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42 Cards in this Set
- Front
- Back
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1. Macroeconomics does not try to answer the question of:
A) why do some countries experience rapid growth. B) what is the rate of return on education. C) why do some countries have high rates of inflation. D) what causes recessions and depressions. |
B) what is the rate of return on education.
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2. The total income of everyone in the economy adjusted for the level of prices is called:
A) a recession. B) an inflation. C) real GDP. D) a business fluctuation. |
C) real GDP.
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3. Real GDP ______ over time and the growth rate of real GDP ______.
A) grows; fluctuates B) is steady; is steady C) grows; is steady D) is steady; fluctuates |
A) grows; fluctuates
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4. Deflation occurs when:
A) real GDP decreases. B) the unemployment rate decreases. C) prices fall. D) prices increase, but at a slower rate. |
C) prices fall.
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5. All of the following statements about sticky prices are true except:
A) in the short run, some wages and prices are sticky. B) the sticky-price model describes the equilibrium toward which the economy slowly gravitates. C) for studying year-to-year fluctuations, most macroeconomists believe that price stickiness is a better assumption than is price flexibility. D) magazine publishers tend to change their newsstand prices only every three or four years. |
B) the sticky-price model describes the equilibrium toward which the economy slowly
gravitates. |
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6. Variables that a model tries to explain are called:
A) endogenous. B) exogenous. C) market clearing. D) fixed. |
A) endogenous.
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In an economic model:
A) exogenous variables and endogenous variables are both fixed when they enter the model. B) endogenous variables and exogenous variables are both determined within the model. C) endogenous variables affect exogenous variables. D) exogenous variables affect endogenous variables. |
D) exogenous variables affect endogenous variables.
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Variables that a model takes as given are called:
A) endogenous B) exdogenous. C) market clearing. D) macroeconomic. |
B) exogenous
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7. The amount of capital in an economy is a ______ and the amount of investment is a
______. A) flow; stock B) stock; flow C) final good; intermediate good D) intermediate good; final good |
A) flow; stock
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8. Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002
and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was: A) $5. B) $6.50. C) $9.50. D) $11. |
B) $6.50.
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9. If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP
deflator grew by approximately ______ percent. A) 2 B) 3 C) 5 D) 8 |
A) 2
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10. Real GDP is a better measure of economic well-being than nominal GDP, because real
GDP: A) excludes the value of goods and services exported aboard. B) includes the value of government transfer payments. C) measures changes in the quantity of goods and services produced by holding prices constant. D) adjusts the value of goods and services produced for changes in the foreign exchange rate. |
C) measures changes in the quantity of goods and services produced by holding prices
constant. |
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11. If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657,
investment is $741, and net exports are –$1,910, then government purchases are: A) $2,977. B) $1,910. C) –$843. D) $1,067. |
A) $2,977.
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12. In the long run, the level of national income in an economy is determined by its:
A) factors of production and production function. B) real and nominal interest rate. C) government budget surplus or deficit. D) rate of economic and accounting profit. |
A) factors of production and production function.
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13. Unlike the real world, the classical model with fixed output assumes that:
A) all factors of production are fully utilized. B) all capital is fully utilized but some labor is unemployed. C) all labor is fully employed but some capital lies idle. D) some capital lies idle and some labor is unemployed. |
A) all factors of production are fully utilized.
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14. If bread is produced by using a constant returns to scale production function, then if the:
A) number of workers is doubled, twice as much bread will be produced. B) amount of equipment is doubled, twice as much bread will be produced. C) amounts of equipment and workers are both doubled, twice as much bread will be produced. D) amounts of equipment and workers are both doubled, four times as much bread will be produced. |
C) amounts of equipment and workers are both doubled, twice as much bread will be
produced. |
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15. A competitive, profit-maximizing firm hires labor until the:
A) marginal product of labor equals the wage. B) price of output multiplied by the marginal product of labor equals the wage. C) real wage equals the real rental price of capital. D) wage equals the rental price of capital. |
B) price of output multiplied by the marginal product of labor equals the wage.
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1. The most frequently used tool of monetary policy is:
A) open-market operations. B) changes in the discount rate. C) changes in reserve requirements. D) changes in interest rate paid on reserves |
A) open-market operations.
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2. To increase the monetary base, the Fed can:
A) conduct open-market purchases. B) conduct open-market sales. C) raise the interest rate paid on reserves. D) lower the required reserve ratio. |
A) conduct open-market purchases.
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3. If the Federal Reserve wishes to increase the money supply, it should:
A) decrease the discount rate. B) increase interest paid on reserves. C) sell government bonds. D) decrease the monetary base. |
A) decrease the discount rate.
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4. If the currency–deposit ratio equals 0.5 and the reserve–deposit ratio equals 0.1, then the
money multiplier equals: A) 0.6. B) 1.67. C) 2.0. D) 2.5. |
D) 2.5.
