Macroeconomics Final Exam- Connect Quizzes

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look for and pursue opportunities to increase their utility

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when economists say that people act rationally in their self-interest, they mean that individuals

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benefit exceeds its marginal cost

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a person should consume more of something when its marginal

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the decision to engage in one activity means forgoing some other activity

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opportunity cost exists because

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all production involves the use of scarce resources and thus the sacrifice of alternative goods

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the assertion that "there is no free lunch" means that

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although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events

answer

which of the following is a correct statement about economic laws?

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all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant

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suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." this statement indicates that

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national income grew by 2.7 percent last year

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which of the following statements pertains most directly to macroeconomics?

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is based on value judgements

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a normative statement is one that

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natural gas

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which of the following is a land resource?

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autos owned by a car rental firm, computers at the car rental agency, vans used to shuttle rental customers to and from the airport

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which of the following lists includes only capital resources (and therefore no labor or land resources)?

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money, as such, does not produce anything

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money is not an economic resource because

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innovate

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the main function of the entrepreneur is to

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investment

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the process of producing and accumulating capital goods is called

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if the resources of an economy are in use, more of one good can be produced only if less of another good is produced

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the production possibilities curve illustrates the basic principle that

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resources are not generally equally efficient in producing every good

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a nation's production possibilities curve is bowed out from the origin because

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the economy was not employing all of its resources before the policy change

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assume that a change in government policy results in greater production of both consumer goods and investment goods. we can conclude that

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if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so

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the law of increasing opportunity costs states that

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comparing marginal benefits and marginal costs

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the point on the production possibilities curve that is most desirable can be found by

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upsloping because of increasing marginal opportunity costs

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the marginal cost curve is

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international specialization and trade

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which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

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the production possibilities curves of such nations have shifted inward

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some agricultural sub-saharan nations of africa have over farmed and overgrazed their land to the extent that significant portions of it have turned into desert. this suggests that

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central planning

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which of the following is a distinguishing feature of a command system?

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government should not interfere with the operation of the economy

answer

the term "laissez-faire" suggests that

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who owns the factors of production and the methods used to coordinate economic activity

answer

economic systems differ according to which two main characteristics?

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encourages owners to maintain to improve their property to preserve or enhance value

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private property

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results in greater total output

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specialization in production is important primarily because it

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expand in industry Z, as more resources will move to that industry

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if competitive industry Z is making substantial economic profit, output will

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encourages innovation because successful innovators are rewarded with economic profits

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the competitive market system

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the quantities and prices of the resources that households supply

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in a market economy, the distribution of output will be determined primarily by

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"in ways that minimize the cost per unit of output"

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the market system's answer to the fundamental question "how will the goods and services be produced?" is essentially

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"through the profit potential that encourages development of new technology"

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the market system's answer to the fundamental question "how will the system promote progress?" is essentially

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creative destruction

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the advent of Netflix movie streaming and redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. this is an example of

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buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers

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"consumer sovereignty" means that

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allocated resources efficiently and allows economic freedom

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two major virtues of the market systems are that it

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she has served society's interests by providing a desired good or service

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according to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then

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coordination problem under central planning

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"under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. this is a nearly impossible task without markets and profits." this quotation best identifies the

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workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products

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the incentive problems under communist central planning refers to the idea that

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households sell resources to businesses

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in the resource market,

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price and quantity demanded

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the demand curve shows the relationship between

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lower price increases the real incomes of buyers, enabling them to buy more

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one reason that the quantity demanded of a good increases when its price falls is that the

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a change in the price of product K

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which of the following will not cause the demand for the product K to change

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reduce the demand for soda and increase the demand for tacos

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suppose that tacos and pizza are substitutes, and that soda and pizza are complements. we would expect an increase in the price of pizza to

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price has declined and consumers therefore want to purchase more of the product

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an increase in the quantity demanded means that

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why the supply curve is upsloping

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increasing marginal cost of production explains

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increases product supply

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a government subsidy to the producers of a product

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the supply to increase as farmers plant more corn

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suppose that corn prices rise significantly. if farmers expect the price of corn to continue rising relative to other crops, then we would expect

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capacity of a competitive market to equalize quantity demanded and quantity supplied

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the rationing function of prices refers to the

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increase, quantity demanded to decrease, and quantity supplied to increase

