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Quiz on Intermediate Macro Economics Exam 1 Study Guide, created by mehmehmehdino on 27/09/2014.

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Intermediate Macro Economics Exam 1 Study Guide

Intermediate Macro Economics Exam 1 Study Guide

Question 1 of 32

1

What is the business cycle?

Select one of the following:

  • 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

Explanation

Question 2 of 32

1

The definition of inflation is:

Select one of the following:

  • 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

Explanation

Question 3 of 32

1

From 1900 to 1970, the United States had a trade deficit.

Select one of the following:

  • True
  • False

Explanation

Question 4 of 32

1

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

Select one of the following:

  • Agree;Disagree

  • Disagree;Disagree

  • Agree;Agree

  • Disagree;Agree

Explanation

Question 5 of 32

1

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

Select one or more of the following:

  • 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.

Explanation

Question 6 of 32

1

The components of total spending are

Select one of the following:

  • 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

Explanation

Question 7 of 32

1

Why are imports subtracted when GDP is calculated in the expenditure approach?

Select one of the following:

  • 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.

Explanation

Question 8 of 32

1

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?

Select one of the following:

  • 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.

Explanation

Question 9 of 32

1

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

Select one of the following:

  • 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.

Explanation

Question 10 of 32

1

How does GDP differ from GNP?

Select one of the following:

  • 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.

Explanation

Question 11 of 32

1

If a country employs many foreign workers, GDP is likely to be ________GNP

Select one of the following:

  • Higher than

  • Lower than

  • Equal to

  • Not Enough Information

Explanation

Question 12 of 32

1

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:

Select one of the following:

  • $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.

Explanation

Question 13 of 32

1

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.

Select one of the following:

  • $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.

Explanation

Question 14 of 32

1

What is a flow variable?

Select one of the following:

  • Variable that are measured per unit of time.

  • Variable that are defined at a point of time.

Explanation

Question 15 of 32

1

What is a stock variable?

Select one of the following:

  • Variable that are measured per unit of time.

  • Variables that are defined at a point of time.

Explanation

Question 16 of 32

1

Which of the following best describes the relationship between savings and wealth?

Select one of the following:

  • 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.

Explanation

Question 17 of 32

1

Since United States investment is generally higher than United States national saving:

Select one of the following:

  • 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.

Explanation

Question 18 of 32

1

Private savings is equal to:

Select one of the following:

  • Government spending minus taxes.

  • Disposable income minus consumption.

  • Income minus consumption.

  • Income minus consumption minus taxes

Explanation

Question 19 of 32

1

National saving is equal to:

Select one of the following:

  • The same as government saving

  • Government saving plus private saving plus capital

  • The same as private saving.

  • Government saving plus private saving.

Explanation

Question 20 of 32

1

Real GDP

Select one of the following:

  • 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.

Explanation

Question 21 of 32

1

Real GDP is a better measure of economic growth than nominal GDP because

Select one of the following:

  • 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.

Explanation

Question 22 of 32

1

The correct interest rate for studying most economic decision is

Select one of the following:

  • the expected interest rate

  • the nominal interest rate

  • the real interest rate

Explanation

Question 23 of 32

1

A problem with using the expected real interest rate is that:

Select one of the following:

  • 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.

Explanation

Question 24 of 32

1

The base year is a point where

Select one of the following:

  • nominal and real GDP collide

  • point were the GDP deflator= 100

  • all of the above

  • none of the above

Explanation

Question 25 of 32

1

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?

Select one of the following:

  • 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.

Explanation

Question 26 of 32

1

What is the marginal product of labor?

Select one of the following:

  • 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.

Explanation

Question 27 of 32

1

How is the MPN curve related to the labor demand curve?

Select one of the following:

  • 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.

Explanation

Question 28 of 32

1

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

Select one or more of the following:

  • 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

Explanation

Question 29 of 32

1

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)

Select one or more of the following:

  • 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

Explanation

Question 30 of 32

1

Shutting down unsafe forms of capital would have which of the following effects on the economy. Mark all that apply

Select one or more of the following:

  • 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

Explanation

Question 31 of 32

1

How does full-employment output affected by a decrease in the labor supply?

Select one or more of the following:

  • 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.

Explanation

Question 32 of 32

1

How is full-employment output affected by a beneficial supply shock ?

Select one or more of the following:

  • Full-employment will increase

  • Full-employment will not change

  • Full-employment output will decrease

  • The effect on full-employment output cannot be determined

Explanation

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