econ test 2 2.1-2.7

In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was A $150 billion B $100 billion C $50 billion D $25 billion E $4 billion

$25 billion

The table above shows the consumer price index for selected years. On the basis of these data, how much did it cost in 1995 to buy the same goods and services that cost $50 in 1929 ? ( 2.4 chart) A $25 B $100 C $125 D $250 E $300

$300

In 2016 the nominal GDP for Country X was $330 billion and the GDP deflator was 110. The real GDP for 2016 was A $110 billion B $220 billion C $300 billion D $330 billion E $440 billion

$300 billion

Which of the following unemployed individuals represents frictional unemployment? Marissa, a full-time student who plays on the school's soccer team. B Janet, an accounting graduate who is interviewing with a number of accounting firms. C Sameer, a retired faculty member who volunteers at the local hospital. D Jeremy, a customer service representative who was laid-off after his job was automated. E Elizabeth, a financial analyst who was laid off because of the recession.

Janet, an accounting graduate who is interviewing with a number of accounting firms.

The nation of Turboland produces only two goods, X and Y. The prices and final quantities produced of the two goods in 1993 and the base year of 1992 are shown in the table below. ( 2.6 chart) A Nominal GDPGDP is $90, Real GDPGDP is $96 B Nominal GDPGDP is $74, Real GDPGDP is $96 C Nominal GDPGDP is $70, Real GDPGDP is $96 D Nominal GDPGDP is $96, Real GDPGDP is $90 E Nominal GDPGDP is $96, Real GDPGDP is $74

Nominal GDPGDP is $96, Real GDPGDP is $90

In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in 2018 was 2%. How did Sabrina's nominal income and real income change in 2018 compared to 2017? A Nominal income decreased and real income decreased. B Nominal income decreased and real income did not change. C Nominal income increased and real income decreased. D Nominal income increased and real income did not change. E Nominal income increased and real income increased.

Nominal income increased and real income increased.

If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic product grew by 4 percent, inflation for this year would be A -7% B 7% C 8% D 11% E 15%

7%

Which of the following groups of people would benefit from unanticipated inflation? I. Savers II. Borrowers III. Lenders A I only B II only C III only D I and II only E I and III only

II only

The table below shows the cost of the same representative basket of goods in the base year 2012 and in 2013, and the average weekly nominal wage rate in 2012 and 2013. ( 2.4 chart) A The inflation rate from 2012 to 2013 is 10%. B The CPICPI in year 2013 is 110. C The CPICPI in year 2013 is 120. D Based on the CPICPI, the average real weekly wage rate increased by 10% from 2012 to 2013. E Based on the CPICPI, the average real weekly wage rate decreased by 20% from 2012 to 2013

The CPICPI in year 2013 is 120.

If unemployed workers become discouraged and give up trying to find work, the number of workers employed and the unemployment rate would change in which of the following ways?

number of workers unemployed- no change unemployment rate- decrease

The consumer price index (CPI) is criticized for A overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change B overstating the true burden of inflation because it recognizes consumers' ability to substitute goods and services as prices change C understating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change D understating the true burden of inflation because it recognizes consumers' ability to substitute goods and services as prices change E overstating the true burden of inflation because it reflects the prices of both intermediate goods and final goods

overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change

which of the following individuals is considered officially unemployed?

pat, who recently left a job to look for a different in another town

The consumer price index (CPI) measures the A value of current gross domestic product in base-year dollars B prices of all consumer goods and services produced in the economy C prices of selected raw materials purchased by firms D prices of a specific group of goods and services purchased by consumers E prices of imports, but not exports

prices of a specific group of goods and services purchased by consumers

If nominal gross domestic product fell while real gross domestic product rose, which of the following must be true? A Unemployment increased. B The inflation rate was negative. C Net exports were negative. D The average of stock prices rose while bond prices fell. E Nominal interest rates rose by less than the rate of inflation.

