Economics chapters 4 quiz questions

India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars. $20.90 $20,909 $418 $4.18

$418

If the price index moves from 107 to 110, the rate of inflation is: 3% 30% 28% 2.8%

2.8%

country of Cardonia, the natural rate of unemployment is 3.5% according to the Ministry of Economics. Last year there was an economic slow down where the actual rate of unemployment increased to 4.5%. Assuming that the unemployment percentages are accurate for Cardonia, what is the likely outcome for the economy of Cardonia? a) The natural rate of unemployment will increase. b) Cardonia's economy will start growing again until real GDP is equal to potential real GDP and the unemployment rate equals 3.5%. c) The structural rate of unemployment will increase until the natural rate of unemployment equals the current unemployment rate of 4.5%. d) Calculations from the Ministry of Economics are incorrect since by definition the actual rate of unemployment cannot rise above the natural unemployment rate.

Cardonia's economy will start growing again until real GDP is equal to potential real GDP and the unemployment rate equals 3.5%.

If Nominal GDP is $12,000 billion and the GDP deflator is 80, then Real GDP is: a) $15,000 billion b) $9,600 billion c) $ 21,600 billion d) $6,667 billion

a) $15,000 billion

If depreciation equals $32 billion, GNP equals $230 billion, and national income is $215 billion, then what is the Net National Product? a) $198 billion b) $273 billion c) $248 billion d) $189 billion

a) $198 billion

The Department of Economic Health in the country of Cavia has calculated the price index for a basket of goods from 2014 to 2018. January 2014 is the standardized price index (at 100) for a basket of consumer goods. The price index increased in 2015 to 105.7, in 2016 to 108.6, in 2017 to 115.9, and in 2018 it increased to 120.4. What are the yearly inflation rates in Cavia for 2015, 2016, 2017, and 2018? a) 2015: 5.7%; 2016: 2.7%; 2017: 6.7%; 2018: 3.9% b) 2015: 2.7%; 2016: 6.7%; 2017: 3.9%; 2018: 5.7% c) 2015: 5.4%; 2016: 2.3%; 2017: 6.3%; 2018: 3.7% d) 2015: 5.7%; 2016: 8.6%; 2017: 15.9%; 2018: 20.4%

a) 2015: 5.7%; 2016: 2.7%; 2017: 6.7%; 2018: 3.9%

Assume the economy of country G produces hotdogs and buns in the following quantities and prices in 2017 and 2018. Assume also that 2017 is the base year and the real GDP will be calculated using 2017 prices. What is the real yearly growth (between 2017 and 2018)? Hot DogsBunsQuantityPriceQuantityPriceYear 2017 (base year)5 million$32 million$2Year 20187 million$56 million$4 a) 73.7% b) 32.2% c) 211% d) 42.4%

a) 73.7%

Which of the following choices is a true statement about the roots of modern economic growth? a) Modern economic growth finds its roots in technological progress and industrialization. b) Modern economic growth finds its roots in democratic political systems. c) Modern economic growth finds its roots in religious factors. d) Modern economic growth finds its roots in cultural factors.

a) Modern economic growth finds its roots in technological progress and industrialization.

If economists design a way to eliminate the substitution bias in CPI calculations, how is the CPI likely to change as a result? a) The CPI will grow at a slower rate. b) Only the Core CPI would growth slower c) The CPI will not be affected by this change. d) The CPI will grow at a faster rate.

a) The CPI will grow at a slower rate.

A macroeconomist would study a) economic policies designed to stimulate the country's economy out of a recession. b) the impact of regulations in the banking sector in Florida. c) household spending patterns in lower income groups. d) The impact of new tariffs on the agricultural sector in Iowa.

a) economic policies designed to stimulate the country's economy out of a recession.

