ECO315 Midterm - Ch.1

The most comprehensive measure of aggregate output is A) national income. B) the stock value of the industrial 500. C) gross domestic product. D) net national product.

C) gross domestic product.

Well-functioning financial markets promote A) inflation. B) unemployment. C) growth. D) deflation.

C) growth.

According to Prof. Choi, ______ in an economy is like blood in a human body. A) wealth B) credit C) money D) stocks and bonds

C) money

If your 20-year old friend is "institutionalized," she is _____. A) in the labor force and employed B) in the labor force but unemployed C) not in the labor force at all D) not in the labor force but employed E) not in the labor force and unemployed

C) not in the labor force at all

When prices are measured in terms of fixed (base-year) prices they are called ________ prices. A) inflated B) nominal C) real D) aggregate

C) real

Poorly performing financial markets can be the cause of A) financial expansion. B) wealth. C) financial stability. D) poverty.

D) poverty.

If the labor force has 250 million people and 5 million people are unemployed, the unemployment rate is calculated as _____. a) 2% b) 0.02% c) 0.025% d) 2.5% e) 5%

a) 2%

The _______ is responsible for formulating and executing the monetary policy via the control of ______. a) Federal Reserve System; money supply b) U.S. Treasury Department; taxes c) U.S. Treasury Department; money supply d) Federal Reserve System; taxes

a) Federal Reserve System; money supply

An economic recession describes a ______ in the national output and an inflation describes a(n) _______ in an aggregate or average price level. a) decrease; increase b) increase; increase c) decrease; decrease d) decrease; decrease

a) decrease; increase

If a young person of 15 years of age is very eager to work for pay, this individual is considered to be ______. a) not in the labor force b) a discourage worker c) in the labor force d) not a discouraged worker

a) not in the labor force

The National Bureau of Economic Research (NBER) is a ________ institute that declares a period of an economic ______, based on the past economic performance data of a nation. a) not-for-profit; recession b) for-profit; recession c) not-for-profit; growth d) for-profit; growth e) either (a) or (c) of the above

a) not-for-profit; recession

Your friend works in the snow removal business in winter and he finds himself unemployed during spring. This is an example of _______. a) seasonal b) cyclical c) structural d) frictional

a) seasonal

The measure of national output based on the location of production is known as _______ and that based on the ownership of factors of production is known as ________. a) the Gross Domestic Product (GDP); the Gross National Product (GNP) b) the Gross Domestic Product (GDP); the Gross National Wealth (GNW) c) the Gross National Wealth (GNW); the Gross National Product (GNP) d) the Gross National Product (GNP); the Gross Domestic Product (GDP)

a) the Gross Domestic Product (GDP); the Gross National Product (GNP)

Inflation is observed when ________. a) the aggregate or average price level increases b) the price of any single product increases c) the prices of any 10 or more products increase d) the aggregate or average price level decreases

a) the aggregate or average price level increases

The Gross Domestic Product is based on _______ whereas the Gross National Product (GNP) is based on ______. a) the location of production; the ownership of factors of production b) the ownership of factors of production; the national income c) the ownership of factors of production; the location of production d) the location of production; the aggregate national debt

a) the location of production; the ownership of factors of production

If there are a large number of discouraged workers, the official unemployment rate published by the government may ______ the true unemployment rate in the economy. a) under-estimate b) over-estimate c) be the same as

a) under-estimate

If a quarterly inflation rate, as measured by the consumer price index, is 2%, its annualized inflation rate is ______. a) 2% b) 8% c) 1% d) 4% e) 16%

b) 8%

When the aggregate or average price level in an economy declines, it is known as ________. a) inflation b) deflation c) recession d) economic slow-down or cool-down e) depression

b) deflation

In a recession, due to a large number of discouraged workers, the true unemployment rate may be _____ the official unemployment rate published by the government. a) the same as b) higher than c) lower than

b) higher than

According to Professor Choi, if _______ does not flow smoothly throughout the economy, the economy will show symptoms of illnesses. a) trust b) money c) water d) electricity e) credit

b) money

The inflation rate for the wholesale industry is measured by _______. a) the Consumer Price Index b) the Producer Price Index c) the national wholesale manufacturers' index d) the GDP deflator e) none of the above

