Macro homework

Macroeconomists study: a.the decisions of individual households and firms. b.the interaction between households and firms. c.economy-wide phenomena. d.regulations imposed on firms and unions.

C. economy-wide phenomena

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move raises GDP. decreases GDP. doesn't change GDP because gambling is never included in GDP. doesn't change GDP because in either case his income is included.

raises GDP.

In the national income accounts, depreciation is called "consumption of fixed capital." "negative investment." "diminished value." "loss due to wear."

"consumption of fixed capital."

In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015? $1350 $1450 $1050 $1750

$1450

Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800, and investment of $3,000. GDP equals $24,450. $11,550. $15,300. $20,700.

$15,300

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2008, Quality Motors produced $25 million worth of automobiles and sold $12 million in the U.S. and $13 million in Mexico. In addition, it sold $2 million from the previous year's inventory in the U.S. The transactions just described contribute how much to U.S. GDP for 2008? $12 million $14 million $25 million $27 million

$25 million

Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp, Inc., which uses the rawhide to produce and sell dog chews. With each $1 worth of rawhide that it buys from Rolling Rawhide, Chewy Chomp, Inc. produces a dog chew and sells it for $2.50. Neither firm had any inventory at the beginning of 2014. During that year, Rolling Rawhide produced enough rawhide for 2000 dog chews. Chewy Chomp, Inc. bought 90% of that rawhide for $1800 and promised to buy the remaining 10% for $200 in 2015. Chewy Chomp, Inc. produced 1800 dog chews during 2014 and sold each one during that year for $2.50. What was the economy's GDP for 2014? $3,800 $4,500 $4,700 $5,000

$4,700

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is $43,849.05 $61,263.43 $63,195.34 $93,655.50

$63,195.34

A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today? 37 cents $4.63 $67.65 $37.86

$67.65

If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is -3 percent. 0.75 percent. 3 percent. 11 percent.

-3 percent.

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was 98.0. 102.0. 104.0. 151.0.

102.0.

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was 104.0. 103.2. 158.7. 152.0.

103.2

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced 5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years. 7.5 percent deflation between the first and second years, and 4.3 percent deflation between the second and third years. 5.3 percent inflation between the first and second years, and 4.1 percent inflation between the second and third years. 7.5 percent inflation between the first and second years, and 4.3 percent inflation between the second and third years.

5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years.

Investment from abroad is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries. is viewed by economists as a way to increase growth. often requires removing restrictions that governments have imposed on foreign ownership of domestic capital. All of the above are correct.

All of the above are correct.

Which of the following is a determinant of productivity? human capital per worker physical capital per worker natural resources per worker All of the above are correct.

All of the above are correct.

Which of the following is a way to compute GDP? total income earned. total expenditures on final goods. add up the market values of all final goods and services. All of the above are correct.

All of the above are correct.

Which of the following is consistent with the catch-up effect? The United States had a higher growth rate before 1900 than after. After World War II the United States had lower growth rates than war-ravaged European countries. Although the United States has a relatively high level of output per person, its growth rate is rather modest compared to some countries. All of the above are correct.

All of the above are correct.

Which of the following would increase productivity? an increase in the physical capital stock per worker an increase in human capital per worker an increase in natural resources per worker All of the above are correct.

All of the above are correct.

Which of the following items is included in U.S. GDP? final goods and services that are purchased by the U.S. federal government intermediate goods that are produced in the U.S. but that are unsold at the end of the GDP accounting period goods and services produced by foreign citizens working in the U.S. All of the above are included in U.S. GDP.

All of the above are included in U.S. GDP.

The basic tools of supply and demand are: a.useful only in the analysis of economic behavior in individual markets. b.useful in analyzing the overall economy, but not in analyzing individual markets. c.central to microeconomic analysis, but seldom used in macroeconomic analysis. d.central to macroeconomic analysis as well as to microeconomic analysis.