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at the current price, there is a shortage of a product. we would expect price to

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quantity supplied exceeds quantity demanded

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if we say that a price is too high to clear the market, we mean that

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the use of the least-cost method of production

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productive efficiency refers to

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producing the combination of goods most desired by society

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allocative efficiency is concerned with

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an increase in supply

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which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

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suggests that the supply of blu-ray players has increased

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since their introduction, prices of blu-ray players have fallen and the quantity purchased has increased. this statement

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inconsistency between voters' interest in programs and politicians' interest in reelection

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as it relates to the political process, the principal-agent problem results from the

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is called "logrolling"

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"vote for my special local project and I will vote for yours." this political technique

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rent-seeking behavior

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suppose American winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions. this would be an example of

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of the absence of competitive market pressures

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public choice economists contend public bureaucracies are inefficient primarily because

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large economic gains to a small number of people and small economic losses to a large number of people

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the special-interest effect is one that yields

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reflects limited and bundled choices in the public sector

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in a sporting goods store, you can buy the equipment you want and forgo the rest. but in an election you "buy: the entire range of the candidate's positions, including some you may not agree with. this differnece

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authorized expenditures benefiting a narrow, specifically designated group that are included in more comprehensive spending legislation

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"earmarks" refer to

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deregulation of the industry

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which of the following is considered a potential solution to some regulatory capture?

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government officials use unlawful misdirection of governmental resources for their own personal gain

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political corruption occurs whenever

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majority voting fails, under some circumstances, to make consistent choices that reflect the community's underlying preferences

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according to the paradox of voting,

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public and quasi-public goods

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government in a market system can increase economic efficiency by collecting taxes in order to subsidize the production of

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economically inefficient outcomes caused by voting problems of incentive structures in government

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the term government failure refers to the

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does not consider the strength of individual voters' preferences

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majority voting my product economically inefficient outcomes because it

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short-run fluctuations in output and employment and long-run economic growth

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the two topics of primary concern in macroeconomics are

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economies experience a positive growth trend over the long run but experience significant variability in the short run

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which of the following statements is accurate about most economies?

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nominal GDP would rise, but real GDP would be unchanged

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if the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

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rates of population growth virtually matched rates of output growth

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before the period of modern economic growth,

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current income exceeds current spending

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savings are generated whenever

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resources are devoted to increasing future output

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when economists refer to "investment," they are describing a situation where

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boeing builds a new factory

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which of the following would an economist consider to be investment?

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sacrifice current consumption

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if an economy wants to increase its current level of investment, it must

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promote economic growth by helping to direct household savings to businesses that want to invest

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banks and other financial institutions

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when expectations are unmet

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shocks to the economy occur

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consumers become worried about job loss and buy fewer goods and services than expected

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which of the following is an example of a demand shock?

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price inflexibility

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when demand shocks lead to recessions, it is mainly due to

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firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels

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which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices?

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airline tickets

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for which of the following goods and services prices least sticky?

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firms may be reluctant to change prices for fear of setting off a price way or losing customers to rivals

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which of the following best explains why prices tend to be inflexible even when demand changes?

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prices tend to be sticky in the short run but become more flexible over time

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which of the following statements best describes price flexibility in the economy?

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measures the value of final output produced within a nation in one year, using current prices

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nominal gross domestic product

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nominal GDP decreases, while real GDP stays constant

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suppose a small economy produces only smart TVs. in year one, 100,000 TVs are produced and sold at a price of $1,200 each. in year two, 100,000 TVs are produced and sold at a price of $1,000 each. as a result,

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GDP that year is $500 billion

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suppose the total monetary value of all final goods and services produced in a particular country in a year is $500 billion and the total monetary value of final goods and services sold is $450 billion. we can conclude that

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only counting final goods

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national income accountants can avoid multiple counting by

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productive but is excluded from GDP because no market transaction occurs

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tom atoe grows fruit and vegetables for home consumption. this activity is

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$1,200

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arthur sells $100 worth of cotton to bob. bob turns the cotton into cloth, which he sells to camille for $300. camille uses the cloth to make prom dresses that she sells to donita for $700. donita sells the dresses for $1,200 to kids attending the prom. the total contribution to GDP of this series of transactions is

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C is growing more rapidly than that in economy B

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economy A: gross investment equals depreciation
economy B: depreciation exceeds gross investment
economy C: gross investment exceeds depreciation
other things equal, the information suggests that the production capacity in economy

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automobiles for personal use but not houses

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in national income accounting, the personal consumption expenditures category includes purchases of

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a nation's imports exceed its exports

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net exports are negative when

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the purchase of 100 shares of AT&T by a retired business executive

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which of the following is not economic investment?

