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If housing prices rise nationwide, there will be a(n)
a. decrease in overall aggregate expenditures
b. drop in investment spending
c. decrease in wealth as consumers spend more income on mortgage payments
d. increase in consumer spending at any given level of disposable income

d. increase in consumer spending at any given level of disposable income

If there is an inflationary gap, which of the following accurately describes the adjustment to long-run equilibrium?
a. nominal wages rise, and the short-run aggregate supply curve shifts left until the economy reaches long-run equilibrium
b. nominal wages fall, and the aggregate demand curve shifts left until the economy reaches long-run equilibrium
c. nominal wages rise, and the aggregate demand curve shifts right until the economy reaches long-run equilibrium
d. nominal wages fall, and the short-run aggregate supply curve shifts right until the economy reaches long-run equilibrium

a. nominal wages rise, and the short-run aggregate supply curve shifts left until the economy reaches long-run equilibrium

The Business Barometer Index is currently in contraction territory. Which of the following is not one of the factors causing the decline?
a. slowing vehicle production
b. slumping foreign demand for industrial equipment
c. falling interest rates
d. rising uncertainty over global economy

c. falling interest rates

Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. The value of the MPC is:
a. 0.4
b. 4
c. 0.8
d. 0.75

d. 0.75

The only government policy that has a DIRECT effect on the aggregate demand curve is:
a. changing the level of government transfers
b. changing the level of government purchases of final goods and services
c. changing the quantity of money
d. raising or lowering the tax rate

changing the level of government purchases of final goods and services

National savings in a closed economy is all of the following EXCEPT:
a. GDP - C- G
b. government spending minus consumption
c. the total savings generated within the economy
d. the sum of private savings plus the government budget balance

b. government spending minus consumption

The belief that a higher rate of growth in real GDP will lead to higher planed investment spending is known as:
a. unplanned investment spending
b. the accelerator principle
c. the multiplier effect
d. fiscal policy with an emphasis on government spending

b. the accelerator principle

If the economy is in a recessionary gap, then:
a. nominal wages will rise and SRAS will shift to the left and the economy will eventually restore itself
b. AD will shift to the right and prices of goods will rise until the economy goes back to producing potential output
c. the economy will remain in a recession forever without any kind of government intervention
d. nominal wages will fall and SRAS will shift to the right until the economy is at full employment

d. nominal wages will fall and SRAS will shift to the right until the economy is at full employment

Decreasing funding to explore space
a. will shift the aggregate supply curve to the right
b. will shift the aggregate demand curve to the right
c. will shift the aggregate supply curve to the left
d. will shift the aggregate demand curve to the left

d. will shift the aggregate demand curve to the left

Vanessa tells peoples she is consuming more now and probably will continue to do so for some time, but she believes her consumption will smooth out over her lifetime. Vanessa's consumption pattern mirrors:
a. accelerator principle
b. the multiplier principle
c. life-cycle income hypothesis
d. relation income hypothesis

c. life-cycle income hypothesis

Suppose that the marginal propensity to consumer in 0.8 and investment spending increases by $100 billion. The increase in aggregate demand is:
a. $125 billion, composed of $100 billion in investment spending and $25 billion in consumption
b. $500 billion, composed of $100 billion in investment spending and $400 billion in consumption
c. $100 billion, the same amount as investment spending
d. $80 billion, composed of $100 billion in investment spending and a decrease in consumption of $20 billion

b. $500 billion, composed of $100 billion in investment spending and $400 billion in consumption

A fall in the market interest rate makes any investment project:
a. more profitable whether the funds were borrowed or came from retained earnings
b. more profitable only if the funds were borrowed
c. less profitable whether the funds were borrowed or came from retained earnings
d. less profitable if the funds were borrowed and more profitable if i came from retained earnings

a. more profitable whether the funds were borrowed or came from retained earnings