D. central to macroeconomic analysis as well as to microeconomic analysis

Which of the following is not correct? GNP equals net national product plus losses from depreciation. For most countries, including the United States, GDP and GNP are nearly the same. GDP and GNP typically move in opposite directions. Personal income equals disposable personal income plus personal taxes plus certain nontax payments.

GDP and GNP typically move in opposite directions.

How does U.S. gross domestic product (GDP) differ from U.S. gross national product (GNP)? GNP = GDP - losses from depreciation GNP = GDP + income earned by U.S. citizens abroad - income that foreign citizens earned in the U.S. GNP = GDP + transfer payments to households + - indirect sales taxes GNP = GDP - depreciation - retained earnings

GNP = GDP + income earned by U.S. citizens abroad - income that foreign citizens earned in the U.S.

Which of the following is not a correct statement about the growth of real GDP in the U.S. economy? Real GDP in 2009 was almost four times its 1965 level. Growth was steady between 1965 and 2009. Continued growth in real GDP enables the typical American to enjoy greater economic prosperity than his or her parents and grandparents did. The output of goods and services produced grew on average about 3 percent per year between 1965 and 2009.

Growth was steady between 1965 and 2009.

A Mexican oil field service company works on oil rigs in the U.S. The value of the company's services produced by Mexican citizens and the equipment they own is included in Mexican GNP and U.S. GNP. Mexican GDP and U.S. GNP. Mexican GNP and U.S. GDP. Mexican GDP and U.S. GDP.

Mexican GNP and U.S. GDP.

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct? The CPI involves a base year; the GDP deflator does not involve a base year. The CPI can be used to compute the inflation rate; the GDP deflator cannot be used to compute the inflation rate. The CPI reflects the prices of goods and services produced domestically; the GDP deflator reflects the prices of all goods and services bought by consumers. The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services.

The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services.

Which of the following is not correct? The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. The consumer price index is used to monitor changes in the cost of living over time. The consumer price index is used by economists to measure the inflation rate. The consumer price index is used to measure the quantity of goods and services that the economy is producing.

The consumer price index is used to measure the quantity of goods and services that the economy is producing.

Which of the following headlines is more closely related to what microeconomists study than to what macroeconomists study? Unemployment rate falls from 7.5 percent to 7.3 percent. Real GDP falls by 0.4 percent in the third quarter. Inflation was 2.4 percent last year. The price of gasoline rises due to rising oil prices.

The price of gasoline rises due to rising oil prices.

Which of the following statements about recessions is true? An old rule of thumb defining recession is two consecutive quarters of falling nominal GDP. Recessions occur at regular intervals and last standard amounts of time. There is no ironclad rule for the declaration of recessions. Recessions are associated with low unemployment and high income.

There is no ironclad rule for the declaration of recessions.

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle, U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000. U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500. U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500. U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

If foreign citizens earn less income in the U.S. than U.S. citizens earn in foreign countries, U.S. net factor payments from abroad are positive, and its GDP is larger than its GNP. U.S. net factor payments from abroad are positive, and its GNP is larger than its GDP. U.S. net factor payments from abroad are negative, and its GDP is larger than its GNP. U.S. net factor payments from abroad are negative, and its GNP is larger than its GDP.

U.S. net factor payments from abroad are positive, and its GNP is larger than its GDP.

Which of the following is not a question addressed by macroeconomists? Why is average income high in some nations but low in others? What, if anything, can the government do to promote growth in incomes, low inflation, and stable employment? What is the impact of foreign competition on the U.S. auto industry? Why do production and employment expand in some years and contract in others?

What is the impact of foreign competition on the U.S. auto industry?

Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods. Laborland has a population of 5,000, of whom 3,000 work 7 hours a day to produce a total of 105,000 final goods. Workland has higher productivity and higher real GDP per person than Laborland. Workland has higher productivity but lower real GDP per person than Laborland. Workland has lower productivity but higher real GDP per person than Laborland. Workland has lower productivity and lower real GDP per person than Laborland.

Workland has lower productivity but higher real GDP per person than Laborland.

