Macro Exam 2
7. The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________. A) $40 trillion B) $9 trillion C) $14 trillion D) $25 trillion
Answer: C
1. The best definition for economic growth is A) a sustained expansion of production possibilities measured as the increase in real GDP over a given period. B) a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period. C) a sustained expansion of consumption goods over a given period. D) a sustained expansion of production goods over a given period.
Answer: A
2. U.S. investment is financed from A) private saving, government budget surpluses, and borrowing from the rest of the world. B) private saving, government budget deficits, and borrowing from the rest of the world. C) private borrowing, government budget deficits, and lending to the rest of the world. D) private saving and borrowing from the rest of the world only.
Answer: A
4. Suppose that you took out a $1000 loan in January and had to pay $75 in annual interest. During the year, inflation was 6 percent. Which of the following statements is CORRECT? A) The nominal interest rate is 7.5 percent and the real interest rate is 1.5 percent. B) The nominal interest rate is 7.5 percent and the real interest rate is 13.5 percent. C) The real interest rate is 7.5 percent and the nominal interest rate is 1.5 percent. D) The real interest rate is 6 percent and the nominal interest rate is 7.5 percent.
Answer: A
6. When the economy moves into and out of recessions and expansions, the unemployment rate fluctuates around the A) natural unemployment rate. B) structural unemployment rate. C) cyclical unemployment. D) frictional unemployment rate.
Answer: A
7. Which of the following are included in the supply of loanable funds? I. private saving II. government budget surplus III. international borrowing A) I, II and III B) I and III C) II and III D) I and II
Answer: A
1. The total amount spent on new capital in a time period is equal to A) wealth. B) gross investment. C) depreciation. D) net investment.
Answer: B
1. Which of the following statements is INCORRECT? A) The labor force is equal to the number of people employed plus the number of people unemployed. B) The working age population includes everyone over the age of 16. C) The unemployment rate is the number of persons who are unemployed divided by the labor force then times 100. D) The labor-force participation rate is the labor force divided by the working-age population then times 100.
Answer: B
4. An aggregate production function shows the relationship between A) real GDP and leisure. B) real GDP and the quantity of labor employed. C) leisure and unemployment. D) real GDP and unemployment.
Answer: B
8. The quantity of ________ by households will be less ________. A) saving; the higher is disposable income B) saving; the lower is the real interest rate C) consumption; the lower is the inflation rate D) consumption; the higher is disposable income
Answer: B
9. An increase in disposable income ________. A) has no effect on the supply of loanable funds curve B) shifts the supply of loanable funds curve rightward C) shifts the supply of loanable funds curve leftward D) results in movement up the supply of loanable funds curve
Answer: B
In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 0.38 percent B) 9.0 percent C) 3.8 percent D) 8.3 percent
Answer: B
10. An advance in technology shifts the production function upward and shifts the labor A) demand curve leftward. B) supply curve leftward. C) demand curve rightward. D) supply curve rightward.
Answer: C
10. The table below shows the price index for Zimbabwe starting in 2000. Year Price Index 2000 100.0 2001 173.4 2002 404.37 2003 1880.5 2004 8462.2 2005 28,586.6 2006 319,222.5 Which of the following statements CORRECTLY describe the behavior of prices in Zimbabwe? I. The cost of the CPI basket increased. II. The inflation rate was 73.4 percent between 2000 and 2001. A) I only B) II only C) both I and II D) neither I nor II
Answer: C
3. Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double? A) 0.7 years B) 20 years C) 7 years D) 10 years
Answer: C
3. Which of the following is TRUE regarding the real interest rate? I. The real interest rate is the opportunity cost of borrowed funds. II. The real interest rate equals the nominal interest rate adjusted for inflation. A) I B) II C) both I and II D) neither I nor II
Answer: C
4. Suppose there are 100 million in the labor force, and 6 million unemployed people. During the next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed persons is ________ and the new unemployment rate is ________. A) 100.1 million; 5.8 percent B) 100 million; 6.1 percent C) 94.1 million; 5.9 percent D) 93.9 million; 6.1 percent
Answer: C
5. A rise in the real interest rate A) shifts the demand for loanable funds curve rightward. B) shifts the demand for loanable funds curve leftward. C) creates a movement upward along the demand for loanable funds curve. D) creates a movement downward along the demand for loanable funds curve.
Answer: C
5. If the money wage rate rises relative to the price level, firms ________ the quantity of labor they demand and workers ________ the quantity of labor they supply. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Answer: C
9. An increase in the working-age population results in a A) rightward shift of demand for labor curve and an increase in potential GDP. B) rightward shift of the demand for labor curve and no change in potential GDP. C) rightward shift of the supply of labor curve and an increase in potential GDP. D) leftward shift of the supply of labor curve and a decrease in potential GDP.
Answer: C
2. Which of the following is NOT considered to be in the labor force? A) a student who works part-time B) a person who is not working but who has tried to find a job in the past week C) a person who is waiting to start a new job in the next 30 days D) a person who is not working and who has not tried to find a job
Answer: D
3. Using the definition of unemployment, which of the following individuals would be unemployed? A) A full-time student quits school, enters the labor market for the first time, and searches for employment. B) Because of the increased level of automobile imports, an employee of General Motors is laid off but expects to be called back to work soon. C) Because of a reduction in the military budget, your next door neighbor loses her job in a plant where nuclear warheads are made and must look for a new job. D) All of these individuals are unemployed.
Answer: D
5. Full employment exists when A) there is only frictional and structural unemployment. B) the economy is at the natural unemployment rate. C) there is no cyclical unemployment. D) All of the above answers are correct.
Answer: D
6. A decrease in the real interest rate leads to a ________ the demand for loanable funds curve, and a decrease in the expected profit leads to a ________ the demand for loanable funds curve. A) rightward shift in; leftward shift in B) movement down along; movement up along C) rightward shift in; movement up along D) movement down along; leftward shift in
Answer: D
8. The tables above show the labor market and the production function schedule for the country of Pickett. An increase in population changes the labor supply by 20 billion hours at each real wage rate. Potential GDP ________. A) does not change B) decreases to $3 trillion C) increases to $50 trillion D) increases to $18 trillion
Answer: D
9. Which of the following means that the CPI overstates the actual inflation rate? A) new goods bias B) quality change bias C) outlet substitution bias D) All of the above cause the CPI to overstate inflation.
Answer: D
