Macroeconomics Past Paper PDF

1. The economic statistic used to measure the level of prices is: ✅ A) GDP B) CPI C) GNP D) Real GDP 2. The statistic used by economists to measure the value of economic output is: ✅ A) The CPI B) GDP C) The GDP deflator D) The unemployment rate 3. GDP is all of the following exc...

1. The economic statistic used to measure the level of prices is: ✅ A) GDP B) CPI C) GNP D) Real GDP 2. The statistic used by economists to measure the value of economic output is: ✅ A) The CPI B) GDP C) The GDP deflator D) The unemployment rate 3. GDP is all of the following except the total: A) Expenditure of everyone in the economy B) Income of everyone in the economy ❌ C) Expenditure on the economy's output of goods and services D) Output of the economy ✅ 4. The total income of everyone in the economy is exactly equal to the total: A) Expenditure on the economy's output of goods and services B) Consumption expenditures of everyone in the economy C) Expenditures of all businesses in the economy D) Government expenditures 5. An economy's ______ equals its ______. A) Consumption; income B) Consumption; expenditure on goods and services ✅ C) Expenditure on goods; expenditures on services D) Total income; total expenditure on goods and services ❌ 6. All of the following are measures of GDP except the total: A) Expenditures of all businesses in the economy B) Income from all production in the economy C) Expenditures on all final goods and services produced D) Value of all final production 7. It is a national income accounting rule that all expenditure on purchases of products in the economy is necessarily equal to: A) Profits of firms ✅ B) Wages of employees C) Income of the producers of the products in the economy D) Income of employees ​. Two equivalent ways to view GDP are as the: 8 A) Total payments made to all workers in the economy or the total profits of all firms and businesses in the economy B) Total expenditures on all goods produced in the economy or the total income earned from producing all services in the economy C) Total profits of all firms and businesses in the economy or the total consumption of goods and services by all households in the economy ✅ D) Total income of everyone in the economy or the total expenditure on the economy's output of goods and services 9. In the circular flow model, the flow of dollars from firms to households is paid ✅ _____ and the flow of dollars from households to firms is paid _____. A) As wages and profits; for goods and services B) For value added; as imputed values C) In current dollars; in constant dollars D) As interest and dividends; for depreciation and taxes 10. Which of the following is a flow variable?​ A) Wealth​ B) The number unemployed​ ✅ C) Government debt​ D) Income ✅ 11. Which of the following is a stock variable? A) Wealth B) Consumption C) Investment D) Income 12. All of the following are a stock except:​ A) A consumer's wealth​ B) The government budget deficit​ ❌ C) The number of unemployed people​ D) The amount of capital in the economy Correct Answer: B) The government budget deficit ✅ 13. All of the following are a flow except:​ A) The number of new automobile purchases​ B) The number of people losing their jobs​ ❌ C) Business expenditures on plant and equipment​ D) The government debt Correct Answer: D) The government debt ✅ 14. The amount of capital in an economy is a ______ and the amount of investment is a ______. ✅ A) Flow; stock B) Stock; flow C) Final good; intermediate good D) Intermediate good; final good 15. The market value of all final goods and services produced within an economy in a given period of time is called: ✅ A) Industrial production B) Gross Domestic Product (GDP) C) The GDP deflator D) General durable purchases 16. GDP is the market value of all ______ goods and services produced within an economy in a given period of time. A) Used B) Intermediate ✅ C) Consumer D) Final ✅ 17. To compute the value of GDP: A) Goods and services are valued at market prices B) The sale of used goods is included C) Production for inventory is not included D) Goods and services are valued by weight 18. Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of GDP is: A) 10 pieces of fruit ✅ B) $7 C) $8 D) $10 19. All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of a: ✅ A) Book printed in 2009, entitled The Year 3000 B) 2001 Jeep Cherokee C) Year 2010 calendar printed in 2009 D) Ticket to see the movie 2001 20. Since GDP includes only the additions to income, not transfers of assets, ______ are not included in the computation of GDP. ✅ A) Final goods B) Used goods C) Consumption goods D) Goods produced for inventory 22. When a firm sells a product out of inventory, investment expenditures ______ and consumption expenditures ______.