Macroeconomics Midterm

Technological Knowledge:

is a determinant of productivity.

The prices of stock traded on exchanges are determined by:

the supply of, and demand for, the stock.

If 2004 is the base year, then the inflation rate for 2005=

(CPI 2005-CPI 2004)/(CPI 2004)x100

Which of the following is included in GDP?

Both the market value of rental and owner occupied housing services.

In 1931, President Hoover was paid a salary of $75,000. Government statistics show a CPI of 15.2 for 1931 and 214.5 for 2009. President Hoover;s 1931 salary was equivalent to a 2009 salary of:

$1,058,388

Babe Ruth's 1931 salary was $80,000. Government statistics show a CPI of 15.2 for 2931 and 214.5 for 2009. Ruth's 1931 salary was equivalent to a 2009 salary of:

$1,128,947

Refer to table 11-1. If 2005 is the base year, then the CPI of 2005 was:

$100

Refer to table 11-1. If 2006 is the base year, then the CPI of 2006 was:

$100

Refer tot able 11-1. If 2005 is the base year, then the CPI of 2006 was:

$120

Refer to table 11-1. The cost of the bucket in 2005 was:

$200

Refer to table 11-1. The cost of the bucket in 2006 was:

$240

Refer to table 11-1. If 2006 is the base year, then the CPI of 2005 was:

$83.3

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?

1,000, 500, and 1,500 respectively.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving?

1,500 and -500 respectively.

If in some year real GDP was 5 trillion, and GDP deflator was 200, what was nominal GDP?

10 trillion.

Suppose the economy is closed with national saving of $2 trillion, consumption of $8 trillion, and government purchases of $1 trillion. What is GDP?

11 Trillion.

In 2009, the imaginary nation of Mainland had a population of 7,000 and real GDP of 210,000. In 2010 the population was 7,300 and real GDP of 223,380. Over the year in question, real GDP per person in Mainland grew by:

2 percent, which is about the same as average U.S. growth over the last one hundred years.

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,000. What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus?

2,500 deficit.

Refer to table 11-1. If 2005 is the base year, then the inflation rate of 2006 was:

20%

Refer to table 11-1. If 2006 is the base year, then the inflation rate in 2006 was:

20%

If in some year nominal GDP was 10 trillion and real GDP was 4 trillion, what was the GDP deflator?

250.

In 2009, the imaginary nation of Mainland had a population of 6,000 and real GDP of 120,000. In 2010 the population was 6,200 and real GDP of 128,960. Over the year in question, real GDP per person in Mainland grew by:

4 percent, which is high compared to average U.S. growth over the last one hundred years.

If in some year nominal GDP was 20 billion, and GDP deflator was 50, what was real GDP?

40 billion.

You know that a candy bar cost 5 cents in 1962. You also know the CPI for 1962 and the CPI for today (2009). Which of the following would you use to compute the price of the candy bar in today's prices?

5 cents x (today's CPI/1962 CPI)

. Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are 2,000. If national saving amounts to 1,000, then what is GDP?

9,500.

A bond is:

A certificate of indebtedness.

Which of the following is a financial intermediary?

A mutual fund.

Which of the following is a financial market transaction?

A saver buys a bond a corporation has just issued so it can purchase capital.

The CPI is a measure of the overall cost of the goods and services bought by:

A typical consumer.

Natural resources:

All of the above are correct.

Stock Represents:

All of the above are correct.

Which of the following is an example of a renewable natural resource?

All of the above are correct.

Which of the following is considered human capital? Knowledge acquired from:

All of the above are correct.

Which of the following is included in the investment component of GDP?

All of the above are included in the investment component of GDP.

Which of the following are residents of rich countries likely to have in greater quantities, or better quality, than residents of poor countries?

All of the above.

Which of the following is included in the investment component of GDP?

All of the above.

In a simple circular flow diagram households buy goods and services with the income they get from:

All: wages, rent, dividends.

The primary purpose of measuring the overall level of prices in the economy is to:

Allow for comparison of dollar figures from different points in time.

In a simple circular flow diagram, total income and expenditure are:

Always equal because every transaction requires a buyer and a seller.

Which of the statements is true?

Americans have a higher standard of living than Indonesians because American workers are more productive than Indonesian workers.

Most goods and services produced at home:

And most goods and services produced illegally are excluded from GDP.

The level of real GDP person:

And the growth rate of real GDP per person vary widely across countries.

Technological Knowledge refers to:

Available information on how to produce things.

