question

When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is called

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Nondiscretionary

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As the economy declines, the collection of personal income tax revenues automatically falls. This relationship is best describes the progressive income tax system:

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Provides built-in stability for the economy

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If the government passes legislation to cut taxes to counter the effects of a severe recession, then this would be an example of a:

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Expansionary fiscal policy

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Fiscal policy refers to:

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Manipulation of government spending and taxes to stabilize domestic output, employment, and price level

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The amount by which government expenditures exceed revenues during a particular year is the:

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Budget deficit

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As a percent go GDP, the United States public debt is:

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Lower than the public debts of several other major industrial nations

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The size of MPC is assumed to be:

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greater than zero, but less than one

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Suppose that a new machine tool having a useful life of one year costs $80,000. Suppose also, the her additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

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20% (96,000-80,000)/80,000

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If business taxes are reduced and the real interest rate is increases:

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The level of investment spending might either increase or decrease

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The multiplier affect means that:

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An increase in investment can cause GDP to change by a larger amount

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As disposable income decreases, consumption:

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and savings both decrease

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If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule

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will shift upward

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Which would shift the consumption schedule upward?

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An increase in wealth

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An inverse relationship between the rate of interest and and the level of:

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investment spending is suggested by the investment-demand curve

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Which would decrease investment demand?

answer

An increase in the cost of acquiring capital goods

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Generally speaking, the greater the MPS, the:

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Smaller would be the increase in income which results from an increase in consumption spending

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A nation has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under the age of 16. There are 210 million people who are employed and 10 million who are unemployed. What is the unemployment rate?

answer

4.5% 10/210=4.5

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The rate of unemployment when the country is at its potential output is called:

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Natural rate of unemployment

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Ichiro has lost his job at an automobile plant because of the use of robots for welding on the assembly line. Ichiro plans to go to technical school to learn how to repair microcomputers. They type of unemployment Ichiro is facing is

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Structural

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If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double?

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14 years Rule of 70 70/5=14

question

The industries to sectors of the economy in which business cycle fluctuations tend to affect output the most are:

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Capital goods and durable consumer goods

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In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

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Expansion

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During periods of full employment in the United States the:

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unemployment rate for african americans is about twice the rate for whites

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A university graduate using the summer following graduation to search for a job would best be classified as

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frictional unemployment

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If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is:

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$320 billion 340-20

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In which of the following cases would real income rise?

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Nominal income rises by 2% and the price level remains the same

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Suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of a final goods and services sold is $450 billion. We can conclude that:

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GDP is $500 billion

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If depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:

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Net investment is negative

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Real GDP measures:

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Current output base per year

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Real GDP and nominal GDP differ because the real GDP:

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has been adjusted for changes in price level

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The GDP tends to:

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Understate economic welfare because it does not take into account increases in leisure

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The monetary value of all final goods and serves produced by a nation's economy during a year is the:

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GDP

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Which would be considered an investment according to economists?

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A) the purchase of newly-issued shares of Microsoft stock B) The construction of new computer chip factory by Intel C) The purchase of shares of stock by Fidelity, a mutual fund company D) The sale of government bonds by the nation's central bank B

question

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2460); and, government purchases ($470). What is the GDP of the economy?

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$3,237 billion exports(22)-imports(35)= -13 GDP=320+470+4260-13

question

GDP in an economy is $4,600 billion. Consumer expenditures are $3,500 billion, government spending is $900 billion, and gross private domestic investment is $400 billion. Net exports are:

answer

-$200 billion 3500+900+400= 4800 4600-4800= -200

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A consumer price index attempts to measure changes in:

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The price of a select market basket go goods and services

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The fear if unwanted price wars may explain why many firms are reluctant to:

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Reduce prices when a decrease in aggregate demand occurs

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The foreign purchases of effect suggests that an increase in Japanese price level relative to other countries willL

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Increase Japanese imports and decrease Japanese exports

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Which set of events would most likely decrease aggregate demand?

answer

an increase in personal income tax rates

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The slope of the immediate short-run aggregate demand supply curve is based on the assumption that:

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Both input and output prices are fixed

question

A decline in the quantity of real output demanded alone the aggregate demand curve is a result of an:

answer

increase in the price level

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Efficiency wages are associated with:

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A price level that is inflexible downward

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The economy experiences an increase in the price level and a decrease in real domestic output. What is a likely explanation?

answer

Input prices have increased

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If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers, there will be a:

answer

Surplus and the price level will fall

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A private closed economy includes:

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Households, businesses, and international trade, but not the government

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The equilibrium level of GDP in a private closed economy is where:

answer

Aggregate expenditures=GDP

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The equilibrium level of GDP is associated with"

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No unintended change sin inventories

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Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures much have increased by:

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$50 billion 100x0.5 GDP= C+I

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An increase in the investment demand curve will:

answer

shift the investment schedule upward

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Saving and Investing are, respectively:

answer

a leakage and an injection

question

If GDP exceeds aggregate expenditures:

answer

Saving will exceed planned investment

question

Over time, an increase in the real output and incomes of the trading partners of France will:

answer

Increase French exports and French imports

question

The amount by which an aggregate expenditure schedule must shift downward to eliminate the demand-pull inflation and still achieve the full-employment GDP is an:

answer

Inflationary expenditure gap

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Which is a demand factor in economic growth?

answer

An increase in total spending in the economy

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The entry of US women into the workforce since the 1906s resulted in:

answer

A shift outwar in the production possibilities curve of the United States

question

A decline in a nation's rate of productivity growth will:

answer

Slow the growth of the standard of living

question

If the annual growth in a nation's productivity is 2.5% rather than 1.5%, then the nation's standard of living will double in about:

answer

28 years 70/2.5=28

question

Real GDP per capita:

answer

Can grow either more slowly or more rapidly than real GDP

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Growth is advantageous to a nation because:

answer

lessens the burden if scarcity

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Economists who believe the recent increase in the average US productivity growth rate may be permanent claim that the above-normal economic growth in the US between 1995 and 2009 was cause by:

answer

Increase entrepreneurial activity, application of information technology, and global competition

question

Critics of economic growth:

answer

Argue that economic growth does not resolve socioeconomic problems such an an unequal distribution of income and wealth

question

Real GDP

answer

will increase if there is an increase in the level of output

question

If real GDP increases by 5% while the population of a country increases by 7% then:

answer

Output per person necessarily decreases

question

While of the following is the best example of financial investment?

answer

A) Ford Motor Co. builds a new manufacturing plant B) A student purchases an MBA degree C) A retiree purchases google stock D) A young couple purchases a new home C

question

In economics, the word "shocks" refers to:

answer

Situations where firms expectations are unmet

question

Which of the following statements is most accurate about advanced economics?

answer

Economies experience a positive growth trend over the long run, but experience significant variability in the short run

question

Before the period of modern economic growth:

answer

Rates of population growth virtually matched rates of output growth

question

What is the difference between financial investment and economic investment?

answer

Financial invest refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods

question

If an economy wants to increase its current level of investment, it must:

answer

Sacrifice current consumption

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