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Econ 10A - Final

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Principles of Macroeconomic Theory - Final Study Guide
Ricardo Villeda
Quiz by Ricardo Villeda, updated more than 1 year ago
Ricardo Villeda
Created by Ricardo Villeda almost 8 years ago
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Resource summary

Question 1

Question
Over time the U.S. economy has had
Answer
  • fluctuations in growth and unemployment
  • full employment without serious inflation
  • continuous growth in output per person
  • steadily increasing unemployment

Question 2

Question
Economics is best defined as the study of how
Answer
  • to clarify resources used to produce final goods and services
  • resources are apportioned to satisfy human wants
  • modern businesses have grown and prospered
  • technology can be used to change scarce resources into free resources
  • pure capitalism has become the best system for satisfying basic human wants

Question 3

Question
Economists generally classify economic resources into the following three categories
Answer
  • men, money, and machines
  • savings, spending, and investment
  • land, labor, and capital
  • physical, human, and technological
  • employed, unemployed, and free

Question 4

Question
Society's pool of knowledge concerning the industrial arts is called
Answer
  • labor
  • land
  • capital
  • opportunity cost
  • technology

Question 5

Question
The purpose of an economic model is to
Answer
  • be a complex, exact replica of reality
  • demonstrate which values and beliefs are best for the economy
  • make predictions about the real world
  • manage the economy like an automatic pilot
  • set the prices in a price system

Question 6

Question
When Adam Smith described the invisible hand, he was talking about
Answer
  • The price system
  • central planning
  • opportunity cost
  • the division of labor
  • disguised unemployment

Question 7

Question
For this economy to produce 5 million units of consumer goods and 3 million units of defense goods,
Image:
ed0cc5c7-2b22-4ae4-872b-bfaba5655c32 (image/jpeg)
Answer
  • resources must be used inefficiently
  • the production possibilities curve must be pushed outward
  • unemployment must grow
  • income inequality must increase
  • society's resources must shrink

Question 8

Question
The U.S economy may be best characterized as an example of
Answer
  • Market socialism
  • opportunistic imperialism
  • militaristic capitalism
  • pure capitalism
  • Mixed capitalism

Question 9

Question
A market demand curve
Answer
  • Shifts as the price falls
  • slopes outward from left to right
  • is unaffected by changes in consumers' tastes and incomes
  • measures the rate of growth of per-capita output
  • shows the amount buyers would like to purchase at various prices

Question 10

Question
A decrease in demand
Answer
  • Results from a decrease in supply
  • means that the demand curve has shifted to the left
  • increases the quantity sold in the market
  • reflects an increasing consumer preference for the item
  • causes the equilibrium price to rise

Question 11

Question
In general, supply curves slope outward to the right because
Answer
  • increases in the price of a commodity lead to right outward shifts of the supply curve
  • rising prices motivate producers to offer more units for sale
  • technology progresses over time, increasing the ability of firms to produce more at existing prices
  • of increases in input prices as production is increased
  • empirical studies almost always show that the is the case

Question 12

Question
For a maket to exhibit excess demand
Answer
  • supply must exceed demand
  • the equilibrium price must be too high to clear the market
  • the actual price must be below the equilibrium price
  • the demand curve must slope outward
  • the market must be growing

Question 13

Question
The equilibrium price is
Image:
ce2f92b9-c5cd-4a13-935a-0c45b83c9b26 (image/jpeg)
Answer
  • more than $12 per pound
  • $12 per pound
  • $9 per pound
  • $7 per pound
  • less than $7 per pound

Question 14

Question
In a free market, actual price will
Answer
  • remain unchanged as equilibrium price changes
  • move toward equilibrium price
  • cause demand and supply curves to shift direction
  • always exceed equilibrium price
  • be very difficult to calculate

Question 15

Question
If farmers currently produce 800 bushels
Answer
  • the actual price is $2
  • the market is in equilibrium
  • actual price is below equilibrium price and will tend to rise
  • Only increases in demand would encourage the rise above 80 units
  • The market exhibits to surplus

Question 16

Question
Gross domestic product:
Answer
  • equals the total wages paid in a year
  • is a measure of government output
  • equals the total value of final goods and services produced in a year
  • is the sum of all goods, both final and intermediate
  • is an obsolete economic indicator of inflation

Question 17

Question
When measuring GDP, we double count if we include the value of:
Answer
  • Government expenditures
  • Intermediate goods
  • Nonmarket transactions
  • nonproductive transactions
  • net exports

Question 18

Question
GDP expressed in constant dollars is called:
Answer
  • capital accumulation
  • the net national product
  • permanent income
  • real GDP
  • a price index