Last year the imaginary country of Bahkan had a population of 10,000, 6,000 people worked 8 hours a day and produced a real GDP of $30,000,000. The imaginary country of San Andreo had a population of 15,000, 8,000 people worked 7 hours a day and produced a real GDP of $33,000,000. Which of the following is correct?

Bahklan had the higher productivity and the higher real GDP per person.

Two of the economy's most important financial intermediaries are:

Banks and mutual funds.

Which of the following is both a financial institution and a financial intermediary?

Banks.

Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also has increased?

Both B and C are correct.

Changes in nominal GDP reflect:

Both changes in price and quantity.

As of 2008, using real GDP per person as a measure, we would classify:

Canada as an advanced economy, Mexico as a middle-income country, and Pakistan as a poor country.

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures:

Capital Investment.

The basic tools of supply and demand are:

Central to microeconomics and macroeconomics analysis.

Which of the following is an example of a nonrenewable resource?

Coal.

Which of the following is an example of depreciation?

Computers becoming obsolete.

Real GDP is the yearly production of final goods and services valued at:

Constant prices.

Household spending on education is counted in which component of GDP?

Consumption of services.

Household spending on education is included in:

Consumption, although it can be argued as an investment.

Which of the following is not correct?

Countries that have had higher output growth per person have typically done so without higher productivity growth.

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 lower productivity and lower real GDP per person than country B.

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from inventory in the last quarter. GDP likely:

Decreased.

All else equal, when people become more optimistic about a company's future:

Demand for the stock and the price will both rise.

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will:

Demand the required funds by selling bonds.

How is Net National Product calculated?

Depreciation losses are subtracted from the total income of a nation's citizens.

The inflation rate is calculated by:

Determining the percentage increase in the price index from the preceding period.

Which of the following statement's is correct?

Differences in natural resources can explain some of the differences in standards of living around the world.

Which of the following is a correct way to measure productivity?

Divide the quantity of output by the number of hours worked.

The consumption component of GDP includes spending on:

Durable goods, non-durable goods, and services.

Macroeconomics study:

Economy wide phenomena.

If total spending rises from one year to the next, then:

Either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

Waldo works 8 hours and produces 7 units of goods per hour. Emerson works 6 hours and produces 10 units of goods per hour.

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

Expenditures on a nation's domestic production are:

Equal to the nation's domestic production.

Which of the following examples of household spending is categorized as investment rather than consumption?

Expenditures on new housing.

Productivity:

Explains most of the differences in the standard of living across countries.

Government purchases include spending on goods and services by:

Federal, state, and local governments.

Financial intermediaries are:

Financial institutions through which savers can indirectly provide funds to borrowers.

Institutions that help to match one person's saving with another person's investment are collectively called the:

Financial system.

In determining living standards, productivity plays a key role:

For both nations and individuals.

Which of the following statistics is usually regarded as the single best measure of a society's economic well being?

Gross Domestic Product.

If one wants to know how the material well-being of the average person has changed over time in a given country, one should look at the:

Growth rate of real GDP per person.

When economists refer to the term intangible items, they are referring to such things as:

Hair styling and dental care, and the value of such items is included in GDP.

When CPI rises, the typical family:

Has to spend more dollars to maintain their standard of living.

Disposable personal income is income that:

Households and non corporate businesses have left after paying taxes and non tax payments to the government.

In the equation for the production function H/L represents:

Human capital per worker.

Countries that have lower levels of real GDP per person than the United States:

In some cases have growth rates that are higher than that of the United States and in other cases lower than that of the United States.

The value of the housing services produced by the economy's owner occupied houses is:

Included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.

Consumer goods that are produced, go into inventory, and are not sold during the current period are:

Included in current period GDP as inventory investment.

GDP measures:

Income and Expenditures.

If an economy's GDP falls then the economy's:

Income and expenditure both fall.

For an economy as a whole:

Income must equal expenditure.

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing:

Inflation.

The value of goods added to a firm's inventory in a certain year is treated as:

Investment, since GDP aims to measure the value of the economy's production that year.

Which of the following would, by itself, reveal the most about a country's standard of living?

It's productivity.

Human capital is the:

Knowledge and skills that workers acquire through education, training, and experience.

Productivity is defined as the quantity of:

Labor required to produce a nation's GDP.

Compared to stocks, bonds offer the holder:

Lower risk and lower potential return.

In computing GDP, market prices are used to value final goods and services because:

Market prices reflect the values of goods and services.

