Chapter 6 - Quiz

In early 2005, inflation increased unexpectedly due to an increase oil prices. This helped 1. Borrowers 2. Lenders 3. People on fixed incomes 4. Workers

Borrowers

Suppose an apple pie sells at a grocery store for $5. Suppose that the grocery store purchased it from a baking company for $4. Suppose the baking company paid $2 for ingredients, $1 for labor, and made $1 in profit. What is the GDP contribution of the Pie? 1. $4 2. $5 3. $11 4. $12

$5

If the inflation rate is 3% and the nominal interest rate is 4%. then the real interesting rate is 1. 1% 2. 3% 3. 7% 4. 12%

1%

In Figure 6.1, which area represents a recession? 1. A 2. B 3. C 4. D

A

The expenditure approach to GDP equals 1. Employee Compensation + Profit + Net Property Income + Indirect Business Taxes + Depreciation - Income Earned Abroad 2. Consumption + Gross Investment. + Government Purchases + Net Exports 3. Consumption + Net Investment (Gross Investment - Depreciation). + Government Purchases + Net Exports 4. Employee Compensation + Profit + Net Property Income + Indirect Business Taxes - Income Earned Abroad

Consumption + Gross Investment. + Government Purchases + Net Exports

When comparing GDP from one country to another, it is best to use 1. Nominal GDP 2. Real GDP 3. Real GDP per capita 4. CPI

Real GDP per capita

A higher interest rate 1. increases the motivation to delay consumption, and therefore, save 2. increases the motivation to delay consumption, and therefore, borrow 3. decreases the motivation to delay consumption, and therefore, save 4. decreases the motivation to delay consumption, and therefore, borrow

increases the motivation to delay consumption, and therefore, save

In measuring Gross Domestic Product, goods produced by foreign firms in the United States are 1. Counted, and so are goods produced by American firms in foreign countries 2. Counted, but goods produced by American firms in foreign countries are not counted 3. Not counted, but goods produced by American firms in foreign countries 4. Not counted, and goods produced by American firms in foreign countries are also not counted

Counted, but goods produced by American firms in foreign countries are not counted

If a person is laid-off from a job and told that they will be brought back as soon as the economy picks up and Demond for their product rises, then economists call this person. 1. Underemployed 2. Frictionally Unemployed 3. Structurally Unemployed 4. Cyclically Unemployed

Cyclically Unemployed

Economists consider deflation 1. To be generally healthy for the economy 2. To be a normal part of the economy, not necessarily healthy or unhealthy 3. Dangerous, as it can lead to a depression 4. To be no better and no worse than inflation

Dangerous, as it can lead to a depression

How does GDP deal with a Toyota Produced in Kentucky? 1. It is fully county 2. It is not counted at all 3. It is partially counted 4. It is counted at twice the value

It is fully counted

How does GDP deal with a Ford produced in Mexico? 1. It is fully county 2. It is not counted at all 3. It is partially counted 4. It is counted at twice the value

It is not counted at all

The majority of economists believe that the Consumer Price Index 1. Overstates the increase in the cost of living 2. Understate the increase in the cost of living 3. Precisely measure the Increase in the cost of living 4. Overstates the increase in the cost of living in some years and understates it in others

Overstates the increase in the cost of living

When comparing a country's GDP from year to year, it is best to use __________ to measure growth 1. Nominal GDP 2. Real GDP 3. Retroactive GDP 4. CPI

Real GDP

If a person is underemployed because their industry has moved to another country, economists refer to this person as. 1. Underemployed 2. Frictionally Unemployed 3. Structurally Unemployed 4. Cyclically Unemployed

Structurally Unemployed

Defation occurs only when 1. Some prices fall but average prices still rise 2. All prices for all goods fall 3. The average price level (CPI) falls 4. The average price level increases but at a slower rate than before

The average price level (CPI) falls

The reason that only final sales are counted as GDP is 1. To avoid double counting goods that are sold so as to be resold 2. To not count production in other countries 3. Because the government can't get records on intermediate sales 4. To simplify the computation and no other reason

To avoid double counting goods that are sold so as to be resold

When a worker has lost their job, the difference between an underemployed worker and a discouraged worker is 1. Whether they are actively seeking work or not 2. Whether they are seeking work in the same industry 3. Whether they leave the state or not 4. Whether it is related to the seasons

Whether they are actively seeking work or not

Gross Domestic product is counted using two methods; one with counts all the way people ____________ money and another which counts all the ways people ____________ money. 1. earn; spend 2. spend; save 3. earn; save 4. loan; borrow

earn; spend

If the inflation rate turns out to be less than was is expected to be, the clear winners are 1. lenders 2. borrowers 3. people on fixed incomes 4. business

lenders