Which types of unemployment exist at all times and determine the natural rate of unemployment? a) frictional unemployment and structural unemployment b) structural unemployment and cyclical unemployment c) cyclical and frictional unemployment d) frictional unemployment, cyclical unemployment and structural unemployment

a) frictional unemployment and structural unemployment

In the base year in a small island macroeconomy, nominal GDP was $400m. In a later year when the general level of all prices was twice as high, nominal GDP reached $1000m. Between the base year and the later year: a) inflation occurred. b) there was real GDP growth by more than 100%. c) the price index will be 40 d) real GDP declined.

a) inflation occurred.

Which group of people is harmed by the redistribution of purchasing power due to unexpected inflation? a) lenders b) workers with wage adjustment contract c) home buyers with adjustable rate mortgages d) students with variable-rate educational loans

a) lenders

GDP includes a) only final goods to avoid double counting when including intermediate goods. b) intermediate and final goods to count all goods and services produced. c) Cars produced by Ford in Mexico d) final goods and inventories of imported intermediate goods.

a) only final goods to avoid double counting when including intermediate goods.

A year ago Parker reached his retirement and left the business to pursue other interests. He is now spending lots of time playing golf and visiting his grandchildren. For purposes of employment he is considered: a) out of the labor force. b) unemployed. c) underemployed. d) in the labor force

a) out of the labor force.

If the total number of hours worked per year increases, then automatically a) the value of the production will increase. b) the production or output per worker will also increase. c) Hourly wages will rise d) the value of the production per hour worked will also increase.

a) the value of the production will increase.

Concerning the four phases in the economic cycle, what is represented by point D? a) trough b) Expansion c) Recession d) recovery

a) trough

Gustavo lives in New York City and gets to work on a 10 minute subway ride. He lives in NYC because of the variety of events, restaurants, museums, education and people to experience on a daily basis. Is Gustavo's NYC standard of living reflected in factoring the Gross Domestic Product and why or why not? a) Gustavo's environmental quality is left out of GDP because GDP focuses on productivity rather than Gustavo's well being or standard of living. b) Gustavo's dynamic social environment is left out of the GDP because it distracts Gustavo from being productive with his work. c) The value of our imports, the improvements in product quality. d) The quality of Gustavo's environment is included in GDP because it improves his standard of living.

a) Gustavo's environmental quality is left out of GDP because GDP focuses on productivity rather than Gustavo's well being or standard of living.

Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country. Ethiopia = $14.50 Costa Rica = $2250.00 Ethiopia = $14.50 Costa Rica = $225.00 Ethiopia = $145.00 Costa Rica = $2250.00 Ethiopia = $1450.00 Costa Rica = $22,500.00

Ethiopia = $145.00 Costa Rica = $2250.00

A nation's prosperity is sometimes measured in terms of ___________. GNP GDP GDP per capita economic output

GDP per capita

Which of the following are most likely classified by economists as consumer durable goods? food, clothing drugs, toys, magazines, books automobiles, furniture stocks, bonds

automobiles, furniture

If Nominal GDP = $2.5 trillion and the GDP deflator is 125, then real GDP is equal to: a) $1.5 trillion. b) $2 trillion. c) $3 trillion. d) $3.125 trillion

b) $2 trillion.

Compound growth in an economy can increase people's standard of living for country Z. If the economy for country Z starts with a GDP of 150 and a growth rate of 2% per year, what will its GDP be after 15 years? a) 300 b) 202 c) 230 d) 2,295

b) 202

Which factors contribute to economic growth? a) A decline in the stock of physical capital. b) An increase in university graduates. c) A decrease in the quantity of labor due to emigration. d) A decrease in the number of government funded research programs

b) An increase in university graduates.

Which of the following is an important source of labor productivity? a) The market demand for products. b) Human capital c) Low interest on business loans. d) Price of natural resources

b) Human capital

Cree industrial lighting company is looking to deepen its capital. Which one of these steps should the Cree company take to accomplish this? a) Reorganize the production process to use the equipment more efficiently. b) Invest in additional education and advanced training programs for their employees. c) Refinance their business loans and decrease their carried debt amount. d) Restructure and reorganize its departments to shorten production time.

b) Invest in additional education and advanced training programs for their employees.

