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macroeconomics principles
Macroeconomics 9th Edition Stephen Slavin - Solutions
During times of infl ation, we want to. ( LO5 , 6 )a) raise taxes and run budget defi citsb) raise taxes and run budget surplusesc) lower taxes and run budget surplusesd) lower taxes and run budget defi cits
If the federal government attempts to eliminate a budget defi cit during a depression, this will. ( LO5 )a) alleviate the depressionb) contribute to infl ationc) make the depression worsed) have no economic effect
Which statement is true? ( LO8 )a) The national debt is larger than GDP.b) The national debt will have to be paid off eventually.c) Most of the national debt is held by foreigners.d) None of these statements is true.
Since 2001 the federal budget defi cit and the national debt . ( LO5 )a) increased, increasedb) decreased, decreasedc) increased, decreasedd) decreased, increased
Which statement is true? ( LO8 )a) About one-third of the national debt is rolled over(or refi nanced) every year.b) The national debt is doubling every 10 years.c) Unless we balance the budget within the next fi ve years, the United States stands a good chance of going bankrupt.d) None of these
The fi scal policy recognition lag ( LO7)a) is always very short.b) is always very long.c) is always longer than the decision and impact lags combined.d) can very considerably in length.
Statement 1: A tax cut will have the same impact on the recessionary gap as an increase in G only if people spend the entire tax cut. ( LO1 , 2 )Statement 2: The paradox of thrift is more relevant today, when savings are so low, than it was back in the 1950s and 1960s.a) Statement 1 is true and
If equilibrium GDP is $5.5 trillion and full employment GDP is $5 trillion, there is . ( LO1 , 2 )a) defi nitely an infl ationary gapb) probably an infl ationary gapc) defi nitely a recessionary gapd) probably a recessionary gap
The crowding-out effect cancels out at least part of the impact of . ( LO9 )a) expansionary fi scal policyb) expansionary monetary policyc) restrictive fi scal policyd) restrictive monetary policy
The requirement to override a presidential veto is. ( LO5 )a) a majority vote in each house of Congressb) a two-thirds vote in each house of Congressc) a three-quarters vote in each house of Congressd) a majority vote of both houses of Congress combined
Fiscal policy is made by . ( LO1 )a) the president onlyb) Congress onlyc) both the president and Congressd) neither the president nor Congress
Which of the following is an example of crowding out? ( LO9 )a) Federal government spending causes changes in state and local government spending.b) Government spending reduces private spending.c) Tax changes perceived as temporary are largely ignored.d) Government spending causes the price level
Each of the following is an example of discretionary fi scal policy except . ( LO5 )a) public works spendingb) making the automatic stabilizers more effectivec) changes in tax ratesd) the unemployment insurance program
The automatic stabilizers . ( LO4 )a) help smooth out the business cycleb) make the business cycle worsec) eliminate the business cycle
When there is a recession, the biggest decline is in. ( LO4 )a) Social Security tax receiptsb) personal income tax receiptsc) consumer spendingd) corporate aftertax profi ts
The crowding-out effect is . ( LO9 )a) much stronger during a recession than during prosperityb) much stronger during prosperity than during a recessionc) equally strong during a recession and prosperity
Each of the following is an automatic stabilizer except . ( LO4 )a) unemployment compensationb) direct taxesc) welfare paymentsd) Social Security benefi ts
Budget surpluses are most appropriate during. ( LO5 )a) depressionsb) recessionsc) infl ations Workbook for Chapter 12 Name Date
Fiscal policy and monetary policy are. ( LO1 )a) different means used to attain different goalsb) different means used to attain the same goalsc) the same means to attain the same goalsd) the same means to attain different goals
There is an infl ationary gap when. ( LO1 , 2 )a) equilibrium GDP is equal to full-employment GDPb) equilibrium GDP is smaller than full-employment GDPc) equilibrium GDP is larger than full-employment GDPd) none of these occur
When equilibrium GDP is too small, we have. ( LO1 , 2 )a) a recessionary gapc) an infl ationary gapb) a depressiond) none of these
Which one of these would be the most accurate statement? . ( LO7 )a) There was a very short fi scal policy decision lag in 2008.b) There was virtually no fi scal policy impact lag in 2008.c) In 2008 rebate checks were sent out within weeks after the beginning of the economic slowdown.d) President
As late as 1992 we were running budget defi cits of nearly $300 billion. How do you explain the decline in the defi cits through the rest of the decade of the 1990s?
