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Macroeconomics > Exam 4 > Flashcards

Exam 4 Flashcards

Chapters: 10, 11, 13

1
Q

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

A

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

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2
Q

Which of the following is an example of a public good?

A

a weather warning system

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3
Q

As it relates to corporations, the principal-agent problem is that

A

the goals of the corporate managers (the agents) may not match the goals of the corporate owners (the principals)

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4
Q

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

A

Nominal GDP would rise, but real GDP would be unchanged

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5
Q

A good measure of the standard of living is

A

real GDP per capita

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6
Q

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2018, we would say that in 2018, the average American could buy ________ times as many goods and services as the average American in 1950

A

8

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7
Q

Countries with high rates of economic growth tend to have

A

a labor force that is more productive

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8
Q

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

A

labor productivity

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9
Q

The total amount of physical capital available in a country is know as the country’s

A

capital stock

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10
Q

Human capital refers to which of the following?

A

the accumulated knowledge and skills workers acquire from education and training or from their life experiences

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11
Q

Potential GDP refers to

A

the level of GDP attained when all firms are producing at capacity

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12
Q

Actual real GDP will be above potential GDP if

A

firms are producing above capacity

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13
Q

Suppose that real GDP for 2017 was $10,000 billion and real GDP for 2018 was $11,000 billion. What is the rate of growth of real GDP between 2017 and 2018?

A

10%

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14
Q

Suppose that real GDP for 2017 was $10,000 billion and real GDP for 2018 was $9,500 billion. What is the rate of growth of real GDP between 2017 and 2018?

A

-5%

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15
Q

If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to double in size?

A

23 years

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16
Q

If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size?

A

28 years

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17
Q

Which of the following is most liquid?

A

a dollar bill

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18
Q

One difference between stocks and bonds is that

A

stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond

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19
Q

In a closed economy, which of the following components of GDP is not included?

A

net exports

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20
Q

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds

A

demanders; suppliers

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21
Q

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase during the next decade, and due to these higher deficits, “the nation’s capital stock ultimately would be smaller, and productivity and income would be lower than would be the case if the debt was smaller.” This higher budget deficit would be represented graphically by

A

a shift in the supply curve for loanable funds to the left

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22
Q

In comparison to a government that runs a balanced budget, when the government runs a budget deficit

A

business investment will fall

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23
Q

Refer to Figure 21-5. “Crowding out” of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above

A

A to B

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24
Q

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase during the next decade, and due to these higher deficits, “the nation’s capital stock ultimately would be smaller, and productivity and income would be lower than would be the case if the debt was smaller.” This higher budget deficit could crowd out business investment if it resulted in an increase in interest rates. Crowding out of business investment would be represented graphically by a

A

a movement to the left along the demand curve for loanable funds

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25
Q

A country with no trade and no borrowing and lending relationships with other countries is known as a(n)

A

closed economy

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26
Q

Refer to Figure 21-6. The loanable funds market is in equilibrium, as shown in the figure above. An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?

A

The real interest rate is 3 percent, and the quantity of loanable funds is $150 million

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27
Q

During the expansion phase of the business cycle, which of the following eventually increases?

A

all of these

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28
Q

During the recession phase of the business cycle

A

interest rates are usually falling

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29
Q

The period between a business cycle peak and a business cycle trough is called

A

recession

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30
Q

From 1991 until 2001, the United States was in a period of

A

expansion

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31
Q

Purchases of which of the following goods would be dramatically reduced during a recession?

A

refrigerators

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32
Q

The economic effects of a recession are likely to have the smallest impact on the sales of which of the following businesses?

A

a fast-food restaurant

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33
Q

GDP is the

A

monetary value of all the final goods and services produced within the borders of a nation in a particular year

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34
Q

Which of the following is an intermediate good?

A

the purchase of baseball uniforms by a professional baseball team

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35
Q

Economic growth is best defined as an increase in

A

either real GDP or real GDP per capita

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36
Q

One reason that Mexico has experienced relatively low rates of economic growth is that

A

the country has problems with organized crime and corruption

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37
Q

The rapid growth of the Chinese economy should

A

benefit U.S. consumers as they have access to less-expensive consumer goods

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38
Q

Suppose that in 2018, real GDP grew in Estonia by 3% and the population increased by 5%. Therefore, in 2018, Estonia experienced

A

economic growth, but not an increase in living standards

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39
Q

The period of time from 1,000,000 B.C. to 1300 A.D. was a period of

A

no sustained economic growth

40
Q

Refer to Table 22-1. Based on the table above, which country has a higher standard of living and why?

A

Ireland has a higher standard of living because their GDP per capita is higher

41
Q

In the long run, ________ differences in economic growth rates result in ________ differences in GDP per capita

A

small; large

42
Q

________ is considered a high income country, ________ a developing country, and ________ a newly industrializing country

A

United States; Somalia; Taiwan

43
Q

An economic growth model explains

A

changes in real GDP per capita in the long run

44
Q

Refer to Figure 22-1. Diminishing marginal returns is illustrated in the per-worker production function in the figure above by a movement

A

up along any of the production functions

45
Q

Refer to Figure 22-1. Using the per-worker production function in the figure above, the largest changes in an economy’s standard of living would be achieved by a movement from

A

B to C to D

46
Q

In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?

A

It shifted up

47
Q

Knowledge capital is nonrival in the sense that

A

two people can use the same knowledge to develop and produce a product

48
Q

Firms free ride on the research and development of other firms when they

A

use knowledge other firms have developed without paying for that knowledge

49
Q

Creative destruction means that

A

firms develop new products that replace old products in the economy, thereby encouraging economic growth

50
Q

Refer to Figure 22-3. Technological change is shown in the figure above by the movement from

A

B to E

51
Q

Refer to Figure 22-3. Which of the following would cause an economy to move from a point like A in the figure above to a point like B?