A sudden decrease in the growth rate of GDP will cause a change in:
a. neither planned nor unplanned investment spending
b. planned investment spending
c. unplanned investment spending
d. both planned and unplanned investment spending

b. planned investment spending

Factory new orders fell 5.2% in August. Which of the following causes the decline in new orders?
a. durable good orders
b. core capital goods
c. non defense capital goods
d. non durable good orders

a. durable good orders

The magnitude of the multiplier process that links planned aggregate spending to GDP is determined by:
a. the level of autonomous consumption
b. the marginal propensity to save
c. the level of planned investment spending
d. the interest rate

b. the marginal propensity to save

When David has no income, he spends $500. If his income increases to $2,000, he spends $1,900. Which of the following represents his consumption function?
a. C=0.95 x YD
b. C=$500 + 1,000 x YD
c. C=1.2 x YD
d. C=$500 + 0.7 x YD

d. C=$500 + 0.7 x YD

Productivity rose 2.2% in the second quarter of 2012 and compensation rose 3.7%. Calculate the growth in unit labor costs.
a. 5.9&
b. -2.7%
c. 1.5%
d. 3.7%

c. 1.5%

If membership falls in labor unions and unions become less popular, then:
a. production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level
b. production costs will increase, SRAS will shift to the left, decreasing equilibriumGDP and increasing the aggregate price level
c. production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level
d. production costs will fall, there will be a downward movement along SRAR, equilibrium GDP will increase and aggregate price level will fall

c. production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level

An expansionary fiscal policy:
a. would shift AD to the right and increase the size of the government budget deficit
b. would shift AD to the left and decrease the size of the government budget deficit
c. would not be effective in the presence of a budget surplus
d. in the presence of a budget deficit would decrease the size of the government debt

a. would shift AD to the right and increase the size of the government budget deficit

When Julie Ann's disposable income is $10,000, she spends $10,000, and when her disposable income is $15,000, her spending is $12,5000. Julie Ann's autonomous consumption is _______ and her _______.
a. $0; MPS=0.5
b. $0; MPC=0.5
c. $5,000; MPC=0.5
d. $10,000; MPS=0.5

c. $5,000; MPC=0.5

Interest rates and planned investment spending:
a. exhibit a negative relationship
b. have no relationship, since planned investment is fixed
c. have no relationship if the firm has retained earnings
d. have a positive relationship

a. exhibit a negative relationship

Federal Government debt held by the public excludes which of the following?
a. debt held by foreigners
b. debt held by the federal reserve
c. debt held by banks
d. debt held by households

b. debt held by the federal reserve

If the MPC is 0.8 and the government spending decreases by $50 million, then equilibrium GDP will decrease by:
a. $50 million
b. $250 million
c. $40 million
d. $200 million

b. $250 million

In an open economy where government spending was $30 billion, consumption was $70 billion, taxed were $20 billion and GDP was $100 billion this year, investment spending was $10 billion. As a result, there was:
a. a trade surplus of $20 billion and a financial deficit of $20 billion
b. a net capital outflow of $10 billion
c. capital inflows of $10 billion and capital outflows of $20 billion
d. a net capital inflow of $10 billion

d. a net capital inflow of $10 billion

If a government's debt is increasing but its GDP is increasing faster, one will find the government's:
a. ability to pay falling
b. deficit falling
c. total debt falling
d. debt-GDP ration falling

d. debt-GDP ration falling

During the Great Depression, the U.S.:
a. moved to the left along its short-run aggregate supply curve
b. moved to the left along its aggregate demand curve
c. moved to the right along its aggregate demand curve
d. moved to the right along its short-run aggregate supply curve

a. moved to the left along its short-run aggregate supply curve

You receive an email from a firm proposing the following business deal. They will send you $1,000 now, and in exchange you will send them $1,100 in one year. You will just break even from this deal if the annual interest rate is:
a. 6%
b. 10%
c. 4%
d. 12%

10%

Suppose the government increases taxed by more than is necessary to close an inflationary gap. Which of the following would most likely result?
a. this will not have any adverse effects on the economy, since inflation has been abated.
b. the economy will generate a larger inflationary gap than anticipated
c. equilibrium real GDP will be more than anticipated
d. the economy could move into a recession

d. the economy could move into a recession

Suppose the economy is operating in long-run equilibrium. If a positive demand shock hits the economy, we would expect:
a. a short-run increase in real GDP and the price level, and a long-run increase in real GDP and a decrease in the price level
b. a short-run increase in real GDP and the price level, and a long-run decrease in real GDP and a decrease in the price level
c. a short-run increase in real GDP and the price level, and a long-run decrease in real GDP and a increase in the price level
d. a short-run increase in real GDP and the price level, and a long-run increase in real GDP and a increase in the price level

c. a short-run increase in real GDP and the price level, and a long-run decrease in real GDP and a increase in the price level

