econ test 2

Which of the following statements is correct

Most buyers of stocks and bonds prefer those issued by large and familiar companies

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

$4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars

In 2009, the imaginary nation of Platland had a population of 10,000 and real GDP of 42,000,000. During the year its real GDP grew by about 1.98%. Which of the following sets of growth rates is consistent with this growth in real GDP

1% population growth and 3% real GDP growth

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2004 was

104

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00. Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7. Taking these four transactions into account, how much is added to GDP?

19

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

37.11

Last year real GDP per person in the imaginary nation of Olympus was 4,500. The year before it was 4,250. By about what percentage did Olympian real GDP per person grow during the period?

5.9 percent

The traditional view of the production process is that capital is subject to a. diminishing returns, so that other things the same real GDP in poor countries should grow at a faster rate than in rich countries. b. diminishing returns, so that other things the same real GDP in poor countries should grow at a slower rate than in rich countries. c. increasing returns, so that other things the same real GDP in poor countries should grow at a faster rate than in rich countries. d. increasing returns, so that other things the same real GDP in poor countries should grow at a slower rate than in rich countries

A

The traditional view of the production process is that capital is subject to a. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. b. diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries. c. increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. d. increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries

A

On a production function, as capital per worker increases, output per worker a. increases. This increase is larger at larger values of capital per worker. b. increases. This increase is smaller at larger values of capital per worker. c. decreases. This decrease is larger at larger value of capital per worker. d. decreases. This decrease is smaller at larger value of capital per worker.

B

The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis a. is positive and gets steeper as capital per worker rises. b. is positive and gets flatter as capital per worker rises. c. is negative and gets steeper as capital per worker rises. d. is negative and gets flatter as capital per worker rises

B

The traditional view that the production process has diminishing returns implies that a. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. b. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. c. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. d. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones

D

The traditional view that the production process has diminishing returns implies that a. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. b. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. c. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. d. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones

D

How is net national product (NNP) calculated?

Depreciation losses are subtracted from the total income of a nation's citizens

Which of the following is correct

Historically, in periods where the rate of population growth was high, so was the rate of growth in world real GDP per person

96.1 so prices are lower than in the base yea

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is

A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them before the end of the second quarter, and holds the others in its warehouse. How will the 200,000 unsold DVDs be treated in the GDP statistics?

The DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP

The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result

U.S. government purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP is unaffected

Rachel babysits for her sister for no pay. When she babysits for someone else she charges $8 an hour. When is Rachel's babysitting included in GDP?

When she babysits for someone else, but not when she babysits for her sister

Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods. Laborland has a population of 5,000, of whom 4,000 work 12 hours a day to produce a total of 120,000 final goods

Workland has higher productivity but lower real GDP per person than Laborland

When the relative price of a good increases, consumers respond by buying

a smaller quantity of that good and a larger quantity of substitutes for that good

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily

market prices

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

bond

Consider three imaginary countries. In Old York, saving amounts to $3,000 and consumption amounts to $7,000; in New Frank, saving amounts to $2,000 and consumption amounts to $8,000; and in Ganzee, saving amounts to $4,500 and consumption amounts to $10,500. The saving rate is a. higher in Old York than in Ganzee, and it is higher in Ganzee than in New Frank. b. higher in New Frank than in Ganzee, and it is higher in Ganzee than in Old York. c. higher in Ganzee than in New Frank, and it is the same in New Frank and Old York. d. higher in Old York than in New Frank, and it is the same in Old York and Ganzee.

d

In the actual economy, households

divide their income among spending, taxes, and saving

If a firm sells a total of 100 shares of stock, then

each share represents ownership of 1% of the firm

Government purchases include spending on goods and services by

federal, state, and local governments

the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.

generally move together

Much of macroeconomics attempts to explain

long-run growth and short-run fluctuations in real GDP

In the United States, real interest rates were

low in the 1970s and high in the 1990s

Changes in the GDP deflator reflect

only changes in prices

If natural resources had become scarcer, then we would expect their

prices to have risen more than inflation, but they have not

Over the last ten years productivity grew faster in Oceania than in Freedonia and the population and total hours worked remained the same in both countries. It follows that

real GDP per person grew faster in Oceania than in Freedonia

Other things being constant, when a firm sells new shares of stock, the

supply of the stock increases and the price decreases

An important difference between the GDP deflator and the consumer price index is that

the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.

Total income from the domestic production of final goods and services equals

the expenditures for these goods whoever buys them

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

the method to reduce costs of producing automobile glass, but not the formula for the substance that prevents smudging