Can you remember the last good or service you purchased? Explain how the money you spent will lead to a multiplied chain of increased income and spending.
Given the information in Figure 2 : (a) Which aggregate demand curve represents our economy during the Great Depression? (b) Which aggregate demand curve represents our economy during nearly all the years since World War II? (c) Which aggregate demand curve represents our economy during a period of
Given the information in Figure 2 : (a) If aggregate demand shifts from AD 1 to AD 2 , what happens to the level of prices and to output? (b) If aggregate demand shifts from AD 2 to AD 3 , what happens to the level of prices and to output? (c) If aggregate demand shifts from AD 3 to AD 4 , what
Given the information in Figure 1 , and assuming an interest rate of 15 percent: (a) Will the economy be at equilibrium? (b) Will savings equal investment?(c) What will happen, according to the classical economists? ( LO3 , 6 ) Interest rate (%) 15 10 10 5 Quantity Savings Investment
Keynes and the classical economics would agree that. ( LO 6 )a) our economy is always at equilibrium or tending toward equilibriumb) our economy is never at or tending toward equilibriumc) the prime mover of our economy is aggregate supplyd) the prime mover of our economy is aggregate demand
If we are operating in the classical range of the aggregate supply curve and aggregate demand rose, then . ( LO 4 )a) output would rise and the price level would remain the sameb) output would remain the same and the price level would risec) output would rise and the price level would rised) output
Which of the following is the most accurate statement about meeting our current economic needs? ( LO2 , 7 )a) John Maynard Keynes, rather than Jean Baptiste Say, is providing the economic answers we need.b) Say, rather than Keynes, is providing the economic answers we need.c) Neither Keynes nor Say
Which of the following antirecession (or antidepression) programs would not be one that John Maynard Keynes would have prescribed? ( LO7 )a) The New Deal under President Franklin Rooseveltb) The one-trillion-dollar Japanese public works program of the 1990sc) Letting the forces of supply and demand
The slope of the aggregate demand curve is explained by each of the following except . ( LO3 , 4 )a) the real balance effectb) the interest rate effectc) the foreign purchases effectd) the profi t effect
As the price level rises, . ( LO4 )a) the quantity of goods and services demanded fallsb) the quantity of goods and services demanded risesc) the quantity of goods and services demanded stays the samed) none of the above is correct
When the economy is in disequilibrium,. ( LO4 )a) production automatically risesb) production automatically fallsc) it automatically moves back into equilibriumd) it stays in disequilibrium permanently
When aggregate demand is greater than aggregate supply, . ( LO4 )a) inventories get depleted and output risesb) inventories get depleted and output fallsc) inventories rise and output risesd) inventories rise and output falls
Keynes was concerned mainly with. ( LO4 , 5 )a) aggregate supplyb) aggregate demandc) the interest rated) infl ation
Keynes considered full-employment GDP to be. ( LO5 , 6 )a) the normal state of economic affairsb) a rare occurrencec) an impossibilityd) none of these
Which statement best describes the classical theory of employment? ( LO2 )a) We will always have a great deal of unemployment.b) We will usually have a great deal of unemployment.c) We will occasionally have some unemployment, but our economy will automatically move back toward full employment.d)
The classical economists’ aggregate supply curve is vertical . ( LO4 )a) both in the short run and in the long runb) in neither the short run nor the long runc) in the short run, but not in the long rund) in the long run, but not in the short run
Keynes said . ( LO5 )a) the expected profi t rate was more important than the interest rateb) the interest rate was more important than the expected profi t ratec) the expected profi t rate and the interest rate were equally importantd) neither the expected profi t rate nor the interest rate was
That we are always tending toward full employment is a belief of . ( LO6 )a) Keynesb) the classicalsc) both Keynes and the classicalsd) neither Keynes nor the classicals