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subtract $10 billion from other elements of investment in calculating total investment

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suppose that inventories were $80 billion in year 1 and $70 billion in year 2. for year 2, national income accountants would

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personal consumption

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the largest component of total expenditures in the united states is

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compensation of employees

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the largest component of national income is

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transfer payments exceeded the sum of social security contributions, corporate income taxes, and undistributed corporate profits

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if personal income exceeds national income in a particular year, we can conclude that

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the GDP price index

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nominal GDP is adjusted for price changes using

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inflated to $1,080 billion

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suppose a nation's nominal GDP is $972 billion and the general price index is 90. to make this year's GDP comparable with an earlier base year's GDP, then this year's GDP must be

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suggests that the general price level has risen

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the fact that nominal GDP has risen faster than real GDP

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nominal GDP must have increased

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if real GDP rises and the GDP price index has increased,

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understated GDP

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a large underground economy results in an

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understate economic welfare because it does not take into account increases in leisure

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GDP tends to

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quality of products and services improves

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the growth of GDP may understate changes in the economy's economic well-being over time if the

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sums together the dollar value of economic activity at every stage of production

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gross output (GO)

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14 years

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if a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately

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3.1 percent

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between 1950 and 2018, US real GDP grew at an average annual rate of about

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2.0 percent

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between 1950 and 22018, US real GDP per capita grew at an average annual rate of about

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modern economic growth is characterized by sustained and ongoing increases in living standards

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which of the following statements is most accurate about modern economic growth?

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move toward more democratic forms of government

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countries that have experienced modern economic growth have also tended to

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africa

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which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

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tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs

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economic growth rates in follower countries

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people are more likely to invest if they don't fear that others can take their returns on investment without compensation

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strong property rights are important for modern economic growth because

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is $500

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if the number of worker-hours in an economy is 100 and its labor productivity is $5 of output per worker-hour, the economy's real GDP

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labor productivity must be $0.50

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suppose total output (real GDP) is $10,000 and worker hours are 20,000. we can conclude that

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technological advance

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the largest contributor to increases in the productivity of american labor is

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increased the average productivity of labor

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the historical reallocation of labor from agriculture to manufacturing in the united states has

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public capital goods such as highways and sanitation systems

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a nation's infrastructure refers to

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labor productivity to rise

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other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect

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network effects

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increases in the value of a product to each user, including existing users, as the total number of users rises are called

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higher levels of debt incurred prior to the great recession have hindered firms' ability to make productivity-enhancing investments

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which of the following explanations is consistent with the decline in productivity growth that followed the great recession?

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argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth

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critics of economic growth

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level of total spending

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most economists agree that the immediate determinant of the volume of output and employment is the

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capital goods and durable consumer goods

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the industries or sectors of the economy in which business cycle fluctuations tend to affect output most (except in 2020) are

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expansion

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in which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

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that rate of unemployment occurring when the economy is at its potential output

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the natural rate of unemployment is

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teenagers is much higher than that of adults

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the unemployment rate of

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not in the labor force

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alex works in his own home as a homemaker and full-time caretake of his children. officially, he is

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structural unemployment

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susie has lost her job in a vermont textile plant because of import competition. she intends to take a short course in electrons and move to oregon, where she anticipates that a new job will be available. we can say that susie is faced with

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a deficiency of spending on goods and services

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cyclical unemployment results from

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structural and frictional unemployment

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which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

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the official unemployment rate will remain unchanged

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suppose there are 10 million part-time workers and 90 million full-time workers in an economy. five million of the part-time workers switch to full-time work. as a result,

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a high rate of unemployment

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a large negative GDP gap implies

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$385 billion

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if potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

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deflation of 3.33 percent

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if the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

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3.5 percent

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between 1980 and 2000, the price level approximately doubled. the average annual rate of inflation over this 20-year period was about

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moves the economy inward from its production possibilities curve

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cost-push inflation

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demand-pull inflation

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which of the following would most likely occur during the expansionary phase of the business cycle?