Janice has calculated the GDP for 2018 by using the total final goods and services times the 2018 prices of total goods and services. If Janice wishes to create a real value GDP value for 2018, what must she do? a) Janice must divide the total value of consumer goods by the exported goods values. b) Janice must adjust the total value 2018 GDP for inflation. c) Janice must only consider real goods and remove services from the calculation. d) Janice must multiply the total value by the projected GDP for 2019.

b) Janice must adjust the total value 2018 GDP for inflation.

The Campus Collective company, which creates unique apps for colleges, has recently lost three large university clients that made up 40% of its total revenue. This has hit the company hard and management finds it necessary to reduce staff or wages. The economy also appears to be headed toward a recession and gaining more clients will most likely be harder to accomplish. Because it is a smaller company everyone knows each other and knows there are tough choices ahead. Management brings up the idea of an across the board wage reduction so that no one be let go, but some employees don't believe that a wage cut will be equally applied to all. The employees are also not sure if other people working their same jobs in the economy are getting reduced wages. They start to argue against wage reduction and things get a bit heated. Which of the following theories best illustrate this wage stickiness scenario? a) Insider-outsider model b) Relative wage coordination argument c) Implicit contract theory

b) Relative wage coordination argument

To find unemployment, you need to calculate a) The number in the labor force divided by the population. b) The number of unemployed workers divided by the labor force. c) The number of discouraged workers divided by the number of civilian workers. d) The percentage of people not working out of the civilian population

b) The number of unemployed workers divided by the labor force.

Which one of these answers is included in GDP for 2017? a) The purchase of corn flour for a manufacturer who makes tortillas in 2017. b) The tickets to a Janet Jackson concert purchased and used in 2017. c) The purchase of a Ford pick up from 2016 inventory in january 2017 d) Revenue from the sale of a five-year old boat in 2017.

b) The tickets to a Janet Jackson concert purchased and used in 2017

What factors are left out of the Gross Domestic Product calculation but are still necessary in determining and reflecting our standard of living? a) The value of our imports, the improvements in product quality. b) The value of leisure, the quality of our environment, improvements in products quality. c) Improvements in product quality, profit for shareholders ad business owners d) The value of our imports and exports, the value of leisure.

b) The value of leisure, the quality of our environment, improvements in products quality.

Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able. triple double one-half one-fourth

double

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: trough, expansion, recession, peak contraction, recession, expansion, boom expansion, trough, recession, peak expansion, peak, recession, trough

expansion, peak, recession, trough

In order to avoid double counting, statisticians just count the __________________. final inventories final goods and services intermediate goods and services durable goods and nondurable goods

final goods and services

The effects of inflation are seen in: goods and services only wages and income levels only services and wages only goods, services, wages and income levels

goods, services, wages and income levels

In the long run, the most important source of increase in a nation's standard of living is a: zero rate of population growth high rate of economic growth. high rate of consumption. high rate of labor force growth.

high rate of economic growth.

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices. ongoing decrease ongoing rise short term rise short term decrease

ongoing rise

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time. all goods the basket of goods all goods and services all services

the basket of goods

Which of the following is included in GDP? revenue from the sale of a three-year old car the fees charged for a stock broker's services the receipts from a sale of land the value of lawn care service provided by a sixteen-year-old as part of his weekly chores

the fees charged for a stock broker's services

Which of the following is unlikely to affect the rate of economic growth? the quality of available resources the quantity of available resources the level of government spending technological change

the level of government spending

Which of the following is not counted as a part of GDP? the purchase of 100 shares of AT&T stock by your grandfather. the purchase of a snow plough by the city of Minneapolis. the unsold additions to inventory at an appliances store the purchase of a loaf of bread by a consumer

the purchase of 100 shares of AT&T stock by your grandfather.

Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________. 30 40 50 60

30

In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars? 19.4% 47% 68% 147%

47%

If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to: 100 million. 94 million. 106 million. 6 million.

94 million.

_________ is output per hour in the business sector. Net exports Productivity Investment GDP per capita

Productivity

_________ are now the largest single component of the supply side of GDP, representing over half of GDP. Durable goods Services Nondurable goods Structures

Services

Which of the following is true? A depression is a recession that is mild and relatively brief. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. The timing of business fluctuations is regular and therefore easily predictable. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

The unemployment rate measures: a) The percentage of working age adults who are unemployed but not looking for work. b) The percentage of working age adults who are unemployed. c) The percentage of working age adults who are employed. d) The percentage of the labor force who do not have a job, but are looking for one.

The percentage of the labor force who do not have a job, but are looking for one.

Gross Domestic Product (GDP) is designed to measure: a) a nation's total investment level b) a nation's total production of final goods and services. c) a nation's total imports of final goods and services d) a nation's total consumption of final goods and services by households.

b) a nation's total production of final goods and services.

One of the important factors supporting economic growth is a) A strong military sector b) an effective system of laws. c) a strong currency. d) laws ensuring low prices.

b) an effective system of laws.

In the long run, important sources of an increase in a nation's economic growth include a a) low college graduation rate. b) high rate of labor force growth. c) zero rate of population growth. d) Reduced immigration

b) high rate of labor force growth.

If Nominal GDP is $17,000 billion and the GDP deflator is 75, then Real GDP is: a) $16.50 billion. b) $22,667 billion. c) 4.$12,750 billion d) $12.75 billion.

b)$22,667 billion.

With a Consumer Price Index of 179.8 at the end of last year and 186.5 at the end of this year, the country experienced which of the following? a) A deflation rate of 3.72 percent. b) A deflation rate of 3.59 percent. c) An inflation rate of 3.72 percent. d) An inflation rate of 3.59 percent.

c) An inflation rate of 3.72 percent.

Wesley lives in a country with little protection under the law for conducting business or bringing his ideas about a revolutionary new car tire to the market with patent production. Because of the economic conditions what will Wesley most likely do? a) Develop his tire and bring it to market with ease and minimal cost. b) Bring his new tire to market and enjoy high profit in the long run. c) Find a country where he can develop his tire idea and have it protected under strong patent laws. d) Keep his ideas in a notebook and sell them to the highest bidder.

c) Find a country where he can develop his tire idea and have it protected under strong patent laws.

Which of the following would be included in the computation of GDP in a particular year? a) Distribution of food stamps to recipients. b) Charitable donations c) Government expenditure on national defense. d) An increase in imported goods.

c) Government expenditure on national defense.

Which of the following BEST fits the definition of inflation? a) A new car model costs 15% more than the previous year's model. b) The cost of education has increased by 100% over the past two decades. c) The price of most goods and services increases by 5% over a 2 year period. d) Most prices in the economy took a dive during this last recession

c) The price of most goods and services increases by 5% over a 2 year period.

Which of the following is left out of being counted as part of GDP? a) The exports of US made Harley Davidson b) The purchase of a new snow plough by the city of Minneapolis. c) The purchase of your next door neighbor's 20 year old house. d) The unsold additions to inventory at an appliances store.

c) The purchase of your next door neighbor's 20 year old house.

Throughout human history, economic growth a) follows a steady, long-term upward path. b) has been rapid and even across countries c) has brought about substantial gains in incomes and standards of living in many countries. d) has achieved substantial gains in per capita GDP since the 19th century for all countries.

c) has brought about substantial gains in incomes and standards of living in many countries.

Economic growth is supported by a) laws limiting access to private property. b) laws restricting immigration. c) laws that build trust between parties. d) laws restricting trade between nations.

c) laws that build trust between parties.

