Economic fluctuations (or business cycles)
a. are changes in the number of businesses started
b. are fluctuations in the level of economic activity, relative to a long-term growth trend
c. look at the role of business in the hiring resources
d. are fluctu
are fluctuations in the level of economic activity, relative to a long-term growth trend
A recession is best defined as a period during which
a. the percentage of the population employed is declining
b. the budget deficit and trade deficit are both growing
c. the price level is declining
d. more resources are used
e. employment, output, and i
employment, output, and income decline
Certain economic activities signal forthcoming changes in the economy. These are known as the
a. coincidental economic indicators
b. GDP implicit price deflator
c. leading economic indicators
d. composite of economic activities
e. lagging economic indicat
leading economic indicators
As the price level decreases, individuals feel richer. Therefore, they will spend more.
a. True
b. False
F***ing TRUE!!!
Given the following aggregate demand and aggregate supply schedules, determine the equilibrium level of prices and output. (OTHERSIDE)
a. equilibrium output $1,000 and equilibrium price level 25
b. equilibrium output $800 and equilibrium price level 50
c.
equilibrium output $600 and equilibrium price level 75
Which of the following would not be included in an economist's definition of investment spending?
a. the purchase of robots by Motor Magic Manufacturing
b. the construction of a new office building by the Mountain City Real Estate Company
c. the purchase
the purchase of General Motors stock by Donald Trump
If business leaders become pessimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.
a. reduce; increases; fulfilled
b. reduc
reduce; reduces; fulfilled
According to Keynes, the policy of incurring budget deficits will cause the equilibrium price level to __________ and equilibrium output to __________.
a. fall; rise
b. fall; fall
c. rise; rise
d. rise; fall
e. remain the same; remain the same
rise; rise
Stagflation is best described as
a. decreasing output and decreasing prices
b. decreasing output and increasing prices
c. no change in output or prices
d. increasing output and decreasing prices
e. increasing output and increasing prices
decreasing output and increasing prices
Use the following data to calculate GDP: consumption = $2,000; gross investment = $500; government purchases = $400; exports = $400; imports = $360.
a. GDP = $2,940
b. GDP = $3,660
c. GDP = $3,140
d. GDP = $3,400 e. GDP cannot be determined due to insuffi
GDP = $2,940
If a firm hires labor for $20,000, pays rent of $12,000, buys raw materials for $6,000, earns profits of $3,000, and sells its output for $41,000, the firm's value added is
a. $0
b. $15,000
c. $38,000
d. $35,000
e. $41,000
$35,000
Leakages include any diversion from the domestic spending stream.
a. True
b. False
True
If real GDP increased by 3 percent, then
a. government spending increased by 3 percent
b. the price level has increased by 3 percent
c. consumer spending increased by 3 percent
d. real output has increased by 3 percent
e. the increase might have been caus
real output has increased by 3 percent
Refer to Exhibit 7-3. Between 2002 and 2003, real GDP for this nation (OTHERSIDE)
a. increased by slightly more than $4 billion
b. decreased by slightly more than $5 billion
c. remained constant
d. increased by only about $1 billion
e. cannot be determine
increased by slightly more than $4 billion
In 2007, if the country of Moolah had consumption of $20 trillion, government purchases $5 trillion, net exports of -2 trillion, and GDP of $26 trillion, then gross investment must have been
a. - $3 trillion
b. - $29 trillion
c. + $29 trillion
d. + $3 tri
+ $3 trillion
If real GDP is $7 trillion for a particular year and the GDP price index is 140, then nominal GDP is $5 trillion.
a. True
b. False
MOTHA F*uckin FALSE
If Q is total real output, K is capital in use, L is labor employed, and the productivity of labor grows, other things constant, then a. Q/L rises
b. L/K rises
c. K/L rises
d. Q/K falls
e. (Q + K)/L falls
Q/L rises
Human capital does not include the machinery, equipment and other manufactured creations used to produce goods and services.
a. True
b. False
TRUE
Which of the following would not increase labor productivity?
a. technological change
b. an increased amount of capital per unit of labor
c. greater job experience for the work force
d. a lower unemployment rate
e. all of the above increase labor producti
a lower unemployment rate
A small change in the rate of productivity growth will have
a. a large impact on output in both the short run and the long run
b. a small impact on output in both the short run and the long run
c. a large impact on output in the short run but a small impa
a small impact on output in the short run but a large impact in the long run
If per capita GDP growth exceeds labor productivity growth,
a. human capital must be increasing
b. employment must be growing faster than the population
c. the labor-capital ratio must be decreasing
d. the data are incorrect; this could not occur
e. physi
employment must be growing faster than the population
Applied research seeks to answer specific questions or to apply scientific discoveries to the development of specific products.
a. True
b. False
True
According to the convergence theory,
a. the growth rates of all countries converge because in the long run, all resources are alike
b. the impact of basic and applied research should converge over time
c. human capital differences can never be made up
d.