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rise by about 15 percent

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suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. the person's real income will

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arbitrarily redistributes real income and wealth

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inflation is undesirable because it

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lender correctly anticipates inflation and increases the nominal interest rate accordingly

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a lender need not be penalized by inflation if the

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all the points at which consumption and income are equal

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the 45 degree line on a graph relating consumption and income shows

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average propensity to consume falls

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as disposable income goes up, the

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decreases consumption by moving downward along a specific consumption schedule

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a decline in disposable income

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relatively stable

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in contrast to investment, consumption is

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consumption exceeds income

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dissaving occurs where

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plotting the vertical differences between the consumption schedule and the 45 degree line

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given the consumption schedule, it is possible to graph the relevant saving schedule by

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both the consumption and saving schedules downward

answer

when consumption and savings are graphed relative to real GDP, an increase in personal taxes will shift

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enable more investment projects to be undertaken profitably

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

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15 percent

answer

assume a machine that has a useful life of only one year costs $2,000. assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. the expected rate of return on this machine is

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purchase the machine because the expected rate of return exceeds the interest rate

answer

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$10 billion

answer

assume there are no prospective investment projects that will yield an expected rate of return of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, and so on. if the real interest rate is 15 percent in this economy, the aggregate amount of investment will be

question

shift the investment demand curve to the right

answer

other things equal, a 110 percent decrease in corporate income taxes will

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an increase in the excess production capacity available in industry

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the investment demand curve will shift to the left as a result of

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more variable than real GDP

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in annual percentage terms, investment spending in the united states is

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infinitely large

answer

if 100 percent of any change in income is spent, the multiplier will be

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increase by $10 billion

answer

in the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

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consumption by $80 billion

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if the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase

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in addition to saving

answer

the actual multiplier effect in the US economy is less than the multiplier effect in the text examples because

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an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending

answer

the interest-rate effect suggests that

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increase US imports and decrease US exports

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the foreign purchases effect suggests that an increase in the US price level relative to other countries will

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a change in the price level

answer

which one of the following would not shift the aggregate demand curve?

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leftward by $40 billion at each price level

answer

if investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift

question

an increase in stock prices that increases consumer wealth

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which of the following would most likely shift the aggregate demand curve to the right?

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increase aggregate demand

answer

in an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. we would expect this to

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total output depends on the volume of spending

answer

the shape of the immediate-short-run aggregate supply curve implies that

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is steeper above the full-employment output than below it

answer

the aggregate supply curve (short run)

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per-unit production costs rise as the economy moves toward and beyond its full-employment real output

answer

aggregate supply curve (short run) is upsloping because

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productivity

answer

a rightward shift in the aggregate supply curve is best explained by an increase in

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remain unchanged

answer

suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. all else being equal, if the price of each input increased from $4 to $6, productivity would

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supply curve will shift

answer

suppose that nominal wages fall and productivity rises in a particular economy. other things equal, the aggregate

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increase both aggregate demand and aggregate supply

answer

other things equal, a reduction in personal and business taxes can be expected to

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eventually rise and fall to match upward or downward changes in the price level

answer

the economy's long-run AS curve assumes that wages and other resource prices

question

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve

answer

graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a

question

diminished if inflation occurs

answer

the size of the multiplier associated with an initial increase in spending will be

question

labor contracts

answer

when aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of

question

decreasing taxes by $25 billion

answer

if the MPC in an economy is 0.8, government could shift the aggregate demand curve rightward by $100 billion by

question

increase tax rates and/or reduce government spending

answer

in a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. full-employment GDP is $120 billion. to obtain price-level stability under these conditions, the government should

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shift the AD curve to the left

answer

in an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will

question

larger is the economy's MPC

answer

a tax reduction of a specific amount will be more expansionary the

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with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus

answer

built-in stability means that

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tax revenues would exceed government expenditures if full employment were achieved

answer

if the economy has a cyclically adjusted budget surplus, this means that

question

contractionary fiscal policy

answer

suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP. the government is engaging in an

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politician will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections

answer

which of the following best describes the idea of a political business cycle?

