ECON 103 Exam practice questions
Suppose you want to realize a future value of $150,000 in 30 years on an investment you make. The average annual rate of return is 8.75%. What will be the present value of your investment? $163,125 $12,112 $150,000 $1,857,673
$12,112
If the interest rate is 6% and the average inflation rate is 3.1%, what is the approximate future value of $75,000 in 20 years? $42,340 $240,535 $89,743 $132,852
$132,852
Refer to the following statistics. Based on these statistics, the level of business investment is: Inventories: $12 million Housing: $400 million Equipment: $500 million Business structures: $350 million Intellectual property: $700 million $500 million. $1,050 million. $1,550 million. $1,562 million.
$1,550 million. (Equipment + Business Structure + Intellectual property)
If the interest rate is 5%, what is the approximate present value of $25,000 received in five years? $31,907 $22,676 $19,588 $23,810
$19,588 (FV x 1/ (1+R) ^t)
The table contains information about Pfizer's stock. How much is Pfizer, as a company, worth? $200.33 billion. $35.86. $36.22. $36 billion.
$200.33 billion. (look for market cap)
If the interest rate is 4%, what is the approximate future value of $15,000 in 10 years? $10,133 $22,204 $17,949 $15,900
$22,204 (PV x (1 + R) ^ t)
The table contains information about Twitter's stock. When the stock market opened today, at what price was a share of Twitter stock traded? $45.86 $41.35 $42.50 $40.61
$42.50 (look for open)
Suppose you have $5,000 to invest in a Treasury bill for 20 years. The average annual rate of return is 1.5%. What is the real future value of your investment after 20 years? $3,712 $5,075 $5,000 $6,734
$6,734
In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars? $227 $9,422 $1,410 $8,746
$8,746 (current CPI/ past CPI x Past price)
You've graduated from college and are now working in an investment firm where you advise clients on investment decisions. Here is the information on a proposed project. Up-front cost: $300,000 Next year's revenue: $15,000 Real interest rate: 8% Depreciation rate: 10% What is the present value of the stream of payments from this project? $83,333 $383,333 $315,000 $18,000
$83,333 (1/ (1+r)^t x FV)
The news of an impending recession in the economy will lead to a: (i) fall in consumption. (ii) rise in precautionary saving. (iii) rise in national saving. (iv) rise in consumption.
(i), (ii), and (iii)
Which of the following changes could create a more positive output gap? (i) The U.S. dollar appreciates. (ii) The U.S. dollar depreciates. (iii) Trading partners reduce tariffs on U.S. exports. (iv) Monetary policy actions boost the economy.
(ii), (iii), and (iv)
Which of the following tasks are performed by banks? (i) Print new money. (ii) Provide zero-interest loans. (iii) Create long-term loans from short-term deposits. (iv) Pool savings from many savers.
(iii) and (iv)
The table shows consumer price index data for the United Kingdom. Based on this information, what is the rate of inflation in 2016? 2013- 98.2 2014- 99.6 2015- 100 2016- 101 2017- 103.6 1.43% 1% 2.32% 2.29%
1%
What is Sri Lanka's GDP deflator if its nominal GDP is $88.9 billion (in current US$) and the real GDP is $59.34 billion? 66.7 149.8 136.5 100
149.8 (divide nominal GDP by Real GPD x 100)
You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%? 0.15% 3.65% -0.15% 1.75%
-0.15% (Advertised rate - inflation rate= real rate of return)
Refer to the following table. What was the approximate output gap in 1998? -5.5% 1.2% -1.2% 3%
-1.2%
Refer to the following table. What was the approximate output gap in 1974? 3.3% -6.5% 2.1% 6.1%
-6.5% (actual - potential/ potential x 100)
The table shows the salary of a worker in India. The marginal propensity to consume (MPC) is: 1.89. 0.47. 0.53. 0.68.
0.53. (RISE/ RUN = CHANGE IN CONSUMPTION/ CHANGE IN INCOME)
If a $100 million increase in total income leads to a $62 million increase in consumption, the slope of the consumption function is: 0.38. zero. 0.62. negative
0.62. (RISE over RUN= consumption / income)
You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. What is your expected real rate of return? 3.75% 2.25% -0.75% 0.75%
0.75% (nominal rate - inflation rate) ALWAYS DO THE OTHER NUMBER THAN INFLATION RATE FOR REAL RATE OF RETURN
Total consumption is $1,800 when income is $2,000, and total consumption increases to $2,600 when income is $3,000. What is the marginal propensity to consume? 0.2 0.8 0.5 1.25
0.8 (Change in consumption / change in income)
If government spending rises by $62 billion and GDP rises by $110 billion, then the multiplier in the economy is approximately: 1.77. 2.77. 1.12. 0.56.
