Macro Exam 2

A nation's standard of living is best measured by its - real GDP per person. - nominal GDP per person. - nominal GDP. - real GDP.

real GDP per person.

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is - $105,000.00. - $61,950.00 - $35,000.00. - $46,666.67.

$46,666.67.

Allied Business Consultants employs five researchers that each work 8 hour days. In one day the researchers prepared 10 reports for its 2 largest clients. What was Allied Business Consultants' productivity? 5 reports per client 1/4 report per hour 10 reports 1.25 reports per hour

1/4 report per hour

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was - 104.0. - 151.0. - 98.0. - 102.0.

102.0.

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was - 103.2. - 104.0. - 158.7. - 152.0.

103.2

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year? 4 percent 12 percent 2 percent 10 percent

2 percent

Hit-It produces 320 baseball bats per day using 2 workers who each work 8 hours per day. What is Hit-It's productivity? None of the above is correct. 320 baseball bats 160 baseball bats per hour 20 baseball bats per hour

20 baseball bats per hour

Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period? 1.6 percent 6 percent 3.7 percent 2.5 percent

3.7 percent

Greg's Ice Cream produces 1120 gallons of ice cream per day. Each employed works seven hours and has productivity of 20 gallons an hour. How many employees does Greg's employ? 8 None of the above is correct. 56 160

8

Stock represents: a claim to a share of the profits of a firm. ownership in a firm. equity finance. All of the above are correct

All of the above are correct

Waldo works eight hours and produces 7 units of goods per hour. Emerson works six hours and produces 10 units of goods per hour. Waldo's productivity and output are greater than Emerson's. Waldo's productivity is greater than Emerson's but his output is less Emerson's productivity and output are greater than Waldo's. Emerson's productivity is greater than Waldo's but his output is less

Emerson's productivity and output are greater than Waldo's.

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: - Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. - Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index. - Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. - Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

Which of the following is correct? - The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. -The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. -The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. -The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.

In an imaginary economy, consumers buy only razors and cologne. The fixed basket consists of 6 razors and 4 bottles of cologne. A razor cost $20 in 2009 and $25 in 2010. A bottle of cologne cost $30 in 2009 and $40 in 2010. Using 2009 as the base year, which of the following statements is correct? - For the typical consumer, the number of dollars spent on razors is equal to the number of dollars spent on cologne in each of the two years. - The consumer price index is 310 in 2010. - The rate of inflation is 29.17% in 2010. - None of the above is correct.

The rate of inflation is 29.17% in 2010.

Which of the following equations represents GDP for a closed economy? Y = C + I + G + T Y = C + I + G S = I - G I = Y - C + G

Y = C + I + G

Estimates of the values of which of the following non-market goods or services are included in GDP? a. the value of unpaid housework b. the value of vegetables and other foods that people grow in their gardens c. the estimated rental value of owner-occupied homes d. All of the above are included in GDP.

c

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will supply funds to the financial system by selling bonds. demand funds from the financial system by buying bonds. demand funds from the financial system by selling bonds. supply funds to the financial system by buying bonds.

demand funds from the financial system by selling bonds.

All or part of a firm's profits may be paid out to the firm's stockholders in the form of: interest payments. dividends. retained earnings. capital accounts.

dividends

People who buy newly issued stock in a corporation such as Crate and Barrel provide: debt finance and so become creditors of Crate and Barrel. equity finance and so become part owners of Crate and Barrel. debt finance and so become part owners of Crate and Barrel. equity finance and so become creditors of Crate and Barrel.

equity finance and so become part owners of Crate and Barrel.

If the quality of a good deteriorates while its price remains the same, then the value of a dollar: - rises and the cost of living increases. - falls and the cost of living decreases. - rises and the cost of living decreases. - falls and the cost of living increases.

falls and the cost of living increases.

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up - in the consumer price index and in the GDP deflator. - in the consumer price index, but not in the GDP deflator. - in the GDP deflator, but not in the consumer price index. - in neither the consumer price index nor in the GDP deflator.

in the GDP deflator, but not in the consumer price index.