​ ✅ A) Increase; decrease​ B) Decrease; increase ​ C) Decrease; remain unchanged​ D) Remain unchanged; increase 23. Assume that a bakery hires more workers and pays them wages and that the workers produce more bread. GDP increases in all of the following cases except when the bread: A) Is sold to households ✅ B) Is stored away for later sale C) Grows stale and is thrown away D) Is sold to other firms 24. When bread is baked but put away for later sale, this is called: A) Waste B) Saving ✅ C) Fixed investment D) Investment in inventory 25. Assume that a rancher sells McDonald's a quarter-pound of meat for $1 and that McDonald's sells you a hamburger made from that meat for $2. In this case, the value included in GDP should be: A) $0.50 ✅ B) $1 C) $2 D) $3 26. Assume that a tire company sells 4 tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount ✅ from these transactions that should be counted in GDP is: A) $20,000 B) $20,000 less the automobile company's profit on the car C) $20,900 D) $20,900 less the profits of all three companies on the items that they sold 27. The value added of an item produced refers to: A) A firm's profits on the item sold B) The value of the labor inputs in the production of an item C) The value of a firm's output less the value of its costs ✅ D) The value of a firm's output less the value of the intermediate goods that the firm purchases 28. Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is: ✅ A) $10,000 B) $12,000 C) $20,000 D) $22,000 29. In computing GDP: A) Expenditures on used goods are included. B) Production added to inventories is excluded. C) The amount of production in the underground economy is imputed. ✅ D) The value of intermediate goods is included in the market price of the final goods. 30. To avoid double counting in the computation of GDP, only the value of ______ ✅ goods are included.​ A) Final ​ B) Used​ C) Intermediate​ D) Investment 31. Imputed values included in GDP are the: ✅ A) Market prices of goods and services. B) Estimated value of goods and services that are not sold in the marketplace. C) Price of goods and services measured in constant prices. D) Price of goods and services measured in current prices. 32. An example of an imputed value in the GDP is the: ✅ A) Value-added of meals cooked at home. B) Housing services enjoyed by homeowners. C) Services of automobiles to their owners. D) Value of illegal drugs sold. 33. In principle, the GDP accounts should—but do not—have an imputation for: ✅ A) Housing services enjoyed by homeowners. B) Rental services of automobiles driven by owners. C) Meals cooked in restaurants. D) Housing services enjoyed by renters. 34. The underground economy:​ A) Is included in the latest GDP accounts.​ ✅​ B) Includes only illegal activities.​ C) Includes domestic workers for whom Social Security tax is not collected. D) Excludes the illegal drug trade. 35. Real GDP is measured in _____ prices ____ time. A) Current; at a point in B) Current; per unit of ✅ C) Constant; at a point in D) Constant; per unit of ✅ 36. Nominal GDP is measured in _____ prices _____ time. A) Current; at a point in B) Current; per unit of C) Constant; at a point in D) Constant; per unit of 37. Nominal GDP means the value of goods and services is measured in ______ ✅ prices. A) Current B) Real C) Constant D) Average 38. Real GDP means the value of goods and services is measured in ______ prices. A) Current ✅ B) Actual C) Constant D) Average 39. Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was: A) $5​ ✅​ B) $6.50​ C) $9.50 D) $11 40. The best measure of the economic satisfaction of the members of a society is: ✅ A) Nominal GDP B) Real GDP C) The rate of inflation D) The value of corporate profits 41. If nominal GDP in 2009 equals $14 trillion and real GDP in 2009 equals $11 trillion, what is the value of the GDP deflator? A) 0.79​ ✅​ B) 1.03​ C) 1.27 D) 1.30 42. If the GDP deflator in 2009 equals 1.25 and nominal GDP in 2009 equals $15 trillion, what is the value of real GDP in 2009? ✅​ A) $12 trillion​ B) $12.5 trillion C) $15 trillion​ D) $18.75 trillion 43. The GDP deflator is equal to: A) The ratio of nominal GDP to real GDP ✅​ B) The ratio of real GDP to nominal GDP​ C) Real GDP minus national GDP​ D) Nominal GDP minus real GDP 44. Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 5 in 2009, then the GDP deflator in 2009, using a base year of 2002, was approximately: A) 1.5​ ✅​ B) 1.7​ C) 1.9 D) 2.0 45. If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately ______ percent. A) 2 ✅​ B) 3​ C) 5​ D) 8 46. If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent. A) increased; 2 ✅​ B) decreased; 2​ C) increased; 8​ D) decreased; 8 47. Nominal GDP measures the value of goods and services in ______ prices, while real GDP measures the value of goods and services in ______ prices. A) foreign; domestic​ ✅​ B) domestic; foreign​ C) current; constant D) constant; current 48. Real GDP is a better measure of economic well-being than nominal GDP, because real GDP: A) excludes the value of goods and services exported abroad.​ B) includes the value of government transfer payments.​ ✅ C) measures changes in the quantity of goods and services produced by holding prices constant ​ D) adjusts the value of goods and services produced for changes in the foreign exchange rate. 49. Chain-weighted measures of real GDP make use of prices from: ✅ A) an unchanging base year.​ B) a continuously changing base year ​ C) a base year that is changed approximately every 5 years.​ D) a base year that is changed approximately every 10 years. 50. The new chain-weighted measures of real GDP are an improvement over traditional measures because the prices used to compute real GDP are: A) never far out of date ✅​ B) always from the same base year.​ C) imputed.​ D) chained to the CPI. 51. The national income accounts identity, for an open economy, is: A) Y = C + I + G – NX ✅​ B) Y = C + I + G + NX​ C) Y = C + I + G​ D) Y = C + I – G 52. If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are: ✅​ A) $131​ B) –$131 C) $31​ D) –$31 53. If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are –$1,910, then government purchases are: A) $2,977​ B) $1,910​ ✅ C) –$843​ D) $1,067 54. If real GDP grew by 6 percent and population grew by 2 percent, then real GDP per person grew by approximately ______ percent. A) 2​ ✅​ B) 3​ C) 4 D) 8 55. In the national income accounts, consumption expenditures include all of the following except household purchases of: A) durable goods​ ✅​ B) nondurable goods​ C) new residential housing D) services 56. In the national income accounts, the purchase of durables, nondurables, and services by households are classified as: A) consumption ✅ ​ B) investment​ C) government purchases​ D) net exports 57. If total consumption (measured in billions of current dollars) equals $3,657, consumption of durable goods is $480, and consumption of nondurable goods is $1,194, then consumption of services is: ✅​ A) $1,674​ B) $2,083 C) $2,463​ D) $1,983 58. In the national income accounts, goods bought for future use are classified as which type of expenditure? ✅ A) services​ B) investment ​ C) government purchases​ D) net exports 59. If total investment (measured in billions of current dollars) equals $741, business fixed investment is $524, and residential fixed investment is $222, then inventory investment is: ✅ A) $5​ B) –$5 ​ C) $15​ D) –$15 60. In the national income accounts, all of the following are classified as government purchases except: A) payments made to Social Security recipients​ B) services provided by police officers​ C) purchases of military hardware​ D) services provided by U.S. senators 61. In the national income accounts, government purchases are goods and services purchased by: A) the federal government​ B) the federal and state governments​ ✅ C) the state and local governments​ D) the federal, state, and local governments 62. In the national income accounts, net exports equal: ✅​ A) exported goods minus imported goods​ B) exported goods and services minus imported goods and services C) exported goods minus imported services​ D) exported goods and services plus imported goods and services 63. If GDP (measured in billions of current dollars) is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are: A) $673​ B) –$673​  ✅ C) $704​ D) –$704 64. All of the following actions are investments in the sense of the term used by macroeconomists except: A) IBM's building a new factory​ B) corner candy store's buying a new computer​ ✅ C) John Smith's buying a newly constructed home​ D) Sandra Santiago's buying 100 shares of IBM stock 65. The investment component of GDP includes all of the following except: A) purchases of corporate stock​ B) spending on new plants and equipment​ C) purchases of new housing by households​ D) changes