What is the business cycle?
The short-run movements (inflations and deflations) of prices
The relationship between political activity and economic activity
The short-run movements (expansions and recessions) of economic activity
The long-run growth trend of the economy
The definition of inflation is:
a one-time increase in the price level
a period in which average prices are rising over time
a period in which average prices are falling over time
a one-time decrease in the price level
From 1900 to 1970, the United States had a trade deficit.
Economist could agree about the effects of a particular economic policy but disagree about the desirability of implementing the policy. This would occur if they ____ about the positive analysis and _____ about the normative analysis of the policy
Agree;Disagree
Disagree;Disagree
Agree;Agree
Disagree;Agree
Which of the following questions are positive in nature? (as opposed to normative in anaylsis)
A tax cut will raise interest rates.
A reduction in the payroll tax would primarily benefit poor and middle-class workers.
Payroll taxes are too high.
A cut in the payroll tax would improve the President's popularity ratings.
Payroll taxes should not be cut unless capital gains taxes are cut also.
The components of total spending are
investment, intermediate Goods, and Factors of Production
Consumption, Imports, Investment, and Money Supply
Consumption, Investment, Government Spending, and Net Exports
Consumption, Investment, Government Spending, Exports, and Imports
Why are imports subtracted when GDP is calculated in the expenditure approach?
They do not do so in formal markets and thus cannot be calculated through GDP.
They are valued in currencies other than domestic currency.
They are produced abroad and GDP only counts domestic production.
They are not a part of consumption in the domestic economy.
It is discovered that consumers bought $6 Billion more furniture than previously thought. This furniture was manufactured in North Carolina during the current year. What effects would this have on the United States national income and product accounts?
Consumption increases by $ 6 Billion, Imports increase by $6 Billion, and GDP does not change.
Investment increases by $6 Billion, and GDP increases by $6 Billion.
Consumption increases by $6 Billion, and GDP increases by $6 Billion.
Investment Increases by $ 6 Billion, imports increase by $ 6 Billion, GDP does not change.
None of the above is correct.
It is discovered that consumers bought $ 6 Billion more furniture than previously thought. This furniture was manufactured in Sweden during the current year.
Consumption increases by $ 6 Billion, imports increase by $ 6 Billion, and GDP does not change.
Consumption increases by $6 Billion, and GDP increases by $ 6 Billion.
Investment increases by $ 6 Billion, and GDP increases by $6 Billion.
Investment increases by $ 6 Billion, imports increase by $6 Billion, and GDP does not change.
None of the above answers is correct.
How does GDP differ from GNP?
GDP and GNP both measure production, there is no difference between them.
GDP measures production, but GNP measures income.
GDP measures national productivity, while GDP measures both national and international productivity.
GDP measures the output of factors of production in a nation, while GNP measures both national and international productivity.
If a country employs many foreign workers, GDP is likely to be ________GNP
Higher than
Lower than
Equal to
Not Enough Information
Colonel Hogwash purchases a Civil War-era mansion for $1,000,000. The broker's fee is 6%, which the colonel also pays, for a total expenditure of $1,060,000. Using the expenditure approach, this transaction would be recorded as:
$60,000 increase in residential investment.
$1,060,000 increase in domestic value added, for the value of the house.
$60,000 increase in domestic value added by the brokerage sector.
$1,060,000 increase in consumption.
$60,000 increase in income received by the real estate broker.
Colonel Hogwash purchases a Civil War-era mansion for $1,000,000. The broker's fee is 6% , which the colony also pays, for a total expenditure of $1,060,000.
$1,060,000 increase in residential investment.
What is a flow variable?
Variable that are measured per unit of time.
Variable that are defined at a point of time.
What is a stock variable?
Variables that are defined at a point of time.
Which of the following best describes the relationship between savings and wealth?
Saving is a flow into the stock of wealth.
Saving is a flow out of current income, but wealth is a flow into current into current income.
Wealth is a flow into the stock of saving.
Saving and wealth are unrelated variables.
Since United States investment is generally higher than United States national saving:
the US current account balance is generally postive
US national saving will rise in the future
US investment will fall in the future.
the US current account balance is generally negative.
Private savings is equal to:
Government spending minus taxes.
Disposable income minus consumption.
Income minus consumption.
Income minus consumption minus taxes
National saving is equal to:
The same as government saving
Government saving plus private saving plus capital
The same as private saving.
Government saving plus private saving.
Real GDP
Under chain weighting equals real consumption + real investment + real government purchases + real net exports.
Growth rates under chain weighting change when the base year changes.
Equals nominal GDP divided by CPI
and nominal GDP are equal in the base year because current prices and base-year prices are the same in the base year.
Real GDP is a better measure of economic growth than nominal GDP because
an increase in nominal GDP does not correctly measure market values of production in the economy.
an increase in nominal GDP may show an increase in prices rather than an increase in output.
an increase in nominal GDP only shows increases in prices.
an increase in nominal GDP only shows output.
The correct interest rate for studying most economic decision is
the expected interest rate
the nominal interest rate
the real interest rate
A problem with using the expected real interest rate is that:
Interest rates are important to banks and businesses but not to be consumers
People do not generally make informed economic decision.
It is difficult to determine what the public's expected rate of inflation is.
Interest rates change frequently, so the public cannot form stable expectations.
The base year is a point where
nominal and real GDP collide
point were the GDP deflator= 100
all of the above
none of the above
A technological breakthrough raises a country's total factor productivity, A, by 10%.
How does this change affect the production function relating output to capital and the production function relating output to labor?
The production function relating to capital to output will shift upward, the production function relating labor to output will shift downwards.
Both production functions will shift upwards.
The production function relating capital to output will shift downward, the production function relating labor to output will shift upward.
Both production functions will shift downward.
What is the marginal product of labor?
the additional amount of output produced when one unit of labor is added.
the additional amount of output produced when one unit of capital and one unit of labor is added
the total amount of output produced when an additional unit of labor is added
the additional amount of output produced when one unit of capital is added.
How is the MPN curve related to the labor demand curve?
The MPN curve divided by the price level is the labor demand curve.
The MPN curve is not related to the labor demand curve.
The MPN curve is identical to the labor demand curve.
The MPN curve multiplied by price level is the labor demand curve.
A large number of immigrants entering the country would have which of the following impacts on the economy
Increase the Labor Force
Decrease the Labor Force
Not Impact the Labor Force
Increase Full Employment Output
Decrease Full Employment Output
Not Impact Full Employment Output
Energy Supplies become depleted. Which of the following answers would describe the impact on the economy? (mark more than one response if more than one response is true)
Increases Factors of production
Decreases Factors of Production
Increases the capital stock
Decreases the Capital Stock
Increases Full Employment Output
Decreases Full Employment output
Does not impact full employment output
Shutting down unsafe forms of capital would have which of the following effects on the economy. Mark all that apply
Increase Capital Stock
Decrease Capital Stock
Increase Other Factors of production
Decrease other factors of production
How does full-employment output affected by a decrease in the labor supply?
Full-employment output will decrease.
Full-employment output will not change
Full -employment output will increase.
The effect on full-employment output cannot be determined.
How is full-employment output affected by a beneficial supply shock ?
Full-employment will increase
Full-employment will not change
Full-employment output will decrease
The effect on full-employment output cannot be determined
