STUDY GUIDE FROM MISSED QUESTIONS MACRO #2

14. All of the following are microeconomic consequences of inflation except: A. A price effect. B. An income effect. C. A wealth effect. D. A profit effect.

D

4. Which of the following forces did Keynes assert had the strongest influence on consumption decisions? A. Prices B. Wealth C. Interest rates D. Disposable income

D

Who is all about spending money to make money?

Keynes

What is the Classical Approach?

Let the market work itself out

The 3 macroeconomic consequences of inflation are?

Price effect, income effect, wealth effect

Economic growth is most commonly measured with what?

Real GDP per capita

If more teenagers stay in school what will happen to the PPC curve?

Shift inward

Deflation is a ________ in the average level of prices and goods

decrease

What did Keynes assert that had the strongest influence on consumption decisions?

disposable income

What are the redistributive mechanics of inflation?

price effect, income effect, wealth effect

Consumption expenditure account for how much of total spending?

2/3

10. According to Keynes, which of the following can be used to slowdown an overheated economy? A. Decrease government purchases B. Decrease taxes C. Make more money available D. Employ more people

A

20. Hyperinflation is: A. An inflation rate in excess of 200 percent, lasting at least one year. B. An inflation rate in excess of 200 percent, lasting at least one month. C. A common problem in the United States. D. The movement of taxpayers to higher tax brackets because of rising prices.

A

28. According to Keynes, when the economy falters the government should do any of the following except: A. Practice a laissez-faire policy approach. B. Provide more dollars in income transfers. C. Make more money available. D. Buy more output.

A

3. Consumption expenditures: A. Account for over two-thirds of total spending. B. Include purchases of new and used goods by consumers. C. Are equal to disposable personal income plus personal savings. D. Are equal to consumer spending plus transfer payments.

A

30. Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100. If the price level is equal to 120 at the end of the year, the real value of your savings is closest to: A. $1,667. B. $1,880. C. $2,120. D. $2,400.

A

7. When the government enforces contracts between two parties, it is acting in its roles to promote economic growth by: a. ensuring a stable legal system b. providing physical and human capital c. ensuring a stable and secure financial system d. promoting free and competitive markets

A

9. A legal system that enforces property rights is important to economic growth because: a. legal protection of ideas and technologies gives people who innovate the ability to protect their work b. the legal system can help the government with tax collection c. strong laws demonstrate commitment by legislators to economic growth d. bankruptcy laws encourage lending

A

1. Aggregate demand is the total quantity of output: A. Demanded if the economy is in equilibrium. B. Demanded at alternative price levels in a given time period. C. Producers are willing and able to supply at alternative price levels. D. Consumers actually buy.

B

11. Which of the following is characteristic of a downturn in the business cycle? A. Lower unemployment rates B. Lower real output C. Higher prices D. Higher interest rates

B

26. Assume the CPI increases from 110 to 121 and Manny's nominal income increases from $100,000 to $120,000 over the same period. Manny's real income has: A. Increased by approximately 10 percent. B. Increased by approximately 9 percent. C. Decreased by approximately 8 percent. D. Remained the same.

B

4. If more teenagers stay in school longer: A. The production possibilities curve shifts outward. B. The production possibilities curve shifts inward. C. The production possibilities curve remains unchanged. D. The unemployment rate goes up.

B

7. According to classical theory: A. Keynes had "neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand." B. Macro equilibrium might start out badly and get worse in the absence of government intervention. C. Flexible wages and prices allow a laissez-faire economy to adjust to shifts in aggregate demand. D. Business cycles are not relevant and do not occur. A key principle of classical theory is flexible prices and its focus on the economy's self-correcting tendencies.

C

1. GDP can be calculated by all of the following methods except: A. Adding up the spending on goods and services by business, government, households, and foreigners, and subtracting imports. B. Adding up the "value added" at every stage of production in the economy. C. Adding up all of the receipts of households, government, and business. D. Adding up all income and expenses by consumers and businesses.

D

1.Economic growth is most commonly measured by: A.GDP B.GDP per capita C.Genuine Progress Indicator per capita D.Real GDP per capita

D

14. The redistributive mechanics of inflation include all of the following except: A. Price effects. B. Income effects. C. Wealth effects. D. Output effects.

D

2. The labor-force participation rate is the number: A. Of unemployed divided by the number of employed. B. Of employed divided by the number in the labor force. C. Of employed divided by the total population. D. In the labor force divided by the total population.

D

27. The government can "prime the pump" by doing all of the following except: A. Buying more output. B. Employing more people. C. Making more money available. D. Raising taxes.

D

3. Jack graduated from college last month, but he has not yet started looking for a job. Jack is: A. Frictionally unemployed. B. Structurally unemployed. C. A discouraged worker and is part of the unemployment statistic. D. Not part of the labor force and is not counted in the unemployment rate.

D

What is the total quantity of output demanded at alternative price levels in a given time period ?

Aggregate demand/ Real GDP

13. Deflation is a/an ____________ in the average level of prices of goods and services. A. Increase B. Decrease C. Stagnation D. Increase followed by a decrease

B

17. Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100. If the price level is equal to 92 at the end of the year, the real value of your savings is closest to: A. $908. B. $920. C. $1,087. D. $1,092.

C

the government can "prime the pump" by all the following except A. Buying more output B. Making more money available C. Raising Taxes D. Employing more people

C

an inflation rate in excess of 200% lasting at least one year

hyper inflation

What are all persons age 16 & over that are either working for pay or actively seeking employment. (unemployed and employed people)

labor force

If you're fresh out of college but not looking for a job are you included in the labor force?

no

Why would the government enforce a contract between 2 parties?

to ensure a stable legal system