Our economy is defi nitely at equilibrium in each case except when . ( LO 4 )a) saving equals investmentb) aggregate demand equals aggregate supplyc) the amount people are willing to spend equals the amount that producers are producingd) equilibrium GDP equals full-employment GDP
According to the classical economists, if the amount of money people are planning to invest is greater than the amount that people want to save, . ( LO3 )a) interest rates will rise and saving will riseb) interest rates will fall and saving will fallc) interest rates will fall and saving will
“Our economy is always at full employment” was a claim made by . ( LO2 , 4 )a) both Keynes and the classicalsb) neither Keynes nor the classicalsc) Keynes but not the classicalsd) the classicals but not Keynes
Keynes believed . ( LO5 )a) recessions were temporaryb) once a recession began, it would always turn into a depressionc) the real problem that modern economies faced was infl ationd) none of these
Say’s law states that . ( LO1 )a) we can have an infl ation or a recession, but never both at the same timeb) the normal state of economic affairs is recessionc) demand creates its own supplyd) supply creates its own demand
Practical Application: If you lived in a village cut off from the rest of the world, show how Say’s law would apply to your village’s economy.
Cameron Amundson and Carter Amundson reside in Eagle’s Nest, Iowa, which has an unemployment rate of 6 percent and a labor force of 100. Cameron is a senior at the University of Dubuque and Carter is unemployed. Cameron graduates and fi nds a job;Carter gives up looking for work and enrolls in
Answer these questions, given the information that follows: (a) How many people are in the labor force?(b) What is the unemployment rate? Employed:90 million; discouraged workers: 4 million;unemployed: 10 million; people collecting unemployment insurance: 8 million. (LO4)
If the rate of infl ation is 5 percent, the prime rate of interest is 6 percent, and the unemployment rate is 7 percent, how much is the misery index? (LO7)
In recent years, which one of the following has tended to push up our natural unemployment rate? (LO5)a) Our increasing disability rolesb) The quadrupling of our prison populationc) The rapid growth of the temporary-help industryd) Growing worker insecuritye) The entry of millions of teenagers into
Which would be the most accurate description of the six decades since the late 1940s compared to the eight decades preceding the 1940s? (LO1)a) The recessions were milder and the booms less pronounced.b) The recessions were more severe and the booms more pronounced.c) The recessions were more
Which is the most accurate statement? (LO4)a) The monthly rate of job creation during the administration of George W. Bush has been faster than that during Bill Clinton’s administration.b) We need to create at least 150,000 new jobs every month to accommodate the people entering or reentering the
When the unemployment rate goes above 5 percent, anything above that 5 percent level isa) frictionally unemployedb) structurally unemployedc) cyclically unemployed. (LO5)
Brad Peterson, a man in his mid-50s whose skills have become obsolete, would bea) frictionally unemployedb) structurally unemployedc) cyclically unemployed. (LO5)
Austin Noorda, Mark Noorda, and Debbie Noorda are “between jobs.” They area) frictionally unemployedb) structurally unemployedc) cyclically unemployed. (LO5)
Brian Horn, a factory worker who is laid off until business picks up again, isa) frictionally unemployedb) structurally unemployedc) cyclically unemployed. (LO5)
Sophia King, a homemaker returning to the labor market after an absence of 10 years and looking for work, isa) frictionally unemployedb) structurally unemployedc) cyclically unemployed. (LO5)
Ella Jillian Fosnough, an autoworker who is still out of work two years after her plant closed, isa) frictionally unemployedb) structurally unemployedc) cyclically unemployed. (LO5)
Which statement is false? (LO5)a) Over the last two decades there has been an upward drift in the unemployment rate.b) The unemployment rate for blacks is about twice that for whites.c) The offi cial unemployment rate includes“discouraged” workers.d) None of the above is false.