in business inventories 66. In 2013, the GDP of the United States totaled about: A) $16.8 billion​ ✅​ B) $168 billion​ C) $16.8 trillion D) $168 trillion 67. In 2013, GDP per person in the United States was approximately: A) $5,000​ ✅ B) $35,000​ C) $53,000 ​ D) $353,000 68. In 2013 in the United States, the approximate amount of GDP (in current dollars) that was spent on consumption per person was: A) $36,400 ✅​ B) $53,100​ C) $8,400​ D) $16,800 69. In 2013 in the United States, total government purchases per person (in current dollars) amounted to approximately: A) $1,900 ✅​ B) $9,900​ C) $13,500​ D) $25,600 70. In 2013, American net borrowings from abroad, per person, in current dollars, amounted to approximately: ✅ A) $100​ B) $220 ​ C) $1,600​ D) $10,000 71. GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad. A) plus; plus ✅ ​ B) minus; minus​ C) minus; plus​ D) plus; minus 72. Net national product equals GNP: A) plus net investment​ B) minus net investment​ ✅ C) plus depreciation​ D) minus depreciation 73. National income differs from net national product by an amount called: A) depreciation ✅ ​ B) indirect business taxes​ C) statistical discrepancy​ D) net foreign factor income payments 74. The largest component of national income is: ✅​ A) corporate profits​ B) compensation of employees C) proprietors' income​ D) net interest 75. Disposable personal income: A) is computed by subtracting personal tax from personal income ✅​ B) is generally greater than personal income​ C) includes corporate profits but not dividends​ D) does not include government transfers to individuals 76. According to the usual seasonal pattern of the U.S. economy, GDP is highest in the quarter of the year that includes: A) January, February, and March​ B) April, May, and June​ ✅ C) July, August, and September​ D) October, November, and December 77. The CPI is determined by computing: A) an average of prices of all goods and services​ B) the price of a basket of goods and services that changes every year, relative to the same basket in a base year​ ✅ C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year ​ D) nominal GDP relative to real GDP 78. Prices of items included in the CPI are: A) averaged with the price of every item weighted equally​ ✅​ B) weighted according to amount of the item produced in GDP​ C) weighted according to quantity of the item purchased by the typical household D) chained to the base year by the year-to-year growth rate of the item 79. Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is: A) 0.75​ ✅ B) 0.80​ C) 1 ​ D) 1.25 80. The core inflation rate: A) measures the change in producer prices.​ ✅ B) is measured using a Paasche index.​ C) excludes food and energy prices ​ D) includes the price of exports and includes the price of imports. 81. Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation, ✅ A) provides a real, rather than a nominal, rate of inflation.​ B) gives a better measure of ongoing, sustained price changes ​ C) is more consistent with measures of inflation used in other countries.​ D) fluctuates more than measures of inflation that include food and energy prices. 82. An increase in the price of goods bought by firms and the government will show up in: ✅​ A) the CPI but not in the GDP deflator.​ B) the GDP deflator but not in the CPI C) both the CPI and the GDP deflator.​ D) neither the CPI nor the GDP deflator. 83. An increase in the price of imported goods will show up in: A) the CPI but not in the GDP deflator ✅​ B) the GDP deflator but not in the CPI.​ C) both the CPI and the GDP deflator.​ D) neither the CPI nor the GDP deflator. 84. Unlike the GDP deflator, the CPI includes the prices of: A) goods purchased by firms.​ B) goods purchased by governments.​ ✅ C) exported goods.​ D) imported goods 85. Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given this data, a Laspeyres price index of 2009 prices using 2004 as the base year would be: ✅​ A) 1.05.​ B) approximately 1.07 C) approximately 1.33.​ D) 1.50. 86. Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given these data, a Paasche index for 2009 using 2004 prices would be: ✅​ A) 1.05.​ B) approximately 1.07 C) approximately 1.33.​ D) 1.50. 87. The CPI is a: A) Laspeyres price index ✅​ B) Paasche price index.​ C) Laspeyres quantity index.​ D) Paasche quantity index. 88. The GDP deflator is a: A) Laspeyres price index ✅​ B) Paasche price index.​ C) Laspeyres quantity index.​ D) Paasche quantity index. 89. When prices of different goods are increasing by different amounts, the price index that will rise the fastest is: A) Fisher's ideal index.