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    improvements in the exchange rate

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    During one period in history, business investment spending dropped and our trade deficit got larger (imports were bigger than exports.) A reason this did not lead to a drop in GDP could have been:

    A) consumer spending increased
    B) government deficits declined
    C) imports dropped relative to exports
    D) exports dropped relative to imports
    E) our exchange rate improved

    Which of the following is a problem with the way we measure GDP

    A) only 50,000 households are surveyed
    B) it is only a "basket" of goods that is measured
    C) the items in the "basket" are only changed every 10 years
    D) the value of "home production" is not included
    E) we "double count" investment spending

    In 2005 Eagle Computers produced a computer which was delivered to the
    company's retail outlet in November of 2005. The computer was sold to a
    customer in March, 2006. This computer is counted as:

    A) consumption in 2005 and as disinvestment in 2006.
    B) disinvestment in 2005 and consumption in 2006.
    C) investment in 2005 and as consumption and disinvestment in 2006.
    D) disinvestment in 2005 and as investment in 2006.
    E) GDP in both 2005 and 2006.

    The phase of the business cycle in which real domestic output decreases is called:

    A) the peak
    B) a recovery
    C) a recession
    D) the trough
    E) the expansion

    Fred Flugelman quit work to go back to school and get a Master's Degree in Engineering. After graduation he is only able to find part time work at a McDonalds for the first two years. He then finds a full time job once the economy picks up. During his two years at McDonalds:

    A) Fred was structurally unemployed
    B) Fred was frictionally unemployed
    C) Fred was cyclically unemployed
    D) Fred was not unemployed
    E) Fred was a discouraged worker

    High School dropouts have a much higher unemployment than college graduates. This difference most likely reflects:

    A) frictional unemployment
    B) structural unemployment
    C) cyclical unemployment
    D) hyper unemployment
    E) not unemployment, they are not in the labor force

    In order of largest to smallest, the components of GDP for the U.S.A. are:

    A) investment, government spending, household consumption, net exports
    B) investment, household consumption, government spending, net exports
    C) household consumption, government spending, investment, net exports
    D) household consumption, investment, government spending, net exports
    E) household consumption, investment, net exports, government spending

    Assume the MPE is .75. If the government raises spending by $100 Billion the equilibrium level of GDP should (assuming Keynesian economics):

    A) fall by $ 300 billion
    B) rise by $ 300 billion
    C) fall by $ 400 billion
    D) rise by $ 400 billion
    E) there is no way to estimate with this information

    In a period of high unemployment the Fed. would probably:

    A) raise the fed funds rate
    B) raise the discount rate
    C) raise the required reserve ratio
    D) buy bonds through open market operations
    E) increase government spending and cut taxes

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    Solution Summary

    Keynesian economics are used.