A

an increase in capital per hour worked

52
Q

Growth in the United States from 1800 to 1900 can be characterized as

A

positive and increasing

53
Q

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

A

2006-2016

54
Q

Some economists argue that the higher productivity growth that began in the mid-1990s is based on the development of

A

information technology

55
Q

One of the primary reasons that Mexico has had trouble attracting foreign investment and has therefore experienced relatively low rates of economic growth is

A

the failure to fully establish the rule of law

56
Q

The economic growth model predicts that

A

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

57
Q

Refer to Figure 22-5. Based on the “catch-up line” drawn above, poorer countries are more likely to be at a point like ________, where growth in GDP is relatively ________, while richer countries are more likely to be at a point like ________, where growth in GDP is relatively ________.

A

A; high; B; low

58
Q

The purchase by an individual or firm of stock or bonds issued in another country is called

A

foreign portfolio investment

59
Q

High-income countries have ________ and ________ as compared to developing countries

A

high rates of savings; high rates of growth

60
Q

Which of the following best explains why productivity growth in the United States has been faster than in other leading industrialized nations?

A

There are fewer government regulations in the United States regarding the way firms can hire and fire workers

61
Q

The term “brain drain” refers to

A

highly educated individuals who leave developing countries for high-income countries

62
Q

Disease, poor nutrition, and substandard health care in developing nations can reduce growth in an economy by

A

reducing human capital

63
Q

Enforcing property rights in an economy will

A

raise the level of investment

64
Q

The most important determinate of consumption and saving is the

A

level of income

65
Q

The greater is the marginal propensity to consume, the

A

smaller is the marginal propensity to save

66
Q

At the equilibrium GDP for a private open economy,

A

net exports may be either positive or negative

67
Q

Other things equal, an improvement in productivity will

A

shift the aggregate supply curve to the right

68
Q

In macroeconomic models, prices are assumed to be completely inflexible in

A

the very short run only

69
Q

The basic aggregate demand and aggregate supply curve model helps explain

A

short-term fluctuations in real GDP and the price level

70
Q

When the economy enters into a recession, your employer is ________ to reduce your wages because ________.

A

unlikely; lower wages reduce productivity and morale

71
Q

An increase in the value of which of the following would not increase household wealth?

A

a credit card balance

72
Q

The international trade effect states that

A

an increase in the price level will lower net exports

73
Q

During the recession of 2007-2009 in the United States, ________ relative to potential GDP

A

net export spending rose and consumption spending declined

74
Q

Refer to Figure 24-1. Ceteris paribus, an increase in interest rates would be represented by a movement from

A

AD2 to AD1

75
Q

Refer to Figure 24-1. Ceteris paribus, an increase in personal income taxes would be represented by a movement from

A

AD2 to AD1

76
Q

Refer to Figure 24-1. Ceteris paribus, an increase in households’ expectations of their future income would be represented by a movement from

A

AD1 to AD2

77
Q

Refer to Figure 24-1. Ceteris paribus, a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would result in U.S. exports increasing faster than U.S. imports. This would be represented by a movement from

A

AD1 to AD2

78
Q

Refer to Figure 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

A

AD2 to AD1

79
Q

Refer to Figure 24-1. Ceteris paribus, an increase in government spending would be represented by a movement from

A

AD1 to AD2

80
Q

Refer to Figure 24-1. Ceteris paribus, an increase in firms’ expectations of the future profitability of investment spending would be represented by a movement from

A

AD1 to AD2

81
Q

Refer to Figure 24-1. Ceteris paribus, an increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

A

AD2 to AD1

82
Q

The long-run aggregate supply curve

A

is vertical

83
Q

Which aggregate supply curve has a positive slope?

A

short run only

84
Q

Refer to Figure 24-2. Ceteris paribus, an increase in the labor force would be represented by a movement from

A

SRAS1 to SRAS2

85
Q

Refer to Figure 24-2. Ceteris paribus, a decrease in the capital stock would be represented by a movement from

A

SRAS2 to SRAS1

86
Q

Refer to Figure 24-2. Ceteris paribus, an increase in the price level would be represented by a movement from

A

point A to point B

87
Q

Refer to Figure 24-3. Suppose the economy is at point C. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

A

A

88
Q

Refer to Figure 24-3. Suppose the economy is at point C. If investment spending decreases in the economy, where will the eventual long-run equilibrium be?

A

A

89
Q

When the price of oil rises unexpectedly, the equilibrium price level ________ and the unemployment rate ________ in the short run

A

rises; rises

90
Q

Stagflation usually results from

A

a supply shock

91
Q

On average, in the recessions since 1950, it has taken ________ for real GDP to return to its cyclical peak

A

about 18 months

92
Q

Refer to Figure 24-4. In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the growth rate in potential GDP in year 2?

A

10%

93
Q

Refer to Figure 24-4. Given the economy is at point A in year 1, what is the inflation rate between year 1 and year 2?

A

1.8%

94
Q

Refer to Figure 24-4. In the figure above, AD1, LRAS1 and SRAS1 denote AD, LRAS and SRAS in year 1, while AD2, LRAS2 and SRAS2 denote AD, LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the actual growth rate in GDP in year 2?

A

7.3%

95
Q

Refer to Figure 24-4. Given the economy is at point A in year 1, what will happen to the price level in year 2?

A

It will rise

Macroeconomics (6 decks)

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