Macro Exam 2 Practice Sets

T/F The largest spending category in GDP is consumption.

True

Enchante Inc., a designer clothing company, buys $400 worth of silk from a silk trader and $30 worth of accessories from AccessoriesRuS to produce each dress. If the value added by Enchante is equal to $200, then according to the value-added approach, the price of the designer dress should be: A) $630. B) $230. C) $200. D) $830.

A) $630.

(Figure: Circular-Flow Model) If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of that box), which of the following is likely to happen if there is a decrease in exports? A) a decrease in the nominal GDP B) an increase in the real GDP C) a decrease in the unemployment rate D) an increase in the inflation rate

A) a decrease in the nominal GDP

An example of a factor that causes the natural rate of unemployment to rise is: A) a population boom that increases the number or young workers joining the labor force. B) the loss of labor union membership across industries. C) because of the loss of retirement funds, more people in the baby boom generation continue to work past the typical retirement age. D) the use of new technology in the workplace that increases labor productivity.

A) a population boom that increases the number or young workers joining the labor force.

A stock in a company is: A) a share of ownership of a company held by a shareholder. B) an IOU that pays interest. C) a portion of a firm's profits paid to stock owners. D) part of private savings.

A) a share of ownership of a company held by a shareholder.

Nominal GDP: A) has not been adjusted for changes in prices over time. B) has been adjusted for changes in prices over time. C) is a small or nominal amount of output. D) excludes the international sector.

A) has not been adjusted for changes in prices over time.

Structural changes in an economy as well as changes in consumer tastes are reasons for: A) job creation and job destruction. B) job searches. C) unemployment during recessions. D) unemployment during expansions.

A) job creation and job destruction.

People who are counted as unemployed by the government are: A) people without a job who are actively seeking a job. B) discouraged workers. C) workers who are underemployed. D) people without a job who are actively seeking a job, discouraged workers, and workers who are underemployed

A) people without a job who are actively seeking a job.

GDP is the: A) total market value of all final goods and services produced in one year. B) total accumulated wealth of an economy. C) volume of all dollar transactions made in an economy in one year. D) dollar amount of all sales made in the economy in one year.

A) total market value of all final goods and services produced in one year.

Which of the following would NOT be a part of GDP? A) used car sales B) new residential construction C) a new truck purchased by a building contractor D) telephone service purchased for a home

A) used car sales

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is: A) 2%. B) 5%. C) 7%. D) 9%.

B) 5%.

If the CPI is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about: A) 5.26%. B) 5.56%. C) 6.5%. D) 10%.

B) 5.56%.

Which one of the following is an example of consumption expenditure? A) Samantha bought an oven for her cooking show on Food Network. B) Stephanie bought a laptop for her brother. C) Jim purchased 200 shares of Google stock. D) Mr. Smith spent $1,500 to buy a used car for his son.

B) Stephanie bought a laptop for her brother.

In 2010, _____ was the largest component of U.S. GDP, at approximately 70% of the total aggregate spending. A) government spending B) consumer spending C) investment spending D) net export spending

B) consumer spending

Which of the following would accurately characterize the portion of a firm's profit paid to the owner of one share of its stock? A) interest B) dividend C) stock D) bond

B) dividend

Goods that are produced in a particular period but NOT sold in that period: A) go into inventory and are called consumption. B) end up in inventory and are included in investment. C) are finally included in depreciation when they are sold. D) are classified as intermediate goods.

B) end up in inventory and are included in investment.

The GDP deflator is: A) a price index. B) equal to 100 in the base year. C) the ratio of real GDP for year X divided by nominal GDP for year X × 100. D) a measure that tracks price changes for consumer goods.

B) equal to 100 in the base year.

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's: A) disposable income. B) gross domestic product. C) trade deficit. D) value added.

B) gross domestic product.

To be classified as unemployed, a worker must: A) be working less than full time (40 hours a week). B) not have a job and must be actively looking for work. C) not be looking for a job and must not have a job. D) be a discouraged worker.

B) not have a job and must be actively looking for work.

An example of an intermediate good is: A) wages paid to an employee. B) steel purchased by aircraft manufacturers. C) vegetables purchased for your dinner. D) electric bills for the office.

B) steel purchased by aircraft manufacturers.

The total volume of business sales in the economy is much larger than GDP because: A) GDP understates the value of total output. B) the output approach to measuring GDP excludes intermediate transactions. C) GDP includes transfer payments. D) GDP excludes exports.

B) the output approach to measuring GDP excludes intermediate transactions.

Unemployment rates tend to: A) be the same across geographic areas. B) vary depending upon age groups and ethnicities. C) increase when an expansion in the economy occurs. D) stay the same only when there is cyclical unemployment.

B) vary depending upon age groups and ethnicities.

Assume that the real GDP of the United States is approximately $12 trillion and the population of the United States is approximately 300 million. What is per capita real GDP? A) $4,000 B) $36,000 C) $40,000 D) Real per capita GDP can't be determined without more information.

C) $40,000

Which one of the following price indexes measures the cost of living? A) producer price index B) wholesale price index C) CPI D) GDP deflator

C) CPI

Which of the following statements is true concerning the producer price index? A) The producer price index is just another term for the GDP deflator. B) Changes in the producer price index generally follow changes in the CPI. C) The producer price index measures the cost of a basket of goods typically purchased by producers. D) The producer price index shows how the cost of all purchases by urban families changes.

C) The producer price index measures the cost of a basket of goods typically purchased by producers.

Suppose only two countries existed in the world. Country A imported $200 million worth of goods and services from country B. Country B imported $100 million worth of goods and services from country A. Net exports for: A) country A equal $200 million. B) country B equal $200 million. C) country A equal -$100 million. D) country B equal -$100 million.

C) country A equal -$100 million.

Goods and services sold to people in other countries are known as: A) imports. B) investments. C) exports. D) transfer payments.

C) exports.

Ron quit his job in retail management and moved to Florida with his wife, a physician who opened a new practice there. He was not successful in his job search for the next four months. Ron's unemployment is known as: A) structural unemployment. B) cyclical unemployment. C) frictional unemployment. D) seasonal unemployment.

C) frictional unemployment.

If more women enter or reenter the labor force, the natural rate of unemployment is expected to: A) decrease. B) remain unchanged. C) increase. D) decrease if they are well educated.

C) increase.

Which of the following would NOT be considered a government transfer? A) unemployment compensation B) food stamps C) payments by the Defense Department for a new weapons system D) Medicare benefits paid to someone who is indigent

C) payments by the Defense Department for a new weapons system

If the price level in the economy and the nominal wages both doubled, then real wages would: A) also double. B) increase by half. C) remain unchanged. D) decrease by half.

C) remain unchanged.

The percentage of the labor force that is unemployed is the: A) labor force participation rate. B) employment ratio. C) unemployment rate. D) natural employment rate.

C) unemployment rate.

T/F A high unemployment rate implies a high level of GDP

False

T/F Discouraged workers is another term for the unemployed.

False

T/F If the United States exports $500 of goods and services and imports $700 of goods and services, net exports are $1,200.

False