official exam 1

If real GDP falls while nominal GDP rises, then prices on average have: -fallen. -Real GDP cannot rise when nominal GDP falls. -stayed the same. - risen.

risen.

A survey reveals that, on a small island, initially 1,000 people have jobs, 200 people are unemployed but are looking for jobs, and 200 people are neither working nor looking for work. Suppose that 100 of the 200 people who weren't looking for work now begin looking for work and that half of the new entrants find a job. The unemployment rate: -rises to 19.2%. -rises to 28.6%. -Nothing happens to the unemployment rate. -rises to 21.4%.

rises to 19.2%.

A fixed interest rate of _____% with _____% inflation will yield the highest rate of return for a lender. -19; 15 -11; 5 -12; 7 -8; 3

11; 5

The consumer price index in 1979 was 72.6. In 1980, it was 82.4. What was the rate of inflation from 1979 to 1980? -11.89% -17.6% -9.8% -13.5%

13.5%

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: -7%. -10%. -4.2%. -14.29%.

14.29%.

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Using year 2 as the base year, real GDP in year 1 is: -$900. -$1,077.50. -$970. -$1,000.

$1,000.

Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is: -$700. -$300 -$100. -$1,300.

$1,300.

Suppose a consumer buys a Perfect Pizza frozen cheese pizza at the grocery store for $10. Perfect Pizza purchased the dough and tomato sauce from a food-processing company for $2 and bought the cheese for $1. It sold the pizza to the store for $5. How much has GDP increased? -$18 -$10 -$5 -$2

$10

If, during 2010, the Republic of Sildavia recorded investment spending of $3 billion, government purchases of $3 billion, consumer spending of $7 billion, imports of $5 billion, government transfers of $1 billion, and exports of $3 billion, Sildavia's GDP in 2010 was: -$13 billion. -$14 billion. -$11 billion. -$12 billion.

$11 billion.

Assume that the real GDP of the United States is approximately $12 trillion and the population of the United States is approximately 300 million. What is per capita real GDP? -$4,000 -$40,000 -Real per capita GDP can't be determined without more information. -$36,000

$40,000

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be: -$230. -$630. -$830. -$200.

$630.

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The value of nominal GDP in years 1 and 2, respectively, is: -$900 and $990. -$900 and $1,077.50. -$180,000 and $257,400. -$1,000 and $1,005.

$900 and $1,077.50.

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, real GDP in year 2 is: -$900. -$1,077.50. -$970. -$1,000.

$970.

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its labor force is: -155 million. -335 million. -150 million. -200 million.

150 million.

If the consumer price index for 2009 was 148.3 and for 2010 was 152.5, what was the inflation rate between the two years? -2.83% -4.20% -0.97% -9.72%

2.83%

If a country has a working-age population of 200 million, 120 million people with jobs, and 30 million people unemployed and seeking employment, then its unemployment rate is: -15%. -7.5%. -20%. -5%

20%.

You read in the newspaper that the consumer price index in 2011 was 120. You conclude that a typical market basket in 2011 would have cost _____ more than the same market basket purchased in _____. -120%; 2010 -20%; the base year -120%; the base year -20%; 2010

20%; the base year

Suppose that the market basket for the university student price index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gasoline costs $1 per gallon. In 2011, textbooks still cost $50 each and gasoline costs $4 per gallon. The USPI for 2011 is: -100. -250. -200. -150.

200.

Assume that the consumer price index for 2009 was 124.0 and for 2010 was 130.7. What was the inflation rate between the two years? -6.70% -3.20% -0.95% -5.40%

5.40%

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is _____%. -8.8 -10 -7.8 -19.7

7.8

The Republic of Livonia has an adult population of 100 million; 60% of Livonia's population is employed, and 10% of the people are unemployed. The labor force participation rate in Livonia is _____%. -10 -7 -60 -70

70

Suppose only two countries existed. Country A imported $200 million worth of goods and services from country B. Country B imported $100 million worth of goods and services from country A. Net exports for country _____ equal _____. -A; $200 million -B; $200 million -B; -$100 million -A; -$100 million

A; -$100 million

Suppose that a bank wishes to make a 5% rate of return on a one-year loan but expects inflation over the course of the loan to be roughly 3%. Which statement is TRUE? -If the bank charges an interest rate of 8% or higher, it will earn the expected return. -As long as the bank charges a nominal interest rate of at least 5%, it will earn its expected return. -If the bank charges 8% and the inflation rate is more than 3%, then the bank will have earned a higher rate of return than expected. -If the bank charges 8% and the inflation rate is less than 3%, then the bank will have earned a higher rate of return than expected.