The consumer price index is not very useful as a measure of the cost of living. a perfect measure of the cost of living. a useful measure, but not a perfect measure, of the cost of living. not used as a measure of the cost of living.

a useful measure, but not a perfect measure, of the cost of living.

According to the circular-flow diagram GDP: can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production. can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services. cannot be computed as either the revenue firms receive or the payments they make to factors of production.

can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production.

When the consumer price index falls, the typical family has to spend more dollars to maintain the same standard of living. can spend fewer dollars to maintain the same standard of living. finds that its standard of living is not affected. can save less because they do not need to offset the effects of rising prices.

can spend fewer dollars to maintain the same standard of living.

For the purpose of calculating GDP, investment is spending on stocks, bonds, and other financial assets. real estate and financial assets such as stocks and bonds. capital equipment, inventories, and structures, including household purchases of new housing. capital equipment, inventories, and structures, excluding household purchases of new housing.

capital equipment, inventories, and structures, including household purchases of new housing.

Foreign saving is used for domestic investment when foreigners engage in foreign direct investment. foreign portfolio investment. either foreign direct investment or foreign portfolio investment. None of the above is correct.

either foreign direct investment or foreign portfolio investment.

Because every transaction has a buyer and a seller, GDP is more closely associated with an economy's income than it is with an economy's expenditure. every transaction contributes equally to an economy's income and to its expenditure. the number of firms must be equal to the number of households in a simple circular-flow diagram. firms' profits are necessarily zero in a simple circular-flow diagram.

every transaction contributes equally to an economy's income and to its expenditure.

Net exports equal exports plus imports. exports minus imports. imports minus exports. GDP minus imports.

exports minus imports.

Other things equal, relatively poor countries tend to grow slower than relatively rich countries; this is called the poverty trap. slower than relatively rich countries; this is called the fall-behind effect. faster than relatively rich countries; this is called the catch-up effect. faster than relatively rich countries; this is called the constant-returns-to-scale effect.

faster than relatively rich countries; this is called the catch-up effect.

In recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in foreign portfolio investment. indirect domestic investment. foreign direct investment. foreign indirect investment.

foreign portfolio investment.

The CPI and the GDP deflator generally move together. generally show different patterns of movement. always show identical changes. always show different patterns of movement.

generally move together.

A transfer payment is a payment made by consumers, but not in exchange for a tangible product. firms, but not in exchange for capital equipment. foreigners, but not in exchange for a domestically-produced good or service. government, but not in exchange for a currently produced good or service.

government, but not in exchange for a currently produced good or service.

In the United States, nominal interest rates were high in the 1970s and 1990s. low in the 1970s and 1990s. high in the 1970s and low in the 1990s. low in the 1970s and high in the 1990s.

high in the 1970s and low in the 1990s.

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included in both German GDP and U.S. GDP. in German GDP, but is not included in U.S. GDP. in U.S. GDP, but is not included in German GDP. in neither German GDP nor U.S. GDP.

in German GDP, but is not included in U.S. GDP.

Inward-oriented policies include imposing tariffs and other trade restrictions. have generally increased productivity and growth in the countries that pursued them. promote the production of goods and services that the country produces most efficiently. All of the above are correct.

include imposing tariffs and other trade restrictions.

U.S. GDP includes production of foreigners working in the U.S. and production by U.S. residents working in foreign countries. includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries. excludes production of foreigners working in the U.S. but includes production by U.S. residents working in foreign countries. excludes production of foreigners working in the U.S. and production by U.S. residents working in foreign countries.

includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries.

For an economy as a whole, wages must equal profit. consumption must equal income. income must equal expenditure. consumption must equal saving.

income must equal expenditure.

On a production function, as capital per worker increases, output per worker increases. This increase is larger at larger values of capital per worker. increases. This increase is smaller at larger values of capital per worker. decreases. This decrease is larger at larger value of capital per worker. decreases. This decrease is smaller at larger value of capital per worker.

increases. This increase is smaller at larger values of capital per worker.