question

increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment

answer

the crowding-out effect of expansionary fiscal policy suggests that

question

an increase in government spending on infrastructure that increases private sector productivity

answer

which of the following fiscal policy actions is most likely to increase aggregate supply?

question

about 76 percent of the size of GDP

answer

in 2018, the US federal debt held by the public was

question

29 percent

answer

approximately what percentage of the US public debt is held by foreign individuals and institutions (2018)?

question

reducing the current level of investment

answer

the most likely way the public debt burdens future generations, if at all, is by

1 of 188

question

look for and pursue opportunities to increase their utility

answer

when economists say that people act rationally in their self-interest, they mean that individuals

question

benefit exceeds its marginal cost

answer

a person should consume more of something when its marginal

question

the decision to engage in one activity means forgoing some other activity

answer

opportunity cost exists because

question

all production involves the use of scarce resources and thus the sacrifice of alternative goods

answer

the assertion that "there is no free lunch" means that

question

although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events

answer

which of the following is a correct statement about economic laws?

question

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant

answer

suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." this statement indicates that

question

national income grew by 2.7 percent last year

answer

which of the following statements pertains most directly to macroeconomics?

question

is based on value judgements

answer

a normative statement is one that

question

natural gas

answer

which of the following is a land resource?

question

autos owned by a car rental firm, computers at the car rental agency, vans used to shuttle rental customers to and from the airport

answer

which of the following lists includes only capital resources (and therefore no labor or land resources)?

question

money, as such, does not produce anything

answer

money is not an economic resource because

question

innovate

answer

the main function of the entrepreneur is to

question

investment

answer

the process of producing and accumulating capital goods is called

question

if the resources of an economy are in use, more of one good can be produced only if less of another good is produced

answer

the production possibilities curve illustrates the basic principle that

question

resources are not generally equally efficient in producing every good

answer

a nation's production possibilities curve is bowed out from the origin because

question

the economy was not employing all of its resources before the policy change

answer

assume that a change in government policy results in greater production of both consumer goods and investment goods. we can conclude that

question

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so

answer

the law of increasing opportunity costs states that

question

comparing marginal benefits and marginal costs

answer

the point on the production possibilities curve that is most desirable can be found by

question

upsloping because of increasing marginal opportunity costs

answer

the marginal cost curve is

question

international specialization and trade

answer

which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

question

the production possibilities curves of such nations have shifted inward

answer

some agricultural sub-saharan nations of africa have over farmed and overgrazed their land to the extent that significant portions of it have turned into desert. this suggests that

question

central planning

answer

which of the following is a distinguishing feature of a command system?

question

government should not interfere with the operation of the economy

answer

the term "laissez-faire" suggests that

question

who owns the factors of production and the methods used to coordinate economic activity

answer

economic systems differ according to which two main characteristics?

question

encourages owners to maintain to improve their property to preserve or enhance value

answer

private property

question

results in greater total output

answer

specialization in production is important primarily because it

question

expand in industry Z, as more resources will move to that industry

answer

if competitive industry Z is making substantial economic profit, output will

question

encourages innovation because successful innovators are rewarded with economic profits

answer

the competitive market system

question

the quantities and prices of the resources that households supply

answer

in a market economy, the distribution of output will be determined primarily by

question

"in ways that minimize the cost per unit of output"

answer

the market system's answer to the fundamental question "how will the goods and services be produced?" is essentially

question

"through the profit potential that encourages development of new technology"

answer

the market system's answer to the fundamental question "how will the system promote progress?" is essentially

question

creative destruction

answer

question

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers

answer

"consumer sovereignty" means that

question

allocated resources efficiently and allows economic freedom

answer

two major virtues of the market systems are that it

question

she has served society's interests by providing a desired good or service

answer

according to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then

question

coordination problem under central planning

answer

question

workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products

answer

the incentive problems under communist central planning refers to the idea that

question

households sell resources to businesses

answer

in the resource market,

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price and quantity demanded

answer

the demand curve shows the relationship between

question

lower price increases the real incomes of buyers, enabling them to buy more

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one reason that the quantity demanded of a good increases when its price falls is that the

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a change in the price of product K

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which of the following will not cause the demand for the product K to change

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reduce the demand for soda and increase the demand for tacos

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suppose that tacos and pizza are substitutes, and that soda and pizza are complements. we would expect an increase in the price of pizza to

