Macro Test 1

An economy has a population of 226,500. Of them, 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is _______. (Round the percentage to one decimal place; for example, 0.0436 is 4.4%.) A) 6.5% B) 21.0% C) 5.5% D) 21.1%

A) 6.5%

Last year the consumer price index (CPI) was 115 and this year's CPI is 125. The rate of inflation is: A) 8.7%. B) 8%. C) 9.2%. D) 10.8%.

A) 8.7%.

Which of the following statements does NOT describe an adjustment to national income to obtain GDP? A) Net exports are added to national income. B) A capital consumption allowance is added to national income. C) Income payments from the rest of the world are added to national income. D) Payments U.S. corporations and residents send to foreign residents are subtracted from national income.

A) Net exports are added to national income.

When a recession gets under way: A) firms start to lay off workers to reduce costs. B) consumer confidence rises because people expect the eventual recovery. C) inflation always rises because the government prints more money. D) inflation falls because the government reduces its budget deficit.

A) firms start to lay off workers to reduce costs.

The four types of spending in GDP are personal consumer spending, ___________ private domestic investment, government spending, and _______. A) gross; net exports B) gross; net imports C) net; net exports D) net; net imports

A) gross; net exports

In a ____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources. A) market; planned B) planned; socialist C) planned; market D) socialist; planned

A) Market; Planned

The payment to land is called: A) rent. B) wages. C) interest. D) profit.

A) Rent

Trade can benefit society as a whole because it allows: A) for a more efficient use of resources. B) for goods to be obtained at a lower opportunity cost. C) people to specialize in activities in which they have a comparative advantage. D) All of these make trade beneficial to society as a whole.

A) for a more efficient use of resources.

If an economy is producing at a point inside its PPF: A) it is possible to produce more of one good without sacrificing some of the other good. B) it is producing efficiently. C) it is producing beyond its production possibilities. D) full employment is achieved.

A) it is possible to produce more of one good without sacrificing some of the other good.

What are the three basic economic questions each society must answer? A) what to produce; how to produce; for whom to produce B) how much to produce; what quality to produce; and what price to sell at C) what to produce; how to much to produce, how to consume D) how much goes to government; how much goes to consumers; how much is exported

A) what to produce; how to produce; for whom to produce

International trade: A) increases consumer prices. B) increases consumption possibilities. C) reduces production possibilities. D) reduces resource consumption.

B

Which of the following is included in personal consumption expenditures? A) highway construction B) the purchase of a new TV by a household C) construction of residential housing D) purchases of common stock by an investor

B) the purchase of a new TV by a household

Nominal GDP in the first quarter of 2010 was $14,592.3 billion. The GDP deflator was 110.2 in the first quarter of 2010. Real GDP for the first quarter of 2010 was equal to: A) $13,133.1 billion. B) $13,241.7 billion. C) $13,103.9 billion. D) $13,424.9 billion.

B) $13,241.7 billion.

Which of the following is NOT generally considered a problem with using the consumer price index to measure consumer prices? A) Only private goods are considered and public goods are excluded. B) Many federal benefits and income tax rates are indexed to the consumer price index. C) Quality improvements are difficult to account for. D) New products are often overlooked.

B) Many federal benefits and income tax rates are indexed to the consumer price index

If the cost of a typical market basket is 400 in 2018, 410 in 2019, and 405 in 2020, then during this period the economy is undergoing: A) inflation. B) disinflation. C) deflation. D) hyperinflation.

B) disinflation.

Land: A) is not a scarce resource. B) earns rent. C) earns interest. D) is only agricultural.

B) earns rent.

U.S. business cycles since 1950 have shown: A) expansions to be just as lengthy as recessions. B) expansions to be longer than recessions. C) expansions to be shorter than recessions. D) stable unemployment rates.

B) expansions to be longer than recessions.

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates the author: A) fails to understand the fallacy of composition. B) fails to understand that all voluntary trades benefit both parties involved. C) fails to understand the significance of the PPF. D) uses sound economic thinking. The statement is essentially correct.

B) fails to understand that all voluntary trades benefit both parties involved.

(Figure: Bread and Honey) In the graph, a move from point f to point g: A) is a move from full employment to less than full employment. B) is impossible at present. C) is a move from an inefficient point to one that fully utilizes all the available resources. D) reflects a positive opportunity cost tradeoff.

B) is impossible at present.

Economists refer to "rent" as a payment to: A) housing. B) land. C) capital. D) labor.

B) land.

