Dual Enrollment Macroeconomics: Practice Test Questions~Test #2
Directions: Click on the graph to the right and select Multiple Plots. For each Y listbox, select one of the four countries (the EU15 represents the 15 countries that made up the European Union prior to May 1, 2004). Then click on the plot button, and roll your cursor over each line to identify the data. According to the graph, which country had the lowest unemployment rate over the longest period during the years 1993-2004? A. Canada. B. The United States. C. Japan. Your answer is correct. D. The European Union (EU15).
C
If last year a pineapple cost $2, and this year it costs $4, there has been a ________ percent rise in the price of the pineapple over a one-year period. A. 50 B. 200 C. 100 Your answer is correct. D. 400
C
In the long run, persistent deflation in a growing economy can occur if A. AD increases regardless of what the LRAS does. B. there is a temporary decrease in input prices. C. increases in the LRAS are proportionately larger than the increases in AD. Your answer is correct. D. increases in AD are proportionately larger than the increase in LRAS.
C
New growth theory differs from traditional growth theory in that A. traditional theory understood that there would be greater technological advances when there are rewards but new growth theory places no importance on rewards. B. traditional theory did not include the growth of the labor productivity in the computation of economic growth, but new growth theory does. C. traditional theory did not explain what causes improvements in technology, but new growth theory does. Your answer is correct. D. traditional theory did not recognize the contribution of labor to total output, but new growth theory does.
C
The primary difference between the aggregate demand curve and an individual demand curve is that A. a change in real balances will shift an individual demand curve but not the aggregate demand curve. B. the aggregate demand curve is vertical in the long run, while an individual demand curve is downward sloping. C. the aggregate demand curve represents total planned expenditures on all goods and services while an individual demand curve represents a single good or service. Your answer is correct. D. a change in the price level will shift the aggregate demand curve but not an individual demand curve.
C
The table on the right shows four major price indices of the US economy: the Consumer Price Index (CPI), the Producer Price Index (PPI), the Personal Consumption Expenditure Index (PCE) and the GDP deflator. All four indices are used to measure inflation. Based on the data from the four indices in the table, which price index suggests the highest rate of inflation between the years 1999 and 2000? A. The PCE indicating the highest inflation rate (5.48%). B. The GDP indicating the highest inflation rate (2.18%). C. The PPI indicating the highest inflation rate (5.78%) . Your answer is correct. D. The PPI indicating the highest inflation rate (2.48%).
C
Consider the accompanying diagram when answering the questions that follow. Suppose that the current price level is P3. In this case, the price will rise toward P1because A. firms would stand ready to offer fewer services than people wish to purchase. B. actual real GDP would be less than total planned real expenditures. C. inventories of unsold goods would begin to be depleted. D. All of the above. Your answer is correct. E. A and B, but not C.
D
Developing countries should A. not focus on economic growth. B. produce goods that are capital intensive and not labor intensive. C. focus on producing service goods. D. focus on production based on comparative advantage.
D
Economic growth as it is currently measured A. does not account for how increased per capita income is distributed across income groups. B. does not consider spiritual, cultural or social difficulties that may arise from growth. C. understates actual economic growth since it does not adjust for changes in leisure. D. All of the above.
D
Government enforced property rights are crucial to economic growth because they A. make the returns to risk-taking relatively more certain. B. provide incentives for capital accumulation and entrepreneurial activity. C. encourage people to save knowing their wealth will not be arbitrarily confiscated. D. All of the above.
D
If the LRAS shifts to the right over time and during this time AD does not noticeably change, real GDP will ________ and the price level will ________. A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
D
Labor productivity is normally measured by A. the percentage change in GDP. B. the change in the amount of leisure. C. the educational level of workers. D. dividing total real domestic output by the number of workers or by the number of labor hours.