b) the Producer Price Index

Which of the following does NOT describes phases of a business cycle? a) a slow-down or cool-down b) unemployment and peak c) peak and recovery d) an expansion e) a trough

b) unemployment and peak

If your friend is unemployed because he is between jobs, he is technically classified as a part of ______ unemployment. a) structural b) cyclical c) frictional d) seasonal

c) frictional

If your friend is not looking for a job because she wishes to travel the world, she is _____. a) in the labor force if she receives unemployment compensation b) still in the labor force because she will look for a job later c) not in the labor force at all d) still employed because she is healthy

c) not in the labor force at all

Weak U.S. dollar against Chinese yuan favors _______ . a) the U.S. importers. b) the U.S. consumers c) the Chinese importers d) all of the above e) only (a) and (b) of the above

c) the Chinese importers

If a U.S. company produces and sells $1 million of cars in Europe, it would be included in _______ of the U.S. a) the Gross Total Product (GTP) b) the National Total Product c) the Gross National Product (GNP) d) the Economic Growth Rate (EGR) e) the Gross Domestic Product (GDP)

c) the Gross National Product (GNP)

The cost-of-living adjustment (COLA) is based on the changes in _____. a) the producer price index (PPI) b) the purchasing power index c) the consumer price index (CPI) d) the GDP deflator e) the social security inflation index

c) the consumer price index (CPI)

The market where stocks and bonds are traded is generically known as ______. a) the futures market b) the New York Stock Exchange c) the financial market d) the product market

c) the financial market

An economic recession is defined as a decline in the national output over _______. a) any 2 or more quarters in a given year b) any 2 or more months in a given year c) the last 1 year d) 2 or more consecutive quarters e) 2 or more consecutive months

d) 2 or more consecutive quarters

If the labor force has 200 million people and 5 million people are unemployed, the unemployment rate is calculated as _____. a) 2% b) 0.025% c) 5% d) 2.5%

d) 2.5%

Which of the following is a TRUE statement? A) The inflation rate is measured as the rate of change in the federal government budget deficit. B) The aggregate price level is measured as the rate of change in the inflation rate. C) Money or the money supply is defined as Federal Reserve notes. D) The average price of goods and services in an economy is called the aggregate price level.

d) The average price of goods and services in an economy is called the aggregate price level.

Strong U.S. dollar against Chinese yuan favors _______ . a) the U.S. importers. b) the U.S. consumers c) the Chinese exporters d) all of the above e) only (a) and (c) of the above

d) all of the above

An inflation rate can measured by the change in ____________. a) the consumer price index (CPI) b)the producer price index (PPI) c) the GDP deflator d) any of the above e) only (a) and (b) of the above

d) any of the above

Which of the following can be used to measure inflation in a given economy? a) the consumer price index (CPI) b) the producer price index (PPI) c) the GDP deflator d) any of the above e) only (a) and (b) of the above

d) any of the above

Stocks represent the value of ______ whereas bonds represents the value of _____. a) debt; equity b) liabilities; wealth c) current wealth; future wealth d) equity; debt

d) equity; debt

According to Professor Choi, the reason why it is difficult to cure an economic illness such as a cool-down or a recession is because there are time lags. Which of the following describes the time lag that is associated with its effects being felt throughout the economy? a) administrative lag b) execution lag c) recognition lag d) impact lag

d) impact lag

According to Professor Choi, the reason why it is difficult to cure an economic illness such as a cool-down or a recession is because there are time lags. Which of the following describes the time lag that is associated with knowing whether there is an economic problem or not? a) impact lag b) execution lag c) administrative lag d) recognition lag

d) recognition lag

Which of the following is most often used in labor union contracts to adjust annual salaries or other compensations? a) the GDP deflator b) the social security inflation index c) the producer price index (PPI) d) the consumer price index (CPI) e) the purchasing power index

d) the consumer price index (CPI)