Consumer credit rose $18 billion in August. Which of the following load categories was the major contributor to that growth?
a. government-backed student loans
b. vacation loans
c. boat loans
d. home equity loans

government-backed student loans

According to the Employment Cost Index, benefit costs make up ___% of total labor compensations costs.
a. 10%
b. 20%
c. 40%
d. 30%

d. 30%

An increase in investment leads to _____ in the price level and _____ in real GDP in the short run.
a. an increase; an increase
b. an increase; no change
c. a decrease; no change
d. no change; no change

a. an increase; an increase

If the MPC is 0.9, then the tax multiplier will be:
a. greater than 10
b. zero, because there is no multiplier effect from taxes
c. impossible to determine
d. less than 10

d. less than 10

According to the accelerator principle, a ____ rate of growth in real GDP leads to _____.
a. higher; higher inventory investment
b. higher; higher planned investment spending
c. lower; higher inventory investment
d. lower; lower unplanned inventory investment

b. higher; higher planned investment spending

According to the life-cycle hypothesis, wealth affects consumer spending because:
a. people try to consume as early in their lives as they can
b. wealthier people have higher incomes
c. wealthier people have better connections to buy in-demand goods
d. people try to smooth their consumption over the course of their lives

d. people try to smooth their consumption over the course of their lives

If in an open economy, a country imports more than it exports and the government budget deficit increases:
a. interset rates will increase, but the change in borrowing is ambiguous
b. the change in interest rates is ambiguous, but the amount of borrowing will increase
c. interest rates will decrease and the amount of borrowing will increase
d. interest rates will increase and the amount of borrowing will increase

b. the change in interest rates is ambiguous, but the amount of borrowing will increase

Which of the following would an economic policy maker rank as the most preferred type of shock?
a. positive supply shock
b. negative supply shock
c. negative demand shock
d. positive demand shock

a. positive supply shock

A shift away from taxing asset income and toward taxing consumption would lead to:
a. a larger supply of loanable funds, a lower interest rate, and faster economic growth
b. a larger government budget deficit and slower economic growth
c. a smaller supply of loanable funds, a higher interest rate, and faster economic growth
d. a larger demand for loanable funds, a higher interest rate, and slower economic growth

a. a larger supply of loanable funds, a lower interest rate, and faster economic growth

In the aggregate expenditures model, if aggregate expenditures are higher than real GDP:
a. actual real output is greater than equilibrium real output
b. there are unplanned decreases in inventories
c. employment decreases
d. aggregate output decreases

b. there are unplanned decreases in inventories

Businesses today has a record high "quick ratio" which is defined by which of the following?
a. liquid assets to short-term liabilities
b. cash to bonds
c. net worth to assets
d. short-term liabilities to net worth

a. liquid assets to short-term liabilities

Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your backyard. If the required reserve ratio is 10%, checking account deposits in the banking system as a whole could drop up to a maximum of
a. $0
b. $50
c. $500
d. $5,000

d. $5,000

In September, the Business Barometer Index was in _______ territory, and production was less than new orders foreshadowing a ______ in output
a. Expansion; downshift
b. Expansion; upshift
c. Contraction; downshift
d. Contraction; upshift

b. Expansion; upshift

Which of the following is an example of human capital?
a. A factory building
b. A computer
c. A college education
d. A software program

c. A college education

In a closed economy, which of the following equations reflects investment? (Y=GDP; C=consumption, G=government purchases, T=taxes, and TR=Transfers)
a. C+G-T
b. Y-C-T
c. Y-T+TR
d. Y-C-G

d. Y-C-G

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?
a. Services have become a smaller fraction of GDP since the 1950s
b. Unemployment insurance and other government transfer programs are more prevalent since the 1950s
c. The gov has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s
d. Both B and C

b. Unemployment insurance and other government transfer programs are more prevalent since the 1950s

