Macroeconomics Practice Exam 2
If real GDP per person is growing at 4 percent per year, approximately how many years will it take to double?
17.5 years
the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
Potential GDP
When real GDP is ________ potential GDP, the unemployment rate is ________ the natural unemployment rate
greater than; less than
Standard & Poorʹs forecast for Indiaʹs GDP growth rate was cut by 1 % point to 5.5% as the entire Asia Pacific region feels the pressure of economic uncertainty. India has averaged 7% growth in GDP since 1997. What is true of its PPF?
it has been shifting rightward since 1997
people who are employed and unemployed
labor force
The historical record for the United States over the last 100 years shows...
mostly positive economic growth, though the Great Depression caused actual GDP to dip well below potential GDP.
the unemployment rate that occurs when the economy is at full employment.
natural unemployment rate
What are some components for computing GDP based upon on the income approach?
net interest, corporate profits, and compensation of employees
the largest component of GDP is...
personal consumption expenditures
occurs when real GDP decreases for a period of 6 or more months
recession
occurs when real GDP decreases for at least two successive quarters.
recession
The labor force participation rate is percentage of the ________ who are in the labor force.
working-age population
An indirect tax is exemplified by...
a sales tax
Suppose an economy has some inflation. Then, after a base year, the value of real GDP will...
be greater than nominal GDP.
those not working but looking for a job
unemployed
In 2011, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. Armeniaʹs real GDP per person in 2012 was...
$ 1,545
If consumption expenditures are $500 million, net investment is $100 million, depreciation equals $5 million, imports are $50 million, exports are $55 million, government expenditure on goods and services is $220 million, and government transfer payments are $20 million, then GDP is...
$830 million
GDP equals...
- aggregate expenditure. - the value of the aggregate production in a country during a given time period. - aggregate income
Suppose a country is producing $20 million of real GDP. If the economy grows at 10% per year, approximately how many years will it take for real GDP to grow to $80 million?
14 years
At the end of last year the Consumer Price Index was equal to 157.5 and at the end of this year it was equal to 163.8. What is the inflation rate over this time period?
4%
Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years?
5.4%
In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armeniaʹs economic growth rate from 2011 to 2012?
9%
(T/F) Net Investment = Gross Investment + Depreciation
False
(T/F) The growth rate of real GDP per person accelerated between 1973 to 1984
False
can be calculated either by valuing the nationʹs output of goods and services or by valuing the income generated in the production process
GDP
the sum of the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.
GDP
total amount of income earned in producing the final goods and services in a country during a specific time.
GDP
total amount that buyers spent on the final goods and services produced in a country during a specific time
GDP
value of the final goods and services produced in a country during a specific time
GDP
Convergence of the income gap has been most dramatic between...
Hong Kong and the US
Which of the following people would be considered unemployed by the Bureau of Labor Statistics? I. Mrs. X retires from her job at the age of 55 and does not look for another job. II. Mr. Y was laid off from his job as a welder, but expects to be rehired in 8 months.
II only
During the 1990s, which country experienced the slowest rate of growth in real GDP per person?
Japan
(T/F) The average annual growth rate of real GDP per person in the United States was rapid during World War II.
True
Over the past fifty years, there has been substantial closure of the gap in real GDP per person between which groups of countries?
US and Japan
A loaf of bread purchased by one of your instructors would be best described as...
a final good
When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is...
equal to the actual amount of unemployment.
A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of...
frictional unemployment
Because of a bank merger, Ms. Davis lost her position as VP and had to seek work with other banks. Ms. Davis has the skills necessary to find a new job, thus she is best considered as...
frictionally unemployed
Net investment equals
gross investment - depreciation
The historical record for the United States for the past 100 years shows...
growth in real GDP per person during most years.
