410 Test 1- HW Q's

In the circular flow model, households receive income from the market and save through the market. A) goods; financial B) factor; financial C) goods; factor D) factor; goods

b

The labor force equals the: A) adult population. B) number of employed individuals. C) number of unemployed individuals. D) number of employed and unemployed individuals.

d

Unlike the GDP deflator, the CPI includes the prices of: A) goods purchased by firms. B) goods purchased by governments. C) exported goods. D) imported goods.

d

Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income

d

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they: A) are out of a job, but not looking for work. B) retired from the labor force before age 65. C) do not have a job, but have looked for work in the past 4 weeks. D) are absent from work because of bad weather or illness.

c

All of the following are important macroeconomic variables except: A) real GDP. B) the unemployment rate. C) the marginal rate of substitution. D) the inflation rate.

c

In 2010, the GDP of the United States totaled about: A) $14.5 billion. B) $145 billion. C) $14.5 trillion. D) $145 trillion.

c

In the national income accounts, consumption expenditures include all of the following except household purchases of: A) durable goods. B) nondurable goods. C) new residential housing. D) services.

c

It is a national income accounting rule that all expenditure on purchases of products is necessarily equal to: A) profits of firms. B) wages of employees. C) income of the producers of the products. D) income of employees.

c

Macroeconomic models: A) assume all wages and prices are sticky. B) assume all wages and prices are flexible. C) make different assumptions to explain different aspects of the macroeconomy. D) focus primarily on the optimizing behavior of households and firms.

c

Macroeconomists cannot conduct controlled experiments, such as testing various tax and expenditure policies, because: A) it is against the law. B) they tried it once and it did not work. C) they must make use of the data history gives them. D) economists already know the answers that would come out of the experiments.

c

Prices of items included in the CPI are: A) averaged with the price of every item weighted equally. B) weighted according to amount of the item produced in GDP. C) weighted according to quantity of the item purchased by the typical household. D) chained to the base year by the year-to-year growth rate of the item.

c

The CPI is determined by computing: A) an average of prices of all goods and services. B) the price of a basket of goods and services that changes every year, relative to the same basket in a base year. C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year. D) nominal GDP relative to real GDP

c

The underground economy: A) is included in the latest GDP accounts. B) includes only illegal activities. C) includes domestic workers for whom Social Security tax is not collected. D) excludes the illegal drug trade.

c

When a firm sells a product out of inventory, GDP: A) increases. B) decreases. C) is not changed. D) increases or decreases, depending on the year the product was produced.

c

A competitive firm: A) is small relative to the market in which it trades. B) has to charge a lower price when it wants to sell more goods. C) has several large competitors with whom it engages in fierce competition. D) can set the wage at which it hires workers.

a

A period of falling prices is called: A) deflation. B) inflation. C) a depression. D) a recession.

a

According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person: A) is going to school full time. B) is temporarily absent from a job because of illness. C) has been temporarily laid off. D) is out of a job and looking for work during the previous four weeks

a

Exogenous variables are: A) fixed at the moment they enter the model. B) determined within the model. C) the outputs of the model. D) explained by the model.

a

GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services. D) output of the economy.

a

If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately percent. A) 2 B) 3 C) 5 D) 8

a

Real GDP over time and the growth rate of real GDP . A) grows; fluctuates B) is steady; is steady C) grows; is steady D) is steady; fluctuates

a

The panel of economists appointed by the Senate Finance Committee estimated that the CPI inflation by approximately percentage point(s) per year. A) overestimates; 1 B) overestimates; 10 C) underestimates; 1 D) underestimates; 10

a

To avoid double counting in the computation of GDP, only the value of goods are included. A) final B) used C) intermediate D) investment

a

Unlike the real world, the classical model with fixed output assumes that: A) all factors of production are fully utilized. B) all capital is fully utilized but some labor is unemployed. C) all labor is fully employed but some capital lies idle. D) some capital lies idle and some labor is unemployed.

a

A typical trend during a recession is that: A) the unemployment rate falls. B) the popularity of the incumbent president rises. C) incomes fall. D) the inflation rate rises.

c

A competitive, profit-maximizing firm hires labor until the: A) marginal product of labor equals the wage. B) price of output multiplied by the marginal product of labor equals the wage. C) real wage equals the real rental price of capital. D) wage equals the rental price of capital.

b

A firm's economic profit is: A) the price of output minus the wage minus the rental price of capital. B) revenue minus costs. C) revenue plus capital costs. D) the price of output minus labor costs.

b

All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of a: A) book printed in 2009, entitled The Year 3000. B) 2001 Jeep Cherokee. C) year 2010 calendar printed in 2009. D) ticket to see the movie 2001.

b

An increase in the price of goods bought by firms and the government will show up in: A) the CPI but not in the GDP deflator. B) the GDP deflator but not in the CPI. C) both the CPI and the GDP deflator. D) neither the CPI nor the GDP deflator.

b

Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation, A) provides a real, rather than a nominal, rate of inflation. B) gives a better measure of ongoing, sustained price changes. C) is more consistent with measures of inflation used in other countries. D) fluctuates more than measures of inflation that include food and energy prices

b

The largest component of national income is: A) corporate profits. B) compensation of employees. C) proprietors' income. D) net interest.

b

The marginal product of labor is: A) output divided by labor input. B) additional output produced when one additional unit of labor is added. C) additional output produced when one additional unit of labor and one additional unit of capital are added. D) value of additional output when one dollar's worth of additional labor is added.

b

The market value of all final goods and services produced within an economy in a given period of time is called: A) industrial production. B) gross domestic product. C) the GDP deflator. D) general durable purchases

b

The number of households interviewed in the monthly employment survey of the U.S. Bureau of Labor Statistics is approximately: A) 6,000. B) 60,000. C) 600,000. D) 6 million

b

An economy's factors of production and its production function determine the economy's: A) labor force participation rate. B) budget surplus or deficit. C) population growth rate. D) output of goods and services.

d

In a simple model of the supply and demand for pizza, the endogenous variables are: A) the price of pizza and the price of cheese. B) aggregate income and the quantity of pizza sold. C) aggregate income and the price of cheese. D) the price of pizza and the quantity of pizza sold.

d

In the U.S. economy today, real GDP per person, compared with its level in 1900, is about: A) 50 percent higher. B) twice as high. C) three times as high. D) eight times as high.

d

Macroeconomists are like scientists because they both: A) design data and conduct controlled experiments to test their theories. B) rely on data analyzed from experiments they set up in a laboratory. C) are unlimited in their use of controlled experiments. D) collect data, develop hypotheses, and analyze the results.

d

The circular flow model shows that households use income for: A) consumption, saving, and factor payments. B) consumption, taxes, and factor payments. C) taxes, saving, and factor payments. D) consumption, taxes, and saving.

d