D
Suppose that during the past 3 years, equilibrium real GDP in a country rose steadily, from $458 billion to $508 billion, but even though the position of its aggregate demand curve remained unchanged, its equilibrium price level steadily declined, from 110 to 105. What could have accounted for these outcomes, and what is the term for the change in the price level experienced by this country? A. Recession with inflation; stagflation. B. Economic growth with an increase in aggregate demand; secular deflation. C. Increase in aggregate demand without economic growth: disinflation. D. Economic growth without an increase in aggregate demand; secular deflation.
D
The economic development of a country is dependent on all of the following except A. improving education. B. establishing a stable system of property rights. C. limiting protectionism in the world economy. D. promoting protectionist barriers.
D
The economy of Finlandia is at full employment when A. everyone looking who wants a job has one. B. there is zero unemployment in the economy. C. there is some cyclical unemployment in the economy, but there is no frictional unemployment. D. there is some unemployment due to friction in the labor market, but there is no cyclical unemployment.
D
The table on the right shows four major price indices of the US economy: the Consumer Price Index (CPI), the Producer Price Index (PPI), the Personal Consumption Expenditure Index (PCE) and the GDP deflator. All four indices are used to measure inflation. Based on the data from the four indices in the table, which price index suggests the highest rate of inflation between the years 2000 and 2004, and between 1996 and 1997. What were the corresponding rates suggested by these indices? A. The PCE indicating the highest inflation rate of 10.90% for 2000-2004; the CPI indicates the highest inflation rate of 2.34% for 1996-1997. B. The CPI indicating the highest inflation rate of 8.25% for 2000-2004; the PCE deflator indicating the highest inflation rate of 1.68% for 1996-1997. C. The PPI indicates the highest inflation rate at 10.50% for 2000-2004; the CPI deflator indicating the highest inflation rate of −0.06% for 1996-1997. Your answer is not correct. D. The PPI indicates the highest inflation rate at 10.50% for 2000-2004; the CPI indicates the highest inflation rate of 2.34% for 1996-1997.
D
The long-run equilibrium of an economy occurs A. where the long-run horizontal supply curve meets the aggregate demand curve. B. where the upward sloping supply curve meets the aggregate demand curve. C. where the long-run supply curve is to the right of the aggregate demand curve. D. where the long-run aggregate supply curve meets the aggregate demand curve.
D
Total expenditures for domestically produced goods and services consist of A. government spending only. B. consumer spending, business spending, and net foreign spending. C. consumer spending only. D. consumer spending, business spending, government spending, and net foreign spending.
D
We draw the long-run aggregate supply curve as a vertical line to reflect the fact that A. technology and resource endowments do not affect potential real output. B. the productive capacity of the economy never changes. C. an accurate depiction of the production possibilities curve would also show it as a vertical line. D. changes in the price level do not alter the level of potential real output.
D
Which of the following factors are highly related to the pace of economic development? A. developing an educated population B. establishing a system of property rights C. limiting protectionism D. All of the above.
D
Which of the following helps to explain why the aggregate demand curve slopes downward? A. When the domestic price level rises, our goods and services become less expensive to foreigners. B. When government spending rises, the price level falls. C. There is an inverse relationship between consumer expectations and personal taxes. D. When the price level rises, the real value of financial assets (like bonds, and savings account balances) declines.
D
Which of the following is most likely to gain from unanticipated inflation? A. A restaurant that has printed menus. B. A senior citizen who receives Social Security payments. C. A bank that specializes in mortgage lending. D. A consumer with a five year auto loan.
D
Which of the following would cause a decrease in long-run aggregate supply? A. A decrease in wealth. B. A decrease in the price level. C. A decrease in the number of consumers in the market. D. A decrease in the labor force. Your answer is correct. E. All of the above would cause a decrease in long-run aggregate supply.
D
Directions: Click on the graph to the right and select Multiple Plots to compare the volatility of inflation constructed by taking the year to year percentage change of four major U.S. price indices over the years 1948-2005. For each Y listbox, select a different inflation proxy: the Consumer Price Index (CPI), the Producer Price Index (PPI), the Personal Consumption Expenditure Index (PCE) and the GDP deflator. Roll your cursor over each plotted line to identify the data. Which price index resulted in the highest and most volatile measure of inflation? A. GDP deflator. B. PCE. C. CPI. D. PPI.