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price has declined and consumers therefore want to purchase more of the product

answer

an increase in the quantity demanded means that

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why the supply curve is upsloping

answer

increasing marginal cost of production explains

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increases product supply

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a government subsidy to the producers of a product

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the supply to increase as farmers plant more corn

answer

suppose that corn prices rise significantly. if farmers expect the price of corn to continue rising relative to other crops, then we would expect

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capacity of a competitive market to equalize quantity demanded and quantity supplied

answer

the rationing function of prices refers to the

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increase, quantity demanded to decrease, and quantity supplied to increase

answer

at the current price, there is a shortage of a product. we would expect price to

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quantity supplied exceeds quantity demanded

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if we say that a price is too high to clear the market, we mean that

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the use of the least-cost method of production

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productive efficiency refers to

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producing the combination of goods most desired by society

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allocative efficiency is concerned with

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an increase in supply

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which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

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suggests that the supply of blu-ray players has increased

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since their introduction, prices of blu-ray players have fallen and the quantity purchased has increased. this statement

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inconsistency between voters' interest in programs and politicians' interest in reelection

answer

as it relates to the political process, the principal-agent problem results from the

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is called "logrolling"

answer

"vote for my special local project and I will vote for yours." this political technique

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rent-seeking behavior

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suppose American winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions. this would be an example of

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of the absence of competitive market pressures

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public choice economists contend public bureaucracies are inefficient primarily because

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large economic gains to a small number of people and small economic losses to a large number of people

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the special-interest effect is one that yields

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reflects limited and bundled choices in the public sector

answer

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authorized expenditures benefiting a narrow, specifically designated group that are included in more comprehensive spending legislation

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"earmarks" refer to

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deregulation of the industry

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which of the following is considered a potential solution to some regulatory capture?

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government officials use unlawful misdirection of governmental resources for their own personal gain

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political corruption occurs whenever

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majority voting fails, under some circumstances, to make consistent choices that reflect the community's underlying preferences

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according to the paradox of voting,

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public and quasi-public goods

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government in a market system can increase economic efficiency by collecting taxes in order to subsidize the production of

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economically inefficient outcomes caused by voting problems of incentive structures in government

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the term government failure refers to the

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does not consider the strength of individual voters' preferences

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majority voting my product economically inefficient outcomes because it

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short-run fluctuations in output and employment and long-run economic growth

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the two topics of primary concern in macroeconomics are

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economies experience a positive growth trend over the long run but experience significant variability in the short run

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which of the following statements is accurate about most economies?

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nominal GDP would rise, but real GDP would be unchanged

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if the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

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rates of population growth virtually matched rates of output growth

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before the period of modern economic growth,

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current income exceeds current spending

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savings are generated whenever

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resources are devoted to increasing future output

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when economists refer to "investment," they are describing a situation where

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boeing builds a new factory

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which of the following would an economist consider to be investment?

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sacrifice current consumption

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if an economy wants to increase its current level of investment, it must

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promote economic growth by helping to direct household savings to businesses that want to invest

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banks and other financial institutions

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when expectations are unmet

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shocks to the economy occur

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consumers become worried about job loss and buy fewer goods and services than expected

answer

which of the following is an example of a demand shock?

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price inflexibility

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when demand shocks lead to recessions, it is mainly due to

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firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels

answer

which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices?

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airline tickets

answer

for which of the following goods and services prices least sticky?

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firms may be reluctant to change prices for fear of setting off a price way or losing customers to rivals

answer

which of the following best explains why prices tend to be inflexible even when demand changes?

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prices tend to be sticky in the short run but become more flexible over time

answer

which of the following statements best describes price flexibility in the economy?

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measures the value of final output produced within a nation in one year, using current prices

answer

nominal gross domestic product

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nominal GDP decreases, while real GDP stays constant

answer

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GDP that year is $500 billion

answer

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only counting final goods

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national income accountants can avoid multiple counting by

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productive but is excluded from GDP because no market transaction occurs

answer

tom atoe grows fruit and vegetables for home consumption. this activity is

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$1,200

answer

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C is growing more rapidly than that in economy B

answer

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automobiles for personal use but not houses

answer

in national income accounting, the personal consumption expenditures category includes purchases of

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a nation's imports exceed its exports

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net exports are negative when

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the purchase of 100 shares of AT&T by a retired business executive

answer

which of the following is not economic investment?