The inflation rate was negative.

if a worker's nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has A approximately decreased by 10% B approximately decreased by 20% C approximately increased by 10% D approximately increased by 20% E not changed

approximately increased by 10%

Unexpected increases in inventories usually precede A increases in inflation B increases in imports C stagflation D decreases in production E decreases in unemployment

decrease in production

which of the following is included in the computation of gross domestic product?

e. additional to business inventories

the natural rate of unemployment can be defined as the

economy's long run equilibrium rate of unemployment

which of the following will lead to an increase in the united states gross domestic product?

foreign companies build new assembly plants in the united states

As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in a- the production of military goods B- the production of antipollution devices C- crime prevention services D- household production E- legal services

household production

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate A ignores the duration of unemployment B ignores underemployed and discouraged workers C includes jobs created by the underground economy D excludes all unemployed teenagers E excludes frictionally unemployed workers

ignores underemployed and discouraged workers

The major difference between real and nominal gross domestic product (GDP) is that real GDP A excludes government transfer payments B excludes imports C is adjusted for price-level changes using a price index D measures only the value of final goods and services that are consumed E measures the prices of a market basket of goods purchased by a typical urban consumer

is adjusted for price-level changes using a price index

Suppose that in a particular country, nominal gross domestic product (GDP) grew by 8 percent, and the GDP deflator increased by 10 percent. The country's growth rate of real GDP would be approximately equal to A —2% B —0.8% C 0.8% D 2% E 18%

-2%

The business cycle diagram below shows the cyclical movement of actual real GDP relative to potential real GDP over time for the nation of Galactica. ( 2.7 graph) A 1992 B 1996 C 2002 D 2007 E 2011

2002

What is the nation's unemployment rate? (2.3 chart) A 4% B 5% C 6% D 9% E 66.7%

9%

Which of the following is an example of frictional unemployment? a A person quits a job to search for another job. B A person lacks the skills to fill any of the available jobs. C A person loses a job because of a recession. D A person retires from the workforce. E An unemployed person stops looking for a job.

A person quits a job to search for another job.

Which of the following individuals is classified as unemployed? a A fifteen-year-old high school student who is looking for a babysitting job B A laid-off computer programmer who has given up looking for a new job C A parent who works in an after-school day care center for 15 hours a week D A recent college graduate who is looking for her first job E A mayor who lost an election and retired

A recent college graduate who is looking for her first job

Which of the following will happen if the actual inflation rate is greater than the expected inflation rate? A Lenders of fixed interest rate loans will be better off. B Lenders of variable interest rate loans will be worse off. C Borrowers of fixed interest rate loans will be worse off. D Borrowers of fixed interest rate loans will be better off. E Borrowers of variable interest rate loans will be better off.

Borrowers of fixed interest rate loans will be better off

Which of the following allows an individual to gain from unexpected inflation? A Living on a fixed income B Working at the minimum wage C Lending money at a fixed interest rate D Borrowing money at a fixed interest rate E Saving money in a fixed-interest-rate savings account

Borrowing money at a fixed interest rate

Which of the following explains why the rate of change of the consumer price index (CPI) tends to overstate the actual inflation rate? A Consumers will require more income to buy goods whose prices have increased. B Nominal wages do not always increase by as much as prices do. C When real wages increase, consumers can afford higher-priced goods. D Consumers tend to substitute lower-priced goods that may not be represented in the basket of goods. E The basket of goods in the base year is frequently updated with new products.

Consumers tend to substitute lower-priced goods that may not be represented in the basket of goods

the value of which of the following is counted in the united states gross domestic product

D. a car produced in the united states and sold to europe

which of the following is true according to the circular flow model

D. household are demanders in the product markets and supplier in the factor markets

Which of the following would cause the official unemployment rate to understate the problem of unemployment? a Workers receiving unemployment compensation B Cyclically unemployed workers C Discouraged workers D Recent college graduates looking for work E Retirees

Discouraged workers

Which of the following groups would most likely gain from unanticipated inflation? A Landlords who own apartments in cities with rent controls B Individuals who have fixed retirement incomes C Individuals who earn high incomes D Individuals who have borrowed money at fixed interest rates E Banks that have loaned all excess reserves at a fixed interest rate

Individuals who have borrowed money at fixed interest rates

Suppose that a typical consumer buys the following quantities of three commodities in 1993 and 1994. ( 2.4 chart) a It remained unchanged. B It decreased by 25%. C It decreased by 20%. D It increased by 20%. E It increased by 25%.

It increased by 25%.

