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ECON3120-IntMacro > Final Exam Review > Flashcards

Final Exam Review Flashcards

1
Q

The two major reasons for the tremendous growth in the output of the US economy over the last 125 years are

A

population growth and increased productivity

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2
Q

The man reason that the US has such a high standard of living is

A

high average labor productivity

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3
Q

In analyzing macroeconomic data during the past year, you have discovered that average labor productivity fell, but total output increased. What was most likely to have caused this?

A

There was an increase in labor input.

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4
Q

In which of the following periods did average labor productivity in the US grow the fastest?

A

1949 to 1973

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5
Q

The most direct effect of an increase in the growth rate of average labor productivity would be an increase in

A

the long-run economic growth rate

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6
Q

Short-run contractions and expansions in economic activity are called

A

the business cycle

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7
Q

When national output rises, the economy is said to be in

A

an expansion

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8
Q

Which of the following best describes a typical business cycle?

A

Economic expansions are followed by economic contractions

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9
Q

Average labor productivity is the

A

amount of output per worker

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10
Q

During recessions, the underemployment rate ______ and output ______.

A

rises; falls

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11
Q

The number of unemployed divided by the labor force equals

A

the unemployment rate

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12
Q

The unemployment rate is the

A

number of unemployed divided by the labor force

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13
Q

The highest and most prolonged period of unemployment int he US occurred during

A

the Great Depression

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14
Q

During the Great Depression, the unemployment rate for the US peaked at approximately

A

25%

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15
Q

A country is said to be experiencing inflation when

A

prices of most goods and services are rising over time

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16
Q

From 1800 to 1940, the price level int he US

A

trended neither upward nor downward

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17
Q

Before WWII, the average level of prices in the US usually

A

rose during wartime and fell during peacetime

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18
Q

The inflation rate is the

A

percentage increase in the average level of prices over a year

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19
Q

If the price level was 100 in 1999 and 102 in 2000, the inflation rate was

A

2%

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20
Q

A closed economy is a national economy that

A

doesn’t interact economically with the rest of the world

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21
Q

A country is said to be experiencing deflation when

A

prices of most goods and services are falling over time

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22
Q

An open economy is a national economy that

A

has extensive trading and financial relationships with other national economies

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23
Q

An economy that doesn’t interact economically with the rest of the world is called _____ economy.

A

a closed

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24
Q

US imports are goods and services

A

produced abroad and sold to Americans

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25
Q

Following WWI and WWII, the US had a

A

large trade surplus

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26
Q

In the 1980s and 1990s, the US has had a

A

large trade deficit

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27
Q

A country has a trade surplus when

A

exports exceed imports

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28
Q

A country has a trade deficit when

A

imports exceed exports

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29
Q

Data on exports and imports for the US over the period from 1890 to 2005 show that

A

a higher percentage of US goods was exported in recent years than in earlier years

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30
Q

A central bank is an institution that

A

controls a nation’s monetary policy

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31
Q

The accounting framework used in measuring current economic activity is called

A

the national income accounts

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32
Q

The three approaches to measuring economic activity are the

A

product, income, and expenditure approach

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33
Q

The value of a producer’s output minus the value of the inputs it purchases from other producers is called

A

value added

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34
Q

Sam’s semiconductors produces computer chips. which it sells for $10 mil to Carl’s Computer Co. Carl’s computers are sold for a total of $16 mil. what is the value added of Carl’s?

A

$6 mil

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35
Q

Total production = total income = total expenditures is called

A

fundamental identity of national income accounting

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36
Q

To ensure that the fundamental identity of national income accounting holds, changes in inventories are

A

treated as part of expenditures

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37
Q

To what extent are homemaking and child-rearing accounted for in GDP?

A

only to the extent that they are provided for pay

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38
Q

The measurement of GDP includes

A

estimated values of activity in the underground economy

39
Q

Which of the following is included in US GDP?

A

a newly constructed house

40
Q

Government statisticians adjust GDP figures to include estimates of

A

the underground economy

41
Q

Because government services are not sold in markets

A

they are valued at their cost of production

42
Q

Intermediate goods are

A

goods that are used up in the production of other goods in the same period that they were produced

43
Q

Capital goods are

A

final goods, because they are not used up during a given year

44
Q

Marin’s Metal Company produces screws that it sells to Ford, which uses the screws as a component of its cars. The screws are an

A

intermediate good

45
Q

Larry’s Lathe-makers Limited produces lathes, which are purchased by furniture manufacturers all over the world. The standard lathe depreciates over a twenty-five year period. In the national income accounts, the lathes are classified as

A

capital goods

46
Q

Fred the farmer purchased 5 new tractors for $20,000 each. Fred sold his old tractors for $50,000. The net increase in GDP is?

A

$100,000

47
Q

Inventories include each of the following EXCEPT

A

raw materials held by firms

48
Q

GDP differs from GNP because

A

GDP = GNP - net factor payments from abroad

49
Q

If an American construction company built a road in Kuwait, this activity would be

A

included in US GNP only for that portion that was attributable to American capital and labor

50
Q

Nations such as Egypt and Turkey may have wide differences between GNP and GDP because both countries

A

have a large number of citizens working abroad

51
Q

If C=$500, I=$150, G=$100, NX=$40, and GNP=$800, how much is NFP?