Question 19

Question
To deflate, one must:
Answer
  • multiply the price ratio by 100
  • divide the current dollar values by the price index
  • subtract the constant dollar values from current dollar values
  • add the price index in the current year to the price index in the base year
  • find the difference between the values of two different sets of goods in a given year

Question 20

Question
(Data) According to the data in the table, from 2002 to 2003, GDP in constant dollars rose by:
Answer
  • 6.5 percent
  • 5.7 percent
  • 4.8 percent
  • 3.1 percent
  • 1.7 percent

Question 21

Question
The best example of consumer nondurable counted in this year's GDP is a:
Answer
  • Hair cut
  • Refrigerator
  • Pizza
  • Concert
  • Used car

Question 22

Question
(Data) GDP is:
Answer
  • A. $1240 billion
  • $1250 billion
  • $1340 billion
  • $1640 billion
  • $2590 billion

Question 23

Question
In this economy
Answer
  • the stock of capital goods fell during the year
  • the government balanced its budget
  • value-added exceeded the income
  • output exceeded GDP
  • imports exceeded exports

Question 24

Question
The level of real national output purchased at each price level is called:
Answer
  • A market basket
  • A market demand curve
  • An aggregate demand curve
  • A derived demand curve
  • A consumption of possibilities curve

Question 25

Question
If the money supply is fixed, increases in the price level reduce:
Answer
  • Interest rate
  • Imports
  • The rate of inflation
  • Total real output purchased
  • The average money cost of each transaction

Question 26

Question
When the economy is at equilibrium in the horizontal range of the short run aggregate supply curve,:
Answer
  • There is little upward pressure on prices because of widespread unemployment
  • The aggregate demand curve must be horizontal as well
  • Economic conditions similar to those experienced during world war II prevail
  • Real output is equal to potential output
  • A change in aggregate demand causes price levels to fall

Question 27

Question
People temporarily out of work because they are changing jobs or looking for their first jobs are examples of
Answer
  • frictional unemployment
  • structural unemployment
  • cyclical unemployment
  • inflationary unemployment
  • residual unemployment

Question 28

Question
People actively looking for work who cannot find jobs because of an insufficiency of aggregate demand are examples of:
Answer
  • Frictional unemployment
  • Structural unemployment
  • Cyclical unemployment
  • Inflationary unemployment
  • Residual unemployment

Question 29

Question
During a period when total spending is too high relative to potential output, the economy experiences:
Answer
  • Excessive unemployment
  • Failing average prices
  • A glut
  • A great crash
  • Inflation

Question 30

Question
The phase of the business cycle in which output is highest relative to its potential level is the:
Answer
  • Peak
  • Trough
  • Recession
  • Expansion
  • Trend

Question 31

Question
In general, a business cycle goes through its phases in the following sequence:
Answer
  • Trough, peak, expansion, recession
  • Recession, trough, expansion, peak
  • Trough, recession, expansion, peak
  • Trough, expansion, recession, peak
  • Expansion, recession, trough, peak

Question 32

Question
If Carolyn's consumption rises by $5,000 as her income from $26,000 to $32,000 per year, her marginal propensity to consume is
Answer
  • 0.16
  • 19
  • 0.83
  • 1.20
  • impossible to determine from the data

Question 33

Question
The average propensity to consume equals the
Answer
  • Change in personal consumption expenditures divided by the current level of consumption expenditures
  • amount spent on consumption divided by the amount of disposable income
  • change in personal consumption expenditures divided by the amount of disposable income
  • personal consumption expenditures divided by personal saving
  • sum of personal consumption expenditures and disposable income divided by two

Question 34

Question
An MPS of .32 implies that the MPC is
Answer
  • 1.32
  • 0.74
  • 0.68
  • 0.36
  • impossible to calculate unless the change in income is specified

Question 35

Question
If the interest rate is 7%, the number of projects undertaken would be
Answer
  • 1
  • 2
  • 3
  • 4
  • 5

Question 36

Question
The relationship between household spending and disposable income is known as the
Answer
  • investment function
  • multiplier
  • gross domestic product
  • consumption function
  • saving function

Question 37

Question
If disposable income raises by $100 billion and personal consumption expenditure rises by $60 billion, what is the marginal propensity to consume?
Answer
  • 0.60
  • 0.40
  • 1.60
  • 1.66
  • 2.50

Question 38

Question
If disposable income is $1,800 billion, the average propensity to consume is
Answer
  • .8
  • .84
  • .92
  • 1.0
  • 1.08

Question 39

Question
If disposable income is $1,900 billion, saving is
Answer
  • $16 billion
  • $20 billion
  • $144 billion
  • $160 billion
  • $180 billion