​ B) the CPI.​ ✅ C) the GDP deflator.​ D) a Paasche index 90. The panel of economists appointed by the Senate Finance Committee estimated that the CPI ______ inflation by approximately ______ percentage point(s) per year. A) overestimates; 1 ✅ ​ B) overestimates; 10​ C) underestimates; 1​ D) underestimates; 10 91. The number of households interviewed in the monthly employment survey of the U.S. Bureau of Labor Statistics is approximately: ✅ A) 6,000.​ B) 60,000. ​ C) 600,000.​ D) 6 million. 92. According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person: A) is going to school full time. ✅ ​ B) is temporarily absent from a job because of illness.​ C) has been temporarily laid off.​ D) is out of a job and looking for work during the previous four weeks. 93. According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they: A) are out of a job, but not looking for work.​ ✅​ B) retired from the labor force before age 65.​ C) do not have a job, but have looked for work in the past 4 weeks. D) are absent from work because of bad weather or illness. 94. The labor force equals the: A) adult population.​ B) number of employed individuals.​ ✅ C) number of unemployed individuals.​ D) number of employed and unemployed individuals. 95. Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ______ percent. ✅​ A) 4.9​ B) 7.4 C) 7.9​ D) 9.4 96. If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent. ✅​ A) 3.5​ B) 4.7 C) 4.9​ D) 7 97. The labor-force participation rate is the percentage of the: ✅​ A) adult population that is employed.​ B) adult population that is in the labor force. C) labor force that is employed.​ D) labor force that is unemployed. 98. If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals ______ million. A) 11.28​ B) 176.72​ ✅ C) 188​ D) 200 99. If an increasing proportion of the adult population is retired, then the labor force participation rate: ✅ A) will increase.​ B) will decrease. ​ C) will remain constant.​ D) may increase, decrease, or remain constant. 105. A worker with two jobs is counted: ✅​ A) once in both the household and the establishment surveys.​ B) once in the household survey, but twice in the establishment survey. C) once in the establishment survey, but twice in the household survey.​ D) twice in both the household and the establishment surveys. 106. An estimate of the number of unemployed workers in the economy can be obtained from: ✅​ A) both the household and establishment surveys.​ B) from the household survey, but not from the establishment survey. C) from the establishment survey, but not from the household survey.​ D) from neither the household nor the establishment surveys. 107. An estimate of total employment in the economy can be obtained from: A) both the household and establishment surveys.​ ✅​ B) from the household survey, but not from the establishment survey.​ C) from the establishment survey, but not from the household survey. D) from neither the household nor the establishment surveys. 108. A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is: ✅​ A) $1.​ B) $2. C) $3.​ D) $6. 109. A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. The marriage: A) does not change GDP. ✅ ​ B) decreases GDP by $60,000.​ C) increases GDP by $60,000.​ D) increases GDP by more than $60,000. 110. A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. If GDP were changed so that it truly measured the sum of all final economic activity, the marriage would: A) decrease GDP. ✅ ​ B) increase GDP.​ C) leave GDP unchanged.​ D) first decrease and then increase GDP. 111. A fixed-weight price index like the CPI ______ the change in the cost of living because it ______ take into account that people can substitute less expensive goods for ones that have become more expensive. A) underestimates; does not ✅​ B) overestimates; does​ C) accurately estimates; does​ D) overestimates; does not OD MILENY MACROECONOMICS 1. When a firm sells a product out of inventory, gross domestic product (GDP): a) increases b) decreases c) is not changed d) increases or decreases, depending on the year the product was produced 2. An increase in the price of goods bought by firms and the government will show up in: a) the consumer price index (CPI) but not in the gross domestic product (GDP) deflator b) the GDP deflator but not in the CPI c) both the CPI and the GDP deflator d) neither the CPI nor the GDP deflator 3. In the classical model with fixed income, if the demand for goods and services is