ECON 201 Test 2

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about A. 1.6 percent. B. 3.4 percent. C. 4.1 percent. D. 2.8 percent.

A. 1.6 percent.

Refer to the table. Between years 1 and 2, real GDP per capita grew by approximately ________ percent in Alta. A. 4 B. 10 C. 3 D. 5

A. 4

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000, real GDP A. increased by $60 billion. B. decreased by $32 billion. C. increased by $117 billion. D. increased by $100 billion.

A. Increased by $60 billion.

Which of the following is correct? A. Total output = worker-hours × labor productivity. B. Labor productivity = worker-hours/total output. C. Total output = labor productivity/worker-hours. D. Worker-hours = labor productivity × total output.

A. Total output = worker-hours × labor productivity.

The largest component of total expenditures in the United States is A. consumption. B. government purchases. C. gross investment. D. net exports.

A. consumption.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Based on this information, positive net investment is occurring in A. economy C only. B. economy A only. C. economies A and B only. D. economy B only.

A. economy C only.

Economic growth is best defined as an increase in A. either real GDP or real GDP per capita. B. wealth in the economy. C. nominal GDP. D. total consumption expenditures.

A. either real GDP or real GDP per capita.

Net exports are A. exports less imports. B. imports less exports. C. exports plus imports. D. that portion of consumption and investment goods sent to other countries.

A. exports less imports.

Personal income will equal disposable income when A. corporate profits are zero. B. personal taxes are zero. C. Social Security contributions are zero. D. transfer payments are zero.

B. personal taxes are zero.

The problematic trend in the "inverse dependency ratio" in the U.S. is likely to show up first in A. agriculture. B. Social Security. C. national defense. D. the manufacturing sector.

B. Social Security.

A large negative GDP gap implies A. a sharply rising price level. B. a high rate of unemployment. C. a low rate of unemployment. D. an excess of imports over exports.

B. a high rate of unemployment.

The phase of the business cycle in which real GDP declines is called A. the trough. B. a recession. C. an expansion. D. the peak.

B. a recession.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are A. military goods and capital goods. B. capital goods and durable consumer goods. C. clothing and education. D. services and nondurable consumer goods.

B. capital goods and durable consumer goods.

In national income accounting, the consumption category of expenditures includes purchases of A. changes in business inventories. B. consumer durable goods, consumer nondurable goods, and services. C. consumer durable goods and consumer nondurable goods but not services. D. both new and used consumer goods.

B. consumer durable goods, consumer nondurable goods, and services.

GDP can be calculated by summing A. consumption, investment, wages, and rents. B. consumption, investment, government purchases, and net exports. C. consumption, investment, government purchases, exports, and imports. D. consumption, investment, government purchases, and imports.

B. consumption, investment, government purchases, and net exports.

The type of unemployment associated with recessions is called A. structural unemployment. B. cyclical unemployment. C. frictional unemployment. D. seasonal unemployment.

B. cyclical unemployment.

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is A. structurally unemployed. B. frictionally unemployed. C. not a member of the labor force. D. cyclically unemployed.

B. frictionally unemployed.

Network effects are A. the change in real GDP resulting from a change in investment or government spending. B. increases in the value of a product to each user, including existing users, as the total number of users rises. C. increases in demand resulting from products being mentioned positively in a television program. D. reductions in per-unit production cost as firms learn by doing.

B. increases in the value of a product to each user, including existing users, as the total number of users rises.

The Industrial Revolution and modern economic growth resulted in A. increased production by local craftspeople. B. the average human lifespan more than doubling. C. all of these. D. a major population shift from urban to rural areas.

B. the average human lifespan more than doubling.

The "inverse dependency ratio" is defined as the ratio of A. the average number of dependents per head of household. B. the working-age population to the number of dependents. C. the number of dependents to the number of the total population. D. the number of parents and grandparents to the number of children.

B. the working-age population to the number of dependents.

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is A. $500. B. $2,300. C. $1,200. D. $1,100.

C. $1,200.

If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately A. 22 years. B. 8 years. C. 14 years. D. 20 years.

C. 14 years.

The table contains information about the hypothetical economy of Scoob. All figures are in millions. The unemployment rate in Scoob is A. 5.0 percent. B. 3.2 percent. C. 6.9 percent. D. 2.5 percent.

C. 6.9 percent.

The United States' economy is considered to be at full employment when A. 90 percent of the labor force is employed. B. about 5 to 6 percent of the total population is unemployed. C. about 5 to 6 percent of the labor force is unemployed. D. 100 percent of the labor force is employed.

