Macroeconomics chapters 7-11

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economic growth is best defined as an increase in:

either real GDP or real GDP per capita

which of the following best measures improvements in the standard of living of a nation

growth of real GDP per capita

given the annual growth rate of national income, the "rule of 70" allows

calculate the numbers of years required for national income to double

which of the following economic regions has experienced the least growth in the real GDP per capita

Africa

which of the following institutional structures is most likely to promote growth

a well-enforced system of property rights

as distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are:

improvements in technology; increases in the supply (stock) of capital goods; increases in the quantity and quality of natural resources; increase in the quantity and quality of human resources

other things equal, which of the following would decrease the rate of economic growth, as measured by changes in real GDP

a decrease in the labor force participation rate

empirical studies suggest that

technological advances account for about 40 percent of US productivity growth

if the economy's real GDP doubles in 18 years, we can

conclude that its average annual growth rate is about 4%

which of the following is the largest contributor to the growth of labor productivity in the United States

technological advance

under what circumstances do rate of economic growth understate the growth of economic well-being

product quality has improved

a nation's real GDP was $250 billion in 2009 and $265 billion in 2010. Its population was 120 million in 2009 and 125 million in 2010. What was its real GDP per capita in 2010?

2,000 per person

which of the following does not correctly characterize modern economic growth

it has not affected the average lifespan of human beings

the recurrent ups and downs in the level of economic activity extending over several years are referred to as:

business cycles

a trough in the business cycle occurs when:

employment and output reach their lowest levels

a recession is a decline

real GDP that lasts six months or longer

in which industry or sector of the economy is output least likely to be affected by the business cycle

agricultural commodities

the full-time homemakers and retirees are classified in the BLS data as

not in the labor forced

assuming the total population is 100 million, the labor force is 80 million, and 72 million workers are employed, the unemployment rate is

10%

in calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are

excluded from the labor force

a worker who loses a job at a call center because business firms switch the call center to another country is and example of

structural unemployment

a headline states: "real GDP falls again as the economy slumps." This condition is most likely produce what type of unemployment?

cyclical

"full employment" refers to the situation when there is

no cyclical unemployment

the GDP gap measures the difference

between actual GDP and potential GDP

if the negative GDP gap were equal to 3% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by

1.5%

inflation is a rise in

the general level of prices over time

if the consumer price index was 110 in one year and 118 in the next year, then the rate of inflation is approximately

7.3%

assume BLS determines that a typical consumer buys 30 apples and 60 hamburgers per month. The price of an apple was $1 and the price of a hamburger was $3 in 2010. The price of an apple rose to $2 in 2011, but the price of a hamburger remained the same in 2011. What is the CPI in 2011 if the base year in 2010.

114.3

the economy has an annual inflation rate of 2%. It will take approximately how many years for the price level to double

35 years

inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level

demand pull inflation

when oil and energy prices rise, the economy tends to experience

cost push inflation

a person's real income will increase by 4% if her nominal income

increases by 6% while the price index rises by 2%

an example of final goods in the calculation of GDP would be

flowers and pots purchased by household Lenny Davis

the sale of a used automobile would not be included in GDP of the current year because it is a

nonproduction transaction

which of the following is not a component of GDP in the expenditures approach

workers' wages and other compensation

money spent on the purchase of a new house is included in the GDP as a part of

gross domestic private investment

a distinguishing characteristic of public transfer payments is that

they involve no contribution to current production in return

personal income will equal disposable income when

personal taxes are zero

If Carol's disposable income increases from $1,000 to $1,600 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

consume is two-thirds

a decline in disposable income

decrease consumption by moving along a specific consumer schedule

a downward shift of the consumption schedule might be caused by a

increase in real interest rate

During the Great recession of 2007-2009, the investment demand curve shifted

to the left because of declines in expected returns

if consumers expect prices to rise and shortages to occur in the future, then it will shift

the consumption schedule upward and the saving schedule downward

if the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule

will shift downward

if the real interest rate falls, it causes

a movement along the investment demand curve to the right

if the slope of a consumption schedule is 0.8, MPC must be

0.8

in contrast to investment, consumption is

relatively stable

in the late 1990s the US stock market boomed, causing US consumption to rise, Economists refer to this outcome as the

wealth effect

a downward shift of the consumption schedule might be a caused by a

reverse wealth effect, caused by a decrease in stock market prices

at the point where the consumption schedule intersects the 45 degree line

the APC is 1.00

the MPC can be defined as the fraction of a

change in income that is spent

APC+ APS=

1

at income level 3, the amount of saving is represented by the line segment

FG

the investment demand slopes downward and to the right because lower real interest rates

enable more investment projects to be undertaken profitably

the multiplier can be calculated by dividing

the change in real GDP by the initial change in spending

the nominal rate of interest rate is 8.5% and the real rate is 5%. The expected rate of return on an investment is 8%, the firm should

undertake the investment because the expected rate of return of 8% is greater than the real rate of interest

the relationship between the real interest rate and investment is shown by the

investment demand curve

when we draw an investment demand curve we hold constant all of the following except

the investment rate

which of the following could shift consumption and saving schedules upward

a decrease in the personal income tax

with an MPS of .3, the MPC will be

.7

the APC can be defined as the fraction as a

given level of income that is spent

if government expenditures increase by $5 billion, GDP will increase by $25 billion. The multiplier is

5

The most basic assumption of the aggregate expenditures model is that

the average price level in the economy is fixed

the investment schedule shows the

amounts business firms collectively intend to invest at each possible level of GDP

the difference between the investment demand curve and the investment schedule is that the former shows

an inverse relationship between investment and interest rate, while the latter shows no correlation between investment and income

which of the following is graphed as a horizontal line across levels of real GDP

the investment schedule

when the economy is at its equilibrium GDP level, all of the following will occur:

aggregate expenditures= GDP; saving equals planned investment; there are no unplanned changes in inventories

savings is $15 billion at the $125 billion equilibrium level of output in a closed, private economy. Actual investment must be:

equal to $15 billion

planned investment is $20 billion and saving is $15 billion when GDP in the economy is $180 billion. The economy is

in disequilibrium and its GDP will increase

recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is .75. Aggregate expenditures must have fallen by

$15 billion

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