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5. If the monetary base equals $400 billion and the money multiplier equals 2, then the
money supply equals: A) $200 billion. B) $400 billion. C) $800 billion. D) $1,000 billion. |
C) $800 billion.
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6. Credit cards:
A) are part of the M1 money supply. B) are part of the M2 money supply. C) are part of both the M1 and M2 money supply. D) may affect the demand for money. |
D) may affect the demand for money.
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7. Checking account balances that are linked to debit cards are included in:
A) M1. B) M2 only. C) both M1 and M2. D) neither M1 nor M2. |
C) both M1 and M2.
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8. All of the following assets are included in M1 except:
A) currency. B) demand deposits. C) traveler's checks. D) money market deposit accounts. |
D) money market deposit accounts.
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9. Open-market operations are:
A) Commerce Department efforts to open foreign markets to international trade. B) Federal Reserve purchases and sales of government bonds. C) Securities and Exchange Commission rules requiring open disclosure of market trades. D) Treasury Department purchases and sales of the U.S. gold stock. |
B) Federal Reserve purchases and sales of government bonds.
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10. All of the following are considered major functions of money except as a:
A) medium of exchange. B) way to display wealth. C) unit of account. D) store of value. |
B) way to display wealth.
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11. The marginal product of capital is:
A) output divided by capital input. B) additional output produced when one additional unit of capital is added. C) additional output produced when one additional unit of capital and one additional unit of labor are added. D) value of additional output when one dollar's worth of additional capital is added. |
B) additional output produced when one additional unit of capital is added.
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12. A competitive firm chooses the:
A) price at which to sell the product produced. B) wage to pay labor. C) quantity of labor and capital to employ. D) rental price to pay capital. |
C) quantity of labor and capital to employ.
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13. If the production function describing an economy is Y = 100 K.25L.75, then the share of
output going to labor: A) is 25 percent. B) is 75 percent. C) depends on the quantities of labor and capital. D) depends on the state of technology. |
B) is 75 percent.
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14. In a Cobb–Douglas production function the marginal product of capital will increase if:
A) the quantity of labor increases. B) the quantity of capital increases. C) labor's share of output increases. D) average capital productivity decreases. |
A) the quantity of labor increases.
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15. Assume that the consumption function is given by C = 150 + 0.85(Y – T) and the tax
function is given by T = t0 + t1Y. If t0 increases by 1 unit, then consumption: A) decreases by 0.85 units. B) decreases by 0.15 units. C) increases by 0.15 units. D) increases by 0.85 units. |
A) decreases by 0.85 units.
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16. Other things equal, an increase in the interest rate leads to:
A) a decrease in the quantity of investment goods demanded. B) no change in the quantity of investment goods demanded. C) an increase in the quantity of investment goods demanded. D) sometimes an increase and sometimes a decrease in the quantity of investment goods demanded. |
A) a decrease in the quantity of investment goods demanded.
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17. Consumption depends positively on ______ and investment depends negatively on
______. A) disposable income; the real interest rate B) the real interest rate; disposable income C) private saving; public saving D) public saving; private saving |
A) disposable income; the real interest rate
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18. Public saving is:
A) income minus consumption minus government spending. B) disposable income minus consumption. C) disposable income minus government spending. D) government revenue minus government spending. |
D) government revenue minus government spending.
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19. If income is 4,800, consumption is 3,500, government spending is 1,000, and taxes
minus transfers are 800, public saving is: A) –200. B) 200. C) 500. D) 1,800. |
A) –200.
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20. Crowding out occurs when an increase in government spending ______ the interest rate
and investment ______. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases |
B) increases; decreases
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21. Assume that a tire company sells 4 tires to an automobile company for $400, another
company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is: A) $20,000. B) $20,000 less the automobile company's profit on the car. C) $20,900. D) $20,900 less the profits of all three companies on the items that they sold. |
A) $20,000.
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22. Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its
workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is: A) $10,000. B) $12,000. C) $20,000. D) $22,000. |
B) $12,000.
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23. An increase in the price of goods bought by firms and the government will show up in:
A) the CPI but not in the GDP deflator. B) the GDP deflator but not in the CPI. C) both the CPI and the GDP deflator. D) neither the CPI nor the GDP deflator. |
B) the GDP deflator but not in the CPI.
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24. A severe recession is called a(n):
A) depression. B) deflation. C) exogenous event. D) market-clearing assumption. |
A) depression.
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25. In an economic model:
A) exogenous variables and endogenous variables are both fixed when they enter the model. B) endogenous variables and exogenous variables are both determined within the model. C) endogenous variables affect exogenous variables. D) exogenous variables affect endogenous variables. |
D) exogenous variables affect endogenous variables.
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