Professor Choi describes and analyzes the overall health of an economy by identifying such markets as _____? a) The labor market and the product market b) The financial market and the foreign market c) The bond market and the stock market d) all of the above e) only (a) and (b) of the above

e) only (a) and (b) of the above

What are the different markets that Professor Choi mentions in his lecture while describing and analyzing the overall health of an economy? a) The labor market and the product market b) The financial market and the foreign market c) The bond market and the stock market d) all of the above e) only (a) and (b) of the above

e) only (a) and (b) of the above

Weak U.S. dollar against Chinese yuan favors _______ . a) the U.S. exporters b) the U.S. consumers c) the Chinese importers d) all of the above e) only (a) and (c) of the above

e) only (a) and (c) of the above

If a Japanese company produces and sells $1 million of cars in the U.S., it would be included in _______ of the U.S. a) the Gross National Product (GNP) b) the National Total Product c) the Economic Growth Rate (EGR) d) the Gross Total Product (GTP) e) the Gross Domestic Product (GDP)

e) the Gross Domestic Product (GDP)

The total market value of all final goods and services produced by the factors of production owned by citizens and companies of a given country during a given year, regardless of location of production, is known as _______. a) the National Total Product b) the Gross Domestic Product (GDP) c) the Gross Total Product (GTP) d) the Economic Growth Rate (EGR) e) the Gross National Product (GNP)

e) the Gross National Product (GNP)

An economic growth in the U.S. is measured by a change in _____. A) GDP B) GDP Deflator C) CPI D) GNP E) unemployment rates

A) GDP

Who officially determines if the U.S. economy was in a recession or not? A) The Congress B) none of these C) The news media D) The White House E) all of these

B) none of these

Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to A) remain unchanged. B) cannot be determined C) decrease. D) increase.

C) decrease.

If the CPI is 120 in 1996 and 180 in 2002, then between 1996 and 2002, prices have increased by A) 180% B) 60%. C) 80%. D) 50%.

D) 50%.

Trade surplus exists when exports are _______ imports. a) larger than b) smaller than c) the same as

a) larger than

Trade deficit exists when exports are _______ imports and trade surplus exists when exports are _______ imports. a) smaller than; larger than b) larger than; smaller than c) larger than; larger than d) smaller than; smaller than

a) smaller than; larger than

In the past around the World War 1, _______ experienced hyperinflation but _______ did not. a) the U.S.; Europe b) Both the U.S. and Europe had experienced hyperinflation c) Both the U.S. and Europe had NOT experienced hyperinflation d) Europe; the U.S.

d) Europe; the U.S.

Sustained downward movements in the business cycle are referred to as A) expansions. B) inflation. C) economic recoveries. D) recessions.

d) recessions

If your friend is unemployed because she has a mismatch of job skills, she is technically classified as a part of ______ unemployment. a) cyclical b) frictional c) seasonal d) structural

d) structural

If real GDP grows from $10 trillion in 2002 to $10.5 trillion in 2003, the growth rate for real GDP is A) 5%. B) 0.5%. C) 10%. D) 50%.

A) 5%.

The fiscal policy is formulated by the _______ while the monetary policy is formulated by the _____. A) Congress and the President; Fed B) U.S. Department of Treasury; Fed C) Federal Reserve Banking System (Fed); U.S. Department of Treasury D) tax payers; bankers E) Fed; Congress and the President

A) Congress and the President; Fed

The organization responsible for the conduct of monetary policy in the United States is the A) U.S. Treasury. B) Federal Reserve System. C) Comptroller of the Currency. D) Bureau of Monetary Affairs.

A) U.S. Treasury.

When a budget deficit occurs in the United States, the U.S. Treasury finances this deficit by A) borrowing. B) increasing the tax rate. C) imposing a moratorium of new government spending. D) printing more dollars.

A) borrowing.

The measure of the aggregate price level that is most frequently reported in the media is the A) consumer price index. B) GDP deflator. C) household price index. D) producer price index.

A) consumer price index.

Total national output of the U.S. is measured by ______ which is based on the concept of the ______ of production. A) Gross Domestic Product (GDP); ownership B) Gross Domestic Product (GDP); location C) Gross National Product (GNP); ownership D) Gross National Product (GNP); location

B) Gross Domestic Product (GDP); location

The gross domestic product is the A) the market value of all intermediate goods and services produced in an economy in a year. B) the market value of all final goods and services produced in an economy in a year. C) the value of all goods and services sold to other nations in a year. D) the value of all wealth in an economy.

B) the market value of all final goods and services produced in an economy in a year.

A key factor in producing high economic growth is A) eliminating foreign trade. B) well-functioning financial markets. C) high interest rates. D) stock market volatility.

B) well-functioning financial markets.