Which of the following statements is true of unanticipated inflation? A It decreases the economic well-being of all members of society proportionately. B It decreases the economic well-being of all members of society equally. C It increases the economic well-being of net creditors. D It increases the economic well-being of net debtors. E It increases the economic well-being of workers with long-term labor contracts.

It increases the economic well-being of net debtors.

Which of the following is true about the real GDP? A It measures aggregate output using current prices. B It measures aggregate output using constant prices. C It is greater than nominal GDPGDP when the GDPGDP deflator is greater than 100. D It is equal to nominal GDPGDP multiplied by the GDPGDP deflator. E It is equal to the GDPGDP deflator divided by nominal GDPGDP.

It measures aggregate output using constant prices.

Which of the following describes a typical business cycle in the correct sequence? A Peak, trough, recession, and expansion B Peak, trough, expansion, and recession C Peak, recession, trough, and expansion D Peak, recession, expansion, and trough E Peak, expansion, trough, and recession

Peak, recession, trough, and expansion

Which of the following will be counted as unemployed by the United States Bureau of Labor Statistics? A Persons who quit their previous jobs to stay at home to care for sick parents B Persons who were laid off from their previous jobs and have not applied for a job in two years C Persons who were fired from their previous jobs and are actively applying for work D Persons who have given up looking for jobs after long searches E Persons who quit their previous jobs to start their own businesses

Persons who were fired from their previous jobs and are actively applying for work

The table above shows the nominal gross domestic product (GDP) and the price index for an economy during the period 2012 and 2013. Which of the following would have occurred from 2012 to 2013?( 2.6 chart) A Real GDP decreased by 20%. B Real GDP decreased by 10%. C Real GDP increased by 20%. D Real GDP increased by 10%. E Real GDP did not change. Related Content & Skills Topic2.6 Skill2.C

Real GDP did not change.

Which of the following necessarily occurs during an economic recession? A Cost-push inflation decreases. B Real gross domestic product decreases. C Cyclical unemployment decreases. D Demand-pull inflation increases. E Nominal wages increase.

Real gross domestic product decreases.

As a measure of economic performance, GDP accounts for which of the following? a Used books donated to a local library B Depletion of durable consumer goods C Increased leisure time D Souvenir gifts purchased by tourists domestically E Cash transactions in the underground economy

Souvenir gifts purchased by tourists domestically

Which of the following situations will benefit lenders of fixed interest rate loans? A The actual inflation rate is equal to the natural rate of unemployment. B The actual inflation rate is less than the expected inflation rate. C The actual inflation rate is equal to the fixed interest rate. D The consumer price index is greater than 100. E There is no cyclical unemployment.

The actual inflation rate is less than the expected inflation rate.

If a nation's actual real GDP is less than potential real GDP, which of the following must be true? A The economy is in expansion B The economy is in recession. C There is no cyclical unemployment. D There is no frictional unemployment. E The actual rate of unemployment exceeds the natural rate of unemployment.

The actual rate of unemployment exceeds the natural rate of unemployment.

Inflation occurs when there is a sustained increase in which of the following? A Real gross domestic product B The average price level C The price of any commodity D Labor productivity E The unemployment rate

The average price level

GDP does NOT account for which of the following? A- The value added by all firms in the economy B- The depletion of natural resources C- Wages, rent, profit, and interest payments D- The value of final goods and services produced domestically E- Imports from foreign countries

The depletion of natural resources

Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following? A The distribution of income B The value of services C The value of intermediate goods D The value of financial transactions and sales of used items E The value of government services

The distribution of income

Based on the above table which of the following is most likely correct? (2.3 chart) a The natural rate of unemployment is 5 percent. B The labor force participation rate is 91 percent. C Discouraged workers are 4 percent of the labor force. D There are 9 million discouraged workers in the nation E There are 95 million people in the labor force

The natural rate of unemployment is 5 percent

Which of the following transactions will be included in the calculation of Country X's Gross Domestic Product (GDP) in 2020? A The sale of corporate stocks B The exchange of a used automobile for a used boat C The purchase of new construction equipment D Social Security checks received by retirees E Carrots grown in a household's backyard and consumed by the family

The purchase of new construction equipment

if an economy is at the peak of the business cycle, then which of the following is true about the state of the economy? A There is a recessionary gap. B There is an inflationary gap. C The economy is producing at its potential output level. D The economy is producing below its potential output level. E The unemployment rate is higher than the natural rate of unemployment.

