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Intermediate Macro Economics Exam 1 Study Guide

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Quiz on Intermediate Macro Economics Exam 1 Study Guide, created by mehmehmehdino on 27/09/2014.
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Quiz by mehmehmehdino, updated more than 1 year ago
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Question 1

Question
What is the business cycle?
Answer
  • 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

Question 2

Question
The definition of inflation is:
Answer
  • 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

Question 3

Question
From 1900 to 1970, the United States had a trade deficit.
Answer
  • True
  • False

Question 4

Question
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
Answer
  • Agree;Disagree
  • Disagree;Disagree
  • Agree;Agree
  • Disagree;Agree

Question 5

Question
Which of the following questions are positive in nature? (as opposed to normative in anaylsis)
Answer
  • 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.

Question 6

Question
The components of total spending are
Answer
  • 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

Question 7

Question
Why are imports subtracted when GDP is calculated in the expenditure approach?
Answer
  • 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.

Question 8

Question
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?
Answer
  • 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.

Question 9

Question
It is discovered that consumers bought $ 6 Billion more furniture than previously thought. This furniture was manufactured in Sweden during the current year.
Answer
  • 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.

Question 10

Question
How does GDP differ from GNP?
Answer
  • 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.

Question 11

Question
If a country employs many foreign workers, GDP is likely to be ________GNP
Answer
  • Higher than
  • Lower than
  • Equal to
  • Not Enough Information

Question 12

Question
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:
Answer
  • $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.

Question 13

Question
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.
Answer
  • $1,060,000 increase in residential investment.
  • $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.
  • $60,000 increase in income received by the real estate broker.

Question 14

Question
What is a flow variable?
Answer
  • Variable that are measured per unit of time.
  • Variable that are defined at a point of time.

Question 15

Question
What is a stock variable?
Answer
  • Variable that are measured per unit of time.
  • Variables that are defined at a point of time.

Question 16

Question
Which of the following best describes the relationship between savings and wealth?
Answer
  • 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.

Question 17

Question
Since United States investment is generally higher than United States national saving:
Answer
  • 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.

Question 18

Question
Private savings is equal to:
Answer
  • Government spending minus taxes.
  • Disposable income minus consumption.
  • Income minus consumption.
  • Income minus consumption minus taxes

Question 19

Question
National saving is equal to:
Answer
  • The same as government saving
  • Government saving plus private saving plus capital
  • The same as private saving.
  • Government saving plus private saving.

Question 20

Question
Real GDP
Answer
  • 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.

Question 21

Question
Real GDP is a better measure of economic growth than nominal GDP because
Answer
  • 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.

Question 22

Question
The correct interest rate for studying most economic decision is
Answer
  • the expected interest rate
  • the nominal interest rate
  • the real interest rate

Question 23

Question
A problem with using the expected real interest rate is that:
Answer
  • 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.

Question 24

Question
The base year is a point where
Answer
  • nominal and real GDP collide
  • point were the GDP deflator= 100
  • all of the above
  • none of the above

Question 25

Question
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?
Answer
  • 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.

Question 26

Question
What is the marginal product of labor?
Answer
  • 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.

Question 27

Question
How is the MPN curve related to the labor demand curve?
Answer
  • 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.

Question 28

Question
A large number of immigrants entering the country would have which of the following impacts on the economy
Answer
  • 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

Question 29

Question
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)
Answer
  • 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

Question 30

Question
Shutting down unsafe forms of capital would have which of the following effects on the economy. Mark all that apply
Answer
  • Increase Capital Stock
  • Decrease Capital Stock
  • Increase Other Factors of production
  • Decrease other factors of production
  • Decrease Full Employment Output
  • Increase Full Employment Output
  • Does not impact full employment output

Question 31

Question
How does full-employment output affected by a decrease in the labor supply?
Answer
  • 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.

Question 32

Question
How is full-employment output affected by a beneficial supply shock ?
Answer
  • Full-employment will increase
  • Full-employment will not change
  • Full-employment output will decrease
  • The effect on full-employment output cannot be determined
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