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing economic growth. stagflation. inflation. deflation.

inflation.

The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis is positive and gets steeper as capital per worker rises. is positive and gets flatter as capital per worker rises. is negative and gets steeper as capital per worker rises. is negative and gets flatter as capital per worker rises.

is positive and gets flatter as capital per worker rises.

The catch-up effect refers to the idea that saving will always catch-up with investment spending. it is easier for a country to grow fast and so catch-up if it starts out relatively poor. population eventually catches-up with increased output. if investment spending is low, increased saving will help investment to "catch-up."

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Which of the following is an example of human capital? a student loan knowledge learned from reading books training videos for new corporate employees All of the above are correct.

knowledge learned from reading books

Which of the following is an example of a renewable natural resource? the knowledge possessed by scientists carpenters' labor services lumber All of the above are correct.

lumber

An increase in capital will increase real GDP per person more in a poor country than a rich country. The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment. more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment. less in a poor country than a rich country. The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment. less in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

The logic behind the catch-up effect is that workers in countries with low incomes will work more hours than workers in countries with high incomes. the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. None of the above is correct.

new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.

Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10 per unit and the price of fish was $75 per unit. For 2010, nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160.

nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5.

Unemployment compensation is part of GDP because it represents income. part of GDP because the recipients must have worked in the past to qualify. not part of GDP because it is a transfer payment. not part of GDP because the payments reduce business profits.

not part of GDP because it is a transfer payment.

National income differs from net national because it includes profits of corporations. of a statistical discrepancy. it includes transfer payments. it excludes depreciation.

of a statistical discrepancy.

Consider the following three items of spending by the government: (i) the federal government pays a $500 unemployment benefit to an unemployed person; (ii) the federal government makes a $2,000 salary payment to a Navy lieutenant; (iii) the city of Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman. Which of these payments contributes directly to government purchases in the national income accounts? only item (i) only item (ii) only items (i) and (ii) only items (ii) and (iii)

only items (ii) and (iii)

When economists talk about growth in the economy, they measure that growth as the absolute change in nominal GDP from one period to another. percentage change in nominal GDP from one period to another. absolute change in real GDP from one period to another. percentage change in real GDP from one period to another.

percentage change in real GDP from one period to another.

The economy's inflation rate is the price level in the current period. change in the price level from the previous period. change in the gross domestic product from the previous period. percentage change in the price level from the previous period.

percentage change in the price level from the previous period.

In a simple circular-flow diagram, firms purchase resources from households. purchase the output produced by households. receive income by selling resources to households. All of the above are correct.

purchase resources from households.

Consumption consists of spending by households on goods and services, with the exception of purchases of intangible services. purchases of durable goods. purchases of new houses. spending on education.

purchases of new houses.

Accumulating capital requires that society sacrifice consumption goods in the present. allows society to consume more in the present. decreases saving rates. involves no tradeoffs.

requires that society sacrifice consumption goods in the present.

The inflation rate you are likely to hear on the nightly news is calculated from the GDP deflator. the CPI. the Dow Jones Industrial Average. the unemployment rate.

the CPI.

Economists use the term inflation to describe a situation in which some prices are rising faster than others. the economy's overall price level is rising. the economy's overall price level is high, but not necessarily rising. the economy's overall output of goods and services is rising faster than the economy's overall price level.

the economy's overall price level is rising.

Which of the following is an example of physical capital? the strength of workers on the job training financial assets like cash and bonds the equipment in a factory

the equipment in a factory

The consumer price index is used to convert nominal GDP into real GDP. turn dollar figures into meaningful measures of purchasing power. characterize the types of goods and services that consumers purchase. measure the quantity of goods and services that the economy produces.

turn dollar figures into meaningful measures of purchasing power.

GDP is defined as the value of all goods and services produced within a country in a given period of time. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. value of all final goods and services produced within a country in a given period of time. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

value of all final goods and services produced within a country in a given period of time.