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This 8 page Study Guide was uploaded by Shelby Sorrell on Friday October 9, 2015. The Study Guide belongs to ECO2013 at a university taught by Deborah Paige in Fall 2015. Since its upload, it has received 24 views.
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Date Created: 10/09/15
1 If MPC is 85 then a MPS is 15 2 If MPC is 75 then if consumer income rises by 10000 we could predict that consumption will a Rise by 7500 3 Savings rates sharply dropped in most developed countries in the 19905 and early 20005 a True 4 When national income is 1000 consumption is 960 When national income is 2000 consumption is 1860 Which of the following is true a MPC is 9 from 1000 to 2000 5 When income is 40000 per person consumers used to spend 38000 but now spend 36000 This suggests that a We have moved to a lower consumption line or function 6 Income rises in the US typically consumption rises even faster a False 7 Large drop in the stock market a Drops consumer wealth and lowers the consumption line 8 The permanent income hypothesis suggests that a People base part of their spending on expected future income 9 In the US consumption tends to account for about of total spending a 67 10The 45 degree line in a consumption function graph is a Every point where consumption income 11APC APS always equals 1 a True 12A corporation a Is a business with its own legal identity as an individual It protects owners from liability issues but must pay additional taxes 13A business wants to buy a set of equipment that will cost 400000 and expects to make 20000 a year pro ting using the equipment The expected rate of pro t is a 5 14A business wants to buy a set of equipment that will cost 200000 and expects to pro t 30000 a year using the equipment In which of the following cases would be the rm be most willing to borrow the money to buy the equipment a The interest rate is 10 15Net investment spending a Is a better measure of what has happened to productive capacity than gross investment 16When a company sells a bond that is actually borrowing money a True 17Company X has 300000 million in preferred stock 5 billion in common stock and 2 billion in bonds The capitalization of the company is a 73 billion 18The most number of US rms are a Proprietorships 19lf a company starts the year with 350 million in inventory and ends the year with 400 million in inventory a Inventory investment was 50 million for the year 20na recession inventory in plants and equipment tends to be a More stable than inventory investment 21At very low levels of disposable income a Consumption is greater than disposable income 22People tend to spend more money the the amount of credit available and the the stock of liquid assets in the hand of consumers a Higher higher 23At the point where C line crosses the 45degree line savings is a Zero 24Autonomous consumption is a The minimum that people will spend even if disposable income is zero 25As disposable income grows a Autonomous C stays the same and induced C rises 26The expected rate of pro t is found by a Dividing expected pro ts by money invested 27Which statement is true a Stock holders are owners of a corporation while bondholders are not 28Which of the following is NOT included in the GDP accounts as a component of investment a The purchase of 50 shares of ATampT stock by an employee of ATampT 29lf depreciation exceeds gross investment we can say that a The economy39s stock of capital is shrinking 30Autonomous consumption in the below graph is equal to a 3000 1 AS demonstrated in the circular ow the public sector represents a All different levels of government 2 If the marginal tax rate is 25 this means a That you are paying 25 of additional income in tax 3 A trade surplus is a When a country exports more than it imports 4 Disposable income is a lncome after taxes and transfers 5 Mr A makes 40000 a year Mr B makes 20000 a year Mr A pays 6000 in taxes while Mr B pays 4000 in taxes Which of the following is true a Taxes are regressive because Mr a pays a lower tax rate than Mr B 6 You earn 50000 and your income tax is 10000 When you get a raise to 80000 your income tax rises to 20000 Which of the following is true a Your rst average tax rate was 20 7 Consumption is 800 exports 300 government purchases 150 investment 200 government transfers 100 and imports 200 What is the level of aggregate demand a 1250 800C 300Xn 150G 200I 200Xn 8 When there is a trade surplus a The AE line shifts upward by the amount of the surplus 9 Which of the following lines best represents all the points where the total spending balances national income a Line 3 10Part of the US Federal Budget that is growing is growing very fast in both dollars and percent of the budget is a Social Security and Medicare 110verall state and local taxes a Are in quotcompetitionquot with nearby states and local taxes 12Which of the following is true a The biggest issue with Social Security system is its ability to redeem all the government bonds 13Which of the following is true a For wage earners Social Security taxes are regressive while Medicare is not 14Government purchases are typically not directly affected by the level of national income a True 15Exports represent money owing out of the economy a False 16Net exports are the only component of Aggregate Expenditures that can be negaUve a True 17US Federal income taxes are mildly progressive for most income groups a True 18Because of progressive taxes most Americans pay more in income tax than in payroll taxes Social Security Medicare a False 19Suppose incomes from 0 to 10000 have a 5 marginal tax rate incomes from 10001 to 20000 have a 7 marginal tax rate and incomes above that have a 10 marginal tax rate Your income is 26000 what is your income tax a 18000 200ne of the consequences of today39s relatively open economy is that some previously US jobs have been sent overseas to subcontractors This is a Outsourcing and offshoring 21Each of the following is a basic economic role of the US government EXCEPT a Owing most of the means of production 22The largest source of federal tax revenue comes from a Individual income taxes 23n 2010 a person earning 300000 would pay Social Security tax on a Less than half her income 24The most important source of state tax revenue is a Sales tax 25lnterest payments on the national debt are about percent of total federal expenditures a year a 7 26We run a trade on goods and a trade on services a De cit surplus 27lf US imports of goods and services exceed exports a AE in the US will be less than the sum of consumption investment and government purchases 28Which of the following is true a Xn has primarily stayed positive from the 19005 