ECON202 EXAM 1

(Table: Unemployment Statistics for Country X) Using the data in the table, what is the natural unemployment rate for this country in the year 1995?

4%

If the production function in a country is Y = K1/2, the investment rate equals 0.25, and the depreciation rate is 0.05, then the steady-state level of output is equal to:

5 units

If GDP was $10 billion in 2010 and $11 billion in 2011 and the population grew 5% between 2010 and 2011, the growth rate of GDP per capita between 2010 and 2011 was:

5%

Which statement about the effects of patents is TRUE?

Patents increase the incentive to research and develop new products but also increase monopoly power once the products are created.

Which of the following is a concern among economists regarding the aging of the U.S. population?

Since older people are less likely to work, an aging population will lead to a decreased labor force participation rate in the United States and lower tax revenues

Which answer best explains why prices of some popular goods have fallen over time?

Technological advances have reduced production costs.

For an industrialized country experiencing a 3% growth rate in real GDP, what is the most likely reason that real GDP per capita is decreasing?

The country's population is growing faster than the growth of real GDP.

Most economists expect labor force participation rates in the United States to:

decrease over time

Diminishing returns to tractors indicates that:

having more tractors leads to more output, but at a decreasing rate.

As a city rebuilds after a hurricane destroys most of its physical capital, we would expect growth in this locale to be:

higher than average in the short run, but return to normal levels in the long run.

The labor force participation rate responds to:

incentives to work

How often is GDP reported for the U.S. economy?

quarterly

(Table: Data from Europia) Based on the data in the table, what is GDP in the economy of Europia?

$13,800

An investment of $1,000 in the bank at an annual interest rate of 4% at the same time that prices rise by 2.5% generates a real return of:

1.5%

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. What was the approximate inflation rate over the period 2009 to 2010?

1.68%

According to the quantity theory of money, if money supply is $1,000 million, the overall price level is 200, and real GDP is 50 million, then the velocity of money is equal to:

10

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is:

110 million

What makes a bigger contribution to GDP, 12 million cars sold at $28,000 each or 20 million computers sold at $1,000 each?

12 million cars

(Table: Inflation in Poland) This table shows actual inflation data for different periods in Poland. Which year was hyperinflationary?

1990

Consider the production function Y = 2 sqrt K. The level of technology in this economy is represented by the value:

2

(Table: Unemployment Statistics for Country X) Using the data in the table, what is the natural unemployment rate for this country in the year 2005?

2.9%

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year was the inflation rate the highest?

2008

Between 1960 and 1990, Argentina's money supply grew at approximately 80%. According to the quantity theory of money, inflation rates in Argentina should have been approximately _____ during this period.

80%

Which statement is NOT true?

The smaller the market, the greater the incentive to research and develop new ideas.

Services involve production that provides:

a benefit without the production of a tangible physical product.

In the Solow model, if a country's saving rate (γ) increased from 10% to 12% and it was operating at its steady state before the change, we would expect to see:

an increase in both the capital stock and output.

The labor force participation rate is highest among those:

between 25 and 54 years of age.

Volatile hyperinflation causes financial intermediation to:

break down

In the national spending approach, investment spending involves the acquisition of which of the following?

capital goods

Based on the nature of China's growth in recent years, it is likely that its growth rate will _____ in coming years.

decrease

The quantity theory of money:

describes the general relationship between money, velocity, real output, and prices.

Which doctrine indicates that an employee may quit and an employer may fire an employee at any time for any reason?

employment-at-will

Among countries with similar Solow steady states, poorer countries tend to grow _____ rich countries.

faster than

The short-term unemployment caused by the ordinary difficulties of matching employee to employer is called:

frictional unemployment

Since 1950, the female labor force participation rate in the United States:

has risen

What do we call an increase in the average level of prices in an economy?

inflation

The most likely influence of the Internet on the rate of frictional unemployment has been to:

lower it

According to the quantity theory, what causes inflation in the long run?

money supply growth

The measure of GDP that has NOT been adjusted for changes in prices is called:

nominal GPD

Using the national spending approach to measuring GDP, if Tyler buys 50 shares of Apple stock, it is included in GDP as part of:

nothing; it is not included as part of GDP

Using the national spending approach to measuring GDP, the social security checks the government sends retirees each month get included in GDP as part of:

nothing; they are not included as part of GDP.

If we hold ideas, education, and labor constant in the Solow model, then output (GDP) is a function of:

physical capital only.

When workers lose their jobs and become officially unemployed, the labor force participation rate:

remains constant

An assumption of the quantity theory of money is that real GDP growth:

remains relatively constant

Which of the following is considered investment according to the national spending approach?

spending $1,000 on a new piece of farming equipment

Diminishing returns to capital implies that _____ diminishes as more capital is added.

the marginal product of capital

A good is not rivalrous if:

two or more people can consume it at the same time.

Which of the following is NOT considered a government purchase?

unemployment checks

The factor income approach to calculating GDP states that GDP is equal to:

wages + rent + interest + profit.