C. about 5 to 6 percent of the labor force is unemployed.

Critics of economic growth A. say that its benefits accrue nearly exclusively to white males. B. point out that growth results in greater economic security for workers. C. argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth. D. contend that growth and industrialization reduce pollution.

C. argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

Given the annual rate of economic growth, the "rule of 70" allows one to A. determine the growth rate of per capita GDP. B. calculate the size of the GDP gap. C. calculate the number of years required for real GDP to double. D. determine the accompanying rate of inflation.

C. calculate the number of years required for real GDP to double.

A nation's gross domestic product (GDP) A. can be found by summing C + S + G + Xn. B. is always some amount less than its NDP. C. can be found by summing C + Ig + G + Xn. D. is the dollar value of the total output produced by its citizens, regardless of where they are living.

C. can be found by summing C + Ig + G + Xn.

The table contains information about the hypothetical economy of Scoob. All figures are in millions. If the natural rate of unemployment in Scoob is 5 percent, then A. structural unemployment is about 3 percent. B. hidden unemployment is about 5 percent. C. cyclical unemployment is about 2 percent. D. frictional unemployment is about 2 percent.

C. cyclical unemployment is about 2 percent.

Human capital refers to the A. amount of financing available to start-up firms. B. tools and equipment available to workers. C. education, training, and skills of workers. D. number of workers available in the economy.

C. education, training, and skills of workers.

The natural rate of unemployment is the A. unemployment rate experienced at the depth of a depression. B. unemployment rate experienced by the least-skilled workers in the economy. C. full-employment rate. D. unemployment rate experienced by the most-skilled workers in the economy.

C. full-employment rate.

An unexpected increase in total spending will cause an increase in GDP A. only if prices are stuck in the long term. B. regardless of whether prices are sticky or fully flexible. C. if prices are sticky. D. if prices are fully flexible.

C. if prices are sticky.

A nation's gross domestic product (GDP) A. can be found by summing C + In + S + Xn. B. is the dollar value of all final output produced by its citizens, regardless of where they are living. C. is the dollar value of all final output produced within the borders of the nation during a specific period of time. D. is always some amount less than C + Ig + G + Xn.

C. is the dollar value of all final output produced within the borders of the nation during a specific period of time.

National income accountants can avoid multiple counting by A. counting both intermediate and final goods. B. only counting intermediate goods. C. only counting final goods. D. including transfer payments in their calculations.

C. only counting final goods.

The natural rate of unemployment is A. lower than the full-employment rate of unemployment. B. found by dividing total unemployment by the size of the labor force. C. that rate of unemployment occurring when the economy is at its potential output. D. higher than the full-employment rate of unemployment.

C. that rate of unemployment occurring when the economy is at its potential output.

Core inflation measures A. underlying increases in the CPI after removing volatile food and energy prices. B. changes in the prices of the most commonly used goods, including food and energy. C. underlying changes in the CPI, after accounting for the price volatility of high-tech goods. D. changes in key input prices.

C. underlying increases in the CPI after removing volatile food and energy prices.

Official unemployment statistics A. overstate unemployment because workers who are involuntarily working part time are counted as being employed. B. include cyclical and structural unemployment but not frictional unemployment. C. understate unemployment because discouraged workers are not counted as unemployed. D. understate unemployment because individuals receiving unemployment compensation are counted as employed.

C. understate unemployment because discouraged workers are not counted as unemployed.

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is A. $490 billion. B. $990 billion. C. $10 billion. D. $510 billion.

D. $510 billion.

The value added of a firm is the market value of A. the firm's inputs bought from others. B. the firm's output. C. a firm's output plus the value of the inputs bought from others. D. a firm's output less the value of the inputs bought from others.

D. a firm's output less the value of the inputs bought from others.

Which of the following is not a supply factor in economic growth? A. technological advance B. the stock of capital C. the size and quality of the labor force D. aggregate expenditures of households, businesses, and government

D. aggregate expenditures of households, businesses, and government

If the economy's real GDP doubles in 18 years, we can A. conclude that its average annual rate of growth is about 2.4 percent. B. not say anything about the average annual rate of growth. C. conclude that its average annual rate of growth is about 5.5 percent. D. conclude that its average annual rate of growth is about 3.9 percent.

D. conclude that its average annual rate of growth is about 3.9 percent.

Which of the following best measures improvements in the standard of living of a nation? A. growth of national income B. growth of nominal GDP C. growth of real GDP D. growth of real GDP per capita

D. growth of real GDP per capita