greater than the supply, the interest will: a) increase b) decrease c) remain unchanged d) fluctuate depending on whether consumption is greater or less than investment 4. In a closed economy, private saving equals: a) Y-C-G b) Y-T-C c) Y-I-C d) Y-T 5. To increase the money supply, the Federal Reserve: a) buys government bonds b) sells government bonds c) buys corporate stocks d) sells corporate stocks 6. A bank balance sheet consists of these items: Deposits: $1000 Reserves: $100 Securities: $400 Bonds: $500 Issues Loans: $2000 What is the value of bank capital? a) -$1000 b) +$5500 c) +$1000 d) -$5500 7. Real money balances equal the: a) sum of coin, currency, and balances in checking accounts b) amount of money expressed in terms of the quantity of goods and services it can purchase c) number of dollars used as a medium of exchange d) quantity of money created by the Federal Reserve 8. Given that M/P = kY, when the demand for money parameter, k, is large, the velocity of money is ___ and money is changing hands ___ a) large; frequently b) large; infrequently c) small; frequently d) small; infrequently 9. A policy that decreases the job separation rate ___ the natural rate of unemployment a) will increase b) will decrease c) will not change d) could either increase or decrease 10. Which of these is the BEST example of structural unemployment? a) Tim is looking for a job with flexible hours but has not been offered one yet. b) Vickie lost her job as a graphic artist at a movie studio because she did not have training in computer-generated animation. c) Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available. d) Fatima lost her job at a packing plant but has not looked very intensively for a new job because she still has two months of unemployment insurance benefits left. 11. Over the business cycle, investment spending _______ consumption spending. a) is inversely correlated with b) is more volatile than c) has about the same volatility as d) is less volatile than 12. Exhibit: Shift in Aggregate Demand Assume that the economy is initially at point A with aggregate demand given by AD2. A shift in the aggregate demand curve to AD0 could be the result of either a(n) _____ in the money supply or a(n) _____ in velocity. a) increase; increase b) increase; decrease c) decrease; increase d) decrease; decrease 13. Holding output, Y, fixed, a reduction in the demand for money is the equivalent of a(n) _____ in velocity and will shift the aggregate demand curve to the _____. a) increase; right b) increase; left c) decrease; right d) decrease; left 14. In the short run, a favourable supply shock causes: a) both prices and output to rise b) prices to rise and output to fall c) prices to fall and output to rise d) both prices and output to fall 15. The IS curve plots the relationship between the interest rate and _____ that arises in the market for _____. a) national income; goods and services b) the price level; goods and services c) national income; money d) the price level; money 16. Exhibit: Market for Real Money Balances Based on the graph, if the interest rate is r1, then people will ______ bonds, and the interest rate will ______. a) sell; rise b) sell; fall c) buy; rise d) buy; fall 17. The intersection of the IS and LM curves determines the values of: a) r, Y, and P, given G,T, and M b) r, Y, and M, given G, T, and P c) r and Y, given G,T,M, and P d) p and Y, given G,T, and M 18. The IS-LM model is generally used: a) only in the short run. b) only in the long run. c) both in the short run and in the long run. d) in determining the price level. 19. Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a decrease in government spending would generate the new equilibrium combination of interest rate and income a) r2, Y2 b) r2, Y3 c) r3, Y2 d) r3, Y3 20. Exhibit: Policy interaction Based on the graph, starting from equilibrium at interest rate r1, income Y1, IS1, and LM1, if there is an increase in government spending that shifts the IS curve to IS2, then in order to keep output constant, the Federal Reserve should: a) increase; LM2 b) decrease; LM2 c) increase; LM3 d) decrease; LM3 21. An increase in consumer saving for any given level of income will shift the: a) LM curve upward and to the left b) LM curve downward and to the right c) IS curve downward and to the left d) IS curve upward and to the right 22. In the IS-LM model, a decrease in output would be the result of a(n): a) decrease in taxes b) increase in money supply c) increase in money demand d) decrease in investment