until the 19705 29lf more foreign tourists visited the US this would a Improve overall trade imbalance 30The basis for international trade is a All of the choices are true 1 When making international comparisions of average material standard of living a It is best to use real GDP per capita if possible correcccted for the local cost of living 2 Which of the following would be in the GDP of 2010 a The broker39s commission for placing your 100 shares Cisco stock order 3 Real GDP for the current year is 4 trillion while current nominal GDP is 10 trillion This means that a This year39s output sold in base year prices would have been woth 4 trillion 4 GDP is likely to underestimate the true standard of living in a country a That has a large component of home produced home consumed goods and services 5 Full employment is level of GDP a Where production is as high as possible without causing major in ation 6 Which of the following statements is true a The business cycle is a short run phenomenon 7 The typical phases of the business cycle are a Peak recession trough and expansion 8 nGDP is 9 trillion in Yr Z and rGDP is 8 trillion in Yr Z Which of the following is true a Prices are higher in Year Z than in the base year 9 C is 200 billion l is 50 billion G transfers is 70 billion G purchases is 50 billion Depreciation is 10 billion exports is 60 billion and imports are 40 billion Find rGDP a 320 billion 10C is 200 billion l is 50 billion G transfers is 70 billion G purchases is 50 billion Depreciation is 10 billion exports is 60 billion and imports are 40 billion Find nGDP a 310 billion 11Typicaly the period where GDP hits its lowest point in the business cycle is called a Atrough 12We cut down trees and sell the timber for 8000 The timber is sawn up into lumber that sells for 18000 The lumber is used to build furniture that sells for 30000 a 30000 goes in GDP 13The long run annual growth rate of the US economy tends to be about a Close to 2 or a bit more 14Which of the following is correct a If the error in GDP is stable the growth rates are fairly accurate 15Which of the following do we want to leave out of GDP a Purely nancial transactions 16GDP is awed in part because not all production is reported to the government a True 17nGDP is GDP without the foreign sector a false 18The GPl is an alternative suggested to GDP because it considers usage 0 nonrenewable resources and quality of life issues a True 19lf the quality of goods is declining then GDP underestimates our standard of living all other things are equal a False 20Some countries have a higher living cost of living than the US a True 21ln 2009 GDP in the US was slightly over a 14 trillion 22The largest component of national income is a Salaries and wages 23Which statement is true a GDP is a single number that seeks to measure our national output 24Historically real GDP has risen less rapidly than nominal GDP because a The general price level has risen 25After a business cycle trough expansion follows a All of the time 26lf 1996 is the base year which of the following statement could be made about the relationship between nGDP and rGDP today a nGDP is higher than rGDP 27lf the GDP de ator is now 115 then we may conclude that since the base year a Prices have risen 15 since the base year 28GDP is 7 trillion C is 42 trillion l is 14 trillion G is 21 trillion then a Imports exceed exports by 07 trillion 29Which of the following is NOT a part of GDP a The value of sales of stocks and bonds bought and sold during the year 30The current output at current year price is called a nGDP 1 Which of the following unemployed workers would be an example of structural unemployment a John loses his job and can39t nd a new one as new technology is adopted in his industry 2 Frictional unemployment a Is temporary for the people involved usually about 6 to weeks at full employment 3 The unemployment rate is most likely to underestimate the true job problem a When the economy is extremely weak 4 The unemployment rate a Measures the percent of the labor force without a job 5 Underemployment a Is when people involuntarily have hours cut or have to accept a job under their skill level 6 There are 118 million people in the labor force and 62 million out of it The number employed is 1121 million a The unemployment rate is 5 7 The number of unemployed is calculated by a Large monthly survey of households conducted for the Bureau of Labor Statistics 8 The natural rate of underemployment a Is the unemployment rate when the economy is at full employment 9 Stag ation is when the economy has a High unemployment and in ation at the same time 10A core in ation rate a Does not include food and energy prices 11There is a 5 in ation rate the price level will double in approximately a 14 years 12Banks want a real rate of 5 on a particular loan while in ation is 7 the necessary nominal rate is a 12 13When predicting where the economy is relative to the natural rate of output and gauging the overall level of in ationary pressure building in the economy we would be best to use a The core PPI 14The CPI a All of the above 15You made 26400 in 2000 when the CPI was 120 ten years later you made 33000 when the CPI was 150 Your income in constant dollars a Was 22000 in 2000 and 22000 in 2010 16A market basket costs 60 to buy in the base year and 78 to buy this year a The price index for this year is 130 17All hyperin ation comes from excessive money a True 18Economists want cyclical unemployment to be 0 a True 19Job creation can be positive or zero but it can be negative a False 20In ation is typically underestimated a False 21Discouraged workers are of cially a Not in the labor force 22The inventory theory of the business cycle a Was particularly important when our economy was dominated by manufacturing 23n US economic history a The business cycle has gotten less volatile in recent decades 24lf the unemployment rate rises from 55 to 70 and the rate of in ation declines from 40 to 30 then the misery index a Has risen from 95 to 10 25Supposed there are 12 million parttime workers and 104 million fulltime workers in the economy 4 million of the parttime workers switch to fulltime work By itself we can conclude that this will cause a The unof cial unemployment rate to remain the same 26lf the CPI is 125 the prices have since the base year a Risen by 25 27lf the unemployment rate rose from 6 to 7 a Cyclical unemployment rose by 1 28Each of the following people would be hurt by unanticipated in ation EXCEPT a Debtors 29During unanticipated in ation a All answers are correct 30lf the nominal rate of interest is 12 and the real rate of interest is 3 then the rate of in ation a 9
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