Econ 202 Test 2 Don Lee - Assignment Essays

question

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by

answer

The level of aggregate expenditure.

question

If aggregate expenditure is more than GDP, how will the economy reach macroeconomic equilibrium?

answer

Inventories will decline, and GDP and employment will rise.

question

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is

answer

0.9

question

If disposable income falls by $50 billion and consumption falls by $40 billion, then the slope of the consumption function is

answer

0.80

question

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

answer

$5 million

question

If the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries what happens to US net exports?

answer

US net export rises

question

How will a decrease in government purchases affect aggregate expenditure in the United States?

answer

Decrease it

question

If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?

answer

Net exports will decrease as U.S. exports decrease.

question

On the 45-degree line diagram, the 45-degree line shows points where

answer

real aggregate expenditure equals real GDP.

question

When aggregate expenditure = GDP, what occurs?

answer

macroeconomic equilibrium

question

If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?

answer

Inventories will rise, and GDP and employment will decline.

question

Growth in real GDP per hour worked in the United States was slowest during what period of time?

answer

1973-1994

question

What happened during the productivity slowdown in the US during the mid 1970's in regard to oil prices?

answer

High oil prices raised the costs of doing business for markets worldwide, and reduced output worldwide as well.

question

The "New Economy" that emerged in the mid-1990s is based on

answer

information technology.

question

The economic growth model predicts that

answer

the level of real GDP per capita in poor countries will grow faster than in rich countries.

question

The purchase or building by a corporation of a facility in a foreign country is called

answer

foreign direct investment.

question

The process of countries becoming more open to foreign trade and investment is called

answer

Globalization

question

Increasing vaccinations against infectious diseases, undergoing political reform to decrease corruption, and enacting stronger laws to protect property rights are all policies which promote

answer

long-run economic growth

question

Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if

answer

there is technological change.

question

The productivity slowdown of the mid-1970s can be explained by

answer

a decline in labor quality

question

Consider two countries, Alpha and Beta. In Alpha, real GDP per capita is $6,000. In Beta, real GDP per capita is $9,000. Based on the economic growth model, what would you predict about the growth rates in real GDP per capita across these two countries?

answer

The growth rate of real GDP per capita will be higher in Alpha than it is in Beta.

question

Developing countries with low saving rates and poor levels of health and education are likely to experience

answer

low rates of growth in real GDP per capita.

question

How is GDP per capita in developing countries affected by globalization?

answer

It experiences a higher growth rate

question

Enforcing property rights in an economy will cause the level of investment to

answer

be raised

question

While the Soviet Union had plenty of capital, their economy still failed. what are three reasons for their economic failure?

answer

A centrally planned economy, no competition between firms, not enough technological change

question

Total spending = total production at

answer

macroeconomic equilibrium

question

How will a decrease in social security payments affect consumption spending?

answer

decrease it

question

What does Autonomous expenditure not depend on?

answer

Real GDP

question

When the price level in the United States falls relative to the price level of other countries, _____ will fall, _____ will rise, and _____ will rise.

answer

imports, exports, net exports

question

When the price level in the United States rises relative to the price level of other countries, _____ will fall, _____ will rise, and _____ will fall.

answer

exports, imports, net exports

question

If disposable income increases by $100 million, and consumption increases by $80 million, then the marginal propensity to consume is

answer

0.8

question

If the MPC is 0.2, then a $10 million increase in disposable income will increase consumption by

answer

$2 million

question

How does an increase in government purchases affect the aggregate expenditure line?

answer

It shifts the aggregate expenditure line upward.

question

The multiplier is calculated by

answer

change in real GDP/ change in autonomous expenditure.

question

If an increase in investment spending of $50 million results in a $500 million increase in equilibrium real GDP, then the multiplier is

answer

question

The multiplier _____ as the MPC rises

answer

rises

question

According to the graph, at what point is aggregate expenditure less than GDP?

answer

question

According to the graph, at what point will inventories fall and firms increase production?

answer

question

What causes a movement along the AD curve?

answer

an change in price level (A - B or B - A)

question

An increase in household's expectations will shift the AD curve

answer

right (AD1 to AD2)

question

What causes a movement along the SRAS curve?