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant? - unmeasured quality change - substitution bias - introduction of new goods - income bias

introduction of new goods

The source of the supply of loanable funds: and the demand for loanable funds is investment. and the demand for loanable funds is saving. is investment and the source of demand for loanable funds is saving. is saving and the source of demand for loanable funds is investment.

is saving and the source of demand for loanable funds is investment.

Human capital is: the same thing as technological knowledge. the same thing as labor. the tools and equipment operated by humans. knowledge and skills that workers have acquired.

knowledge and skills that workers have acquired.

The primary economic function of the financial system is to: match one person's saving with another person's investment. match one person's consumption expenditures with another person's capital expenditures. keep interest rates low. provide expert advice to savers and investors.

match one person's saving with another person's investment.

The consumer price index is used to: - monitor changes in the level of real GDP over time. - monitor changes in the level of wholesale prices in the economy. - monitor changes in the stock market. - monitor changes in the cost of living over time.

monitor changes in the cost of living over time

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead, use equity finance. sell bonds. invest in physical capital. purchase bonds.

sell bonds.

The length of time until a bond matures is called the: intermediation. perpetuity. maturity. term.

term.

A nation's standard of living is determined by - the quantity of natural resources with which it is endowed. - the productivity of its workers. - the percentage of its GDP that is accounted for by government purchases. - factors and events that are beyond the nation's control.

the productivity of its workers.

In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct? - When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007. - When 2007 is chosen as the base year, the consumer price index is 100 in 2006. - When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007. - When 2006 is chosen as the base year, the consumer price index is 90 in 2007.

When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007.

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by a. surveying consumers. b. surveying sellers of the goods and services. c. working backward from the rate of inflation to arrive at imputed values for those quantities. d. arbitrary choices made by federal government employees.

a

Which of the following are financial intermediaries? neither banks or mutual funds banks but not mutual funds both banks and mutual funds mutual funds but not banks

both banks and mutual funds

Last year real GDP per person in the imaginary nation of Olympus was 4,500. The year before it was 4,250. By about what percentage did Olympian real GDP per person grow during the period? a. 4.6 percent b. 5.2 percent c. 5.9 percent d. 6.5 percent

c

3. Which of the following domestically produced items is not included in GDP? a. a bottle of shampoo b. a hairdryer c. a haircut d. All of the above are included in GDP.

d

When the consumer price index rises, the typical family: - can spend fewer dollars to maintain the same standard of living. - has to spend more dollars to maintain the same standard of living. - can offset the effects of rising prices by saving more. - finds that its standard of living is not affected.

has to spend more dollars to maintain the same standard of living.

When a country saves a larger portion of its GDP than it did before, it will have: more capital and higher productivity. less capital and lower productivity. more capital and lower productivity. less capital and higher productivity.

more capital and higher productivity.

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant? - substitution bias - introduction of new goods - income bias - unmeasured quality change

unmeasured quality change

If a firm sells a total of 100 shares of stock, then: the supply of, and demand for, those shares determine the price per share. each share represents ownership of 1 percent of the firm. the firm is engaging in equity finance. All of the above are correct.

All of the above are correct.

If the CPI was 125 this year and 120 last year, then: - the cost of the CPI basket of goods and services increased by 4.2 percent this year. - the price level increased by 4.2 percent this year. - the inflation rate for this year was 4.2 percent. - All of the above are correct.

All of the above are correct.

Which of the following items plays a role in determining productivity? physical capital natural resources technological knowledge All of the above are correct.

All of the above are correct.

Which of the following would increase productivity? an increase in the physical capital stock per worker an increase in human capital per worker an increase in natural resources per worker All of the above are correct.

All of the above are correct.

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that: the credit risk associated with Bond A is lower than the credit risk associated with Bond B. Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. Bond A has a term of 20 years and Bond B has a term of 2 years. All of the above are correct.

Bond A has a term of 20 years and Bond B has a term of 2 years.

Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods. Country A has higher productivity, but lower real GDP per person than country B. Country A has higher productivity and higher real GDP per person than country B. Country A has lower productivity and lower real GDP per person than country B. Country B has lower productivity, but higher real GDP per person than country B.

