Unit 2 Econ Test Review
The consumer price index (CPI) does not measure the true cost of inflation because
improvements in the quality of goods or services are not fully reflected
Which of the following would most likely benefit from unexpected deflation?
lenders
In one year, spending on consumption, investment, and government purchases was equal to 103 percent of a country's gross domestic product. This would be possible only if
net exports were negative
Frictional unemployment occurs when which of the following happens?
A worker voluntarily quits a job to search for a better one.
Which of the following is most likely included in gross domestic product?
Ali buys a new bicycle
For an economy consisting of households and businesses only, which of the following is consistent with the circular flow of income and production?
Households are suppliers of resources and consumers of goods and services.
Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation is $500 billion. Disposable income is equal to which of the following?
$2,500 billion
In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was
$25 billion
When the average price level increases by 10 percent in a given year, which of the following must increase by 10 percent for real output to remain constant?
Nominal National Income
In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in 2018 was 2%. How did Sabrina's nominal income and real income change in 2018 compared to 2017?
Nominal and real income increase
The consumer price index (CPI) is criticized for
overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change
A country's real gross domestic product is the annual value of all final goods and services that are
produced in that country, adjusted for changes in the price level
Last year both a borrower and a lender expected an inflation rate of 3 percent when they signed a long-term loan agreement with fixed nominal interest rates of 5 percent. If the actual inflation rate were lower than expected, then which of the following would be true?
The lender would benefit
An increase in the number of discouraged workers causes the unemployment rate to
decrease along with the labor-force participation rate
The natural rate of unemployment can be defined as the
economy's long-run equilibrium rate of unemployment
The official unemployment rate understates the unemployment level in the economy because the official unemployment rate
ignores underemployed and discouraged workers
A nation's unemployment rate is the ratio of the number of unemployed seeking employment to the nation's
labor force
An industry historically used employees with specific skills. If this industry experiences technological advances that require new skills, there will most likely be
structural unemployment
In the circular flow diagram of a market economy, which of the following supplies the factors of production?
The household sector
If the consumer price index increases from 200 to 240 in a one-year period, then the inflation rate is
20%
Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product?
A newly constructed home
Which of the following will happen if the actual inflation rate is greater than the expected inflation rate?
Borrowers of fixed interest rate loans will be better off.
Which of the following types of unemployment is caused by a recession?
Cyclical
Which of the following represents a leakage from the circular flow in an economy?
Imports
Which of the following groups would most likely gain from unanticipated inflation?
Individuals who have borrowed money at fixed interest rates
Which of the following statements is true of unanticipated inflation?
It increases the economic well-being of net debtors.
Suppose that a country's nominal gross domestic product (GDP) was $1,000 in year 1 and $2,000 in year 2. If year 1 is the base year and real (GDP) in year 2 was $1,000, which of the following is true?
Prices doubled between year 1 and year 2.
An increase in which of the following is most likely to increase the long-run growth rate of an economy's real per capita income?
The educational attainment of the population
Which of the following situations will benefit lenders of fixed interest rate loans?
The actual inflation rate is less than the expected inflation rate.
If a nation's actual real GDP is less than potential real GDP, which of the following must be true?
The actual rate of unemployment exceeds the natural rate of unemployment.
The natural rate of unemployment is the unemployment rate when
There is no cyclical unemployment
A lender will realize unexpected benefit when the
actual inflation rate is lower than the anticipated inflation rate
Public policy that generates an unexpected increase in consumer prices will inflict short-run costs on all of the following EXCEPT
borrowers
Which of the following groups of people would benefit from unanticipated inflation? Savers Borrowers Lenders
borrowers
Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following?
the distribution of income
Structural unemployment is best described as unemployment arising from
the elimination of jobs as a result of technological change
The unemployment rate is calculated as
the number of people not working but actively seeking employment divided by the number of people in the labor force