If the US dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?
a. This will shift the aggregate demand curve to the right
b. This will move the economy down along a stationary aggregate demand curve
c. This will shift the aggregate demand curve to the left
d. This will move the economy up along a stationary aggregate demand curve

a. This will shift the aggregate demand curve to the right

Consumption is $5 mllion, planned investment spending is $8 million, government purchases are $10 million, and NX are $2 million. If GDP during that same period is $27 million, what unplanned changes in inventories occurred?
a. There was no unplanned change in inventories
b. There was an unplanned increase in inventories equal to $2 million
c. There was an unplanned decrease in inventories equal to $19 million
d. There was an unplanned decrease in inventories equal to $2 million

b. There was an unplanned increase in inventories equal to $2 million

The purchase of $1 million of Treasury securities by the Federal Reserve, if there is no change in the quantity of currency, will cause reserves at banks to
a. Decrease by less than $1 million
b. Increase by $1 million
c. Increase by less than $1 million
d. Decrease by $1 million

b. Increase by $1 million

If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?
a. 1 year and 3 months
b. 2 years and 6 months
c. 8 years
d. 8 years and 9 months

d. 8 years and 9 months

Which of the following will increase investment spending in the economy, holding everything else constant?
a. An increase in the federal government surplus
b. An increase in the budget deficit
c. An increase in transfer payments
d. An increase in consumer dissavings

a. An increase in the federal government surplus

If disposable income falls by $50 billion and consumption falls by $40 billion, then the slope of the consumption function is
a. 1.20
b. 0.80
c. 0.70
d. 0.10

b. 0.80

A manufacturer's unfilled orders will be unchanged if during the month
a. New Orders = change in inventory
b. New orders = production
c. New orders = shipments
d. New orders = unfilled orders

c. New orders = shipments

When an economy faces diminishing returns,
a. The slope of the per-worker production function becomes steeper as capital per hour worked increases
b. The per-worker production function shifts to the right
c. The per-worker production function shifts to the left
d. The slope of the per-worker production function becomes flatter as capital per hour worked increases

d. The slope of the per-worker production function becomes flatter as capital per hour worked increases

If the required reserve ratio is 10%, an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit) in the banking system as a whole of up to
a. $100
b. $1,000
c. $10,000
d. $100,000

c. $10,000

If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income will
a. Increase consumption by $2,500
b. Decrease consumption by $2,500
c. Increase consumption by $7,500
d. Decrease consumption by $7,500

d. Decrease consumption by $7,500

What is investment in a closed economy if you have the following economic data?
Y=$10 trillion C=$5 trillion G=$2 trillion TR=$2 trillion
a. $2 trillion
b. $3 trillion
c. $5 trillion
d. Cannot be determined without information on taxes (T)

b. $3 trillion

Which of the following would you expect to increase the equilibrium interest rate?
a. A decrease in the profitability of investment projects firms are considering
b. A change from an income tax to a consumption tax
c. An increase in the percentage of income after net taxes that households save
d. An increase in budget deficit

c. An increase in the percentage of income after net taxes that households save

In September, the Purchasing Managers Index was in _____ territory while the New Orders component was in _____ territory
a. Contraction; expansion
b. Contraction; contraction
c. Expansion; expansion
d. Expansion; contraction

d. Expansion; contraction

All of the following are affecting the demand for new homes EXCEPT
a. Rising number of foreclosed homes
b. Slow job growth
c. Tight credit
d. Low confidence

a. Rising number of foreclosed homes

Which of the following is not a factor-pushing down longer-term interest rates today?
a. Euro-zone Debt Crisis
b. Operation Twist
c. Large Federal Deficits
d. QE-2

c. Large Federal Deficits

The demand for durable goods
a. Has decreased over time
b. Declines by a greater percentage than does GDP during a recession
c. Declines by a smaller percentage than does GDP during a recession
d. Rises by a greater percentage than does GDP during a recession

c. Declines by a smaller percentage than does GDP during a recession

The response of investment spending to an increase in the government budget deficit is called
a. A private dissaving
b. Expansionary investment
c. Income minus net taxes
d. Crowding out

d. Crowding out

Typically, as an economy begins to emerge from a recessionary phase of the business cycle,
a. Unemployment falls immediately
b. Unemployment continues to rise
c. Inflation begins to fall
d. Investment begins to fall

b. Unemployment continues to rise

Which of the following explains the cause of the change in the unemployment rate at the end of a recession?
a. Discouraged workers leave the labor force and this makes the unemployment rate rise
b. Firms are hesitant to rehire laid off workers as they continue to operate below capacity
c. Discouraged workers return to the labor force and this make the unemployment rate fall
d. Firms rapidly hire new workers at the first sign of on an increase in demand for their goods

b. Firms are hesitant to rehire laid off workers as they continue to operate below capacity

