Macroeconomics Midterm

14. Gross domestic product measures a. income and expenditures. b. income but not expenditures. c. expenditures but not income. d. neither income nor expenditures.

A

27. The one variable that stands out as the most significant explanation of large variations in living standards around the world is a. productivity. b. population. c. preferences. d. prices.

A

30. Which of the following would likely make the interest rate on a bond higher than otherwise? a. both high credit risk and a long term b. high credit risk but not a long term c. a long term but not a high credit risk d. neither high credit risk nor a long term

A

7. The property of society getting the most it can from its scarce resources is called a. efficiency. b. equality. c. externality. d. Productivity

A

10. The circular-flow diagram is an example of a. a laboratory experiment. b. an economic model. c. a mathematical model. d. All of the above are correct.

B

13. In the circular-flow diagram, in the markets for a. goods and services, households and firms are both sellers. b. goods and services, households are buyers and firms are sellers. c. the factors of production, households are buyers and firms are sellers. d. the factors of production, households and firms are both buyers

B

18. The consumer price index is used to a. monitor changes in the level of wholesale prices in the economy. b. monitor changes in the cost of living over time. c. monitor changes in the level of real GDP over time. d. monitor changes in the stock market.

B

21. Which entity within the U.S. government is responsible for computing and reporting the CPI? a. the Department of Commerce b. the Department of Labor c. the General Accounting Office d. the Council of Economic Advisers

B

26. A nation's standard of living is best measured by its a. real GDP. b. real GDP per person. c. nominal GDP. d. nominal GDP per person.

B

33. You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds a. is not subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S. government. b. is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government. c. is subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S. government. d. is subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government.

B

34. People who buy newly issued stock in a corporation such as Crate and Barrel provide a. debt finance and so become part owners of Crate and Barrel. b. debt finance and so become creditors of Crate and Barrel. c. equity finance and so become part owners of Crate and Barrel. d. equity finance and so become creditors of Crate and Barrel.

C

Which of the following is an example of financing? a. An investor purchases stocks and bonds b. A company issues stock to raise money to purchase assets c. An investors buys shares in a mutual fund to earn a return d. An investor sells stocks and bonds

B

15. For an economy as a whole, a. wages must equal profit. b. consumption must equal income. c. income must equal expenditure. d. consumption must equal saving.

C

19. When the overall level of prices in the economy is increasing, economists say that the economy is experiencing a. economic growth. b. stagflation. c. inflation. d. deflation.

C

20. The CPI is a measure of the overall cost of the goods and services bought by a. a typical firm. b. the government. c. a typical consumer. d. All of the above are correct.

C

23. Average income has been stagnant for many years in a. Western European counties. b. some Asian countries like South Korea and Singapore. c. some Sub-Saharan African countries. d. All of the above are correct.

C

25. A nation's standard of living is determined by a. the percentage of its GDP that is accounted for by government purchases. b. the quantity of natural resources with which it is endowed. c. the productivity of its workers. d. factors and events that are beyond the nation's control.

C

28. The sale of bonds a. and stocks to raise money is called debt finance. b. and stocks to raise money is called equity finance. c. to raise money is called debt finance, while the sale of stocks to raise funds is called equity finance. d. to raise money is called equity finance, while the sale of stocks to raise funds is called debt finance.

C

35. The prices of stock traded on exchanges are determined by a. the Corporate Stock Administration. b. the administrators of NASDAQ. c. the supply of, and demand for, the stock. d. All of the above are correct.

C

8. The goal of an economist who formulates new theories is to a. provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works. b. provoke stimulating debate in scientific journals. c. contribute to an understanding of how the world works. d. demonstrate that economists, like other scientists, can formulate testable theories.

C

9. Economists build economic models by a. generating data. b. conducting controlled experiments in a lab. c. making assumptions. d. reviewing statistical forecasts.

C

The adage, "There is no such thing as a free lunch," means a. even people on welfare have to pay for food. b. the cost of living is always increasing. c. people face tradeoffs. d. all costs are included in the price of a product.

C

11. Which two groups of decision makers are included in the simple circular-flow diagram? a. markets and government b. households and government c. firms and government d. households and firms

D

12. Factors of production are a. the mathematical calculations firms make in determining their optimal production levels. b. social and political conditions that affect production. c. the physical relationships between economic inputs and outputs. d. inputs into the production process.

D

16. If an economy's GDP falls, then it must be the case that the economy's a. income falls and saving rises. b. income and saving both fall. c. income falls and expenditure rises. d. income and expenditure both fall.

D

17. In a simple circular-flow diagram, households buy goods and services with the income they get from a. wages. b. rents. c. profits. d. All of the above are correct.

D

24. Productivity is the amount of goods and services a. an economy produces. It is not linked to a nation's economic policies. b. an economy produces. It is linked to a nation's economic policies. c. produced for each hour of a worker's time. It is not linked to a nation's economic policies. d. produced for each hour of a worker's time. It is linked to a nation's economic policies.

D

31. The sale of stocks a. and bonds to raise money is called debt finance. b. and bonds to raise money is called equity finance. c. to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. d. to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

D

Approximately what percentage of the world's economies experience scarcity? a. 10% b. 40% c. 85% d. 100%

D

In considering how to allocate its scarce resources among its various members, a household considers a. each member's abilities. b. each member's efforts. c. each member's desires. d. All of the above are correct.

D

In most societies, resources are allocated by a. a single central planner. b. a small number of central planners. c. those firms that use resources to provide goods and services. d. the combined actions of millions of households and firms.

D

Other things the same, bonds are likely to have higher interest rates if they have a. tax exemptions and short terms. b. tax exemptions and long terms. c. no tax exemptions and short terms. d. no tax exemptions and long terms.

D

The principle that "people face tradeoffs" applies to a. individuals. b. families. c. societies. d. All of the above are correct.

D

29. The bond markets e. is a financial market, whereas the stock market is a financial intermediary. f. is a financial intermediary, whereas the stock market is a financial market. g. is a financial market, as is the stock market. h. is a financial intermediary, as is the stock market.

G