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subtract $10 billion from other elements of investment in calculating total investment

answer

suppose that inventories were $80 billion in year 1 and $70 billion in year 2. for year 2, national income accountants would

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personal consumption

answer

the largest component of total expenditures in the united states is

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compensation of employees

answer

the largest component of national income is

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transfer payments exceeded the sum of social security contributions, corporate income taxes, and undistributed corporate profits

answer

if personal income exceeds national income in a particular year, we can conclude that

question

the GDP price index

answer

nominal GDP is adjusted for price changes using

question

inflated to $1,080 billion

answer

suppose a nation's nominal GDP is $972 billion and the general price index is 90. to make this year's GDP comparable with an earlier base year's GDP, then this year's GDP must be

question

suggests that the general price level has risen

answer

the fact that nominal GDP has risen faster than real GDP

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nominal GDP must have increased

answer

if real GDP rises and the GDP price index has increased,

question

understated GDP

answer

a large underground economy results in an

question

understate economic welfare because it does not take into account increases in leisure

answer

GDP tends to

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quality of products and services improves

answer

the growth of GDP may understate changes in the economy's economic well-being over time if the

question

sums together the dollar value of economic activity at every stage of production

answer

gross output (GO)

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14 years

answer

if a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately

question

3.1 percent

answer

between 1950 and 2018, US real GDP grew at an average annual rate of about

question

2.0 percent

answer

between 1950 and 22018, US real GDP per capita grew at an average annual rate of about

question

modern economic growth is characterized by sustained and ongoing increases in living standards

answer

which of the following statements is most accurate about modern economic growth?

question

move toward more democratic forms of government

answer

countries that have experienced modern economic growth have also tended to

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africa

answer

which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

question

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs

answer

economic growth rates in follower countries

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people are more likely to invest if they don't fear that others can take their returns on investment without compensation

answer

strong property rights are important for modern economic growth because

question

is $500

answer

if the number of worker-hours in an economy is 100 and its labor productivity is $5 of output per worker-hour, the economy's real GDP

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labor productivity must be $0.50

answer

suppose total output (real GDP) is $10,000 and worker hours are 20,000. we can conclude that

question

technological advance

answer

the largest contributor to increases in the productivity of american labor is

question

increased the average productivity of labor

answer

the historical reallocation of labor from agriculture to manufacturing in the united states has

question

public capital goods such as highways and sanitation systems

answer

a nation's infrastructure refers to

question

labor productivity to rise

answer

other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect

question

network effects

answer

increases in the value of a product to each user, including existing users, as the total number of users rises are called

question

higher levels of debt incurred prior to the great recession have hindered firms' ability to make productivity-enhancing investments

answer

which of the following explanations is consistent with the decline in productivity growth that followed the great recession?

question

argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth

answer

critics of economic growth

question

level of total spending

answer

most economists agree that the immediate determinant of the volume of output and employment is the

question

capital goods and durable consumer goods

answer

the industries or sectors of the economy in which business cycle fluctuations tend to affect output most (except in 2020) are

question

expansion

answer

in which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

question

that rate of unemployment occurring when the economy is at its potential output

answer

the natural rate of unemployment is

question

teenagers is much higher than that of adults

answer

the unemployment rate of

question

not in the labor force

answer

alex works in his own home as a homemaker and full-time caretake of his children. officially, he is

question

structural unemployment

answer

question

a deficiency of spending on goods and services

answer

cyclical unemployment results from

question

structural and frictional unemployment

answer

which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

question

the official unemployment rate will remain unchanged

answer

suppose there are 10 million part-time workers and 90 million full-time workers in an economy. five million of the part-time workers switch to full-time work. as a result,

question

a high rate of unemployment

answer

a large negative GDP gap implies

question

$385 billion

answer

if potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

question

deflation of 3.33 percent

answer

if the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

question

3.5 percent

answer

between 1980 and 2000, the price level approximately doubled. the average annual rate of inflation over this 20-year period was about

question

moves the economy inward from its production possibilities curve

answer

cost-push inflation

question

demand-pull inflation

answer

which of the following would most likely occur during the expansionary phase of the business cycle?