purchases 23. According to the sticky-price model, other things being equal, the greater the proportion of firms that follow sticky prices, the _____ in output in response to an unexpected price increase. a) greater increase b) smaller decrease c) greater decrease d) smaller increase 24. Exhibit: ID-AS Shifts Starting from long-run equilibrium at A with output equal to Y1 and the price level equal to P1, if there is an unexpected monetary contraction that shifts aggregate demand from AD1 to AD3, then the long-run neutrality of money is represented by the movement from: a) A to B b) A to C c) A to D d) C to D 25. Along a short-run aggregate supply curve, output is related to unexecuted movements in the __. Along the Philips curve, unemployment is related to the unexpected movements in the ___. a) price level; inflation rate b) inflation rate; price level c) unemployment rate; price level d) price level; level of output 26. Exhibit: Short-run Philips curve As the short-run Philips curve shifts from A to B to C to D, policymakers face: a) the same tradeoff between inflation and unemployment b) a lower rate of inflation for any level of unemployment c) a higher rate of inflation for any level of unemployment d) higher than expected inflation rates and lower unemployment rates 27. The lag between the time that economic stimulus is needed and the time that a tax cut is passed by Congress is an example of: a) fiscal inside lag b) fiscal outside lag c) monetary inside lag d) monetary outside lag 28. If people’s expectations of inflation are formed rationally rather than based on adaptive expectations and if policymakers make a credible policy move to reduce inflation, then the cost of reducing inflation will be ___ traditional estimates of the sacrifice ratio. a) much higher than b) much lower than c) exactly equal to d) approximately 2 percent greater than 29. If government debt is not changing, then: a) the economy is at a long-run equilibrium b) the government’s budget must be balanced c) gross domestic product (GDP) must equal the natural rate of output d) capital per worker is constant 30. Capital budgeting is a procedure that: a) adjusts the deficit for inflation b) estimates what the deficit would be if the economy were operating at the natural rate of output c) accounts for assets as well as liabilities d) measures the impact of fiscal policy on the lifetime incomes of individuals of different ages. ——————————— Other questions: 1. Fiscal policy has a relatively long ___ leg, and monetary policy has a relatively long ____ leg. a) inside; outside b) outside; inside c) inside; inside d) outside; outside 2. A policy rule: a) must specify money growth at a constant rate. b) must specify as active policy c) must specify as passive policy d) may specify either as active or passive policy 3. When GDP growth declines, investment spending typically ___, and consumption spending typically ___. a) increases; increases b) increases; decreases c) decreases; decreases d) decreases; increases 4. Which of the following is a mock variable? a) wealth b) consumption c) investment d) income 5. An economy’s factors of production and its production function determine the economy’s: a) labor-force participation rate b) budget surplus or deficit c) population growth rate d) output of goods and services 6. The marginal product of labor is: a) output divided by labor input b) additional output produced when one additional unit of labor is added c) additional output produced when one additional unit of labor and one additional unit of capital are added d) value of additional output when one dollar’s worth of additional labor is added. 7. All of the following are considered major functions of money except as a: a) medium of exchange b) way to display wealth c) unit of account d) store of value 8. To increase the money supply, the Federal Reserve: a) buys government bonds b) sells government bonds c) buys corporate stocks d) sells corporate stocks 9. All of the following are reasons for frictional unemployment except: a) workers have different preferences and abilities b) unemployed workers accept the first job offer that they receive c) the flow of information is imperfect d) geographic mobility takes time 10. Business cycles are: a) regular and predictable b) irregular and predictable c) regular but unpredictable d) irregular and unpredictable 11. The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on: a) the labor supply b) the supply of capital c) the money supply d) technology Hej myszko