Increases in real GDP since 1900 can actually underestimate growth in the standard of living for American since 1900 because
a. The crime rate was higher in 1900 than it is today
b. The quality of health care that exists today was not available in 1900
c. The level of pollution in 1900 was much higher than it is today
d. Goods and services are more expensive today as compared to 1900

b. The quality of health care that exists today was not available in 1900

An increase in the price level results in a(n) _____ in the quantity of real GDP demanded because _____.
a. Decrease; a higher price level reduces consumption, investment, and net exports
b. Decrease; a higher price level increases consumption, investment, and net exports
c. Increase; a higher price level increases consumption, investment, and net exports
d. Increase; a higher price level reduces consumption, investment, and net exports

a. Decrease; a higher price level reduces consumption, investment, and net exports

Which of the following will raise consumer expenditures?
a. An increase in expected future income
b. An increase in interest rates
c. An increase in the price level
d. A general decline in housing prices

a. An increase in expected future income

Over the last year productivity grew 0.74% and labor compensation increased 2.65% resulting in a ____ in Unit Labor Costs and a shift ____ in the supply curve
a. Decline; up
b. Rise; up
c. Decline; down
d. Rise; down

b. Rise; up

When the government runs a budget deficit we would expect to see that
a. Investment will fall
b. G + TR < T
c. Private savings will fall
d. Public savings is positive

a. Investment will fall

Which of the following government policies would most likely result in an increase in economic growth?
a. A decrease in the life of a patent from 20 years to 15 years
b. A decrease in the interest rate at which the government provides student loans
c. A decrease in government spending on grants issued through the National Insitute of Health
d. Decreased copyright protection on music and movies

b. A decrease in the interest rate at which the government provides student loans

When aggregate expenditure is more than GDP, which of the following is true?
a. There was an unplanned decrease in inventories
b. Firms spent less on capital goods than they planned
c. Households bought fewer new homes than they planned
d. All of the above must be true when aggregate expenditure is more than GDP

a. There was an unplanned decrease in inventories

Which of the following is not one of the three sources of technological change?
a. Increase in human capital
b. Better machinery and equipment
c. Additional amounts of existing capital
d. Better means of organizing and managing production

c. Additional amounts of existing capital

Consumer credit loan balances fell $9.5 billion in August because of all the following EXCEPT
a. Low consumer confidence
b. Low new auto interest rates
c. Tighter bank lending standards
d. Banks charging off loans

b. Low new auto interest rates

Assume the ISM Purchasing managers received the following survey data; 25% reported increasing business activity, 50% reported no change, and 25% reported decreasing business activity. Calculate the ISM Purchasing Managers Diffusion Index
a. 18%
b. 50%
c. 75%
d. 25%

b. 50%

Financial intermediary's main function is to match ____ with excess funds to ___ who want to borrow funds.
a. Households; firms
b. Households; households
c. Firms; households
d. Firms; firms

a. Households; firms

Which of the following will result in an increase in labor productivity?
a. A decline in the amount of human capital per worker
b. A decrease in the number of people attending institutions of higher education
c. An increase in technology
d. A decline in the capital stock per hour worked

c. An increase in technology

If the ISM Chicago Diffusion Index is greater than ____, this indicates a(n) ____ business environment in the Midwest
a. 0; expanding
b. 0; contracting
c. 50; expanding
d. 100; contracting

c. 50; expanding

An increase in the price level will
a. Move the economy down along a stationary short run aggregate supply curve
b. Move the economy up along a stationary short run aggregate supply curve
c. Shift the short run aggregate supply to the left
d. Shift the short run aggregate supply curve to the right

b. Move the economy up along a stationary short run aggregate supply curve

The international trade effect states that
a. An increase in the price level will lower net exports
b. An increase in the price level will raise exports
c. An increase in the price level will raise net exports
d. An increase in the price level will lower imports

a. An increase in the price level will lower net exports

When the price level in the US rises relative to the price level of other countries, ____ will rise, ____ will fall, and _____ will fail.
a. Net exports; exports; imports
b. Net exports; imports; exports
c. Exports; imports; net exports
d. Imports; exports; net exports

