Econ Exam 2 quizzes

If the average level of nominal income in a nation is $44,000 and the Consumer Price Index is 175, the average real income would be about $18,857. $25,143. $44,000. $77,000.

$25,143.

The following is national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2,460), and government purchases ($470). What is GDP in this economy? $3,250 billion $3,263 billion $3,237 billion $3,290 billion

$3,237 billion

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately $3,846 billion. $3,925 billion. $4,108 billion. $4,379 billion.

$4,108 billion.

Answer the next question on the basis of the following information: Three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per unit prices of these three goods are A = $2, B = $3, and C = $1. If the per unit prices of the three goods were each $1 in a base year used to construct a GDP price index, then real GDP in the current year is $110. $115. $45. $160.

$45.

Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. YEAR UNITS OF OUTPUT PRICE PER UNIT 1 8 $2 2 10 3 3 15 4 4 18 5 5 20 6 If year 2 is the base year, then real GDP in year 5 is $120. $90. $60. $30.

$60

Assume that the real GDP of a developing nation increases from $120 billion to $140 billion while its population expands from 100 to 110 million. As a result, real GDP per capita has increased by about $56 per person. $64 per person. $72 per person. $88 per person.

$72 per person

In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $500 billion. In year 2, the total expenditure for the same market basket of goods was $550 billion. What was the Consumer Price Index for the economy in year 2? 100 110 115 120

110

The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percentage of adults who are not in the labor force is 25.3 percent. 20.6 percent. 30.3 percent. 13.9 percent.

20.6 percent.

The economy has an annual inflation rate of 3.5 percent. It will take approximately how many years for the price level to double? 10 years 21 years 28 years 35 years

21 years

A nation's average annual real GDP growth rate is 3%. Based on the "rule of 72," the approximate number of years that it would take for this nation's real GDP to double is 175 years. 40 years. 24 years. 17.5 years.

24 years.

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation is approximately 5.5 percent. 5.9 percent. 6.3 percent. 7.2 percent.

5.9 percent.

Over a 10-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 72, we can say that the average annual rate of inflation over this period was approximately 10%. 9%. 7%. 5%.

7%.

Consider two scenarios for a nation's economic growth. Scenario A has real GDP growing at an average annual rate of 1%; scenario B has an average annual growth of 6%. The nation's real GDP would double in about 72 years under scenario A, versus 18 years under scenario B. 72 years under scenario A, versus 12 years under scenario B. 36 years under scenario A, versus 12 years under scenario B. 36 years under scenario A, versus 9 years under scenario B.

72 years under scenario A, versus 12 years under scenario B.

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be 4 percent. 6 percent. 8 percent. 10 percent.

8 percent.

Which of the following scenarios is an example of an investment in human capital? A firm replaces manually controlled production with a computer-controlled procedure. A firm pays for workers to take college classes. A chemical firm supports research to develop new chemicals. A firm purchases new equipment for a manufacturing process.

A firm pays for workers to take college classes.

Which of the following underground economy activities would be considered a black market? Ben provides child care in his home for cash payments and does not report the income. Carrie waits tables at the local restaurant for salary and tips, but only reports her salary as income. Celeste sells counterfeit designer bags at a roadside stand. Harry makes Sally dinner while she changes the oil in his car.

Celeste sells counterfeit designer bags at a roadside stand.

Melita heard that there had been inflation last month. She laughed and did not believe it. When asked why not, she said that last week she spend less at the grocery store because the cost of food had come down. Which of the following is the correct response? Melita is right, if food prices are lower, so are all other prices. Melita is wrong, food prices may have fallen, but other prices have risen so the average price of goods is higher. Melita is right, all prices must be rising for there to be inflation. Melita is wrong, food prices are not used to calculate the rate of inflation.

Melita is wrong, food prices may have fallen, but other prices have risen so the average price of goods is higher.