D
A country that saves a larger percentage of GDP than another country will, ceteris paribus A. experience higher rates of economic growth since there will be more investment. Your answer is correct. B. experience lower rates of economic growth since there will be more investment. C. experience lower rates of economic growth since there will be less investment. D. experience higher rates of economic growth since there will be less investment.
A
All of the following are benefits of economic growth except A. urban congestion. Your answer is correct. B. improved health. C. reduction in illiteracy. D. political stability.
A
An increase in long-run aggregate supply cuases the price level to increase, and is therefore inflationary. A. False Your answer is correct. B. True
A
Consider an economy with only two groups of people: Wage earners and Goods sellers. If the price level increases by 20% while the nominal wages remains the same, A. income will be redistributed from wage earners to goods sellers. Your answer is correct. B. real wages will not be affected as nominal wages remained the same. C. no income redistribution will occur as nominal wages are same as before. D. income will be redistributed from goods sellers to wage earners.
A
Consider the figure to the right showing the long-run aggregate supply (LRAS) and the aggregate demand (AD) curves. Suppose that the long-run aggregate supply curve moves to a GDP level of $20 billion. Which of the following is true? A. The equilibrium price level will increase, and equilibrium GDP will decrease. Your answer is correct. B. The equilibrium price level will decrease, and equilibrium GDP will decrease. C. The equilibrium price level will increase, and equilibrium GDP will increase. D. The equilibrium price level will decrease, and equilibrium GDP will increase.
A
If there is persistent inflation in a growing economy, A. the long-run aggregate supply is shifting to the right at a slower rate than aggregate demand. Your answer is correct. B. the long-run aggregate supply is shifting to the right at a faster rate than aggregate demand. C. there is an excess of total planned expenditures. D. the long-run aggregate supply is constant.
A
Population growth generally A. encourages technological progress that increases economic growth. Your answer is correct. B. increases economic growth by stimulating more savings. C. has no effect on economic growth on average. D. reduces economic growth because more people are a drain on the limited resources.
A
Suppose real GDP for a country is $1,400 billion. The GDP price index is 114.3. There are 26 million workers who work 36 hours per week, and the real wage averages $16 per hour. What is labor productivity for this country? A. $53,846 Your answer is correct. B. $3,150 C. $12,248 D. $24,231
A
The U.S. aggregate demand curve would shift to the left if A. the Federal Reserve Board caused the real interest rate to increase. Your answer is correct. B. the economic conditions in Europe improved. C. there was a tax decrease. D. the foreign exchange rate of the dollar decreased.
A
The World Bank estimates that _______ of the world's people live on less than $2.00 per day. A. nearly 10 percent Your answer is correct. B. less than 3 percent C. approximately 6 percent D. over 50 percent
A
The economic development of a country is dependent on all of the following except A. promoting protectionist barriers. Your answer is correct. B. establishing a stable system of property rights. C. limiting protectionism in the world economy. D. improving education.
A
What determines the total value of annual U.S. GDP? A. The spending and production decisions of consumers, firms, governments, and foreigners. Your answer is correct. B. The Congressional Budget Office. C. Wall Street. D. The Federal Reserve Board.
A
Which of the following statements is false? A. A society that wants more in the future should consume more of its capital today. Your answer is correct. B. A society that wants more in the future should invest in more human capital today. C. A society that wants more in the future should invest more today. D. A society that wants more in the future should consume less today.
A
Which of the following will shift the aggregate demand curve to the left? A. Interest rates rise. Your answer is correct. B. There is an economic boom overseas that raises the incomes of foreign households. C. The government decreases personal income taxes. D.
A
Whenever inflation rates are overestimated for the life of a loan, creditors lose and debtors gain. A. False Your answer is correct. B. True If you invest $1,000 in a savings account that pays 2 percent annually, your $1,000 investment will have gained the most purchasing power in one year if the inflation rate is A. 2 percent. B. 1 percent. Your answer is correct. C. 5 percent. D. 3 percent.