d. Imports; exports; net exports

Which of the following is true?
a. National income = Consumption - Savings + Taxes
b. National income = Consumption + Savings - Taxes
c. National income = Consumption - Savings - Taxes
d. National income = Consumption + Savings + Taxes

d. National income = Consumption + Savings + Taxes

Assume the following for the month of March: Production = 100, Change in Inventory = 40, New Orders = 20. Calculate the change in unfilled orders during March.
a. +160
b. -20
c. -40
d. +60

c. -40

A stock market crash which causes stock prices to fall should cause
a. An increase in consumption spending
b. No change in consumption spending
c. A decrease in consumption spending
d. An increase in wealth

c. A decrease in consumption spending

Spending on the war in Iraq is essentially categorized as government purchases. How do increases in spending on the war in Iraq affect the aggregate demand curve?
a. This will shift the aggregate demand curve to the left
b. This will move the economy down along a stationary aggregate demand curve
c. This will shift the aggregate demand curve to the right
d. This will move the economy up along a stationary aggregate demand curve

c. This will shift the aggregate demand curve to the right

During a(n) ____ many firms experience reduced profits, which reduces ____ and investment spending.
a. Recession; cash flow
b. Expansion; cash flow
c. Expansion; business confidence
d. Recession; business confidence

a. Recession; cash flow

Assume that compensation per hour rose 6% and the output per hour rose 2.5% over the last year, We can then say that unit labor costs _____, and the supply curve shifted ____.
a. Fell 6.0; down
b. Rose 8.5%; up
c. Fell 8.5%; down
d. Rose 3.5%; up

d. Rose 3.5%; up

Knowledge capital is ____ in production and ____. As a result, firms ___ free ride.
a. Rival; nonexcludable; cannot
b. Nonrival; nonexludable; can
c. Nonrival; nonexcludable; cannot
d. Nonrival; excludable; can

b. Nonrival; nonexludable; can

Labor productivity is
a. The quantity of output that can be produced in one hour by several workers
b. The quantity of output produced in one hour by one worker
c. The quantity of output produced in one hour by one machine
d. The quantity of labor produced in one hour

b. The quantity of output produced in one hour by one worker

If disposable income increased by $100 million, and consumption increases by $90 million, then the marginal propensity to consumer is
a. .9
b. .6
c. .75
d. .8

a. .9

____ of unemployment during ____ make it easier for workers to ____ wages.
a. High levels; an expansion; negotiate higher
b. Low levels; a recession; negotiate higher
c. High levels; a recession; accept lower
d. Low levels; an expansion; accept lower

c. High levels; a recession; accept lower

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long run equilibrium?
a. The leftward shift in aggregate demand that occurs after a recession
b. The rightward shift in aggregate demand that occurs after a recession
c. The leftward shift in short run aggregate supply that occurs after a recession
d. The rightward shift in short run aggregate supply that occurs after a recession

d. The rightward shift in short run aggregate supply that occurs after a recession

Suppose that real GDP for 2004 was $10,000 billion and real GDP for 2005 was $11,000 billion. What is the rate of growth of real GDP?
a. 2%
b. 5%
c. 10%
d. 1%

c. 10%

On the 45-degree line diagram, the 45-degree line shows point such that
a. Real aggregate output equals the quantity produced
b. Real aggregate expenditure equals rela GDP
c. Real aggregate expenditure equals C + I
d. Real income equals real GDP

b. Real aggregate expenditure equals rela GDP

Workers expect inflation to rise from 3% to 5% next year. As a result this should
a. Shift the short run aggregate supply curve to the left
b. Move the economy up along a stationary short run aggregate supply curve
c. Move the economy down along a stationary short run aggregate supply curve
d. Shift the short run aggregate supply curve to the right

a. Shift the short run aggregate supply curve to the left

An increase ____ in shifts ____ the production function, and makes it possible to produce a higher level of GDP with ___ capital per hour worked
a. Technology; up; the same amount of
b. Consumption; up; a lesser amount
c. Labor productivity; down the same amount of
d. Technology; down the same amount of

a. Technology; up; the same amount of

If technological change occurs in the economy,
a. We will move up along the long run aggregate supply curve
b. The long run aggregate supply curve will shift to the left
c. The long run aggregate supply curve will shift to the right
d. We will move down along the long run aggregate supply curve