question

rise by about 15 percent

answer

suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. the person's real income will

question

arbitrarily redistributes real income and wealth

answer

inflation is undesirable because it

question

lender correctly anticipates inflation and increases the nominal interest rate accordingly

answer

a lender need not be penalized by inflation if the

question

all the points at which consumption and income are equal

answer

the 45 degree line on a graph relating consumption and income shows

question

average propensity to consume falls

answer

as disposable income goes up, the

question

decreases consumption by moving downward along a specific consumption schedule

answer

a decline in disposable income

question

relatively stable

answer

in contrast to investment, consumption is

question

consumption exceeds income

answer

dissaving occurs where

question

plotting the vertical differences between the consumption schedule and the 45 degree line

answer

given the consumption schedule, it is possible to graph the relevant saving schedule by

question

both the consumption and saving schedules downward

answer

when consumption and savings are graphed relative to real GDP, an increase in personal taxes will shift

question

enable more investment projects to be undertaken profitably

answer

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

question

15 percent

answer

question

purchase the machine because the expected rate of return exceeds the interest rate

answer

question

$10 billion

answer

question

shift the investment demand curve to the right

answer

other things equal, a 110 percent decrease in corporate income taxes will

question

an increase in the excess production capacity available in industry

answer

the investment demand curve will shift to the left as a result of

question

more variable than real GDP

answer

in annual percentage terms, investment spending in the united states is

question

infinitely large

answer

if 100 percent of any change in income is spent, the multiplier will be

question

increase by $10 billion

answer

in the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

question

consumption by $80 billion

answer

if the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase

question

in addition to saving

answer

the actual multiplier effect in the US economy is less than the multiplier effect in the text examples because

question

an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending

answer

the interest-rate effect suggests that

question

increase US imports and decrease US exports

answer

the foreign purchases effect suggests that an increase in the US price level relative to other countries will

question

a change in the price level

answer

which one of the following would not shift the aggregate demand curve?

question

leftward by $40 billion at each price level

answer

if investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift

question

an increase in stock prices that increases consumer wealth

answer

which of the following would most likely shift the aggregate demand curve to the right?

question

increase aggregate demand

answer

in an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. we would expect this to

question

total output depends on the volume of spending

answer

the shape of the immediate-short-run aggregate supply curve implies that

question

is steeper above the full-employment output than below it

answer

the aggregate supply curve (short run)

question

per-unit production costs rise as the economy moves toward and beyond its full-employment real output

answer

aggregate supply curve (short run) is upsloping because

question

productivity

answer

a rightward shift in the aggregate supply curve is best explained by an increase in

question

remain unchanged

answer

question

supply curve will shift

answer

suppose that nominal wages fall and productivity rises in a particular economy. other things equal, the aggregate

question

increase both aggregate demand and aggregate supply

answer

other things equal, a reduction in personal and business taxes can be expected to

question

eventually rise and fall to match upward or downward changes in the price level

answer

the economy's long-run AS curve assumes that wages and other resource prices

question

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve

answer

graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a

question

diminished if inflation occurs

answer

the size of the multiplier associated with an initial increase in spending will be

question

labor contracts

answer

when aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of

question

decreasing taxes by $25 billion

answer

if the MPC in an economy is 0.8, government could shift the aggregate demand curve rightward by $100 billion by

question

increase tax rates and/or reduce government spending

answer

question

shift the AD curve to the left

answer

in an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will

question

larger is the economy's MPC

answer

a tax reduction of a specific amount will be more expansionary the

question

answer

built-in stability means that

question

tax revenues would exceed government expenditures if full employment were achieved

answer

if the economy has a cyclically adjusted budget surplus, this means that

question

contractionary fiscal policy

answer

suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP. the government is engaging in an

question

politician will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections

answer

which of the following best describes the idea of a political business cycle?

question

increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment

answer

the crowding-out effect of expansionary fiscal policy suggests that

question

an increase in government spending on infrastructure that increases private sector productivity

answer

which of the following fiscal policy actions is most likely to increase aggregate supply?

question

about 76 percent of the size of GDP

answer

in 2018, the US federal debt held by the public was

question

29 percent

answer

approximately what percentage of the US public debt is held by foreign individuals and institutions (2018)?

question

reducing the current level of investment

answer

the most likely way the public debt burdens future generations, if at all, is by

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