answer

a change in price level (A - B or B - A)

question

An increase in labor force would shift the SRAS curve

answer

right (SRAS1 to SRAS2)

question

The AD curve shows the relationship between

answer

the price level and the quanitity of real GDP demanded by households, firms, and the government

question

The SRAS curve shows the relationship between

answer

the price level and the quantity of real GDP supplied by firms

question

Y stands for

answer

GDP

question

C stands for

answer

Consumption

question

I stands for

answer

Investment

question

G stands for

answer

government purchases

question

NX stands for

answer

net exports (exports - imports)

question

The process by which an increase or decrease in price causes real household wealth to decrease or increase respectively

answer

The wealth effect

question

Private Saving =

answer

Y+TR-C-T

question

Public Saving=

answer

T-G-TR

question

What prevents a country from developing (5 factors)

answer

Wars and revolution, poor public education, poor public health, low rates of savings, low rates of investment

question

Sources of technological changes (3)

answer

Better machinery and equipment, increase in human capital, better means of organizing and managing production

question

Foreign Direct Investment (FDI) is when

answer

Companies build factories and promote jobs in foreign countries

question

The two policies that promote technological changes

answer

FDI, Subsidizing research and development (R&D)

question

Policy that promotes savings and investment (1)

answer

Tax incentives

question

AE =

answer

C+I+G+NX

question

Y =

answer

C+I+G+NX

question

Five variables that determine consumption

answer

current disposable income, household wealth, expected future income, price level, interest rate

question

Disposable income =

answer

Y+TR-T

question

The most important determinant of consumption is

answer

Disposable income

question

correlation between expected future income and consumption

answer

positive

question

correlation between interest rates and consumption

answer

negative

question

correlation between price level and consumption

answer

negative

question

MPC =

answer

Change in consumption/change in disposable income

question

Variables that determine level of investment

answer

Expectations of future profitability, interest rate, taxes, cash flows

question

correlation of expectations of future profitability and investment

answer

positive

question

correlation of interest rate and investment

answer

negative

question

correlation of corporate income tax and investment

answer

negative

question

correlation of investment tax incentives and investment

answer

positive

question

cash flow =

answer

cash revenue-cash spending

question

correlation of cash flow and investment

answer

positive

1 of 73

question

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by

answer

The level of aggregate expenditure.

question

If aggregate expenditure is more than GDP, how will the economy reach macroeconomic equilibrium?

answer

Inventories will decline, and GDP and employment will rise.

question

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is

answer

0.9

question

If disposable income falls by $50 billion and consumption falls by $40 billion, then the slope of the consumption function is

answer

0.80

question

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by

answer

$5 million

question

If the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries what happens to US net exports?

answer

US net export rises

question

How will a decrease in government purchases affect aggregate expenditure in the United States?

answer

Decrease it

question

If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?

answer

Net exports will decrease as U.S. exports decrease.

question

On the 45-degree line diagram, the 45-degree line shows points where

answer

real aggregate expenditure equals real GDP.

question

When aggregate expenditure = GDP, what occurs?

answer

macroeconomic equilibrium

question

If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?

answer

Inventories will rise, and GDP and employment will decline.

question

Growth in real GDP per hour worked in the United States was slowest during what period of time?

answer

1973-1994

question

What happened during the productivity slowdown in the US during the mid 1970's in regard to oil prices?

answer

High oil prices raised the costs of doing business for markets worldwide, and reduced output worldwide as well.

question

The "New Economy" that emerged in the mid-1990s is based on

answer

information technology.

question

The economic growth model predicts that

answer

the level of real GDP per capita in poor countries will grow faster than in rich countries.

question

The purchase or building by a corporation of a facility in a foreign country is called

answer

foreign direct investment.

question

The process of countries becoming more open to foreign trade and investment is called

answer

Globalization

question

Increasing vaccinations against infectious diseases, undergoing political reform to decrease corruption, and enacting stronger laws to protect property rights are all policies which promote

answer

long-run economic growth

question

Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if

answer

there is technological change.

question

The productivity slowdown of the mid-1970s can be explained by

answer

a decline in labor quality

question

answer

The growth rate of real GDP per capita will be higher in Alpha than it is in Beta.

