Study Guide For Macroeconomics Final

1. Study Guide For Macroeconomics Final Dr. Frank Jacobson

2. For an economy, expenditure is equal to income because:a. By law firms must pay out all their revenue as income to someone.b. For every sale there is a buyer and a seller.c. Prices of individual goods and services change, but the average price level stays the same.d. None of the above is correct; expenditure is not always equal to income for an economy.

3. GDP is defined as the market value of all final goods and services produced:a. By the citizens of a country, regardless of where they live, in a given period of time; this definition focuses on GDP as a measure of total income.b. By the citizens of a country, regardless of where they live, in a given period of time; this definition focuses on GDP as a measure of total expenditure.c. Within a country in a given period of time; this definition focuses on GDP as a measure of total income.d. Within a country in a given period of time; this definition focuses on GDP as a measure of total expenditure.

4. Which of the following statements is correct?a. The value of all intermediate goods and final goods is included in GDP.b. The value of intermediate goods is included in GDP only if those goods were produced in the previous year.c. The value of intermediate goods is included in GDP only if those goods are added to firms’ inventories to be used or sold at a later date.d. The value of intermediate goods is never included in GDP.

5. U.S. GDP and U.S. GNP are related as follows:a. GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.b. GNP = GDP + Income earned by foreigners in the U.S. - Income earned by U.S. citizens abroad.c. GNP = GDP + Value of exported goods - Value of imported goods.d. GNP = GDP - Value of exported goods + Value of imported goods.

6. Unlike national income, personal income:a. Includes retained earnings, corporate income taxes and social insurance contributions, and excludes interest and transfer payments received by households from government.b. Excludes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government.c. Excludes retained earnings, corporate income taxes and social insurance contributions, and includes interest and transfer payments received by households from government.d. Includes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government.

7. Which of the following represents a transfer payment?a. You transfer $1,000 from your bank account to a mutual fund.b. The government sends your grandfather his Social Security check.c. The bank transfers $10 in quarterly interest to your savings account.d. Your employer automatically transfers $100 each month from your wages to a non-taxable medical spending account.

8. Economists use the term inflation to describe a situation in which:a. Some prices are rising faster than others.b. The economy's overall price level is rising.c. The economy's overall price level is high, but not necessarily rising.d. The economy's overall output of goods and services is rising faster than the economy's overall price level.

9. The economy's inflation rate is the:a. Price level in the current period.b. Change in the price level from the previous period.c. Change in the gross domestic product from the previous period.d. Percentage change in the price level from the previous period.

10. In the calculation of the CPI, coffee is given greater weight than tea if:a. Consumers buy more coffee than tea.b. The price of coffee is higher than the price of tea.c. It costs more to produce coffee than it costs to produce tea.d. Coffee is more readily available than is tea to the typical consumer.

11. Which is the most accurate statement about the GDP deflator and the consumer price index?a. The GDP deflator compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the consumer price index compares the price of currently produced goods and services to the price of the same goods and services in the base year.b. The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.c. Both the GDP deflator and the consumer price index compare the price of a fixed basket of goods and services to the price of the basket in the base year.d. Both the GDPdeflator and the consumer price index compare the price of currently produced goods and services to the price of the same goods and services in the base year.

12. The basket of goods in the consumer price index changes:a. Occasionally, as does the group of goods used to compute the GDP deflator.b. Automatically, as does the group of goods used to compute the GDP deflator.c. Occasionally, whereas the group of goods used to compute the GDP deflator changes automatically.d. Automatically, whereas the group of goods used to compute the GDP deflator changes occasionally.

13. A nation's standard of living is measured by its:a. Real GDP.b. Real GDP per person.c. Nominal GDP.d. Nominal GDP per person.

14. Productivity:a. Is nearly the same across countries, and so provides no help explaining differences in the standard of living across countries.b. Explains very little of the differences in the standard of living across countries.c. Explains some, but not most of the differences in the standard of living across countries.d. Explains most of the differences in the standard of living across countries.

15. Which of the following is true?a. Productivity is hours worked divided by output produced.b. Americans have a higher standard of living than Indonesians because American workers are more productive than Indonesian workers.c. Trends in the market prices of most resources indicate that they have become increasingly scarce over time.d. All of the above are correct.

16. The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce furniture are called:a. Human capital.b. Physical capital.c. Natural resources.d. Technological knowledge.

17. Which of the following is considered human capital?a. Knowledge acquired from early childhood education programs.b. Knowledge acquired from grade school.c. Knowledge acquired from on-the-job training.d. All of the above are correct.

18. In a market economy, the real, or inflation adjusted, price of a resource measures its:a. Contribution to revenue.b. Relative scarcity.c. Productivity.d. Contribution to efficiency.

19. Technological knowledge refers to:a. Human capital.b. Available information on how to produce things.c. Resources expended transmitting society's understanding to the labor force.d. All of the above are technological knowledge.

20. If there are diminishing returns to capital, then:a. Capital produces fewer goods as it ages.b. Old ideas are not as useful as new ones.c. Increases in the capital stock eventually decrease output.d. Increases in the capital stock increase output by ever smaller amounts.

21. If a country's saving rate increases, then in the long run:a. Both productivity growth and income growth increase.b. Only productivity growth increases.c. Only income growth increases.d. Neither productivity growth nor income growth increase.

22. A bond is a:a. Financial intermediary.b. Certificate of indebtedness.c. Certificate of partial ownership in an enterprise.d. None of the above is correct.

23. Compared to long-term bonds, other things the same, short-term bonds generally have:a. More risk and so pay higher interest.b. Less risk and so pay lower interest.c. Less risk and so pay higher interest.d. About the same risk and so pay about the same interest.

