MACRO Test 2-Summer 1 – Flashcards
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Gross domestic product is officially measured by adding together the
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market value of all final goods and services produced within the borders of a nation
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Which of the following would be counted as a final good for inclusion in GDP?
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A piece of glass bought this year by a consumer to fix a broken window.
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Which of the following expenditures would not be included in GDP?
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Purchase of a silver cup previously sold new in 1950.
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Gross domestic product (GDP) includes:
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only final goods and services.
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Income received minus personal taxes is called:
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disposable personal income.
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Personal consumption expenditures include:
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all goods and services bought by households.
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Which of the following spending is larger for U.S. GDP?
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State and local government.
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The largest component of GDP is:
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personal consumption expenditures.
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Gross domestic product is a measure of:
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market value of the output produced during a period.
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Using the income approach, an estimate of the value of capital worn out producing GDP is:
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capital consumption allowance or depreciation.
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The income approach to measuring GDP includes:
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compensation for employees, net interest, rent, net profits, and indirect business taxes and depreciation.
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The sum of payments made to resource owners for the use of their resources is:
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national income.
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A business cycle is the:
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recurring growth and decline in real GDP.
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The period of declining growth in real GDP between the peak of the business cycle and the trough is called a(n):
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recessionary phase.
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Which of the following will most likely occur during the recessionary phase of a business cycle?
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The sales of most businesses decline, and the unemployment rate rises.
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The business cycle consists of four phases. At the top we have:
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peak, then a recession followed by recession, and finally, recovery.
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The civilian labor force consists of:
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the employed plus the unemployed who are not in the military.
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An individual who is employed part time, but is looking for a full-time job, is classified as:
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employed.
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John Steinbeck's Cannery Row describes a character who takes his own life because of poor job prospects. If he was an unemployed person who gave up looking for work, he would be considered:
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a discouraged worker.
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The presence of discouraged workers may cause:
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the unemployment rate to be understated.
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Which of the following offers an example of frictional unemployment?
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The rise in unemployment among farm workers after harvest.
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When individuals are unemployed because they lack the qualifications to fill available jobs, this is called:
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structural unemployment.
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The type of unemployment that occurs because of a recession is called:
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cyclical unemployment.
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Full employment is the rate of employment that results when:
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only frictional and structural unemployment are present.
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As it affects average consumers, inflation:
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is measured by changes in the cost of a typical market basket of goods between time periods.
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The consumer price index (CPI):
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includes only goods and services bought by typical urban consumer.
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Which of the following is true of inflation?
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It is an increase in the general price level of goods and services.
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Deflation refers to a:
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decreasing price level.
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Unlike the GDP deflator, the CPI does not consider goods and services purchased by business and government.
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true
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Last year the Olsen family earned $70,000. This year their income is $77,000. In an economy with an inflation rate of 8 percent, we can conclude that the Olsen's nominal income:
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and real income both increased.
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If the nominal interest rate is 5 percent and there is no inflation, then the real interest rate:
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is 5 percent.
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The real interest rate can be expressed as the:
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nominal interest rate minus the inflation rate.
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Classical economists believed that:
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price flexibility automatically directs market economies to full employment.
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Classical economic theory predicted that in the long run the economy would experience:
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full employment.
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According to the classical economists, which of the following would make prolonged unemployment impossible?
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Flexible prices, wages, and interest rates.
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The classical economists argued that the production of goods and services (supply) generates an equal amount of total income and, in turn, total spending. This theory is called:
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Say's Law.
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John Maynard Keynes and his followers argued that the Great Depression was primarily the result of:
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insufficient aggregate spending on goods and services.
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Keynesian economics:
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believes that unemployment results when aggregate demand is insufficient to reach a full-employment level of real GDP.
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In the basic Keynesian model, the major determinant of consumption expenditures is:
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disposable income.
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Which of the following will shift the consumption function upward?
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An increase in consumer wealth.
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Autonomous consumption spending is consumption spending:
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that is independent of the level of disposable income.
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Given the consumption function C = $100 billion + 0.75 ($300 billion), autonomous consumption is equal to:
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$100 billion.
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If disposable income is $400 billion, consumption spending is $380 billion, and MPC is 0.5, what is the level of saving?
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$20 billion.
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The marginal propensity to consume is defined as the:
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proportion of any change in income that is spent on consumption.
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Mathematically, the marginal propensity to consume is:
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the change in consumption divided by the change in income.
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If the marginal propensity to consume = 0.75, then:
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he marginal propensity to save = 0.25.
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The investment demand curve shows the amount businesses spend for investment goods at different possible:
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rates of interest.
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If the interest rate rises, then firms' investment spending:
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falls.
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What is the definition of "Unemployment" ? (What must be true about a person in order to be classified as unemployed in the U.S.?)
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a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. To be classified as unemployed a person must have no job and they must be actively seeking employment.
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How is the unemployment rate defined? (Write out a formula for the rate of unemployment)
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the unemployment rate is measured by taking the number of unemployed persons and dividing it by the number of individuals in the labor force. Remember that the labor force includes those who are employed and those who are unemployed.
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If a country had 60 people employed and 20 people unemployed,(and altogether 120 non-institutionalized civilians over the age of 16)What is it's unemployment rate? (numbers will be different on the exam)
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Unemployment rate would be 10%.
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What is inflation? (Define inflation)
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a general increase in prices and fall in the purchasing value of money
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If the Consumer Price Index rises from 200 to 220 over 12 months time, what was the rate of inflation over this time period? (numbers will be different)
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The rate of inflation would be 10%.