1.77.
Refer to the following table. What was the approximate output gap in 1999? 1.2% -3.6% 3% 1.9%
1.9% ( actual - potential/ potential x 100)
Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year? -9.09% 10.13% -10% 8.99%
10.13% (quantity x price for both years then do CPI2- CPI 1/ CPI 1 x 100)
The table shows the salary of a construction worker in Japan. The level of saving in 2017 is: 23,100 euros. 17,100 euros. 18,900 euros. 18,000 euros.
18,000 euros. (Income - Consumption)
The table shows the salary of a worker in Japan. The level of saving in 2015 is _____ yen. 2.2 million 2.4 million 3.3 million 3.6 million
2.2 million (income - consumption)
Consider the following financial information for The Procter & Gamble Company stock. What is Procter & Gamble's price-to-earnings ratio? Procter & Gamble Stock price per share: $124.57 Earnings per share: $4.32 Price-to-book ratio: 6.8649 28.84 538.14 4.32 18.15
28.84 (stock price / earnings per share)
The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 2006? 2005- 195.27 2006- 201.56 2007- 207.34 2008- 215.25 2009- 214.57 2010- 218.08 1.64% 2.87% 3.81% 3.22%
3.22% (cpi new - cpi old/ cpi old x100)
If the risk-free rate is 1.5% and the risk premium is 2%, the MP curve is at: 2%. 4%. 3.5%. 1.5%.
3.5%. add them
The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1991? 1990- 130.66 1991- 136.17 1992- 140.31 1993- 144.48 2.79% 2.97% 4.22% 3.04%
4.22%
The table shows the salary of a worker in India. The level of saving in 2017 is: 49,350 rupees. 47,000 rupees. 53,000 rupees. 50,290 rupees.
50,290 rupees. (INCOME - CONSUMPTION)
Refer to the data dashboard shown. Which indicator tells you how fast wages and benefits are rising? Business confidence Inflation Stock prices: S&P 500 Employment cost index
Employment cost index
Suppose falling interest rates in Australia discourage saving. What effect does this have on the consumption function in Australia?
A
What effect does a booming real estate market in China have on the consumption function in China?
A
You are a financial adviser. Your client, Mena, does not like risk and wants Federal Deposit Insurance Corporation (FDIC) insurance. Which of the following instruments should she invest in? Bonds issued by a corporation in financial distress An index fund Treasury bills A bank savings account
A bank savings account
You are a financial adviser. Your client, Archie, wants professional management of his investments but also wants a diversified portfolio. Which of the following investments is right for Archie? Small corporation stocks Corporate bonds Large corporation stocks A mutual fund
A mutual fund
Which of the following will fall when the economy is expanding? Business confidence Consumer confidence Applications for unemployment benefits Nonfarm payrolls
Applications for unemployment benefits
Which of the following graphs shows the correct effect on the consumption function when consumer wealth increases?
B
Bond A is a five-year bond issued by a company with a very good credit rating. Bond B is a five-year bond issued by a different company in financial distress. Which of the following is likely? Bond A will have a higher default risk than Bond B. Bond A will have a higher interest rate than Bond B. Bond B will have a higher term risk than Bond A. Bond B will have a higher interest rate than Bond A.
Bond B will have a higher interest rate than Bond A.
Which of the following graphs shows the correct effect on the consumption function when consumer wealth decreases?
C
Why does an anticipated change in income lead to no change in consumption for a consumption smoother? - There is a failure of the permanent income hypothesis. - The consumer is not aware of anticipated changes in future income. - There are high tax rates on anticipated changes in future income. - Consumption is based on permanent income, which is already factored into anticipated future changes in income.
Consumption is based on permanent income, which is already factored into anticipated future changes in income.
Which of the following shows the medium of exchange function of money? - Mena saves his money in a certificate of deposit at the bank. - Daniela goes to the store and purchases roses with U.S. dollars. - Wilma wants to sell her old car, and she values it at $2,400. - Darius goes window shopping.
Daniela goes to the store and purchases roses with U.S. dollars.