We are interested in long-term growth primarily because it brings...
higher standard of living
very high inflation rates.
hyperinflation
Proprietorsʹ income is a component of which approach to measuring GDP?
income approach
Over the past four decades, U.S. real GDP per person has...
increased
An increase in exports of goods or services with no change in imports of goods or services...
increases GDP
What is NOT one of the components for computing GDP based upon the income approach?
investment
Frictional unemployment is the result of...
normal labor market turnover
In calculating GDP, household production is...
not included because there is no market transaction
In the United States, GDP is typically measured...
quarterly
What is used to calculate the standard of living?
real GDP / population
Looking at inflation rates in the United States since the 1970s we see that...
the 1970s experienced the highest inflation rates.
In the circular flow of economic activity aggregate expenditure measures
the dollar value of purchases of final goods and services
Real GDP decreases during...
the movement from peak to trough.
Frictional unemployment increases when...
the number of workers who quit one job to find another increases
accounts for differences in the prices of the same goods in different countries when measuring real GDP
the use of purchasing power parity prices
is found by dividing the number of unemployed people by the sum of working individuals plus unemployed workers, and multiplying by 100
unemployment rate
the percentage of people in the labor force who are unemployed
unemployment rate
the percentage of the labor force not working
unemployment rate
Which of the following is included in ʺcompensation of employeesʺ part of the income approach to measuring GDP? I. Wages and salaries. II. Pension fund contributions. III. Social Security contributions.
I, II, and III
Which of the following is TRUE regarding business cycles? I. Cycles are predictable. II. In each cycle, a peak follows an expansion. III. Potential GDP fluctuates around real GDP.
II only
Over the last 100 years, the average U.S. growth rate in real GDP per person was about
2 percent per year
If the CPI is 120, this means that prices are...
20 percent higher than in the reference base period
If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals...
225
During 2013, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2012, real GDP was 105 billion and the population was 0.85 billion. Economiaʹs growth rate of real GDP per person is...
3.23%
which Asian country has the lowest level of real GDP per person?
China
a measure of the average of the prices paid by urban consumers for a fixed basket of consumer goods and services.
Consumer Price Index
Of the following sequences of price levels, which CORRECTLY represents a 5 percent inflation rate? A) 100, 105, 105, 105 B) 100, 105, 110, 115 C) 100, 100, 100, 100 D) 100, 105, 110.25, 115.76
D) 100, 105, 110.25, 115.76
(T/F) Aggregate expenditure equals GDP but is less than aggregate income.
False
(T/F) Aggregate income is greater than GDP but equal to aggregate expenditure.
False
(T/F) Aggregate income is greater than aggregate expenditure but equal to GDP.
False
(T/F) Consumption expenditure = Net Investment - Depreciation
False
(T/F) Depreciation = Gross Investment - Consumption expenditure
False
(T/F) Aggregate income, aggregate expenditure and GDP are all equal.
True
(T/F) Gross Investment = Net Investment + Depreciation
True
(T/F) In the 1930s, real GDP fell well below its trend
True
(T/F) Over the past 100 years, on the average real GDP per person grew 2 percent a year
True
The nationʹs structural unemployment will increase when...
an increase in textile imports displaces older textile workers who do not have the skills necessary to find new jobs.
The growth rate of real GDP per person in the United States has...
averaged approximately 2 percent per year over the past century
Suppose the country of Tiny Town experienced frictional unemployment. This frictional unemployment would...
be considered a natural occurrence in a growing economy
Which type of unemployment increases during a recession?
cyclical unemployment
the decrease in the stock of capital due to wear and tear
depreciation
a sustained expansion of production possibilities measured as the increase in real GDP over a given period
economic growth
a period of real GDP increases
expansion
Standard & Poorʹs forecast for Indiaʹs GDP growth rate was cut by 1 % point to 5.5% as the entire Asia Pacific region feels the pressure of economic uncertainty. India has averaged 7% growth in GDP since 1997. It is most likely that the slowdown reflects a...
temporary business cycle slowdown