24. Other things the same, as the maturity of a bond becomes longer, the bond will pay:a. Less interest because it has less risk.b. Less interest because it has more risk.c. More interest because it has more risk.d. There is no relation between term to maturity and risk.

25. People who buy stock in a corporation such as General Electric become:a. Creditors of General Electric, so the benefits of holding the stock depend on General Electric's profits.b. Creditors of General Electric, but the benefits of holding the stock do not depend on General Electric's profits.c. Part owners of General Electric, so the benefits of holding the stock depend on General Electric's profits.d. Part owners of General Electric, but the benefits of holding the stock do not depend on General Electric's profits.

26. Profits paid out to stockholders are:a. Retained earnings.b. Dividends.c. The denominator in the price-earnings ratio.d. All of the above are correct.

27. Which of the following equations most simply represents GDP in a closed economy?a. Y = C + I + G + NXb. S = I – Gc. I = Y - C + Gd. Y = C + I + G

28. In a closed economy, national saving equals:a. Investment.b. Income minus the sum of consumption and government purchases.c. Private saving plus public saving.d. All of the above are correct.

29. A budget surplus is created if:a. The government sells more bonds than it buys back.b. The government spends more than it receives in tax revenue.c. Private saving is greater than zero.d. None of the above is correct.

30. Other things the same, when the interest rate rises:a. People would want to lend more, making the supply of loanable funds increase.b. People would want to lend less, making the supply of loanable funds decrease.c. People would want to lend more, making the quantity of loanable funds supplied increase.d. People would want to lend less, making the quantity of loanable funds supplied decrease.

31. If the nominal interest rate is 10 percent and the inflation rate is 4 percent, then the real interest rate is:a. 14 percent.b. 6 percent.c. 2.5 percent.d. .4 percent.

32. Cyclical unemployment refers to:a. The relation between the probability of unemployment and a worker's changing level of experience.b. How often a worker is likely to be employed during her lifetime.c. Year-to-year fluctuations of unemployment around its natural rate.d. Long-term trends in unemployment.

33. The natural rate of unemployment is the economist's notion of:a. Full employment.b. Cyclical employment.c. Structural unemployment.d. Frictional unemployment.

34. Unemployment data is collected:a. From unemployment insurance claims.b. Through a regular survey of about 60,000 households.c. Through a regular survey of about 200,000 firms.d. Unemployment data is collected using all of the above.

35. The labor force:a. Equals the number of people employed.b. Equals the number of people employed plus the number of people unemployed.c. Equals the non-institutionalized adult population.d. Equals the number of people employed plus the number of people cyclically unemployed.

36. Which of the following definitions is correct?a. Labor force = number of employed.b. Labor force = population - number of unemployed.c. Unemployment Rate = (number of unemployed [number of employed + number of unemployed]) 100.d. Unemployment Rate = (number of unemployed adult population) 100.

37. The labor-force participation rates among U.S. men since World War II:a. Decreased because of longer schooling, an increase in stay-at-home dads, earlier retirement, and longer lives.b. Decreased because of longer lives, laws that prevent mandatory retirement, and an increase in stay-at-home dads.c. Increased because of better unemployment insurance, laws that prevent mandatory retirement, and laws that prevent age discrimination in hiring.d. Increased because of easier job searches, better training, and laws that prevent mandatory retirement and age discrimination in hiring.

38. Since 1950, the labor-force participation rate of women has:a. Increased. This can be attributed to longer lives.b. Increased. This can be attributed partly to advances in birth control.c. Decreased. This can be attributed partly to longer schooling.d. Decreased. This can be attributed partly to increases in the minimum wage.

39. Evidence from research studies by economists:a. Show that increased unemployment benefits decrease the job-search efforts of the unemployed.b. Show that increased unemployment benefits have virtually no effect on the job-search efforts of the unemployed.c. Show that increased unemployment benefits increases the job-search effort of the unemployed.d. Find no clear-cut evidence on what increased unemployment benefits do to job-search efforts.

40. If the minimum wage were currently above the equilibrium wage, than a decrease in the minimum wage would:a. Increase both the quantity demanded and the quantity supplied of labor.b. Decrease both the quantity demanded and the quantity supplied of labor.c. Increase the quantity of labor demanded and decrease the quantity supplied.d. Decrease the quantity of labor demanded and increase the quantity supplied.

41. Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?a. Store of value.b. Medium of exchange.c. Unit of account.d. None of the above is correct.

42. An item that people can use to transfer purchasing power from the present to the future is called:a. A medium of exchange.b. A unit of account.c. A store of value.d. None of the above is correct.

43. Current U.S. currency is:a. Fiat money with intrinsic value.b. Fiat money with no intrinsic value.c. Commodity money with intrinsic value.d. Commodity money with no intrinsic value.

44. If an economy used gold as money, its money would be:a. Commodity money, but not fiat money.b. Fiat money, but not commodity money.c. Both fiat and commodity money.d. Neither fiat nor commodity money.

45. Which of the following is not included in M1?a. Currency.b. Demand deposits.c. Savings deposits.d. Travelers' checks.

46. Which of the following is included in the M2 definition of the money supply?a. Credit cards.b. Money market mutual funds.c. Corporate bonds.d. Large time deposits.

47. Debit cards:a. Defer payments.b. Are equivalent to credit cards.c. Are included in M2.d. Are used as a method of payment.

48. Each Federal Reserve District Bank president is appointed by:a. The US president with the approval of the Senate.b. The Board of Governors.c. The voting members of the FOMC.d. Each bank's board of directors.

49. Which of the following is correct?a. The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms.b. The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms.c. The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms.d. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

50. The Fed’s primary tool to change the money supply is:a. Changing the discount rate.b. Changing the reserve requirement.c. Conducting open market operations.d. Redeeming Federal Reserve notes.