There is an inflationary gap.

Which of the following is true if the economy is producing at the full-employment level of output? a The unemployment rate is zero. B No person is receiving unemployment compensation from the government. C There is frictional unemployment. D The government's budget is balanced. E The balance of trade is in equilibrium.

There is frictional unemployment.

The recent popularity of job search Web sites that enable job seekers and potential employers to more efficiently contact each other is most likely to cause a reduction in the labor force participation rate B a reduction in structural, but not in frictional, unemployment rates C a reduction in the frictional unemployment rate D an increase in the overall unemployment rate E a reduction in cyclical, but not in frictional, unemployment rates

a reduction in the frictional unemployment rate

in the measurements of gross domestic product, investment includes spending by

a. business on capital goods and changes in inventories

if purchases of education and medical care were counted as investment rather than consumption, gross domestic product would

a. not change, because there is no change in total experience

the circular flow model illustrates the equality of which of the following?

a. total expenditure and total income

A lender will realize unexpected benefit when the A actual inflation rate is higher than the anticipated inflation rate B actual inflation rate is lower than the anticipated inflation rate C rate of interest is greater than the actual rate of inflation D rate of interest is less than the actual rate of inflation E rate of interest equals the actual rate of inflation

actual inflation rate is lower than the anticipated inflation rate

the table below shows the sales and intermediate purchases of automobile manufacture an steel manufactures in a country ( 2.1 chart) assume these are the only three manufactures in the country, which of the following is true

b, the total value added of the glass, steel, and automobile manufacture is $100 million

Public policy that generates an unexpected increase in consumer prices will inflict short-run costs on all of the following EXCEPT A borrowers B workers with fixed incomes C savers holding non-interest-bearing money D taxpayers shifted into higher tax brackets E people whose incomes are not adjusted for inflation

borrowers

suppose that personal income is $3.500 billion, personal taxes are $1,000 billion and depreciation is $500 billion disposable income is equal to which of the following?

c. $2,500 billion

in one year, spending on consumption, investment and government purchase was equal to 103 percent of a country's gross domestic product, this would be possible only if

c. net exports were negative

which of the following best explains why transfer payment are not included in the calculation of gross domestic product?

c. recipients of transfer payments have not produced or supplied goods and services in exchanged for these payments

gross domestic product is equal to which of the following

c. the sum of income paid to all the factors of production

The consumer price index (CPI) is designed to measure changes in the A spending patterns of urban consumers only B spending patterns of all consumers C wholesale price of manufactured goods D prices of all goods and services produced in an economy E cost of a select market basket of goods and services

cost of a select market basket of goods and services

The consumer price index measures which of the following? A The change over time of the weighted prices of a particular group of goods and services B The change over time of the weighted wholesale price index C The change over time of the difference between the gross domestic product deflator and the wholesale price index D Inflation corrected for changes in the real gross domestic product E Inflation corrected for changes in the wholesale price index

the change over time of the weighted prices of a particular group of goods and services

potential gross domestic product will decrease under which of the following conditions?

the country's annual depreciation is greater than it's annual gross investment

The official unemployment rate is not an accurate indicator of actual unemployment in the economy because a structural unemployment is greater than cyclical unemployment at the going wage rate B full employment is greater than natural unemployment C the unemployment rate is less than natural unemployment D the official rate does not include persons who have given up looking for work E the official rate does not reflect the number of people receiving unemployment compensation

the official rate does not include persons who have given up looking for work

If the nominal gross domestic product (GDP) of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007 A both the price level and the real GDP have increased B neither the price level nor the real GDP has increased C the price level increased by a larger percentage than did the real GDP D the price level increased by a smaller percentage than did the real GDP E the price level and/or the real GDP has increased

the price level and/or the real GDP has increased

Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that A each person's real income is cut in half B consumer incomes are doubled C the prices in an average consumer's market basket are doubled D all consumer goods prices are doubled E all prices in the economy are doubled

the prices in an average consumer's market basket are doubled