If the number of unemployed stays the same and the number of people in the labor force rises,. (LO4)a) the unemployment rate will riseb) the unemployment rate will fallc) the unemployment rate will stay the samed) there is not enough information to determine what will happen to the unemployment rate
The Business Cycle Dating Committee of the National Bureau of Economic Research would most likely classify which one of the following as a recession? (LO3)a) A one-tenth of 1 percent decline in real GDP for two consecutive quartersb) An increase in the unemployment rate for two consecutive monthsc)
Which would be the most accurate statement? (LO7)a) Most business owners prefer defl ation to infl ation.b) In recent years Japan has suffered from defl ation.c) Defl ation is very likely in the United States over the next few years.d) Defl ation is a form of disinfl ation.
If the CPI rose from 100 to 500, the price level rose by . (LO6)a) 100 percentd) 400 percentb) 200 percente) 500 percentc) 300 percent
Practical Application: How were you and your family affected by the recession of 2001?
How much is our misery index right now? How did you compute it?
Suppose that in 2012 we were to have a defl ationary recession. If GDP in 2010 were $17 trillion predict GDP and real GDP in 2012. (LO4)
If real GDP goes up by 3.7 percent and the GDP defl ator goes up by 1.6 percent, fi nd the percentage change in GDP. (LO4)
If GDP rises from $10 trillion to $10.4 trillion and real GDP rises from $10 trillion to $10.3 trillion, fi nd the percentage change in the GDP defl ator. (LO4)
And suppose that Korea’s population rose from 40 million in 2005 to 50 million in 2015. (a) How much is per capita real GDP in 2015? (b) By what percentage did per capita real GDP rise between 2005 and 2015? ( LO4 , 6 )
Suppose the GDP of South Korea were to rise from$600 billion in 2005 to $1.5 trillion in 2015, when the GDP defl ator is
And suppose that our population rose from 300 million in 2007 to 330 million in 2027. (a) How much is per capita real GDP in 2027? (b) By what percentage did per capita real GDP rise between 2007 and 2027? [Hint: Do the problem in four steps:(1) Find real GDP in 2027; (2) fi nd per capita real GDP
Suppose our GDP were to rise from $10 trillion in 2007 to $20 trillion in 2027, when the GDP defl ator is
Find per capita GDP when GDP is $1.5 trillion and population is 300 million. (LO6)
Find per capita GDP when population is 100 million and GDP is $2 trillion. (LO6)
GDP rises from $20 trillion in 2017 to $21 trillion in 2018, but the price level remains the same. (a) How much is real GDP in 2018? (b) By what percentage did real GDP rise between 2017 and 2018? (LO4)
GDP rises from $5 trillion in 1990, the base year, to$7 trillion in 1994. The GDP defl ator in 1994 is 140.Find real GDP in 1994. Find the percentage increase in real GDP between 1990 and 1994. (LO4)
GDP rises from $4 trillion in 1986, the base year, to$5 trillion in 1989. The GDP defl ator in 1989 is 120.Find real GDP in 1989. Find the percentage increase in real GDP between 1986 and 1989. (LO4)
If consumption is $3.8 trillion, investment is$1.1 trillion, government spending is $1.1 trillion, imports are $1.6 trillion, and exports are $1.4 trillion, how much is GDP? ( LO1 , 3 )
If consumption spending is $3 trillion, investment is$800 billion, government spending is $1 trillion, imports are $1.2 trillion, and exports are $900 billion, how much is GDP? ( LO1 , 3 )
If GDP doubles from 2023 to 2028, the GDP defl ator doubles, and the population remains the same, by what percentage does real GDP per capita change? (LO6)
Given: C 65 percent of GDP; I 15 percent of GDP; G 25 percent of GDP. What percent of GDP is Xn? (LO2)
If national income is $3 trillion, depreciation is$400 billion, and indirect business taxes are$300 billion, how much are NDP and GDP? (LO3)
Given the following information, calculate NDP and national income: GDP 5 $5 trillion, Indirect business taxes 5 $300 billion, and Depreciation 5$500 billion. (LO2)
Which one of the following statements would you agree with? (LO7)a) GDP includes only market transactions, while GPI includes both market transactions and other factors affecting our national well-being.b) GPI is a very accurate measure of national well-being.c) As a measure of national well-being,
Which of the following is the most accurate statement? ( LO6 , 8 )a) On a per capita basis, GPI is greater than GDP.b) GPI has more than doubled over the last 40 years.c) The difference between GDP and GPI is the annual rate of infl ation.d) GPI is about one-quarter of GDP on a per capita basis.