c. The long run aggregate supply curve will shift to the right

If the MPC is .95, then a $10 million increase in disposable income will
a. Increase consumption by $9.5 million
b. Increase consumption by $200 million
c. Decrease consumption by $105 million
d. Increase consumption by $950 million

a. Increase consumption by $9.5 million

Private savings is defined as
a. Y + TR - C - T
b. T - G - TR
c. Y + TR + C - T
d. T + G + TR

a. Y + TR - C - T

An increase in taxes will ___ consumption spending, and a decrease in transfer payments will ____ consumption spending
a. Increase; increase
b. Increase; decrease
c. Decrease; decrease
d. Decrease; increase

c. Decrease; decrease

In the long run, a country will experience an increasing standard of living only if it experiences
a. A high rate of labor force growth
b. A slow rate of population growth
c. A high rate of consumption
d. Continuous technological change

d. Continuous technological change

A(n) ____ comes to an end with a business cycle ____
a. Recession; trough
b. Expansion; trough
c. Recession; peak
d. Expansion; phase

a. Recession; trough

Which of the following accurately describes the impact of the rule of law on a country's economic growth rate?
a. Countries with a strong rule of law have faster economic growth
b. Countries with a weak rule of law have faster economic growth
c. Countries where favoritism and bribery are common have stronger rates of growth
d. Countries that enforce property rights through law suits have slower economic growth

a. Countries with a strong rule of law have faster economic growth

If the annualized new home sales pace is currently 120,000 and the inventory of new homes in 50,000, calculate the number of months' supply of homes at the current sales rate
a. 8
b. 2
c. 5
d. 4

c. 5

The marginal propensity to consume is defined as
a. Consumption divided by disposable income
b. Disposable income divided by consumption
c. The change in disposable income divided by the change in consumption
d. The change in consumption divided by the change in disposable income

d. The change in consumption divided by the change in disposable income

An increase in aggregate demand causes an increase in ____ only in the short run, but causes an increase in ____ in both the short run and the long run
a. Real GDP; real GDP
b. The price level; real GDP
c. The price level; the price level
d. Real GDP; the price level

d. Real GDP; the price level

Revolving credit in the U.S. has been declining recently. Which of the following is not contributing factor to this decline?
a. Low consumer confidence
b. Banks writing down loans
c. Low mortgage interest rates
d. Tighter bank lending standards

c. Low mortgage interest rates

Endogenous growth theory states that increases in ___ capital will result in ___ at the ___ level
a. Physical; decreasing returns to scale; firm
b. Knowledge; increasing returns to scale; firm
c. Knowledge; increasing returns to scale; economy
d. Knowledge; decreasing returns to scale; economy

c. Knowledge; increasing returns to scale; economy

The best measure of the standard of living is
a. Real GDP per capita
b. Nominal GDP per capita
c. Nominal GDP
d. Real GDP

a. Real GDP per capita

Single family housing starts in January were relatively weak. Which of the following factors is not responsible for this weak performance?
a. Tight bank credit
b. Weak job growth
c. Low consumer confidence
d. Low mortgage interest rates

d. Low mortgage interest rates

Potential GDP is defined as
a. The amount of GDP produced if there is no structural unemployment
b. The maximum of GDP that the economy can produce
c. The amount of GDP produced if there is no frictional unemployment
d. The level of GDP attained when all firms are producing at capacity

d. The level of GDP attained when all firms are producing at capacity

According to Joseph Schumpeter, which of the factors of production is central to economic growth?
a. Natural resources
b. Land
c. Labor
d. The entrepreneur

d. The entrepreneur

According to Joseph Schumpeter, the theory of creative destruction describes a process by which
a. New products unleash a gail of destruction that drives old products out of the market
b. The creating of new products never involves the destruction of old products
c. New products are created by the destruction of capital
d. New products unleash a gail of destruction that creates other new products

a. New products unleash a gail of destruction that drives old products out of the market

Empirical evidence from 1960-2000 shows that convergence in economic growth is occurring in which of the following cases?
a. Low income industrial countries are catching up to high income industrial countries
b. Low income developing countries are catching up to high income industrial countries
c. Low income industrial countries are catching up to high income developing countries
d. All low income countries are catching up to all high income countries

a. Low income industrial countries are catching up to high income industrial countries

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