A B
Consider this statement: "Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the long-run aggregate supply curve." This statement is describing A. supply-side inflation. B. demand-side inflation. Your answer is correct. C. Both demand-side and supply-side inflation. D. None of the above.
B
Internet job sites, like Monster.com, have led potential employees to find jobs via the internet almost instantly. This has caused A. a fall in structural unemployment. B. a fall in frictional unemployment. Your answer is correct. C. a rise in cyclical unemployment. D. a rise in frictional unemployment.
B
Sean is a lobsterman, but lobster fishing is done only in the summer months, so he doesn't have a job in the winter. Which type of unemployment is this? A. structural unemployment B. seasonal unemployment Your answer is correct. C. cyclical unemployment D. frictional unemployment
B
The following table contains information for the U.S. for 1998. U.S. Economy: 1998 Thousands of Persons Civilian labor force 137,565 Civilian employment 131,293 Civilian working-age population 205,015 Compute the unemployment rate and the labor force participation rate. A. Unemployment rate = 4.56 percent; Labor force participation rate = 95.44 percent. B. Unemployment rate = 4.56 percent; Labor force participation rate = 67.1 percent. Your answer is correct. C. Unemployment rate = 9.54 percent; Labor force participation rate = 67.1 percent. D. Unemployment rate = 3.06 percent; Labor force participation rate = 48.8 percent.
B
The unemployment rate is calculated as A. the number of unemployedthe size of the population×100. B. the number of unemployedthe number of people in the labor force×100. Your answer is correct. C. the number of unemployed×the number of people in the labor force100. D. the number of people in the labor forcethe number of unemployed×100.
B
Total capital is the sum of A. physical capital, human capital, and the money supply. B. physical capital and human capital. Your answer is correct. C. human capital and the money supply. D. physical capital and the money supply.
B
Which of the following measures will lower the natural rate of unemployment? A. Government increases spending to reduce the job loss during a recession. B. More high school graduates enter college without looking for employment right away. Your answer is correct. C. The labor force becomes less educated over time. D. Government increases the duration of unemployment compensation benefits.
B
Which of the following statements is true concerning the historical picture of business activity in the United States? A. Business fluctuations are regular and take 8 years from the start of a recession to the end of the peak period. B. The frequency and size of fluctuations around the trend has decreased since World War II. Your answer is correct. C. The largest expansion since World War II took place in the early 1960s. D. All recessions have been caused by external shocks.
B
Which of the following statements is true? A. Investment in our capital stock lowers our growth rate and living standards. B. A higher saving rate allows us to invest in our capital stock and results in economic growth. Your answer is correct. C. Higher saving rates lower living standards. D. If you want more tomorrow, you have to produce more today.
B
Which of the following will increase labor productivity? A. Workers work more hours. B. Labor has more physical capital to work with. Your answer is correct. C. The rate of growth of labor increases. D. The number of workers increases.
B
Directions: Click on the graph in the window on the right and select Multiple Time Series to compare unemployment rates of different countries for the years 1995-2005. For each Y listbox, select a different option: the United States, Canada, Japan, Australia and the EU15 (the EU15 are the 15 countries that formerly made up the European Union, until the most recent enlargement of the EU on May 1, 2004; with the inclusion of 10 more countries). Roll your cursor over each plotted line to identify the data. According to the graph, which country had the lowest unemployment rate over the longest period during the years 1995-2005? A. The United States (US). B. Japan. Your answer is correct. C. Canada. D. Australia. E. The European Union (EU15).