question

Developing countries with low saving rates and poor levels of health and education are likely to experience

answer

low rates of growth in real GDP per capita.

question

How is GDP per capita in developing countries affected by globalization?

answer

It experiences a higher growth rate

question

Enforcing property rights in an economy will cause the level of investment to

answer

be raised

question

While the Soviet Union had plenty of capital, their economy still failed. what are three reasons for their economic failure?

answer

A centrally planned economy, no competition between firms, not enough technological change

question

Total spending = total production at

answer

macroeconomic equilibrium

question

How will a decrease in social security payments affect consumption spending?

answer

decrease it

question

What does Autonomous expenditure not depend on?

answer

Real GDP

question

When the price level in the United States falls relative to the price level of other countries, _____ will fall, _____ will rise, and _____ will rise.

answer

imports, exports, net exports

question

When the price level in the United States rises relative to the price level of other countries, _____ will fall, _____ will rise, and _____ will fall.

answer

exports, imports, net exports

question

If disposable income increases by $100 million, and consumption increases by $80 million, then the marginal propensity to consume is

answer

0.8

question

If the MPC is 0.2, then a $10 million increase in disposable income will increase consumption by

answer

$2 million

question

How does an increase in government purchases affect the aggregate expenditure line?

answer

It shifts the aggregate expenditure line upward.

question

The multiplier is calculated by

answer

change in real GDP/ change in autonomous expenditure.

question

If an increase in investment spending of $50 million results in a $500 million increase in equilibrium real GDP, then the multiplier is

answer

question

The multiplier _____ as the MPC rises

answer

rises

question

According to the graph, at what point is aggregate expenditure less than GDP?

answer

question

According to the graph, at what point will inventories fall and firms increase production?

answer

question

What causes a movement along the AD curve?

answer

an change in price level (A - B or B - A)

question

An increase in household's expectations will shift the AD curve

answer

right (AD1 to AD2)

question

What causes a movement along the SRAS curve?

answer

a change in price level (A - B or B - A)

question

An increase in labor force would shift the SRAS curve

answer

right (SRAS1 to SRAS2)

question

The AD curve shows the relationship between

answer

the price level and the quanitity of real GDP demanded by households, firms, and the government

question

The SRAS curve shows the relationship between

answer

the price level and the quantity of real GDP supplied by firms

question

Y stands for

answer

GDP

question

C stands for

answer

Consumption

question

I stands for

answer

Investment

question

G stands for

answer

government purchases

question

NX stands for

answer

net exports (exports - imports)

question

The process by which an increase or decrease in price causes real household wealth to decrease or increase respectively

answer

The wealth effect

question

Private Saving =

answer

Y+TR-C-T

question

Public Saving=

answer

T-G-TR

question

What prevents a country from developing (5 factors)

answer

Wars and revolution, poor public education, poor public health, low rates of savings, low rates of investment

question

Sources of technological changes (3)

answer

Better machinery and equipment, increase in human capital, better means of organizing and managing production

question

Foreign Direct Investment (FDI) is when

answer

Companies build factories and promote jobs in foreign countries

question

The two policies that promote technological changes

answer

FDI, Subsidizing research and development (R&D)

question

Policy that promotes savings and investment (1)

answer

Tax incentives

question

AE =

answer

C+I+G+NX

question

Y =

answer

C+I+G+NX

question

Five variables that determine consumption

answer

current disposable income, household wealth, expected future income, price level, interest rate

question

Disposable income =

answer

Y+TR-T

question

The most important determinant of consumption is

answer

Disposable income

question

correlation between expected future income and consumption

answer

positive

question

correlation between interest rates and consumption

answer

negative

question

correlation between price level and consumption

answer

negative

question

MPC =

answer

Change in consumption/change in disposable income

question

Variables that determine level of investment

answer

Expectations of future profitability, interest rate, taxes, cash flows

question

correlation of expectations of future profitability and investment

answer

positive

question

correlation of interest rate and investment

answer

negative

question

correlation of corporate income tax and investment

answer

negative

question

correlation of investment tax incentives and investment

answer

positive

question

cash flow =

answer

cash revenue-cash spending

question

correlation of cash flow and investment

answer

positive

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order