Country A has lower productivity and lower real GDP per person than country B.

In which of the following cases would there be an effect on the value of the U.S. consumer price index, but not on the value of the U.S. GDP deflator? - Most of the earth-moving machines that are produced by a certain company in Illinois are exported to other countries, and the price of these machines increases. - Most of the bananas that are produced by a certain company in Honduras end up in U.S. grocery stores, and the price of these bananas increases. - All of the truck tires that are produced by a certain company in South Korea are sold to the U.S. military, and the price of these tires decreases. - All of the truck tires that are produced by a certain company in California are sold to the U.S. military, and the price of these tires decreases.

Most of the bananas that are produced by a certain company in Honduras end up in U.S. grocery stores, and the price of these bananas increases.

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124? [Dr R-Remember %change formula is (new-old)/old ] a. 106 to 112 b. 112 to 118 c. 118 to 124 d. All of these changes produce the same rate of inflation.

a

You sell cupcakes. One day you double the time you spend and double all your inputs, and make twice as many cupcakes. Your cupcake production function has increasing returns to scale. decreasing returns to scale. constant returns to scale. zero returns to scale.

constant returns to scale.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily, a. values of goods and services based on surveys of consumers. b. market prices. c. consumer and producer surpluses. d. costs of producing goods and services.

b

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2007, Quality Motors produced $20 million worth of automobiles, with $12 million in sales to Americans, $6 million in sales to Canadians, and $2 million worth of automobiles added to Quality Motors' inventory. The transactions just described contribute how much to U.S. GDP for 2007? a. $12 million b. $14 million c. $20 million d. $34 million

c

In the calculation of the CPI, books are given greater weight than magazines if - the price of books is higher than the price of magazines. -consumers buy more books than magazines. -books are more readily available than magazines to the typical consumer. -it costs more to produce books than it costs to produce magazines

consumers buy more books than magazines.

Which of the following is not correct? a. The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. b. The consumer price index is used to monitor changes in the cost of living over time. c. The consumer price index is used by economists to measure the inflation rate. d. The consumer price index is used to measure the quantity of goods and services that the economy is producing.

d

Institutions that help to match one person's saving with another person's investment are collectively called the: banking system. financial system. Federal Reserve system. monetary system.

financial system.

Productivity is defined as the quantity of: labor required to produce one unit of goods and services. goods and services produced from each unit of labor input. goods and services produced per unit of time. labor required to produce a nation's GDP.

goods and services produced from each unit of labor input.

Compared to short-term bonds, other things the same, long-term bonds generally have: less risk and so they pay higher interest rates. about the same risk and so they pay about the same interest rate. less risk and so they pay lower interest rates. more risk and so they pay higher interest rates.

more risk and so they pay higher interest rates.

Suppose the typical consumer buys more bananas than oranges. In fixing the basket of goods and services for the purpose of calculating the consumer price index, the Bureau of Labor Statistics - places more weight on the price of bananas than on the price of oranges; the weights of the two prices are determined by surveying consumers. - ignores the fact that the typical consumer buys more bananas than orange; this procedure does not affect the value of the index. - ignores the fact that the typical consumer buys more bananas than orange; this procedure results in a potentially-serious bias in the index. - places more weight on the price of bananas than on the price of oranges; the weights of the two prices are determined by the extent to which those prices have changed over the previous year.

places more weight on the price of bananas than on the price of oranges; the weights of the two prices are determined by surveying consumers.

When we are calculating the consumer price index and the inflation rate for a certain year, - the inflation rate may depend on the choice of a base year, but the value of the consumer price index does not depend on the choice of a base year. - neither the value of the consumer price index nor the inflation rate depends on the choice of a base year. - the value of the consumer price index may depend on the choice of a base year, but the inflation rate does not depend on the choice of a base year. - both the value of the consumer price index and the inflation rate may depend on the choice of a base year.

the value of the consumer price index may depend on the choice of a base year, but the inflation rate does not depend on the choice of a base year.