Investment, when calculating GDP, refers to the: a) amount of new capital goods purchased by the government. b) Amount of savings from households c) purchase of new capital goods like real estate, equipment, and inventories. d) purchase of stocks and bonds and trading financial assets.

c) purchase of new capital goods like real estate, equipment, and inventories.

If you are focusing on the value of output per hour worked you are considering a) A predictor of inflation. b) the value needed to compute the position in a business cycle. c) the most important determinant of the average wage level in the economy. d) An important determinant of capital deepening

c) the most important determinant of the average wage level in the economy.

Use the data from the following table to calculate the GDP per capita of each country. The GDP per capita for Estonido and for Galicia in 2017 is CountryYearGDP (billions in U.S. $)Population (millions)Estonido2017525.5073Galicia1,658.00118.25Estonido2018721.7578Galicia1,724.30121.8 a) $9,253 for Estonido and $14,157 for Galicia in 2017. b) $72,000 for Estonido and $140,000 for Galicia in 2017. c) $720 for Estonido and $1,402 for Galicia in 2017. d) $7,199 for Estonido and $14,021 for Galicia in 2017.

d) $7,199 for Estonido and $14,021 for Galicia in 2017.

In the table below there are three years of a basket of retail goods. From this information calculate the price index of 1990 if the base year in 1980? (Round your answer to the nearest whole number.) GoodAmount198019851990Tomatoes25$0.15$0.25$0.55Milk5$1.50$2.23$2.95Eggs1$1.00$1.25$1.50 a) 303 b) 152 c) 41 d) 245

d) 245

The fictional small country of Dansbert has had a robust GDP the last few years. Dansbert produces just two products: TVs and Computers. The following chart shows product quantities and prices from 2016 to 2018. With 2016 as the base year calculate the real GDP using 2018 prices. What is the real yearly growth in 2017 & 2018? TVsComputersQuantityPrice/unitQuantityPrice/unitYear 2016 (base year)1 million$202 million$40Year 20173 million$403 million$65Year 20185 million$706 million$80 a) 250% for 2017 : 100% for 2018 b) 180% for 2017 : 240% for 2018 c) 215% for 2017 : 730% for 2018 d) 80% for 2017 : 89% for 2018

d) 80% for 2017 : 89% for 2018

In 2008 the price index was calculated at 165.2 with 2005 as the base year. In 2009 the price index increased to 181.6. What was the inflation from 2008-2009? a) 81.6% b) 9.0% c) 16.4% d) 9.9%

d) 9.9%

Which of the following individuals would be excluded from the unemployment rate? a) Sharon who has been looking for work this last month. b) Devon who just turned 57 and is now older than 55 looking for work. c) Doris, a 17 year old, looking for her first job d) George who is staying home to tend to his children while his partner works.

d) George who is staying home to tend to his children while his partner works.

When the economy is at full employment, what is the relationship between real GDP and real potential GDP? a) Real GDP is above real potential GDP. b) Real GDP is below real potential GDP. c) The unemployment rate is above the natural rate of unemployment d) Real GDP is equal to real potential GDP.

d) Real GDP is equal to real potential GDP.

Which of the following is included in a measure of GDP? a) Spending on imported products b) Spending on non-market transactions like painting your own house. c) Spending on used goods. d) Spending on public infrastructure.

d) Spending on public infrastructure.

What is excluded from the official calculation of the unemployment rate? a) Workers who have been looking for fewer than 4 weeks. b) Foreign companies' employees. c) Those who are looking for work but above the age of 55. d) Students who are attending to school full time and not working.

d) Students who are attending to school full time and not working.

Which of the following is included in GDP calculations? a) The milk that is purchased by Ben & Jerry's and used in the ice cream they sell. b) Coffee from Columbia c) Cash received from a yard sale. d) The university tuition paid to enroll in a course.

d) The university tuition paid to enroll in a course.