If the bank charges 8% and the inflation rate is less than 3%, then the bank will have earned a higher rate of return than expected.

Which example is a LIKELY response to inflation? -People tend to hold on to fewer interest-bearing assets. -People tend to make more transactions. -People choose to carry higher money balances. -People tend to make fewer transactions.

People tend to make more transactions.

Which transaction will be included in the official measurement of GDP? -Sean bought a new truck. -Monica illegally downloaded movies to her laptop. -Ben bought a textbook from his friend who took the class last semester. -Stan sold his 2015 Honda to his sister.

Sean bought a new truck.

In periods of unexpected inflation: -lenders benefit since they are repaid in dollars with a higher real value. -borrowers benefit since they repay their loans in dollars with lower real value. -lenders benefit since the nominal interest rate does not change. -neither borrowers nor lenders are affected by the inflation rate since their nominal interest rate stays the same.

borrowers benefit since they repay their loans in dollars with lower real value.

GDP may be calculated as the sum of: -consumer spending, investment spending, government purchases of goods and services, and exports minus imports. -exports and imports only. -consumer spending, investment spending, government purchases of goods and services, and exports. -consumer spending, investment spending, government transfer payments, and exports minus imports.

consumer spending, investment spending, government purchases of goods and services, and exports minus imports.

The labor force is considered to be: -those not frictionally unemployed plus all others who are employed. -the population of the nation. -everyone who is employed plus everyone who is unemployed. -everyone who is employed.

everyone who is employed plus everyone who is unemployed.

Discouraged workers: -have given up looking for a job. -are getting paid too little. -are working part-time but are looking for a full-time job. -do not like their job.

have given up looking for a job.

Unanticipated inflation: -causes interest rates to decrease. -helps those on fixed incomes. -hurts borrowers and helps lenders. -helps borrowers and hurts lenders.

helps borrowers and hurts lenders.

Alex expects the inflation rate to be 4%. If Alex borrows money at a nominal interest rate of 5%, his real interest rate is: -greater than the nominal interest rate. -negative. -less than the nominal interest rate. -equal to the nominal interest rate.

less than the nominal interest rate.

An intermediate good would be: -a professor's salary. -payments to military personnel. -a new boat to be used for vacations. -lumber used to build a house.

lumber used to build a house.

Purchases of _____ are included in GDP. -used goods -new foreign-produced investment goods - new capital goods -newly issued stocks

new capital goods

The inflation rate is the: -price level in the current year plus the price level in the previous year. -price level in the current year multiplied by the price level in the previous year. -percentage change in the price level from one year to the next. -price level in the current year minus the price level in the previous year.

percentage change in the price level from one year to the next.

Income divided by the price level is _____ income. -disposable -personal -national -real

real

Real per capita GDP is: -real GDP divided by the amount of capital available in the economy. -not a useful measure of human welfare. -rarely used as a tool to compare countries' possible resources. -real GDP divided by the population

real GDP divided by the population

Over the past year, Eli has been working very hard. His employer has taken notice and is giving Eli a 6% raise in salary. During this past year, overall prices in the economy have increased by 6%. Given this information, Eli's real wage has: -decreased by 4%. -increased by 6%. -increased by 2%. -stayed constant.

stayed constant.

The Venezuela example illustrates: -that there is no difference between nominal and real GDP in the real world. -the importance of distinguishing between nominal and real GDP. -that GNP, rather than GDP, is a better measure of a country's economic activity. -that the difference between nominal and real GDP is negligible in most cases.

the importance of distinguishing between nominal and real GDP.

In a market basket of goods: -the quantities may change and the prices are held constant. -the quantities stay constant and the prices may change. -both the prices and the quantities may change. -both the prices and the quantities are held constant.

the quantities stay constant and the prices may change.

GDP is the: -total market value of all final goods and services produced in an economy in one year. -volume of all dollar transactions made in an economy in one year. -dollar amount of all sales made in the economy in one year. -total accumulated wealth of an economy.

total market value of all final goods and services produced in an economy in one year.