The Great Moderation refers to the: Stable level of inflation in the United States. Longstanding effect of the Great Recession. Increase in globalization. Decreased volatility of the U.S. economy.
Decreased volatility of the U.S. economy.
Sensing weaker future earnings, firm managers become cautious about investment. What is the effect on the loanable funds market?
Demand would shift to the left
If the U.S. government lowers personal income tax rates: investment decreases, and this leads to a left shift in the IS curve. Government expenditure falls, and this leads to a left shift of the IS curve. Government expenditure rises, and this leads to a right shift of the IS curve. Disposable income increases, and this leads to an increase in consumption and a right shift of the IS curve.
Disposable income increases, and this leads to an increase in consumption and a right shift of the IS curve.
Which of the following correctly shows the steps needed to calculate the inflation rate? - Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay. - Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate. - Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate. - Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate.
Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.
Which of the following is an investment? Ben's computer depreciates by 15%. Fred pays a contractor to add two new rooms to his house. Dan purchases $6,800 worth of gold. Frank buys a used car.
Fred pays a contractor to add two new rooms to his house.
If an economy has a positive output gap of 1.5%, this means: GDP is 1.5% above potential GDP. GDP is 1.5% below potential GDP. unemployment is 1.5% above the natural rate of unemployment. inflation is 1.5% above the long-run rate of inflation.
GDP is 1.5% above potential GDP.
In September 2008, the stock market fell sharply and continued to perform poorly due to the financial crisis. How did this change impact GDP in the economy?
IS (INVESTMENT SAVINGS) shift to the left
Which of the following correctly describes the business cycle? It refers to ups and downs in business revenue during expansions and recessions. It is the fluctuations of GDP around the potential output. It refers to excess unemployment during recessionary periods. It is the constant rise in GDP over time.
It is the fluctuations of GDP around the potential output.
Which of the following will probably rise when the economy is in a recession? Employment Real retail sales Initial unemployment claims Real GDP growth
Initial unemployment claims
During the Great Recession of 2007 to 2009, banks began to make fewer loans as they became wary of risky projects. Which of the following graphs shows the effect on the investment line?
Line would shift to the left
Which of the following graphs shows what would happen to the investment line if an investment project is expected to earn higher revenues over time?
Line would shift to the right
How do interest rates affect investment in the economy? - Lower interest rates lower the cost of borrowing for firms, and so investment rises. - Higher interest rates increase government expenditure and thus raise investment. - Higher interest rates lower the cost of borrowing for firms, and so firms save more in banks. - Lower interest rates lower the after-tax profit for firms, and thus investment falls.
Lower interest rates lower the cost of borrowing for firms, and so investment rises.
The higher the opportunity cost of consumption, the: Lower the aggregate expenditures. Higher the consumption. More to the right the economy is along the IS curve. Higher the investment in the economy.
Lower the aggregate expenditures.
Which of the following shows the correct effect on the IS-MP framework if there is a credit crunch the economy, meaning banks are unwilling to lend except at high interest rates?
MP (monetary policy) curve shifts up
Refer to the data dashboard shown. Which indicator is a cross-check on GDP? Employment cost index Stock prices: S&P 500 Real GDI Business confidence
Real GDI
Which of the following is a broad indicator? Starbucks stock returns Labor demand in the agricultural industry Agricultural sector output Real gross domestic income
Real gross domestic income
Which economic indicator tells you about the future expected profits of businesses? Initial unemployment claims Consumer price index S&P 500 Nonfarm payrolls
S&P 500
Which of the following causes shifts in the IS (investment savings) curve? Financial shocks occur. The real interest rate decreases. The real interest rate increases. Spending shocks occur.
Spending shock occur
The United States experiences net financial outflows. Which graph shows the effect of this on the loanable funds market?
Supply shifts to the left
Which graph shows the effect of a government budget deficit on the loanable funds market?
Supply shifts to the left
The United States experiences net financial inflows. Which graph shows the effect of this on the loanable funds market?
Supply shifts to the right
Which of the following shows the correct effect on the IS-MP framework if there is a rise in home values and wealth in the economy?
The IS (investment saving) curve shifts to the right
Which economic indicator tells you how fast wages and benefits are rising? Nonfarm payrolls Business confidence The employment cost index S&P 500
The employment cost index
What happens to the investment line if the government institutes a tax break for funds invested? There is a movement up and to the left along the same investment line. The investment line shifts to the left. The investment line shifts to the right. There is a movement down and to the right along the same investment line.