The United States will have a trade deficit in which of the following scenarios? a) Imports into the US are greater than domestic consumption. b) spending by American households, businesses, and government is less than U.S. GDP. c) spending on the American goods and services is less than U.S. GDP. d) U.S. imports are greater than U.S. exports.

d) U.S. imports are greater than U.S. exports

Economic growth is: a) the quantity of goods produced within a four-month period. b) Only the positive changes in households income. c) the sum of Consumption, Investment, Government Spending and Net Exports. d) a long-run process that occurs as a country's potential output increases.

d) a long-run process that occurs as a country's potential output increases.

Your friend asked you what a business cycle means. You tell them that a business cycle reflects changes in real GDP. Then you tell them that the stages of a business cycle in correct order are: a) trough, expansion, recession, peak. b) expansion, trough, recession, peak. c) recession, peak, trough, expansion d) expansion, peak, recession, trough.

d) expansion, peak, recession, trough.

Political stability and property rights protection a) ensure income equality. b) guarantees low unemployment. c) ensure no inflation d) promote economic growth.

d) promote economic growth.

If a nation's labor force receives a significant influx of young workers: a) the natural rate of unemployment is likely to decrease. b) cyclical unemployment is likely to increase. c) frictional unemployment will likely decrease to zero. d) the natural rate of unemployment is likely to increase.

d) the natural rate of unemployment is likely to increase.

Another term used to describe negative inflation is: counter inflation deflation hyperinflation GDP deflator

deflation

Which of the government policies below is most unlikely to encourage per capita economic growth? high taxes on companies that spend a lot on capital formation the use of tax revenues for investment and capital formation special subsidies for capital-intensive forms of production promotion of education and training programs for workers

high taxes on companies that spend a lot on capital formation

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________. perpetual inflation ultra inflation hypo inflation hyperinflation

hyperinflation

Which of the following is most likely to contribute to economic growth as measured by GDP per capita? the imposition of tariffs and quotas on imported goods increased capital formation rapid population growth an increase in marginal tax rates

increased capital formation

A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned. risk premium inflation compound interest opportunity costs

inflation

You are explaining the growth accounting studies to your best friend. You tell them that the best way to achieve greater technological progress for a country is for it to a) continue to pursue traditional ways of working. b) invest in education and research. c) Reduce immigration to your country d) have the central bank inject more money into the economy.

invest in education and research.

Investment in human capital: is of minor importance to economic growth. can be acquired through on-the-job training. is an important source of economic growth. is characterized by both B) and C).

is characterized by both B) and C).

A nation can achieve higher economic growth if: it devotes more resources to research and development. the productivity of labor declines taxes are imposed on investment in capital. more resources are allocated to consumption goods.

it devotes more resources to research and development.

A university student who is enrolled in school fulltime and not seeking employment is considered: out of the labor force. unemployable, and not counted in official statistics. employed in leisure. underemployed.

out of the labor force.

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices. stabilize understate overstate reduce

overstate

The Producer Price Index is based on prices paid for supplies and inputs by: consumers producers of goods and services government the small business sector

producers of goods and services

The value of what is produced per worker, or per hour worked, is called ____________. economic growth human capital productivity GDP per capita

productivity

Economists typically measure economic growth by tracking: the employment rate. the unemployment rate. averaged GDP growth real GDP per capita.

real GDP per capita.

GDP is: the sum of all currency and coins in circulation. the value of all final goods and services produced by a government. the value of all final good and services produced anywhere in the world by a nation's firms. the value of all final goods and services produced domestically.

the value of all final goods and services produced domestically.

The unemployment rate measures: the number of people unemployed divided by the number of people employed. unemployed workers as a percentage of the labor force. unemployed workers as a percentage of the population age over-sixteen. unemployed workers as a percentage of the population.

unemployed workers as a percentage of the labor force.