GDP adds together many kinds of goods and services into a single measure of the value of economic activity. GDP makes use of:

Market prices.

The primary economic function of the financial system is to:

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

GDP

Measures total income of everyone in the economy and total expenditure on the economy's output of goods and services

The CPI is used to:

Monitor changes in the cost of living over time.

When a country saves a larger portion of its GDP than it did before, it will have:

More capital and higher productivity.

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current Yankees, we find that the current median salary of today's Yankees is:

More than 4 times Ruth's salary.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

None of the above is correct.

Which of the following would not be considered physical capital?

On the job training.

Babe Ruth, the famous ball player, earned $80,000 in 1931. Today, the best players can make more than 400 times that salary. However, prices have also risen since 1931. We can conclude that:

One cannot determine whether players today enjoy a higher standard of living that Babe Ruth did in 1931.

A country experiencing a growth rate of 8% per year can go from being one of the poorest to one of the richest in how many generations?

One.

Changes in real GDP reflect:

Only changes in the amounts being produced.

The economy's inflation rate is the:

Percentage change in the price level from the previous period.

The income that households and non-corporate businesses receive is called:

Personal income.

The equipment and structures available to produce goods and services are called:

Physical capital.

The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce furniture are called:

Physical capital.

In a closed economy, (Y-T-C-) represents:

Private saving.

Productivity is the amount of goods and services:

Produced for each hour of a worker's time. It is linked to a nation's economic policies.

In the equation for the production function Y/L represents:

Productivity.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is:

Productivity.

In a closed economy, (T-G) represents:

Public saving.

Which of the following is included in the consumption component of GDP?

Purchases of natural gas by U.S households.

Consumption consists of spending by households on goods and services with the exception of:

Purchases of new houses.

A nation's standard of living is best measured by its:

Real GDP per person.

Given that Monika's income exceeds her expenditures, Monika is best described as a:

Saver or as a supplier of funds.

At the broadest level, the financial system moves the economy's scarce resources from:

Savers to borrowers.

If the government's expenditures exceed it's receipts, it would likely:

Sell bonds directly to the public.

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead:

Sell bonds.

In which of the following countries has economic growth been sufficiently strong in recent history to propel that country from being among the poorest in the world to being among the richest in the world?

Singapore

In which of the following countries has economic growth been sufficiently strong in recent history to propel that country from being among the poorest in the world to being among the richest in the world?

South Korea

Which of the following is included in the investment component of GDP?

Spending on new residential construction, but not stocks and bonds.

An understanding of the best ways to produce goods and services is called:

Technology.

Which of the following is correct?

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

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower.

The sale of stocks:

To raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

The economy's 2 must important financial markets are:

The bond market and the stock market.

Economists use the term inflation to describe a situation in which:

The economy's overall price level is rising.

CPI is a measure of the overall cost of:

The goods and services purchased by a typical consumer.

Which of the following is a good gauge of economic progress?

The growth rate of real GDP per person, but not the level of real GDP per person.

Which of the following is correct?

The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.

Macroeconomics

The percentage of the labor force that is out of work, and the differences in average income from country to country.

Microeconomics

The prices of oranges rise after an early frost.

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

The purchase of a new home.

Which of the following is not correct?

The ranking of countries by average income changes very little over time.

Which of the following can be measured by the level of real GDP per person?

The standard of living but not productivity.

National income is defined as:

The total income earned by a nation's permanent residents in the production of goods and services.

Which of the following is human capital?

Understanding how to use a company's accounting software.

GDP is:

Used to monitor the performance of the overall economy and is the single best measure of a society's economic well being.

GDP is defined as the:

Value of all final goods and services produced in a country within a given amount of time.

Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods. Laborland has a population of 5,000, of whom 4,000 work 12 hours a day to produce a total of 120,000 final goods.

Workland has higher productivity but lower real GDP per person than Laborland.

In the equation Y=C+I+G+NX:

Y represents the economies total expenditure.

Government Purchases

federal gov pays salary of navy officer. state of NV pays a private firm to repair a NV state highway. Las Vegas pays a private firm to collect garbage in the city.

In a simple circular flow diagram:

households spend all of their income, all goods and services are bought by households, expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production

GDP

money continuously flows from households to firms and then back to household, and GDP measures this flow of money

The key determinant of the standard of living in a country is:

the amount of goods and services produced from each hour of a worker's time.

Disposable income is:

the income that households and businesses have remaining after satisfying their obligations to the government.