Most economists believe that the consumer price index ______ the rate of inflation. A) understates B) overstates C) accurately states D) disinflates

B) overstates

A(n) _____ in the business cycle usually means the economy is operating at its capacity. A) upward trend B) peak C) recession D) recovery

B) peak

Economic growth is shown as a: A) shift to the left in the PPF. B) shift to the right in the PPF. C) movement up along the PPF. D) movement down along the PPF.

B) shift to the right in the PPF.

Sweaters Skirts Germany 6 12 Greece 4 20 (Table) Germany has a comparative advantage in producing: A) sweaters and skirts. B) sweaters only. C) skirts only. D) neither good.

B) sweaters only.

If one country has a(n) ____________ advantage in the production of one item, it can always produce more of the item than another nation. A) comparative B) absolute C) special D) trade

B) Absolute

Natural resources such as copper deposits are: A) capital. B) land. C) labor. D) investment capital.

B) Land

In a capitalist economy, the answer to the question "What should be produced?" is determined by: A) the government. B) consumers' demands for specific goods and services. C) producers. D)government and producers acting together

B) consumers' demands for specific goods and services.

Jennifer did not work during college. She just obtained a bachelor's degree in marketing, and she is now looking for a marketing job in the retail industry. Jennifer is considered: A) structurally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) not in the labor force.

B) frictionally unemployed.

If you accept a job in Seattle as a financial analyst, you must give up the chance to accept a similar job in Australia. Giving up the job in Australia is your: A) allocative cost. B) opportunity cost. C) production cost. D) cost factor.

B) opportunity cost.

GDP is $10 trillion in 2001. The GDP deflator is 100 in 2000 and is 110 in 2001. What is real GDP? A) $10 trillion B) $11.1 trillion C) $9.09 trillion D) $110 trillion

C) $9.09 trillion

What is your new salary if you earned $40,000 last year, the consumer price index went from 120 to 125, and your salary is adjusted by the rate of inflation annually? A) $38,400 B) $41,600 C) $41,666.67 D) $40,125

C) $41,666.67

______ refers to the way an economy allocates goods and services to consumers. A) Production B) Capital C) Distribution D) Absolute advantage

C) Distribution

Which of the following statements describes a difference between the consumer price index (CPI) and the producer price index (PPI)? A) Only the CPI is associated with the problem of quality changes. B) Only the PPI is associated with the problem of deleted products. C) Only the PPI measures net revenues received by firms. D) Only the PPI has a fixed market basket.

C) Only the PPI measures net revenues received by firms.

During periods of inflation, which of the following events does NOT occur? A) Mortgage lenders seek inflation adjustments. B) Workers seek escalator clauses. C) People on a fixed income have increased standards of living. D) People on a fixed income have reduced standards of living.

C) People on a fixed income have increased standards of living.

Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a local elementary school. She began looking for a full-time job last week and has already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is: A) a discouraged worker. B) unemployed. C) employed. D) not in the labor force.

C) employed.

In a commustate, the __________ decide(s) what a society wants, but in a capitalist economy, the _______________ decide what products they want. A) government; producers B) consumers; producers C) government; consumers D) producers; consumers

C) government; consumers

Which is considered a land resource? A) a sewing machine B) an apprentice C) mineral deposits D) a copier

C) mineral deposits

One of the key concepts involved in the circular flow diagram is that: A) households and businesses are in conflict with each other. B) the national economy is similar to a zero-sum game. C) one person's spending is another person's income. D) the sum of the resource and product markets must equal household income.

C) one person's spending is another person's income.

The expenditure category that accounts for the largest share of GDP is: A) gross private domestic investment. B) government purchases of goods and services. C) personal consumption expenditures. D) net exports.

C) personal consumption expenditures.

Which of the following items is NOT included in gross private domestic investment? A) residential housing B) new equipment purchased by businesses C) purchases of common stock D) increases in business inventories

C) purchases of common stock

Which of the following items would be considered a durable good? A) college education B) horseradish C) refrigerator D) Mohawk haircut

C) refrigerator

Who developed the theory of comparative advantage? A) John Stuart Mill B) Adam Smith C) David Ricardo D) Karl Marx

C) David Ricardo

The derivation of a production possibilities frontier assumes: A) some resources are not being used. B) there is a fixed quantity of resources and technology available. C) some resources are not being produced efficiently. D) technology is free.

C) some resources are not being produced efficiently.

