Economics Ch. 5-6 Quiz Questions

If your salary was $50,000 last year, and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be this year assuming the CPI has risen from 110 to 114?

$51,818

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

Gross; net exports

Which of the following items is NOT included in the GDP deflator? -imported mangoes -bubble gum -fire engines -turbines

Imported mangoes

The GDP deflator is an index that includes prices of all of the following EXCEPT: -investment goods. -consumer goods. -imports. -government goods and services.

Imports

Which of the following describes the informal economy?

It is largely unmeasured

We are most likely to see a recession if interest rates on long-term bonds are:

Lower than interest rates on short-term bonds

Which organization determines the beginning and end dates of a recession? -the Council of Economic Advisers -the National Bureau of Economic Research -the U.S. Treasury Department -the Federal Reserve Board of Governors

The National Bureau of Economic Research

A business cycle is:

The periodic fluctuation of economic activity

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is: -150. -110. -80. -125.

125

If the current year's consumer price index is 214 and last year's consumer price index was 209, then the rate of inflation is: -2.4%. -3%. -2.8%. -5%.

2.4%

The largest component of GDP is: -consumption expenditure. -gross private domestic investment. -government spending. -net exports.

Consumption expenditure.

Which one of the following would NOT lead to higher prices? -strong consumer demand -higher gas prices -an increase in the supply of food -an increase in the supply of money

An increase in the supply of food

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the:

Circular flow diagram

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%: -debtors gain at the expense of creditors. -there is a redistribution of income from creditors to debtors. -people on a fixed income see the purchasing power of their incomes rising. -creditors gain at the expense of debtors.

Creditors gain at the expense of debtors

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing: -hyperinflation. -inflation. -disinflation. -deflation.

Deflation

Simon Kuznets: -was the Secretary of Treasury during World War II. -set up the National Bureau of Economic Research. -invented the hair net. -devised the gross national product as a way of measuring a nation's economic output.

Devised the gross national product as a way of measuring a nation's economic output

_____ is a reduction in the rate of inflation.

Disinflation

The U.S. gross domestic product is equal to the total market value of all: -intermediate goods and services produced by resources in the United States. -final goods and services produced by resources in the United States. -intermediate goods and services produced by citizens in the United States. -final goods and services produced by resources in the United States.

Final goods and services produced by resources in the United States

Core inflation is found by removing _____ from the consumer price index.

Food and energy

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

GDP falls as a result of this change

The twin perils of the modern macro economy are said to be: -inflation and the trade deficit. -unemployment and the trade surplus. -government and the trade deficit. -inflation and unemployment.

Inflation and unemployment

If actual unemployment is at its natural rate: -there is deflation. -inflation is very low. -the unemployment rate is zero. -interest rates are rising.

Inflation is very low

The value of cars that the Ford Motor Company produces in a German plant:

Is a part of U.S. GNP

People who are considered unemployed include: -None of those listed is considered unemployed. -those who are doing temporary work. -those who are unpaid family workers. -those who do not have a job and are not actively seeking employment.

None of those listed is considered unemployed

Which of the following items would be included in the GDP accounts?

Paying $50 consultation fee over the phone with a psychic adviser

GDP can be found either by adding up all of the _____ or all of the _____ in the economy.

Spending; income

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing: -cyclical unemployment. -full unemployment. -structural unemployment. -frictional unemployment.

Structural unemployment

What event was a major influence on the development of macroeconomics? -the establishment of the Federal Reserve System in the United States -the Great Depression -Employment Act of 1946 -the U.S. entry into World War II

The Great Depression

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

Trough

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as: -temporary workers. -the disgruntled unemployed. -the invisible unemployed. -discouraged workers.

Discouraged workers

U.S. business cycles since 1950 have shown: -expansions to be just as lengthy as recessions. -expansions to be shorter than recessions. -stable unemployment rates. -expansions to be longer than recessions.

Expansions to be longer than recessions

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living: -fell by 3%. -fell by 1%. -rose by 2%. -rose by 1%.

Fell by 1%

Which of the following is NOT included in gross private domestic investment? -purchases of common stock by investors -an increase in business inventories -new equipment purchased by businesses -construction of residential housing

Purchases of common stock by investors