Micro test 2

1) GDP declines during A) the movement from trough to peak. B) the movement from below potential GDP back to potential GDP. C) the movement from peak to trough. D) a decrease in unemployment.

C

13) If the CPI is 120, this means that A) prices are 120 percent higher than in the reference base period. B) prices are 0.12 times higher than in the reference base period. C) prices are 20 percent higher than in the reference base period. D) nominal GDP will be less than real GDP.

C

16) Which of the following occurs while moving along a short-run aggregate supply curve? A) The money wage rate and the price level change by the same percentage. B) The money wage rate changes and the price level is constant. C) The price level changes and the money wage rate is constant. D) Neither the price level nor the money wage rate changes.

C

4) Suppose the working-age population is 220 million, the labor force is 150 million, and the unemployment rate is 10 percent. The number of unemployed people is A) 15 million. B) 22 million. C) 37 million. D) 7 million.

A

7) The real wage rate is A) the nominal wage divided by the price level. B) the nominal wage multiplied by the price level. C) the nominal wage rate divided by the number of employed workers. D) None of the above answers are correct.

A

8) Frictional unemployment includes A) unemployment caused by normal labor turnover associated with people leaving and entering the labor force. B) unemployment caused by industries moving overseas to better meet foreign competition. C) unemployment caused by a lack of education so that workers do not possess necessary job skills. D) unemployment caused by automation of the workplace that displaces unskilled workers.

A

11) Full employment occurs A) only if the unemployment rate is zero. B) only if the unemployment rate is equal to the natural rate of unemployment. C) only if unemployment is equal to structural unemployment plus cyclical unemployment. D) None of the above answers are correct.

B

15) The long-run aggregate supply curve is ________ because along it, as prices rise, the money wage rate ________. A) vertical; falls B) vertical; rises C) upward sloping; falls D) upward sloping; stays constant

B

17) If the money wage rate (i.e. nominal wage rate) changes, A) the LAS curve shifts. B) the SAS curve shifts. C) the AD curve shifts. D) the macroeconomic equilibrium is unaffected

B

19) A reason the aggregate demand curve slopes downward is that when the price level rises, A) real wealth increases. B) real wealth decreases. C) interest rates fall. D) None of the above answers are correct.

B

29) The demand for labor curve slopes downwards because A) as more workers are hired, the marginal product of labor increases. B) as more workers are hired, the marginal product of labor decreases. C) output increases as more workers are hired. D) as more workers are hired, output decreases.

B

31) As the real wage rate increases the A) quantity of labor supplied will decrease. B) quantity of labor supplied will increase. C) the supply of labor will increase. D) the supply of labor will decrease.

B

33) The higher the level of unemployment compensation, A) the lower the natural rate of unemployment. B) the longer a person will search for a job. C) the shorter a person will search for a job. D) the higher the efficiency wage.

B

34) A minimum wage set above the equilibrium wage A) lowers the natural rate of unemployment. B) results in job rationing. C) causes the quantity of labor demanded to exceed the quantity of labor supplied at full employment. D) All of the above answers are correct.

B

35) Suppose the capital stock is 100 in the beginning of year 1, gross investment for the year is 20, and 10 units of the capital stock depreciate during the year. The value of the capital stock at the end of year 1 is A) 120. B) 110. C) 102. D) 118.

B

38) A recession will generally change A) real interest rates and thereby shift the investment demand curve. B) expected profit rates and thereby shift investment demand curve. C) real interest rates and thereby shift the saving supply curve. D) None of the above answers are correct.

B

2) Which of the following would NOT be counted as unemployed? A) a person who is not working but who has tried to find a job in the past week B) a person who is waiting to be called back to a job after having been laid off C) a person who performs traditional housework but does not work outside the home for pay D) a person who is waiting to start a new job in the next 30 days

C

20) One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises, A) firms produce more goods and services. B) firms produce fewer goods and services. C) domestic consumers substitute toward more imported goods and services and foreigners buy fewer domestically produced goods and services D) peoples' wealth increases.

C

25) In the above figure, the short-run equilibrium will eventually adjust to a long-run equilibrium with a A) lower price level and smaller real GDP. B) higher price level and larger real GDP. C) higher price level and smaller real GDP. D) lower price level and larger real GDP.