If a nation selects a product mix focused on ___________ goods, the production possibilities frontier will expand at a greater rate than if the nation produced mostly ___________ goods. A) labor-intensive; capital intensive B) consumption; capital C) labor-intensive; consumption D) capital; consumption

D

Jill has an escalator clause in her labor contract that gives her a raise commensurate with the consumer price index (CPI). Last year she earned $40,000 and the CPI was 100. If the CPI this year is 110, her new salary is: A) $40,110. B) $50,000. C) $40,100. D) $44,000.

D) $44,000.

Which of the following is TRUE within the circular flow of economic activity? A) Households are sellers of products and sellers of production factors. B) Business firms are buyers and sellers of production factors. C) Households are sellers of products and buyers of production factors. D) Business firms are sellers of products and buyers of production factors.

D) Business firms are sellers of products and buyers of production factors.

(Figure: Ships and Autos in Countries A and B) Two countries manufacture automobiles and ships. Based on the graphs, which statement is correct? A) Country A has a comparative disadvantage in producing ships. B) The two countries should not trade with each other because they can produce both goods. C) Country B has an absolute advantage in both goods because the line is closer to the origin. D) Country A has an absolute advantage in producing ships.

D) Country A has an absolute advantage in producing ships.

From 1999 to 2002, the Japanese inflation rates were, respectively, -0.3%, -0.6%, -0.7%, and -0.7%. During this time, the Japanese economy underwent: A) inflation. B) hyperinflation. C) a rise in its price level. D) deflation.

D) deflation.

Gross domestic product measures the output produced by ____________________ using resources in this country, while gross national product measures output produced by resources supplied by ______________. A) foreign citizens only; U.S. citizens B) U.S. citizens only; foreign citizens C) U.S. or foreign citizens; foreign citizens D) U.S. or foreign citizens; U.S. citizens

D) U.S. or foreign citizens; U.S. citizens

Which of the following is NOT an example of gross private domestic investment? A) the construction of new residential housing B) the construction of a new hotel C) a change in business inventories D) a household purchase of shares of Google stock

D) a household purchase of shares of Google stock

The theory which suggested that countries would mutually benefit from trade by specializing in export goods they could produce at a lower opportunity cost than another country is called: A) marginal utility. B) labor specialization theory. C) absolute advantage. D) comparative advantage.

D) comparative advantage.

Frictional unemployment occurs when job openings: A) exist and people are willing to take them, but the applicants do not have the necessary skill set. B) do not exist, although people are willing to work, so it makes no sense to try to bring the two together. C) exist, but people are not willing to take them, so it makes no sense to bring the two together. D) exist, and people are willing to take them, but it takes some time to bring the two together.

D) exist, and people are willing to take them, but it takes some time to bring the two together.

he two approaches used by government in estimating GDP are: A) statistical and nonstatistical. B) survey and nonsurvey. C) income and earnings. D) expenditure and income.

D) expenditure and income.

The natural rate of employment: A) explains why some people are underemployed. B) explains why the unemployment rate is too high. C) occurs when the actual inflation rate is lower than the consumer's inflationary expectations. D) is the rate at which the actual inflation rate is equal to people's inflationary expectations.

D) is the rate at which the actual inflation rate is equal to people's inflationary expectations.

In economics, the term capital refers to: A) money available to firms. B) markets where companies go to raise funds. C) the primary city in each governmental jurisdiction where most economic activity occurs. D) manufactured products used to produce other goods and services.

D) manufactured products used to produce other goods and services.

U.S. steelworkers who have lost their job to workers receiving lower wages overseas are part of ____________ unemployment. A) frictional B) cyclical C) seasonal D) structural

D) structural

Which of the following events has significantly influenced the development of macroeconomic ideas? A) World War II B) the development of the modern corporation C) the Industrial Revolution D) the Great Depression

D) the Great Depression

One of the drivers of economic growth is: A) specialization. B) consumption. C) international trade. D) All of these drive economic growth.

D) All of these drive economic growth.

Trade can benefit society as a whole because it allows: A) for a more efficient use of resources. B) for goods to be obtained at a lower opportunity cost. C) people to specialize in activities in which they have a comparative advantage. D) All of these make trade beneficial to society as a whole.

D) All of these make trade beneficial to society as a whole.

The government can make owning a business easier or more profitable by doing all of the following, EXCEPT: A) reducing regulations. B) offering low-interest loans. C) offering favorable tax treatment. D) asking individual investors to take additional risks.

D) asking individual investors to take additional risks.

Which of the following does NOT impose a limit on the amount of international trade? A) transportation costs B) some industries losing their domestic markets C) the danger of overreliance on a small number of products for exports D) high level of comparative advantage

D) high level of comparative advantage