A

$10

52
Q

The income expenditure identity says that

A

Y=C+I+G+NX

53
Q

Which of the following is NOT a category of consumption spending int he national income accounts?

A

Housing purchases

54
Q

Consumer spending is spending by ______ households on final goods and services produced ______.

A

domestic: domestically and abroad

55
Q

In the expenditure approach to GDP, which of the following would be excluded from measurements of GDP?

A

Government payments for welfare

56
Q

Net national product equals

A

gross national product minus depreciation

57
Q

Monica grows coconuts and catches fish. Last year she harvested 1500 coconuts and 600 fish. She values one fish as having a worth of three coconuts. She gave Rachel 300 coconuts and 100 fish for helping her to harvest coconuts and catch fish, all of which were consumed by Rachel. In terms of fish, Monica’s income would equal

A 
Monica = 900 fish
Both = 1100 fish
58
Q

Private disposable income equals

A

GNP - taxes + transfers + interest

59
Q

A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the

A

production function

60
Q

In the production function Y+AF(K,N), A is ____, K is _______, and N is______.

A 
A = total factor productivity
K = the capital stock
N = the number of workers employed
61
Q

Suppose the economy’s production function……K and N both rise by 20%…..how much does Y increase?

A

20%

62
Q

In the production function equation, what happens if K doubles and N doubles?

A

Y doubles

63
Q

Suppose the economy’s production function is Y = AK0.3N0.7. When K = 1000, N = 50, and A = 15, what is Y?

A

1842

64
Q

The two main characteristics of the production function are

A

it slopes upward from left to right, and the slope becomes flatter as the input increases

65
Q

If the marginal product of capital doesn’t change as the amount of capital increases, a figure showing the relationship between output and capital

A

is a straight line with constant upward slope

66
Q

The marginal product of capital is the increase in

A

output from one-unit increase in capital

67
Q

Suppose the economy’s production function is Y = AK0.3N0.7. Suppose K = 200, N = 2000, and A = 1. Calculate the marginal product of capital

A

1.5

68
Q

The fact that the production function relating output to capital becomes flatter as we move from left to right means that

A

there is diminishing marginal productivity of capital

69
Q

The marginal product of labor

A

decreases as the number of workers already employed increases

70
Q

The fact that the production function relating labor to capital becomes flatter as we move from left to right means that

A

there is diminishing marginal productivity of labor

71
Q

An adverse supply shock would

A

shift the production function down and decrease marginal products at every level of employment

72
Q

An invention that speeds up the Internet is an example of

A

a supply shock

73
Q

A supply shock that reduces total factor productivity directly affects which term in the production function Y = AF(K, N)?

A

A

74
Q

Economists often treat the economy’s capital stock as fixed because

A

it takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital

75
Q

Changes in the capital stock occur ______, and changes in the amount of labor that firms employ occur _____.

A

slowly; quickly

76
Q

An increase in the real wage will cause

A

a movement along the labor demand curve

77
Q

A decrease in the real wage would result in a

A

movement along the labor demand curve, causing an increase in the number of workers hired by the firm.

78
Q

An increase in the number of workers hired by a firm could result from

A

a decrease in the real wage

79
Q

A decrease in the number of workers hired by a firms could result from

A

an increase in the real wage

80
Q

What two factors should you equate in deciding how many workers to employ?

A

the marginal product of labor and the real wage rate

81
Q

One reason that firms hire labor at the point where w = MPN is

A

if w > MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers.

82
Q

Firms hire labor at the point where the

A

nominal wage rate equals the marginal revenue product of labor

83
Q

Your boss wants to know if you should lay off any workers. You answer that you should lay off workers if the

A

marginal product of labor is less than the real wage rate

84
Q

An adverse supply shock, such as a reduced supply of raw materials, would

A

decrease the marginal product of labor

85
Q

Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?

A

a favorable supply shock such as a fall in the price of oil

86
Q

A winter ice storm has paralyzed the entire east coast, reducing productivity sharply. This supply shock shifts the marginal product of labor curve

A

down and to the left, reducing the quantity of labor demanded at any given real wage.

87
Q

The aggregate supply of labor is the

A

sum of the labor supplied by everyone in the economy

88
Q

The tendency of workers to supply more labor in response to a larger reward for working is called the ________ of a higher real wage on the quantity of labor supplied.

A

substitution effect

89
Q

The income effect of higher real wage on the quantity of labor supply is the

A

tendency of workers to supply less labor in response to becoming wealthier

90
Q

If Jeff’s wage rate rises, he decides to work fewer hours. From this, we can infer that

A

for Jeff, the substitution effect is less than the income effect

91
Q

A person is more likely to increase labor supply in response to an increase in the real wage, the ________ is the income effect and the ________ is the substitution effect.

A

smaller; larger

92
Q

A permanent increase in the real wage rate has a ________ income effect on labor supply than a temporary increase in the real wage, so labor supply is ________ with a permanent wage increase than for a temporary wage increase.

A

larger; less

93
Q

Research on labor supply generally shows that

A

labor supply rises in response to a temporary increase in the real wage, but falls in response to a permanent increase in the real wage.

ECON3120-IntMacro (10 decks)

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