What do economists mean when they refer to inflation as "general increase in the prices of goods and services." All prices are rising. All prices are falling. Some prices are rising, some prices are falling, and some prices are constant, but on average, prices are decreasing. Some prices are rising, some prices are falling, and some prices are constant, but on average, prices are increasing.

Some prices are rising, some prices are falling, and some prices are constant, but on average, prices are increasing.

Which of the following is an example of net exports? Electric Car Incorporated increases the number of cars on its lots. The navy purchases a new ship for its fleet. Fred buys a new television set to watch the Super Bowl. The Black Coal Company sells $5 million of coal to Germany.

The Black Coal Company sells $5 million of coal to Germany.

Adding up the market value of all final and intermediate goods and services in an economy in a given year would result in the calculation of GDP for that year. the calculation of NDP for that year. an amount less than GDP for that year. an amount greater than GDP for that year.

an amount greater than GDP for that year.

Which of the following answer choices best describes a consumption expenditure category in the national income accounting? both new and used consumer goods automobiles for personal use, but not newly constructed houses consumer durable and nondurable goods, but not services consumer nondurable goods and services, but not consumer durable goods

automobiles for personal use, but not newly constructed houses

In calculating the unemployment rate, part-time workers are counted as unemployed because they are not working full time. counted as employed because they are receiving payment for work. used to determine the size of the labor force, but not the unemployment rate. treated the same as "discouraged" workers who are not actively seeking employment.

counted as employed because they are receiving payment for work.

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment? structural cyclical frictional natural

cyclical

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as structurally unemployed. frictionally unemployed. not in the labor force. employed.

employed.

The value of corporate stocks and bonds traded in a given year is included in the calculation of GDP because it is a component of gross investment. excluded from the calculation of GDP because it does not represent new production. included in the calculation of a net private domestic investment. included in the calculation of a gross private domestic investment.

excluded from the calculation of GDP because it does not represent new production.

GDP is $7 trillion. If consumption is $3.5 trillion, investment is $1.4 trillion, and government purchases are $2.1 trillion, then net exports cannot be determined from the available information. imports exceed exports. exports exceed imports. exports are equal to imports.

exports are equal to imports.

Real income will rise from one year to the next if nominal income falls and the price level falls faster. rises and the price level rises faster. falls and the price level rises. falls faster than the price level.

falls and the price level falls faster.

Money spent on the purchase of a newly constructed house is included in GDP as a part of household expenditures on durable goods. personal consumption expenditures. personal saving. gross domestic private investment.

gross domestic private investment.

If a person's nominal income increases by 5 percent while the price level increases by 2 percent, then that person's real income increases by 3 percent. increases by 5 percent. decreases by 7 percent. decreases by 2 percent.

increases by 3 percent.

The best example of a "frictionally unemployed" worker is one who reduces productivity by causing friction in a business. is laid off during a recessionary period in the economy. is in the process of voluntarily switching jobs. is discouraged and not actively seeking work.

is in the process of voluntarily switching jobs.

"Full employment" refers to the situation when there is 100 percent employment of the labor force. a 0 percent unemployment rate. no frictional or structural unemployment. no cyclical unemployment.

no cyclical unemployment.

An example of an intermediate good would be bricks bought by a homeowner who plans to build a patio in his backyard. groceries bought by a dentist for his family. cars bought by a car-rental company. paper and ink bought by a publishing company.

paper and ink bought by a publishing company.

The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the output in 2005 was higher than in 2004. prices in 2005 were higher than in 2004. output in 2005 was lower than in 2004. prices in 2005 were lower than in 2004.

prices in 2005 were higher than in 2004.

A GDP price index of 130 in year 2 means that prices in year 2 are on average 130 percent higher than in the base year. prices in year 2 are on average 13 times that in the base year. prices in year 2 are on average 30 percent higher than in the base year. nominal GDP is 130 percent higher than real GDP in year 2.

prices in year 2 are on average 30 percent higher than in the base year.

GDP measured using base year prices is called nominal GDP. real GDP. constant GDP. deflated GDP.

real GDP.

