Question 1

If real GDP per capita doubles between 2007 and 2022, what is the approximate average annual growth rate of real GDP per capita? Use the formula $$g = \frac{\ln(\frac{Y_{t}}{Y_{0}})}{t}$$, where $$Y_{t} is $$the final value, $$Y_{0} is $$the initial value, and $$t is $$the number of years.

Accepted Answer

4.7%

Question 2

Under which of the following circumstances would the government be running a deficit? Assume $$G is $$government spending, $$T is $$tax revenue, and $$TR is $$transfer payments.

Accepted Answer

$$G = \8$ trillion, T$$ = \$$7$$ trillion, $$TR = \1$ trillion

Question 3

Given the following economic data for a closed economy: $$Y = \10$ trillion, C$$ = \$$8$$ trillion, $$G = \1$ trillion, T$$ = \$$2$$ trillion, what is the value of investment ($$I$$)? Use the formula $$Y = C + I + G.$$

Accepted Answer

$$1$$ trillion

Question 4

The demand for loanable funds is downward sloping because, as the ________ interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.

Accepted Answer

lower; greater; greater

Question 5

Increases in real GDP since 1900 can actually underestimate growth in the standard of living for Americans since 1900 because:

Accepted Answer

Stocks are financial securities, while bonds represent ownership in companies.

Question 6

One difference between stocks and bonds is that:

Accepted Answer

Stocks provide a promise to repay a purchaser at the stock value, while bonds represent a promise to repay the purchase price of the bond.

Question 7

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

Accepted Answer

Recession

Question 8

Refer to the loanable funds market graph. If the government increases its budget deficit, what will happen to the equilibrium real interest rate and the equilibrium quantity of loanable funds?

Accepted Answer

Demand shifts right, interest rate increases, quantity increases

Question 9

If real GDP per capita in the United States is $$8,000, what will real GDP per capita in the United States after 5 years if real GDP per capita grows at an annual rate of 3.2%? Use the formula Y$$_{t} = Y_{0}(1 + $$g)^{t}$.

Accepted Answer

$$9,399.66$$

Question 10

If European countries improve unemployment insurance programs, European countries can expect:

Accepted Answer

Longer periods of unemployment for their workers.

Question 11

Using the per-worker production function, the largest changes in an economy's standard of living would be achieved by a movement from:

Accepted Answer

A to B

Question 12

Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s. By doing so, these countries were essentially preventing a movement from:

Accepted Answer

A to B

Question 13

An unplanned increase in inventories results from:

Accepted Answer

Actual investment spending greater than planned investment.

Question 14

If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?

Accepted Answer

Net exports will decrease as U.S. imports increase.

Question 15

If an increase in autonomous consumption spending of $$100 million results in a 500 $$million increase in equilibrium real GDP, then what is the marginal propensity to consume (MPC)? Use the formula $$	ext{Multiplier} = \frac{1}{1 - MPC}.$$

Accepted Answer

MPC is 0.75

Question 16

Which is the smallest component of aggregate expenditure?

Accepted Answer

Planned investment expenditures

Question 17

Spending on durable goods generally ________ during a recession, while spending on nondurable goods ________.

Accepted Answer

Declines by a larger percentage than overall consumption spending during a recession

Question 18

Given the equations for $$C$$, $$I$$, $$G$$, and $$NX$$ below, what is the equilibrium level of GDP? $$C = 2,000 + 0.8Y$$, $$I = 2,500$$, $$G = 3,000$$, $$NX = 400$$

Accepted Answer

$$43,333$$

Question 19

According to the aggregate expenditure model, at what point is aggregate expenditure greater than GDP?

Accepted Answer

Point K

Question 20

If the economy is at point L in the aggregate expenditure model, what will happen?

Accepted Answer

Inventories have fallen below their desired level, and firms increase production.

Macroeconomics Multiple Choice Review: Key Concepts and Applications

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