C

3) The unemployment rate is defined as the A) number of people not working. B) percentage of the population not working. C) percentage of the labor force not working. D) percentage of the working-age population not working.

C

40) When the real interest rate increases, A) the saving supply curve shifts rightward. B) the saving supply curve shifts leftward. C) there is a movement upward along the saving supply curve. D) there is a movement downward along the savings supply curve.

C

14) In the macroeconomic long run, A) real GDP = potential GDP. B) the economy is at full employment. C) regardless of the price level, the economy is producing at potential GDP. D) All of the above are correct.

D

21) Which of the following shifts aggregate demand curve rightward? A) a decrease in government purchases B) the expectation of a future loss of income C) a decrease in the money supply and an increase in interest rates D) a cut in personal income taxes

D

22) In the figure above, in the short-run macroeconomic equilibrium, A) there is no structural unemployment. B) real GDP is greater than potential GDP. C) real GDP equals potential GDP. D) real GDP is less than potential GDP.

D

26) Labor productivity will increase with an increase in A) physical capital. B) human capital. C) technology. D) All of the above are correct.

D

28) Based on the previous table, the marginal product of the second hour is A) 9 units. B) 8 units. C) 16 units. D) 7 units.

D

37) As the real interest rate increases, the quantity of investment ________. Therefore, the investment demand curve plotted against the real interest rate is ________. A) increases; upward sloping B) increases; downward sloping C) decreases; upward sloping D) decreases; downward sloping

D

5) The upward trend in the labor force participation rate since 1961 is explained by the increase in the A) population. B) number of men who work. C) number of discouraged workers. D) number of women who work.

D

6) Suppose there are currently 100 people unemployed, 1500 people employed, and 2000 people in the working age population. With this information, the labor force participation rate equals 100 times A) 100/1500. B) 100/1600. C) 1500/2000. D) 1600/2000.

D

9) Andrew just lost his job as a corkscrew operator since his company has found a machine to perform his work tasks. Andrew did not have the skills needed to operate the machine. Andrew has searched for a new job for 6 months and continues to search. Therefore, Andrew is considered to be A) frictionally unemployed. B) a discouraged worker. C) cyclically unemployed. D) structurally unemployed

D

36) If the nominal interest rate is 11 percent and the inflation rate is 9 percent, then the real interest rate is approximately A) 2 percent. B) 20 percent. C) 4 percent. D) 18 percent.

A

39) If household's disposable income decreases, then A) household's saving will decrease. B) household's saving will increase. C) investment will increase. D) government saving will increase.

A

32) When the quantity of labor demanded exceeds the quantity of labor supplied the real wage rate A) rises to eliminate the labor-market shortage. B) falls to eliminate the labor-market surplus. C) rises to eliminate the labor-market surplus. D) falls to eliminate the labor-market shortage.

A

10) Which type of unemployment increases during a recession? A) cyclical unemployment B) frictional unemployment C) structural unemployment D) the natural rate of unemployment

A

12) When the unemployment rate is below the natural rate of unemployment, A) real GDP is greater than potential GDP. B) real GDP is less than potential GDP. C) real GDP equals potential GDP. D) None of the above is possible because it is impossible for the unemployment rate to be less than the natural rate.

A

18) Which of the following shift the LAS curve rightward? A) an increase in the education level of the labor force B) a decrease in the labor force C) a decrease in the money wage D) an increase in the price level

A

23) The government increases its purchases of goods and services. As a result, in the short run A) real GDP will increase and the price level will rise. B) real GDP and the price level will decrease. C) real GDP will decrease and the price level will increase. D) real GDP will increase and the price level will fall.

A

24) The above figure depicts an economy A) with an inflationary gap. B) with a recessionary gap. C) producing at full employment. D) None of the above answers are correct.

A

27) The decreasing slope of a production function reflects A) diminishing returns. B) rising unemployment. C) decreasing costs. D) increasing aggregate demand.

A

30) Advances in technology rotate the production function ________ and shift the demand for labor curve ________. A) upward; rightward B) upward; leftward C) downward; rightward D) downward; leftward

A