GDP is GPI. (LO8)a) much higher thanb) about the same size asc) much lower than
Which is the most accurate statement? ( LO5 , 7 )a) We may be underestimating our GDP by as much as 50 percent by not taking into account the underground economy.b) Bartered goods and services are generally counted in GDP.c) Within the next fi ve years, China will have a larger GDP than the United
Which would be the most valid statement? ( LO6, 7)a) The American standard of living is, by far, the highest in the world.b) The standard of living of the average American is about twice that of the average Russian.c) The standard of living of the average American is comparable to that of the
Which is the most accurate statement about the underground economy? (LO7)a) It adds hundreds of billions of dollars to our GDP.b) It provides employment to hundreds of thousands of illegal immigrants.c) It is run almost entirely by organized crime.d) It makes the rich richer and the poor poorer.
Which statement is true? (LO1)a) Consumption as a percentage of GDP is higher today than it was in 1979.b) Government purchases are about 30 percent of GDP.c) Real GDP has risen faster than GDP since 1999.d) Consumption is a little over half of GDP.
C 1 I 1 G 1 X n is approach(es) to GDP. ( LO1 , 2 )a) the fl ow-of-incomeb) the expendituresc) both the expenditures and the fl ow-of-incomed) neither the expenditures nor the fl ow-of-income
Which statement is true? ( LO5 , 6 )a) The Japanese have a higher standard of living than we do.b) The Japanese have a larger GDP than we do.c) The typical Japanese family has more living space than the typical American family.d) None of these statements is true.
Since World War II our per capita real GDP has . (LO6)a) stayed about the sameb) risen by 50 percentc) more than tripledd) risen by almost 700 percent
Which statement is true? (LO6)a) Over longer and longer periods of time, comparisons of real per capita GDP become increasingly valid.b) Over the short run, say, up to 10 years, comparisons of per capita real GDP are quite valid.c) International comparisons of per capita real GDP may be made with
Per capita real GDP is found by . (LO6)a) dividing population by real GDPb) dividing real GDP by populationc) adding population to real GDPd) multiplying real GDP by population
We would like to compare real per capita GDP. Which would be the most valid comparison? ( LO5, 6)a) China in 2004 and Thailand in 2004b) Germany in 2002 and 2004c) The United States in 1980 and 2004d) Nigeria in 1960 and the United Kingdom in 1990
Which statement is true? ( LO2 , 7 )a) GDP tells us how much we produce as well as what we produce.b) GDP tells us neither how much we produce nor what we produce.c) GDP tells us what we produce.d) GDP tells us how much we produce.
Suppose the GDP of Argentina were 10 times that of Uruguay. Which statement would be most accurate? (LO5)a) There is no way of comparing the output of Argentina and Uruguay.b) Argentina’s output is greater than that of Uruguay.c) Argentina’s output is probably around 10 times that of Uruguay.d)
Which statement is true? (LO7)a) There is an inconsistency between the defi nition of GDP and the way it is compiled by the U.S.Department of Commerce.b) GDP is an accurate measure of production in the United States.c) U.S. GDP fi gures include estimates for production in the underground economy.d)
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