less-developed countries should grow faster than advanced ones because of the
ability to copy new technology
Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The labor force participation rate is
a. 10 percent
b. 40 percent
c. 50 percent
d. 60 percent
e. 100 percent
60 percent
An individual with a Ph.D. in physics, who can find employment only in a pizza parlor, would be considered as:
a. a discouraged worker
b. unemployed
c. over-employed
d. underemployed
e. not in the labor force
Underemployed
Jamal lost his job as a shipbuilder during 2004. His shipyard never reopened, and so his very specialized skills are no longer in demand. Jamal's unemployment is best classified as
a. frictional
b. seasonal
c. structural
d. cyclical
e. voluntary
Structural
Full employment:
a. will always include some unemployment
b. exists when everyone who wants a job has one
c. exists when the unemployment rate is zero
d. exists when everyone in the labor force has a job
e. exists when everyone in the economy has a job
will always include some unemployment
Because of the way discouraged workers and part-time employment are measured, the official unemployment rate
a. understates the unemployment problem
b. overstates the unemployment problem
c. truly reflects the level of unemployment
d. overstates the size
Understates the unemployment problem
Which of the following would lead to the most inflation?
a. Both aggregate demand and aggregate supply increase.
b. Both aggregate demand and aggregate supply decrease.
c. Aggregate demand decreases and aggregate supply increases.
d. Aggregate demand incr
Aggregate demand increases and aggregate supply decreases.
Suppose you received a 4 percent increase in your nominal wage. Over the year, inflation runs about 7 percent. Which of the following is true?
a. Your real wage increased.
b. Both the nominal and real wages increased.
c. Both your nominal and real wages d
Although your nominal wage rose, your real wage decreased.
Raul borrowed $1,000 from Marta for a year and agreed to repay her $1,050 at the end of the year. If the inflation rate was 3 percent, what is the real rate of interest Marta received?
a. 10 percent
b. 5 percent
c. 3 percent
d. -2 percent
e. 2 percent
2 percent
Inflation
a. always reduces real income
b. never reduces real income
c. reduces the real income of workers when wages increase less than prices do
d. reduces the real income of workers when wages increase more than prices do
e. increases the real income o
reduces the real income of workers when wages increase less than prices do.
Induced saving
a. is that portion of saving that is directly related to income
b. plus autonomous saving equals disposable income
c. is that part of saving that is inversely related to the interest rate
d. is less than disposable income at every level of
Is the portion of saving that is directly related to income
If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its
a. marginal propensity to consume is -0.67
b. marginal propensity to consume is 0.88
c. marginal propensity to consume is 0.20
d. ma
Marginal propensity to save is zero.
Expectations that disposable income will increase in the future will:
a. shift the current consumption function down
b. shift the current consumption function up
c. result in a movement upward along the current consumption function
d. make the current con
Shift the current consumption function up
A grocery store manager has $600 in cash with which to buy a rug cleaner. Rental income from the cleaner would be about $75 per year. The interest rate is 11 percent. Should the manager buy the machine?
a. Yes, since the return of $75 is greater than 11 p
Yes, since the rate of return is greater than the rate of interest.
If investment is autonomous, which of the following is least likely to have an effect on the level of investment?
a. a change in the rate of interest
b. a change in the rate of inflation
c. a change in the level of optimism or pessimism about the economy
A change in the level of income
Which of the following is true regarding net taxes?
a. The level of net taxes varies inversely with the level of transfer payments.
b. The level of net taxes varies inversely with the level of taxes.
c. Net taxes must always be less than zero.
d. Net taxe
The level of net taxes varies inversely with the level of transfer payments.
An increase in incomes in other countries, other things equal, would cause U.S.
a. exports to decrease and imports to increase
b. exports to increase and imports to increase
c. imports to remain unchanged and exports to increase
d. imports to decrease and
Imports to remain unchanged and exports to increase.
An increase in the interest rate, other things equal, would
a. reduce the amount invested because the opportunity costs of investing would be
higher
b. increase the amount invested since the rate of return would be lower
c. increase the amount invested be
Reduce the amount invested because the opportunity costs of investing would be higher
In Exhibit 10-1 (OTHERSIDE), the marginal propensity to consume equals
a. 5/6
b. 4/5
c. 3/4
d. 2/3
e. 1/2
2/3
At the equilibrium level of GDP in Exhibit 10-2, injections equal
a. $1.0 trillion
b. $1.5 trillion
c. $1.4 trillion
d. $1.3 trillion
e. $1.2 trillion
$1.3 trillion
If planned spending exceeds planned output, the result is
a. unintended inventory decreases
b. a reduction in GDP
c. a decrease in imports
d. an increase in government purchases
e. unintended inventory increases
Unintended inventory decreases
If investment increases by $100 and, as a result, GDP ultimately increases by $400, then the MPC equals
(Trillions of Dollars)
a. 0.1
b. 0.75
c. 0.5
d. 0.25
e. 0.9
0.75
Suppose that planned autonomous investment increases by $200 billion and that the marginal propensity to consume equals 0.80. The equilibrium level of real GDP will increase by:
a. $1,000 billion
b. $250 billion
c. $200 billion
d. $160 billion
e. $40 bill
$1,000 billion
An increase in the price level will
A. shift the aggregate demand curve to the right
B. shift the aggregate demand curve to the left
C. decrease the level of aggregate quantity demanded
D. increase the level of aggregate quantity demanded
E. have no effec
Decrease the level of aggregate quantity demanded
A decrease in the price level will have which of the following effects?
a. The aggregate demand curve will shift leftward.
b. The aggregate expenditure line will shift downward.
c. The equilibrium level of output demanded will fall.
d. There will be upwar
The real value of dollar-denominated assets will rise.