Question 40

Question
If the multiplier is 3, a $1 billion decrease in government spending will
Answer
  • lower equilibrium GDP by 1/3
  • Lower equilibrium GDP by 3
  • Raise equilibrium GDP by 1/3
  • raise equilibrium GDP by 3
  • leave equilibrium GDP unchanged but change intended spending by 1/3

Question 41

Question
One reason not to wait for wage rates and other input prices to fall and shift the short-run aggregate supply curve to the right in an economy experiencing a recessionary gap is that
Answer
  • such attention will result in inflation
  • unemployment would fall too fast for a complex adjustment
  • a government budget deficit would be created
  • it would take too long because wages and prices tend to be sticky
  • falling prices would reduce exports

Question 42

Question
Aggregate demand shifts to the right when
Answer
  • government spending is reduced
  • tax rates are reduced
  • equilibrium GDP is reduced
  • total intended spending is reduced
  • the inflator gap is reduced

Question 43

Question
When the equilibrium level of out put in an economy is above its potential output
Answer
  • the government should raise its spending
  • there is an inflationary gap
  • the long-run aggregate supply curve is horizontal
  • unemployment rates are high
  • wages and prices must rapidly falling

Question 44

Question
In an economy experiencing a high unemployment rate, appropriate fiscal policy would attempt to
Answer
  • wait for wages and other input prices to fall
  • discourage firms from investing
  • increase personal tax rates
  • reduce welfare payments to households
  • shift the aggregate demand curve to the right

Question 45

Question
When inflation constitutes a major economic problem, government policy may attempt to
Answer
  • shift the aggregate demand curve to the left
  • shift the aggregate supply curve to the ;eft
  • encourage and augment spending
  • raise the equilibrium price level
  • raise the minimum wage to reduce the effective price level

Question 46

Question
Government anti-inflationary fiscal policy
Answer
  • is intended to shift the short-run aggregate supply curve to the left
  • typically leads to an increase in total real output and a rise in the price level
  • leads to reduction in total real output when the short-run aggregate supply curve is positively sloped
  • shifts the aggregate demand curve to the right
  • is undertaken when the economy is in the horizontal

Question 47

Question
the value of money
Answer
  • rises during periods of inflation
  • is inversely related to the price level
  • is unaffected by creeping inflation
  • has remained relatively constant in the United States over the past 25 years
  • falls as real income rises

Question 48

Question
Inflation
Answer
  • means demand is falling and supply is rising
  • increases the value of the money supply
  • rarely affects the distribution of income or wealth
  • is generally highest when there is plenty of excess capacity and unemployed resources
  • is a general upward movement in the average level of prices

Question 49

Question
In the base year, a price index has a value of
Answer
  • -1
  • zero
  • 1/100
  • 100x100
  • 100

Question 50

Question
Inflation
Answer
  • hurts people living on fixed incomes
  • inevitably tends to die out
  • has been the experience of this country since its founding
  • does not tend to redistribute income
  • inevitably leads to deflation

Question 51

Question
During periods of high inflation, investors tend to buy real estate, art, and commodities like gold because
Answer
  • during inflation there are the only items that are not in short supply
  • such items tend to grow in value at a rate higher than the inflation rate
  • real estate and commodities are very cheap during periods of inflation
  • banks and other lenders are very eager to support such investments
  • the purchasing power of money trises during inflationary periods

Question 52

Question
Demand-side inflation is most likely to occur when the economy
Answer
  • has substantial excess capacity
  • is approaching or operating at full employment
  • has an aggregate demand curve shifting to the left
  • has a horizontal aggregate supply curve
  • has labor productivity rising faster than wages

Question 53

Question
Demand-side and supply-side inflations differ in that, in one case,
Answer
  • total real output rises, and in other, it falls
  • the price level rises, and in other, it falls
  • borrowers benefit and, in other, savers benefit
  • businesses benefit, and in other, householders benefit,
  • inflation is temporary, and in other, inflation is permanent

Question 54

Question
In part, supply-side inflation
Answer
  • is at the heart of demand-side inflation
  • is an example of too little money chasing too may goods
  • is an outgrow of a perfectly competitive market structure
  • results from significant price increases of important resources
  • occurs when labor productivity rises faster than wage rates

Question 55

Question
Currency in the United States is
Answer
  • convertible into gold at fixed rates
  • fiat money
  • issued by commercial banks based on their deposits
  • another name for checking deposits and NOW accounts
  • any interest bearing government note
  • bruh
  • All of them

Question 56

Question
Fiat money is any money that
Answer
  • exist in the form of coin or currency
  • is issued by the Federal Reserve
  • has a greater face value than its purchasing power
  • is money because the government says so and the people accept it
  • earns interest when deposited in banks

Question 57

Question
Assets a government says are money and are accepted by the public as money are called
Answer
  • near money
  • funny money
  • sophisticated money
  • nominal money
  • fiat money
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