The investment line shifts to the right.
Which of the following is correct about a financial instrument and its future value, keeping all other things constant? The higher the interest rate on the instrument, the lower the future value. The longer the time to maturity of the instrument, the higher the future value. The lower the present value of the instrument, the higher the future value. The shorter the time to maturity of the instrument, the lower the future value.
The longer the time to maturity of the instrument, the higher the future value.
Which of the following is a narrow indicator? The consumer price index The stock price for JPMorgan Chase & Co. Non-farm payrolls Real GDI
The stock price for JPMorgan Chase & Co.
Which of the following is correct about a financial instrument and its future value, keeping all other things constant? - The higher the interest rate on the instrument, the higher the future value. - The lower the present value of the instrument, the higher the future value. - The longer the time to maturity of the instrument, the lower the future value. - The lower the interest rate on the instrument, the higher the future value.
Two correct answers: The longer the time to maturity of the instrument, the higher the future value. The higher the interest rate on the instrument, the higher the future value.
Which of the scenarios represents consumption spending? A new hospital is constructed in your town. Your parents pay their income taxes. You eat at a fancy restaurant for Valentine's Day. You take out a bank loan.
You eat at a fancy restaurant for Valentine's Day.
Which of the following shows the correct effect on the IS curve of a decrease in personal income tax rates? a movement from point C to point B a movement from point A to point D a movement from point A to point B a movement from point C to point D
a movement from point C to point D
If Marios is a consumption smoother and has just won a prize of $12,000, we can expect Marios to exhibit: no change in MPC. a large change in consumption. a small change in consumption. zero change in saving.
a small change in consumption.
If there is a temporary rise in income, a consumption smoother will exhibit _____ in consumption, and a hand-to-mouth consumer will exhibit _____ in consumption. no change; a large increase a small increase; a large increase a large increase; a large increase a large increase; no change
a small increase; a large increase
If there is _____ rise in income, there will be an intermediate increase in total consumption in the economy. no news of a a permanent zero a temporary
a temporary
The liquidity of an asset is defined as the: ability to predict the future cash flow of the asset. ability to quickly and easily convert the asset to cash, with little or no loss in value. risk that if you need to sell the asset quickly, you may not be able to get a good price for it. ability to index the asset's returns to the inflation rate.
ability to quickly and easily convert the asset to cash, with little or no loss in value.
The IS (investment savings) curve is constructed by: Adding consumption and savings at each real interest rate. Adding up consumption and investment and plotting these two expenditure levels to income. Adding up the level of aggregate expenditure at each real interest rate. Plotting savings at each real interest rate.
adding up the level of aggregate expenditure at each real interest rate.
Credit constraints limit the: amount of money that banks can accept as deposits. amount of money that people can borrow. amount of saving that people can make. interest rates that banks can charge.
amount of money that people can borrow.
The efficient market hypothesis states that: market supply and market demand interact to reach equilibrium for the stock price. the market price for a stock will always exceed the book value of the stock. at any point in time, a firm selling a stock has engaged in efficient production methods. at any point in time, stock prices reflect all publicly available information.
at any point in time, stock prices reflect all publicly available information.
The neutral interest rate occurs when the economy is: above its potential. experiencing very high inflation. below its potential. at its potential.
at its potential.
Stock prices are an important macroeconomic indicator because they: can predict changes in GDP. can predict inflation in the economy. display a random walk. do not have any correlation with the state of the economy.
can predict changes in GDP.
Which of the following cause(s) shifts in the MP (Monetary Policy) curve? spending shocks consumer pessimism business optimism changes in monetary policy
changes in monetary policy
A bond that is issued by a firm in financial distress is most likely to have: inflation indexation. liquidity risk. term risk. default risk.
default risk.
If the government lowers the corporate tax rate, then the ______ loanable funds shifts to the _______ . demand for; right supply of; left demand for; left supply of; right
demand for; right
Equilibrium in the loanable funds market determines the: up-front cost of capital. point where there is excess demand for loanable funds. equilibrium real interest rate. amount of inventories in an economy.
equilibrium real interest rate.
Planned investment is the: planned purchases of stocks and bonds by consumers. use of electricity and water by factories. expenditure on capital goods by businesses. expenditure on goods and services by consumers.
expenditure on capital goods by businesses.