Society can increase its output and income by increasing its spending and taxes. private and public sectors of the economy. resources and/or the productivity of the resources. markets and prices.

resources and/or the productivity of the resources.

For a person to keep his real income steady at a certain level from one year to the next, his nominal income must rise if the price index falls. stay the same as the price index rises. fall if the price index rises. rise as fast as the price index.

rise as fast as the price index.

Government purchases in national income accounts would include payments for Social Security checks to retirees. salaries for current U.S. military officers. public assistance for welfare recipients. unemployment benefits.

salaries for current U.S. military officers.

A worker who loses a job at a call center because the company moved the call center operations to another country is an example of frictional unemployment. structural unemployment. cyclical unemployment. disguised unemployment.

structural unemployment.

Look at question 15 on quiz 5 a decrease in the price level. allocative efficiency. technological progress. full employment of resources.

technological progress.

Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause Nepal's production possibilities frontier to shift outward faster than the U.S.'s. the U.S.'s production possibilities frontier to shift inward faster than Nepal's. Nepal's production possibilities frontier to shift inward faster than the U.S.'s. the U.S.'s production possibilities frontier to shift outward faster than Nepal's.

the U.S.'s production possibilities frontier to shift outward faster than Nepal's.

Manuel is retired and receives a fixed payment from his pension each month. When there is inflation the value of his pension will rise. Manuel will be better off. the buying power of his pension will fall. will receive more money from his pension.

the buying power of his pension will fall.

When inflation occurs all prices are rising. each dollar of income will buy more output than before. the purchasing power of money increases. the purchasing power of money decreases.

the purchasing power of money decreases.

If net exports is negative, it must be the case that more goods are being imported than exported. the value of goods, services, and resources exported is less than the value imported. more goods are being exported than imported. the value of goods, services, and resources imported is less than the value exported.

the value of goods, services, and resources exported is less than the value imported.

Barbara buys the same market basket each week and spends $60 on it. This week Barbara brought $60 to the store but could not buy her usual market basket. One explanation for this is she became unemployed. there was an increase in real GDP. there was inflation. the GDP price index has decreased.

there was inflation.

Government expenditures for Social Security and unemployment insurance are, for GDP accounting purposes, considered transfer payments, and are not included in government spending as part of GDP. transfer payments, and are included in government spending as part of GDP. government purchases, and are included in government spending as part of GDP. government purchases, and are not included in government spending as part of GDP.

transfer payments, and are not included in government spending as part of GDP.

GDP tends to overstate economic welfare, because it does not include certain nonmarket activities such as home production. understate economic welfare, because it includes expenditures undertaken to offset or correct pollution. understate economic welfare, because it does not take into account increases in leisure. overstate economic welfare, because it does not reflect improvements in product quality.

understate economic welfare, because it does not take into account increases in leisure.

Official unemployment statistics understate unemployment because individuals receiving unemployment compensation are counted as employed. understate unemployment because discouraged workers are not counted as unemployed. include cyclical and structural unemployment but not frictional unemployment. overstate unemployment because workers who are involuntarily working part time are counted as being employed.

understate unemployment because discouraged workers are not counted as unemployed.

Before the Industrial Revolution, living standards in the world were relatively stagnant for long periods of time. were already rising significantly for many decades. are not known, for lack of reliable records from that period. were declining because of rapid increases in population.

were relatively stagnant for long periods of time.

GDP understates the amount of economic production in the United States because it excludes spending for the U.S. military. transfer payments. purchases of stocks and bonds. work performed by households for their own benefit.

work performed by households for their own benefit.

Use the data in the table below to answer the next question. The data describes a hypothetical economy and are denominated in billions of dollars. Personal consumption expenditures $4,500 Consumption of fixed capital 150 Gross private domestic investment 800 Government purchases 950 Exports 65 Imports 85 What is the value of net exports in this economy? $150 billion −$20 billion $20 billion −$65 billion

−$20 billion