True / False Questions
___ (1). Economists and policymakers are generally more concerned about nominal GDP than real GDP.
___ (2). Inflation reduces the purchasing power of a person's income and savings.
___ (3). Economic growth is when a nation's economic output grows faster than its population.
___ (4). Economists believe that expectations have little impact on macroeconomic outcomes.
___ (5). Economic shocks occur to the economy when actual events do not match expectations.
___ (6). Economists believe that most short-run fluctuations in output are the result of supply shocks.
___ (7). It is believed that demand shocks cause problems in the macro-economy primarily because prices are sticky.
___ (8). If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.
___ (9). Within the circular flow model of the economy, the level of total resource income and total spending on output will be approximately equal.
___ (10). Welfare payments to low-income families are included in national income.
___ (11). If nominal GDP is 150 and the GDP price index is 200, real GDP is 75.
___ (12). An economy with an average growth rate of 10 percent can expect to see its real GDP double in approximately 10 years.
___ (13). Growing, undeveloped countries achieve high rates of economic growth by adopting technologies developed by leader countries.
___ (14). Strong patent laws encourage innovation and promote economic growth over the longer term.
___ (15). A competitive market system promotes growth by providing producers with market signals on which to base investment and production decisions.
___ (16). Economic growth can be shown as a movement from a point inside the production possibility curve to a point outside the curve located farther from the origin.
___ (17). Advocates for economic growth claim that rising living standards can lead to environmental improvements as people can afford to care more about the environment.
___ (18). People who work part time, but desire to work full time, are considered to be officially unemployed.
___ (19). The “natural rate” of unemployment (or the full employment unemployment level) in the United States is about 4 to 5 percent.
___ (20). Unanticipated inflation benefits debtors at the expense of creditors.
___ (21). If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent.
___ (22). The slope of the consumption schedule is measured by the MPC.
___ (23). Investment is highly stable; it increases over time at a very steady rate.
___ (24). The tax multiplier is equal to 1/(1-MPC).
___ (25). If the MPC is .9 and investment spending increases by $20 billion, real GDP will increase by $200 billion.