Macroeconomics Midterm - Practice Exam

Which is NOT a reason unemployment rates differ so much within the United States? a. tax differences between states b. cultural differences c. differences in preferences for living in a certain geographic area d. clustering of industries in certain geographic areas

b. cultural differences

According to the production function, which of these changes will NOT result in economic growth? a. improvements in the productivity of labor b. increases in consumption spending c. increases in capital d. improvements in technology

b. increases in consumption spending

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals a. $160. b. $180. c. $150. d. $140.

d. $140

Suppose three years ago a nation's inflation rate was 8%, two years ago it was 5%, and last year it was 2%. This nation is undergoing a. deflation. b. hyperinflation. c. a drop in its price level. d. disinflation.

d. disinflation

Gross domestic product is a measure of a. an economy's total output. b. household production. c. the total weight of all goods produced. d. production by owners of labor and capital only

a. an economy's total output

Suppose an economy has historically grown at a rate of 2.25%. The economy is currently growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle. a. expansion b. recovery c. contraction d. trough

a. expansion

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living a. fell by 1%. b. fell by 3%. c. rose by 1%. d. rose by 2%.

a. fell by 1%

When a recession gets under way a. firms start to lay off workers to reduce costs. b. consumer confidence rises because people expect an eventual recovery. c. inflation always rises because the government prints more money. d. inflation falls because the government reduces its budget deficit.

a. firms start to lay off workers to reduce costs

The principal measure of inflation in the United States is a. the consumer price index. b. gross domestic product. c. the producer price index. d. the leading economic Index.

a. the consumer price index

Wages that are higher than equilibrium can lead to a. unemployment. b. overemployment. c. a labor shortage. d. a downward wage-price spiral.

a. unemployment

John expects to get a raise equal to the increase in the consumer price index (CPI). The CPI has gone from 160 to 164. If John's salary last year was $50,000, what salary does he expect to earn this year? a. $48,750 b. $51,250 c. $52,220 d. $52,250

b. $51,250

Suppose a market basket of goods costs $10,000 in 2009, the base period, and that same basket of goods now costs $11,200. What is the consumer price index for the current period? a. 89.3 b. 112.0 c. 120.0 d. 132.0

b. 112.0

If an economy's GDP will double in 25 years, then its growth rate must be about a. 2.5%. b. 2.8%. c. 25%. d. 28%.

b. 2.8%

An economy has a population of 226,500 people, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is a. 5.5%. b. 6.5%. c. 21%. d. 21.1%.

b. 6.5%

Based on the graph, if households decide to save a larger portion of their income because they fear job loss due to a recession, the loanable funds supply curve will shift from _____ to _____, and the new equilibrium will be at point _____, holding demand constant at D0. a. S0; S1; a b. S0; S1; b c. S1; S0; b d. S1; S0; d

b. S0; S1; b

The demand curve for loanable funds represents _____ and is _____. a. borrowers; horizontal b. borrowers; downward sloping c. savers; horizontal d. savers; downward sloping

b. borrowers; downward sloping

Most economists believe that the consumer price index _____ the rate of inflation a. understates b. overstates c. accurately states d. disinflates

b. overstates

If a country's population increases at a higher rate than the growth rate of its real GDP a. GDP per capita has increased. b. the standard of living in the country has decreased. c. average output per person remains constant. d. the country's rate of inflation has increased.

b. the standard of living in the country has decreased

Zach has been laid off from his job as an aircraft worker. He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is a. employed. b. unemployed. c. a discouraged worker. d. not in the labor force

b. unemployed

Suppose an economist breaks the unemployment rate into the following components: frictional (2%), structural (1%), and cyclical (4%). Based on these estimates, the natural rate of unemployment is a. 0%. b. 3%. c. 5%. d. 7%

c. 3%

Whispering Valley Furniture hires 5 employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires 10 employees working eight hours each to produce 160 rocking chairs. Which company's workers are more productive? a. Whispering Valley Furniture's workers are more productive. b. Rocky Gap Furniture's workers are more productive. c. The two companies' workers are equally productive. d. The two companies are not comparable because they don't have the same number of employees.

c. The two companies' workers are equally productive.

Because of the compounding effect a. people with high credit scores often have difficulty obtaining loans. b. people with low credit scores often have difficulty obtaining loans. c. a small loan balance becomes large. d. a large loan balance becomes smaller.

c. a small loan balance becomes large.

Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a local elementary school. She began looking for a full-time job last week and has already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is a. a discouraged worker. b. unemployed. c. employed. d. not in the labor force.

c. employed

According to the table, the number of people in the labor force is a. 110. b. 115. c. 120. d. 130.

b. 115

What is an example of a final good? a. tartar sauce purchased by a fish restaurant b. corn purchased by a hog farmer c. bacon purchased at a grocery store d. rubber purchased by a bicycle company

c. bacon purchased at a grocery store

When Main Street Bank buys new automatic teller machines, the quantity of _____ in the economy increases. a. land and natural resources b. labor c. physical capital d. entrepreneurial ability, technology, and ideas

c. physical capital

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 while the consumer price index the year his dad started work was 110.8, Dave is a. correct; adjusting for price changes, his salary is more than his dad's salary. b. correct; adjusting for quantity changes, his salary is more than his dad's salary. c. incorrect; adjusting for price changes, his salary is less than his dad's salary. d. incorrect; adjusting for quantity changes, his salary is less than his dad's salary.

c. incorrect; adjusting for price changes, his salary is less than his dad's salary

Which is NOT a source of productivity growth? a. raising the capital-to-labor ratio b. increasing the quality of labor c. moving resources from production to pension benefits d. making investments in technological improvements

c. moving resources from production to pension benefits

One of the key concepts involved in the circular flow diagram is that a. households and businesses are in conflict with each other. b. the national economy is similar to a zero-sum game. c. one person's spending is another person's income. d. the sum of the resource and product markets must equal household income.

c. one person's spending is another person's income

When a financial institution accepts funds from savers and pools this money into a portfolio of diversified financial instruments, it is a. reducing information costs. b. reducing transaction costs. c. spreading risk. d. preventing fraud.

c. spreading risk.

When a perpetual bond with a face value of $1,000 is issued, general interest rates are 3%, so the annual interest payment is _____. After the bond is issued, market interest rates rise to 4%, which forces the price of the bond to _____ to _____. a. $3; rise; $750 b. $3; fall; $75 c. $30; rise; $750 d. $30; fall; $750

d. $30; fall; $750

Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP a. increases by $600 billion. b. increases by $300 billion. c. decreases by $600 billion. d. does not change.

d. does not change

U.S. steelworkers who have lost their jobs to workers receiving lower wages overseas are part of _____ unemployment. a. frictional b. cyclical c. seasonal d. structural

d. structural