of aggregate demand explains the relationship between
AE and the price level
Assume the United States is the "domestic" country and China is the "foreign" country. Which of the following might increase the real exchange rate between the United States and China
An increase in the price level in the United States
When r increases
C goes down, I goes down, NX goes down
Which of the following price indices comes closest to measuring the cost of living of the typical household
Consumer price index
According to the institutional approach to development, which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita
Countries that are relatively poor are more likely to experience wars and revolutions; many of these developing countries do not have a functioning court system that can enforce laws; government administration in poor countries is often corrupt
If the U.S. real exchange rate appreciates, U.S. exports
Decrease and U.S. imports increase
Which of the following explains why many European countries have unemployment rates that are higher than in the United States?
European countries offer higher unemployment benefits than the United States
The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?
Frictional unemployment
In the early 1900s, Henry For Revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?
It shifted up
by offering more generous unemployment insurance programs, European countries can expect
Longer periods of unemployment for their workers
Which of the following shifts aggregate demand to the right
Monetary police lowers interest rates
The "new product bias" in the consumer price index refers to the idea that
New products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers
During the late 1990s, many firms successfully integrated the internet into some aspects of their business, allowing them to produce more efficiently. The result was that
SRAS shifted down
Which of the following statements about GDP is correct?
Nominal GDP values production at current prices, wheres real GDP values production at constant prices
According to new growth theory
Technological change is influenced by economic incentives
Under the Soviet system of communism
Technological progress was slow because managers had little incentive to develop new technologies
Which of the following statements is most consistent with the idea of contingent convergence?
Technology transfer and their ability to attract more capital will allow all poor countries to catch up to richer countries in per capita GDP
Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016?
The value of the services of the real estate agent
Which of the following is not a problem with the CPI?
The way the CPI is calculated allows consumers to substitute a cheaper variety of a good for one which has become more expensive. This is called "substitution bias
Which of the following best describes the "wealth effect"?
When the price level falls, the purchasing power of household wealth rises
Which of the following transactions represents the purchase of a final good?
Your father buys a new John Deere riding lawn mower
which of the following is not an example of investment spending as that term is used by macroeconomists
an employee purchases as stock for his retirement account
On the long-run aggregate supply curve
a decrease in the price level has no effect on the aggregate quantity of GDP supplied
An increase in interest rates due to an increase in the price level will cause ______ in ______, whereas an increase in interest rates due to monetary price will cause
a decrease; aggregate expenditure; a decrease in aggregate demand
Economists have proposed which of the following as a possible explanations for the productivity slowdown of the mid-1970s
a deterioration of the educational system
Which of the following would cause the short-run aggregate supply curve to shift to the right
a technological advance
which of the following will raise consumer expenditure
an increase in expected future income
the international trade effect states that
an increase in the price level will lower net exports
investment spending will increase when
business cash flow increases
the five most important variables that determine the level of __________ are disposable income, wealth, expected future disposable income, price level, and interest rate
consumption
In the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would
decrease
higher personal income taxes
decrease aggregate demand
If the marginal propensity to save is 0.1, then a $10 million decrease in disposable income will
decrease consumption by $9 million
The natural rate of unemployment is the amount of unemployment
equal to frictional plus structural unemployment
during a(n) ________ many firms experience increased profits, which increases _______ and investment spending
expansion; cash flow
Efficiency wages cause unemployment because
firms pay wages that are above the equilibrium wage, causing the quantity of labor demanded to be less than the quantity of labor supplied
consumer spending________ and investment spending _______
follows a smooth trend; is more volatile and subject to fluctuations
the purchase or building by a corporation of a facility in a foreign country is called
foreign direct investment
Which types of unemployment make up the natural rate of unemployment?
frictional and structural
Aggregate demand would shit right if either
government expenditures increased of the interest rate decreased
deflation will
increase aggregate expenditure
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would
increase the measured labor force participation rate
suppose that homemakers are classified as "employed" in the labor force statistic, rather than being counted as "out of the labor force." This would
increase the measured labor force participation rate
Net exports usually ________ when the U.S. economy is in a recession and ______ when the U.S. economy is expanding
increase; decrease
Assuming the real interest rate stays constant, inflation
increases the nominal interest raet
Stagflation occurs when
inflation rises and GDP falls
if firms are pessimistic and believe that future profits will fall and remain weak for the next few years, then
investment spending will fall
If the quantity of goods and services produced in the economy decreases
it may be possible for nominal GDP to increase
If the per-worker production function shifts down
it now takes more capital per hour worked to get the same amount of real GDP per hour worked
A steep short-run aggregate supply curve
means that the majority of prices in the economy are flexible
which of the following would decrease domestic investment
policies by the federal reserve designed to raise the interest rate
The real exchange rate is the nominal exchange rate defined as units of foreign currency per dollar times
prices in the United States divided by foreign prices
the largest source of funds for corporate investment is
retained earnings
a decrease in the expected inflation rate will
shift the short-run Phillips curve to the left
Workers expect inflation to rise from 3% to 5% next year. As a result, this should
shift the short-run aggregate supply curve to the left
A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat. This lumberjack would be
structurally unemployed
If the exchange rate changes from $1.45 = 1 euro to $1.37 = 1 euro, then
the euro has depreciated and the dollar has appreciated
What basket of goods is used to construct the CPI
the goods and services that are typically bought by consumers as determined by government surveys
U.S. net exports fall when
the growth rate of U.S. GDP is faster than the growth rate of GDP
According to the article "The poor and the rich," which of the following features of the neoclassical growth model was called into question by the "new growth theory"?
the law of diminishing returns
All other things being equal, if stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries
the long-run aggregate supply curve will shift to the left
GDP is defined as
the market value of all final goods and services produced within a country in a given period of time
Assuming no change in the nominal exchange rate, how will a decrease in the price level in the United States relative to France affect the real exchange rate between the two countries?
the real exchange rate will fall
the long-run adjustment to a negative supply shock results in
the short-run aggregate supply curve shifting down
When an economy faces diminishing marginal product of capital
the slope of the per-worker production function becomes flatter as capital per hour worked increases
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,
the unemployment rate increased
Assume the United States in the domestic country. If inflation in Russia is higher than it is in the United States, according to a purchasing power parity
the value of the dollar will rise with respect to the ruble in the long run
If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve
this will shift the aggregate demand curve to the right
