Chapters 7, 8, and 9 Exam #2 Review

  1. Which of the following problems is not one of the central concerns of macroeconomics?
  2. Inflation
  3. Income Distribution
  4. Business Cycles
  5. Unemployment
  6. The range of growth rates across countries:
  7. Is narrow
  8. Is wide
  9. Has narrowed in recent years
  10. Has not changed in the past 180 years
  11. During a recessionary phase of a business cycle, the macroeconomy is:
  12. At the peak of the business cycle
  13. At the trough of the business cycle
  14. In between the peak and trough
  15. In between the trough and peak
  16. Edward has quit his job because he has become dissatisfied with the work that he has been asked to do. Because he has highly marketable skills, he expects to find a new job soon. What type of unemployment describes Edward's situation?
  17. Cyclical Unemployment
  18. Full Unemployment
  19. Structural Unemployment
  20. Frictional Unemployment
  21. Which of the following people would be included as a member of the labor force?
  22. A full time college student
  23. A recent high school graduate looking for a first job
  24. A homemaker contributing 15 hours per week as a volunteer worker in a hospital
  25. A retired school teacher collecting social security benefits
  26. When an economy is experiencing accelerating inflation, it is most likely operating:
  27. Below potential output
  28. Above potential output
  29. At potential output
  30. At nominal output
  31. When output is at its potential:
  32. unemployment and capacity utilization rates are below the target levels
  33. unemployment and capacity utilization rates are above the target levels
  34. unemployment and capacity utilization rates are equal to the target levels
  35. the unemployment rate is equal to its target level, but the capacity utilization rate is below its target level
  36. Inflation is generally defined as:
  37. a one-time increase in the price level
  38. a one-time increase in some prices
  39. a sustained increase in the price level
  40. a sustained increase in some prices
  41. Real output is best defined as the total amount of goods and services produced adjusted for changes in:
  42. Quality
  43. Inventories
  44. Buying patterns
  45. The price level
  46. A cost of inflation is that it:
  47. makes everyone in an economy poorer because everyone is paying higher prices
  48. redistributes income from those who do not raise their prices to those who do raise their prices
  49. tends to lower real interest rates, and therefore creates an incentive for undertaking poor investments
  50. tends to lower the value of a country's currency, which increases that country's exports
  51. Aggregate accounting:
  52. provides a set of rules for determining macroeconomic policy.
  53. provides a set of rules and definitions for measuring economic activity in the aggregate economy.
  54. is a useful tool for microeconomists.
  55. can be used to measure a nation's output but not its production or consumption.
  56. In calculating GDP, an example of a final good or service is:
  57. a CD player purchased at a retail store by a consumer.
  58. vegetables purchased by local restaurants to make soup.
  59. iron ore purchased by a steel corporation.
  60. social security benefits.
  61. Which of the following is included in GDP but is not included in GNP?
  62. An American company's production in Germany.
  63. Income of an American citizen working in Japan.
  64. A British company's production in the United States.
  65. Sales of a good by one firm to another firm.
  66. If a used car dealer buys a car for $3,000 and resells it for $3,300, how much has been added to GDP?
  67. nothing.
  68. $300.
  69. $3,000.
  70. $3,300.
  71. A firm buys $100 worth of thread and $10,000 worth of cloth and uses them to produce a thousand pairs of jeans that are sold for $20,000. The firm's value added is:
  72. the value of final sales, or $20,000.
  73. total sales minus total costs, or $9,900.
  74. the value of the inputs, $10,100.
  75. indeterminate because we don't know whether the jeans were sold for their final use.
  76. In calculating GDP, the largest component of total U.S. expenditures is:
  77. Investment
  78. Net exports
  79. Consumption
  80. Government spending
  81. The component that balances aggregate income and aggregate production is:
  82. Inventories
  83. Employee compensation
  84. Profits
  85. Net foreign factor income
  86. If a country's population grows at a faster rate than its GDP, then its per capita GDP:
  87. Will increase
  88. Will decrease
  89. Will remain constant
  90. may increase or decrease depending on the size of the difference between the two growth rates
  91. The distinction between nominal GDP and real GDP is that:
  92. Real GDP is calculated at existing prices, while nominal GDP is adjusted for inflation.
  93. Nominal GDP is calculated at existing prices, while real GDP is adjusted for inflation.
  94. Real GDP is calculated by assuming constant product quality while nominal GDP is not.
  95. Nominal GDP is calculated by assuming constant product quality while real GDP is not.
  96. If an increase in stock prices is purely the result of asset inflation, which of the following has occurred?
  97. Real wealth and nominal wealth have both increased.
  98. Real wealth has increased, and nominal wealth has decreased.
  99. Real wealth has increased, and nominal wealth has remained the same.
  100. Real wealth has stayed the same, and nominal wealth has increased.
  101. Growth theory attempts to isolate the factors that determine:
  102. Output in the short run
  103. Potential output
  104. The depth of business cycles
  105. The duration of business cycles
  106. Small differences in growth rates eventually produce large differences in living standards because of:
  107. Diminishing marginal productivity
  108. Increasing returns to scale
  109. Decreasing returns to scale
  110. Compounding
  111. Increasing the division of labor:
  112. increases the degree of specialization.
  113. reduces the degree of specialization.
  114. does not affect the level of specialization.
  115. may increase or decrease the degree of specialization.
  116. One reason market economies have been so successful in promoting growth is that
  117. market economies have promoted monopolies, a necessary ingredient for growth.
  118. people have worked selflessly to see that everyone has more.
  119. government has successfully directed resources into productive activities.
  120. economic incentives exist for individuals to gain from increased production.
  121. Greater labor force participation by women increases measured growth most directly by:
  122. stimulating new technologies.
  123. increasing capital accumulation.
  124. increasing the availability of resources.
  125. altering the nature of growth enhancing institutions.
  126. Suppose the quantities of all resources increase by 13 percent while output increases by 15 percent. In that case, returns to scale are:
  127. Decreasing
  128. Constant
  129. Increasing
  130. not defined since more than one input is changing.
  131. Suppose the quantity of labor used to produce tables is increased in one-hour increments from 20 hours to 30 hours and that each successive increment raises output by a smaller amount. Assuming all else is equal, this pattern is consistent with:
  132. decreasing returns to scale.
  133. constant returns to scale.
  134. increasing returns to scale.
  135. the law of diminishing marginal productivity.
  136. According to the Classical growth model, richer countries should:
  137. grow faster than poor countries.
  138. grow at the same rate as poor countries.
  139. grow slower than poor countries.
  140. grow at a rate that increases over time.
  141. Patents:
  142. turn innovations into public property.
  143. turn innovations into private property.
  144. magnify positive externalities.
  145. enhance learning by doing.
  146. Which of the following policies is not likely to promote economic growth?
  147. Discouraging saving and investment.
  148. Formalizing property rights and reducing bureaucracy and corruption.
  149. Providing more of the right kind of education.
  150. Promoting technological innovation.