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Tucker Econ > Unit 2 Test > Flashcards

Unit 2 Test Flashcards

1
Q

Which organization determines the beginning and end dates of a recession?

A

the National Bureau of Economic Research

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2
Q

A business cycle is:

A

the periodic fluctuation of economic activity.

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3
Q

U.S. business cycles since 1950 have shown

A

expansions to be longer than recessions.

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4
Q

GDP

A

C+Ig+G+Xn

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5
Q

The economy is currently experiencing negative growth rates, which analysts believe will continue into the near future.

A

Recession

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6
Q

NDP: National Domestic Product

A

GDP-Depreciation

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7
Q

NI: National Income

A

NDP+Net Foreign Income Abroad

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8
Q

PI: Personal Income

A

NI- (Indirect Business taxes+ss taxes+corp. taxes+undistributed corporate profits)+transfer payments.

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9
Q

DI: Disposable Income

A

PI- personal taxes

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10
Q

The largest component of GDP is:

A

Consumption expenditure

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11
Q

Which of the following is NOT included in gross private domestic investment?

A

purchases of common stock by investors

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12
Q

Simon Kuznets:

A

devised the gross national product as a way of measuring a nation’s economic output.

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13
Q

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

A

GDP falls as a result of this change.

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14
Q

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

A

gross; net exports

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15
Q

The economy has recently experienced a significant decline, though analysts believe the future outlook will bring economic growth

A

Trough

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16
Q

The U.S. gross domestic product is equal to the total market value of all:

A

final goods and services produced by resources in the United States.

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17
Q

Which of the following items would be included in the GDP accounts?

A

paying $50 consultation fee over the phone with a psychic adviser

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18
Q

We are most likely to see a recession if interest rates on long-term bonds are:

A

lower than interest rates on short-term bonds.

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19
Q

GDP can be found either by adding up all of the _____ or all of the _____ in the economy.

A

spending; income

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20
Q

The value of cars that the Ford Motor Company produces in a German plant:

A

is a part of the US GNP

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21
Q

What event was a major influence on the development of macroeconomics?

A

The Great Depression

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22
Q

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the:

A

Circular Flow Diagram

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23
Q

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

A

Trough

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24
Q

Which of the following describes the informal economy?

A

It is largely unmeasured.

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25
Q

Core inflation is found by removing _____ from the consumer price index.

A

Food and Energy

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26
Q

Nominal GDP

A

Deflator x Real GDP

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27
Q

The twin perils of the modern macro economy are said to be:

A

inflation and unemployment.

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28
Q

Arlina got a 5% raise while the rate of inflation was 6%. Arlina’s standard of living:

A

fell by 1%

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29
Q

Real GDP

A

Nominal/Deflator

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30
Q

Which of the following items is NOT included in the GDP deflator?

A

Imported mangoes

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31
Q

People who are considered unemployed include:

A

None of those listed is considered unemployed.

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32
Q

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as:

A

discouraged workers

33
Q

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%:

A

creditors gain at the expense of debtors.

34
Q

If your salary was $50,000 last year, and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be this year assuming the CPI has risen from 110 to 114?

A

51,818

35
Q

_____ is a reduction in the rate of inflation.

A

Disinflation

36
Q

The GDP deflator is an index that includes prices of all of the following EXCEPT:

A

imports

37
Q

Which one of the following would NOT lead to higher prices?

A

an increase in the supply of food

38
Q

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing:

A

structural unemployment.

39
Q

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is:

A

125

40
Q

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing:

A

deflation

41
Q

If actual unemployment is at its natural rate:

A

inflation is very low

42
Q

If the current year’s consumer price index is 214 and last year’s consumer price index was 209, then the rate of inflation is:

A

2.4%

43
Q

If the multiplier is 2 and investment spending falls by $5 billion, then equilibrium income:

A

decreases by $10 billion.

44
Q

Suppose full employment real GDP is $13 trillion, current real GDP is $13.2 trillion, and the marginal propensity to consume is 0.5. The inflationary gap is:

A

$0.1 trillion

45
Q

After the acceptance of Keynesian analysis, the government:

A

actions toward macroeconomic policy grew significantly

46
Q

If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase?

A

$900

47
Q

The 45-degree line in the Keynesian model represents:

A

AE=Y

48
Q

_____ is the change in consumption associated with a change in income.

A

The marginal propensity to consume

49
Q

Which of the following illustrates the paradox of thrift?

A

Consumer uncertainty causes people to save more; consumption falls; equilibrium income and production falls; savings decreases because income is lower.

50
Q

In the Keynesian model, the principal determinant of saving is:

A

Income

51
Q

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be:

A

6.67

52
Q

At point A on the consumption spending graph, in which the lines intersect

A

Saving zero

53
Q

Which of the following did classical economists believe would happen if the economy experienced a downturn?

A

The economy would self-correct

54
Q

The slope of the saving schedule is:

A

1 minus the marginal propensity to consume.

55
Q

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume?

A

0.6

56
Q

If a government always balances its budget:

A

The effect of an increase in government spending on aggregate expenditures is weakened.

57
Q

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____

A

disposable income; consumption

58
Q

Show how the aggregate expenditure curve changes if investment decreases

A

Drops underneath

59
Q

If aggregate expenditures equals $7,600 and aggregate income equals $8,000, businesses will produce:

A

less, lowering both employment and income.

60
Q

Firms decide how much to invest by comparing the rate of return on their projects with:

A

the interest rate

61
Q

If $1,000 of additional spending occurs and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output.

A

$5,000

62
Q

The short-run aggregate supply curve is positively sloped because:

A

many input prices are slow to change in the short run.

63
Q

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded.

A

left; decrease

64
Q

Which of the following may be an explanation for the shift in aggregate demand from line A to line B?

A

Interest rates fall and boost investments.

65
Q

Simultaneous recession and deflation can be explained by:

A

a decrease in aggregate demand.

66
Q

The country of Marin has the short-run aggregate supply curve, what will happen if workers in this country become more productive.

A

Since costs have fallen in this case, then the new short-run aggregate supply curve will lie to the right of the original curve

67
Q

Cost-push inflation is a situation in which the:

A

short-run aggregate supply curve shifts leftward.

68
Q

Which is a determinant of aggregate supply?

A

productivity

69
Q

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.

A

right; increase

70
Q

High taxes and/or heavy regulation:

A

raise costs of production so that the aggregate supply curve shifts to the left.

71
Q

If oil prices decline, the short-run aggregate supply curve shifts _____ and output supplied will _____.

A

right; increase

72
Q

What would cause the price level to decrease and employment to increase?

A

a shift to the right of the SRAS curve

73
Q

_____ is the output of goods and services demanded at different price levels.

A

Aggregate demand

74
Q

Which of the following tends to make aggregate demand decrease by more than the amount that consumer spending decreases?

A

the multiplier effect

75
Q

If the pound sterling appreciates against the U.S. dollar, England buys _____ U.S. goods, causing the U.S. aggregate demand curve to shift to the _____.

A

more; right

76
Q

A rising aggregate price level _____ an economy’s interest rates and therefore _____ output demanded.

A

increases; reduces

77
Q

Which of the following will NOT shift the aggregate supply curve to the left?

A

an increase in the price of crude oil

78
Q

The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____.

A

flexible; full employment

Tucker Econ (3 decks)

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