B
Jim's favorite breakfast is two eggs, 1/5 lb. of bacon, 1/7 lb. of white toast, 1/6 can (16 ounce can) of frozen concentrate orange juice, and 1 lb. of grapefruit. The following table contains 1991 and 2001 prices for these five items. Using 1991 as the base year, compute the price index for Jim's breakfast for 2001. Item 1991 Price 2001 Price One dozen eggs $1.08 $1.02 One pound bacon $2.15 $2.75 One pound bread $0.63 $0.98 One can orange juice $1.98 $1.86 One pound grapefruit $0.57 $0.55 A. 93.02 B. 107.5 Your answer is correct. C. 111.7 D. 89.53
B
Supply-side inflation can be caused by a continual A. increase in aggregate demand while aggregate supply remains unchanged. B. decrease in aggregate supply while aggregate demand remains unchanged. Your answer is correct. C. decrease in aggregate supply while aggregate demand has significant decreases. D. increase in aggregate supply while aggregate demand remains unchanged.
B
All of the following are benefits of economic growth except A. reduction in illiteracy. B. political stability. C. urban congestion. Your answer is correct. D. improved health.
C
Assume that the position of a nation's aggregate demand curve has not changed, but the long-run equilibrium price level has risen. Now consider the following factors: Factors a. A decrease in labor productivity b. A decrease in the capital stock c. An increase in the quantity of money in circulation d. The depletion of existing mineral resources used to produce various goods e. A technological improvement Other things being equal, which of these factors might account for this event? A. Factors a, d, and e. B. All factors but c. C. Factors a, b, and d. Your answer is correct. D. Only factor c.
C
Can real standards of living go up without any positive economic growth? A. Yes, standards of living can go up without any positive economic growth if the population grows at the same rate as the economy. B. No, because positive economic growth is needed for incomes to rise. C. Yes, if individuals are, on average, enjoying more leisure by working fewer hours but producing as much as they did before. Your answer is correct. D. No, because a higher standard of living is defined as economic growth.
C
The values of NGDP for the years 1981 and 1982 are $3.1284 and $3.255 trillion, respectively. The values for RGDP for 1981 and 1982 are $5.2917 and $5.1893 trillion, respectively. According to the graph of NGDP and RGDP and the values of the two time series variables for 1981 and 1982, it is correct to state that A. NGDP has always been increasing, while RGDP has both increased and decreased. Between 1981 and 1982, NGDP increased by $.1266 trillion, corresponding to a rate of growth of 5%. RGDP decreased by $.1024 trillion, corresponding to a negative rate of growth of 5%. B. Both NGDP and RGDP have always been increasing in absolute amounts and in terms of their respective rates of growth. C. NGDP has always been increasing, but RGDP has been both increasing and decreasing. Between 1981 and 1982, NGDP increased by $.1266 trillion, corresponding to a rate of growth of 4.05%. RGDP decreased by $.1024 trillion, corresponding to a negative rate of growth of 1.94%. Your answer is correct. D. NGDP has always been increasing, while RGDP has been both increasing and decreasing. Between 1981 and 1982, NGDP increased by $.3024 trillion and RGDP decreased by $.2013 trillion, respectively.
C
The long-run aggregate supply curve A. is vertical because a change in real GDP has no effect on the price level. B. is downward sloping because a higher price level causes businesses and consumers to reduce spending. C. is vertical because changes in the price level have no effect on real output. Your answer is correct. D. shows the various amounts of real output businesses are willing to consume at each price level.
C
Which of the following is not a true statement about the impact of immigration on economic growth? A. A larger market increases incentives for creativity and attracts more skilled immigrants. B. Immigrants may create jobs through purchasing goods and services and starting new businesses. C. Economists agree that population growth through immigration is a drain on the economy because it lowers per capita GDP. Your answer is correct. D. Population growth through immigration increases the amount of labor, which is a major component of economic growth.
C
Directions: Click on the graph to the right and select Multiple Plots. Then select RGDP (real chain weighted GDP) for Y1 and NGDP (nominal GDP) for Y2. Roll your cursor over each plotted line to identify the data. Note that the chain-weighted GDP is a measure of GDP that the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce calculates by continuously updating the weights of the various components of GDP to reflect changes in the relative prices and shares of the various components of GDP. According to the graph, A. RGDP has continually decreased. B. NGDP both increased and decreased over time. C. RGDP has increased and decreased. Your answer is correct. D. NGDP and RGDP have continually increased.
C