The risk premium is the: extra interest charged by lenders to account for risk. extra rise in interest rates when the Federal Reserve identifies an output gap. federal funds rate. risk-free rate of interest.
extra interest charged by lenders to account for risk.
Hyperinflation is: - inflation that occurs when the economy is in a recession. - extremely high rates of inflation. - a period of high money growth in an economy. - very high rates of economic growth.
extremely high rates of inflation
Which of the following cause shifts in the MP (monetary Policy) curve? spending shocks changes in tariffs financial shocks changes in tax rates
financial shocks
You are driving to see your grandparents when you get caught in traffic caused by construction on the interstate. The construction is an example of: consumption. government expenditure. exports. planned investment.
government expenditure.
Holding everything else equal, the _____ the interest rate on saving, the _____ the future value of that saving. higher; greater lower; the more negative higher; lower lower; greater
higher; greater
A good proxy for the risk-free interest rate is the interest rate on a: loan to a member of the public who has a good credit rating. junk bond. corporate bond. loan to the U.S. government.
loan to the U.S. government.
The intersection of the IS curve and the MP curve determine: macroeconomic equilibrium. the largest output gap. the federal funds rate. the risk-free interest rate in the economy.
macroeconomic equilibrium.
A bank run occurs when: bank customers expect the bank to open new branches. a lender makes both long-term and short-term loans. many bank customers try to withdraw their savings at the same time. many bank customers deposit small amounts of money at the bank.
many bank customers try to withdraw their savings at the same time.
The rational rule of consumption is to consume more today if the: - Real interest rate in the future is expected to be higher than the real interest rate today. - Marginal benefit of a dollar of consumption today is less than the marginal benefit of spending a dollar plus interest in the future. - Price of consumption today exceeds the dollar-plus-interest in the future. - Marginal benefit of a dollar of consumption today is greater than (or equal to) the marginal benefit of spending a dollar plus interest in the future.
marginal benefit of a dollar of consumption today is greater than (or equal to) the marginal benefit of spending a dollar plus interest in the future.
The benefit of an extra dollar of consumption is called the: average price of goods and services consumed. marginal benefit of consumption. average benefit of consumption. real interest rate.
marginal benefit of consumption.
Menu costs are the: - total costs of producing goods and services. - costs of producing restaurant meals. - marginal costs of adjusting prices. - variety of costs that cause producers to change their prices.
marginal costs of adjusting prices.
The real interest rate is the: - percentage of the nominal interest that is inflation. - economic growth rate adjusted for the effects of inflation. - nominal interest rate minus the rate of inflation. - nominal interest rate plus the rate of inflation.
nominal interest rate minus the rate of inflation
If you see that the consumer price index this year is lower than the consumer price index last year, this means that: -on average, prices went down across the economy. -the consumer price index is lower than the producer price index. - the prices of each and every good and service went down. - economic growth also decreased.
on average, prices went down across the economy.
If you see that inflation between last year and this year is 3%, this means that: - on average, prices went up across the economy by 3%. - the prices of each and every good and service went up by 3%. - economic growth is also 3%. - the consumer price index rose by 3% more than the producer price index.
on average, prices went up across the economy by 3%.
The fundamental value of a business is the: value of the forecasted future profits. present value of the future profits it will earn. stock price. earnings per share.
present value of the future profits it will earn
If government expenditure rises by $27.5 billion and the multiplier in the economy is 2.5, then: - real GDP rises by $68.75 billion, and the IS curve shifts to the right. - real GDP falls by $55 billion, and the IS curve shifts to the left. - real GDP falls by $11 billion, but the IS curve does not shift. - real GDP rises by $27.5 billion, and the IS curve shifts to the right.
real GDP rises by $68.75 billion, and the IS curve shifts to the right.
Suppose that an economy is in a recession. You would expect to see the unemployment rate: Be equal to the equilibrium unemployment rate. Rise above the equilibrium unemployment rate. Fall below the equilibrium unemployment rate. Be zero.
rise above the equilibrium unemployment rate.
If the fundamental value of a stock is above the current market price of the stock, there will be a: fall in the price and demand of its stock. rise in the price and demand of its stock. decrease in the demand and supply of its stock. fall in the price and supply of its stock.
rise in the price and demand of its stock.
According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate: rises by 0.5%. falls by 0.5%. rises by 1%. falls by 1%.
rises by 0.5%.
In macroeconomics, the difference between saving and investment is that: saving is created by the government, and investment is specific to firms. saving is the money left over after paying for spending, and investment is the purchase of new capital. saving does not depend on income, but investment depends on profitability. saving is the money left over after paying for spending, and investment is the purchase of stocks and bonds.
saving is the money left over after paying for spending, and investment is the purchase of new capital.
What kind of data adjustment removes the effect of sales spikes due to the holiday season? real data nominal data seasonally adjusted data annual data
seasonally adjusted data
Money illusion is the: - inability to understand that prices always rise. - illusion that one's earnings this year are higher than they were last year. - increase in the amount of money that it takes to purchase goods and services when prices rise. - tendency to focus on nominal values instead of inflation-adjusted values.
tendency to focus on nominal values instead of inflation-adjusted values.
The three major pillars of the financial sector are the: banks, the goods market, and the labor market. foreign exchange market, the bond market, and the government. stock market, the bond market, and the banks. stock market, the labor market, and the bond market.
stock market, the bond market, and the banks.
If actual GDP is greater than potential GDP: businesses are not producing at maximum capacity. businesses can easily increase supply. the economy can experience inflation. unemployment must be higher than the natural rate of unemployment.
the economy can experience inflation.
An example of a leading indicator is: nonfarm payrolls. the stock market. unemployment insurance claims. unemployment.
the stock market.
Even though deposit insurance existed, the United States experienced a major financial crisis from 2007 to 2009 because: the deposit insurance system failed during that time. there was excess competition from other countries. banks refused to honor the deposit insurance scheme. there was a run on shadow banks, which were not covered by deposit insurance.
there was a run on shadow banks, which were not covered by deposit insurance.
Suppose you want to realize a future value of $30,000 in 30 years on an investment you make. The average annual rate of return is 6%. What will be the present value of your investment? $5,223 $172,305 $31,800 $30,000
$5,223
A new assembly line robot with a price tag of $2.5 million is expected to depreciate by 3% at the end of next year. The real interest rate is 2.5%. What is the user cost of the robot for one year? $75,000 $62,500 $12,500 $137,500
$137,500 (interest rate + depreciation x price) (2.5 + 3 x 2.5)
What is Uganda's real GDP if its nominal GDP is $27.5 billion (in current US$), and the GDP deflator is 163.4? $12.4 billion $27.5 billion $44.9 billion $16.8 billion
$16.8 billion (Nominal GDP / GDP deflator x 100)
A new assembly line robot costs $1.2 million and is expected to depreciate by 10% at the end of next year. The real interest rate is 4.5%. What is the user cost of the robot for one year? $120,000 $174,000 $66,000 $54,000
$174,000 (Interest rate + depreciation x cost)
In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars? $18,865 $12,130 $16,259 $7,799
$18,865
You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return? 0.85% -2.1% 1.25% -0.85%
0.85% (Nominal rate - inflation rate = real rate of return)
Consider the following data. What is the marginal propensity to consume? 0.1 1.1 0.84 0.9
0.9 (Change in consumption / change in income)
An economy's potential output level is: The level at which no resources are available in the economy. The output that is possible when all resources are fully employed. The equivalent of the GDP at current market value. The output when unemployment is zero.
The output that is possible when all resources are fully employed.
In 1711, a company called the South Sea Company was set up as a merchant trader between Great Britain and South America. Although the company failed to make any real profits, the company's share price rose substantially in a very short time. Eventually, the share price collapsed and returned to the original sale price. This scenario describes: a financial bubble. the process of fundamental analysis. liquidity risk. term risk.
a financial bubble.
An initial public offering occurs when a company: experiences a rise in the price and demand for its stock. first sells stock directly to the public. first opens for business and offers its goods and services for sale to the public. first sells stock directly to the government.
first sells stock directly to the public.
Which of the following lists the functions of money? - store of value, store of interest, and buffer against inflation - carrier of exchange, unit of account, and measure of inflation - medium of exchange, measure of inflation, and benchmark of quality - medium of exchange, store of value, and unit of account
medium of exchange, store of value, and unit of account
The four stages of the business cycle are:
peak, recession, trough, and expansion
The GDP deflator is an index that tracks the: - average price that consumers pay over time for a representative basket of goods and services. - highest prices consumers pay over time for imported goods and services. - price of all goods and services produced domestically. - price that businesses pay over time for the inputs used in the production process.
price of all goods and services produced domestically.
Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will: fall by 1.5%. fall by 2%. rise by 1.5%. rise by 3%.
rise by 1.5%.