Macroeconomics Test

The GDP deflator in year 2 is 110 and the GDP deflator in year 3 is 118. The rate of inflation between years 2 and 3 is A) 4.55%. B) 7.27%. C) 8%. D) 18%.

B

The Humphrey-Hawkins Act formally established a specific unemployment target for the economy of A) 2%. B) 4%. C) 6%. D) 8%.

B

The concept of "market clearing" is adopted and defended by A) Keynesian economists. B) Classical economists. C) fine-tuning economists. D) demand-side economists.

B

Which of the following is included in both the U.S. GDP and GNP? A) The value of all cars produced by Ford in Mexico. B) The value of all cars produced by General Motors in the U.S. C) The value of all cars produced by Toyota in the U.S. D) The value of cars produced by Nissan in Japan and the U.S.

B

The GDP deflator is the A) difference between real GDP and nominal GDP multiplied by 100. B) difference between nominal GDP and real GDP multiplied by 100. C) ratio of nominal GDP to real GDP multiplied by 100. D) ratio of real GDP to nominal GDP multiplied by 100.

C

The personal saving rate is A) the difference between total personal spending and personal saving. B) the difference between personal income and disposable personal income. C) the ratio of personal income to personal saving. D) the percentage of disposable personal income that is saved.

D

If GNP is $800 billion and depreciation is $90 billion, then net national product is A) $710 billion. B) $845 billion. C) $890 billion. D) $980 billion.

A

The equation for GDP using the expenditure approach is A) GDP = C + I + G + EX - IM. B) GDP = C + I + G + (IM - EX). C) GDP = C + I + G + EX + IM. D) GDP = C + I + G - EX - IM.

A

The trend of the economy is A) the long run growth path of the economy. B) the long run inflation rate. C) the long run unemployment rate. D) the short run production capacity of an economy.

A

According to the Classical model, unemployment A) could not persist because wages would rise to eliminate the excess supply of labor. B) could not persist because wages would fall to eliminate the excess supply of labor. C) could be eliminated through fiscal and monetary policies. D) could be eliminated only through government intervention.

B

All of the following explain the growth in output per worker hour during the 20th century EXCEPT A) the quality of labor improved during that period. B) the quantity of labor increased during that period. C) the quality of capital improved during that period. D) the worker capital ratio decreased during that period.

B

An auto worker in Ohio who loses her job because the company relocated the plant to another country represents an example of A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) natural unemployment.

B

An individual who cannot find a job because his or her job skills have become obsolete is an example of A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.

B

Cheryl graduated from college a month ago and is now without work. She accepted a job that will start next month. Today, Cheryl is A) not in the labor force. B) in the labor force. C) employed. D) a discouraged worker.

B

Dividends are A) government profits distributed among bondholders. B) corporate profits distributed among shareholders. C) capital gains realized by stockholders. D) promissory notes issued by corporations.

B

In the U.S. economy, the inflation rate in 1975 peaked at ________ percent. A) 10.1 B) 11.0 C) 14.2 D) 22.4

B

Personal income A) is always less than national income. B) is always greater than national income. C) may be greater than or less than national income. D) will always equal national income.

C

Personal income is national income minus A) depreciation. B) net factor income to the rest of the world. C) the amount of national income not going to households. D) imports.

C

Real GDP is gross domestic product measured A) at a constant output level but at current prices. B) in current dollars. C) in the prices of a base year. D) as the difference between the current year's GDP and last year's GDP.

C

Related to the Economics in Practice on p. 109 [421]: If a Swiss dealer sells a newly produced Swiss watch on eBay to a U.S. customer, the value of the watch is A) counted in U.S. GDP. B) counted in U.S. GDP and Swiss GDP. C) counted in Swiss GDP. D) not counted in either U.S. or Swiss GDP.

C

Related to the Economics in Practice on p. 97 [409]: F. Scott Fitzgerald's The Great Gatsby is set in the "Roaring '20s". This decade in U.S. history was characterized by A) economic expansion and high unemployment. B) recession and high unemployment. C) economic expansion and low unemployment. D) the Great Depression and stagflation.

C

Saving rates tend to ________ during boom times and ________ during recession periods. A) rise; rise B) rise; fall C) fall; rise D) fall; fall

C

Suppose that net investment in 2008 was $20 billion and depreciation was $4 billion. Gross investment in 2008 was A) $16 billion. B) $20 billion. C) $24 billion. D) $28 billion.

C

The change in business inventories is measured as A) final sales minus GDP. B) final sales plus GDP. C) GDP minus final sales. D) the ratio of final sales to GDP.

C

The single largest expenditure component in GDP is A) government spending. B) investment. C) consumption. D) net exports.

C

To bring the economy out of an inflationary period, Keynes argued that the government should A) cut both taxes and government spending. B) increase both taxes and government spending. C) increase taxes and/or decrease government spending. D) decrease taxes and/or increase government spending.

C

We can safely say that total output can increase if there is a(n) A) increase in the size of the labor force and a decrease in the productivity of workers. B) decrease in the size of capital and an increase in the productivity of machines. C) increase in the number of machines per worker. D) decrease in the number of workers per machine.

C

What type of tax affects the amount of money you pay for a product? A) direct tax B) income tax C) indirect tax D) all of the above

C

When the Fed slows the rate of growth of the money supply to slow down the economy, the unemployment type that will be directly affected is the A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) natural rate of unemployment.

C

Which of the following is NOT counted in the GNP of the United States? A) The wage of a U.S. citizen who works in a foreign country for a foreign firm. B) The interest earned by a U.S. bank on loans to a business firm located in Brazil. C) The profit earned by a restaurant located in the United States but owned by a Mexican company. D) The value of services that are produced by state and local governments in the United States.

C

Which of the following would be counted in 2003's GDP? A) the value of a loan you take in 2003 B) the value of a TV that was produced in 2002 but not sold until 2003 C) the bonus check a stockbroker gets from his/her company in 2003 D) the value of a bond sold by the federal government

C

A man is fired from his job because he was late for work too many times. While he is searching for another job he would be classified as A) not in the labor force because his employer had a legitimate reason for firing him. B) structurally unemployed. C) cyclically unemployed. D) frictionally unemployed.

D

According to Keynes, the level of employment is determined by A) flexible wages and prices. B) interest rates. C) price and wages. D) the level of aggregate demand for goods and services.

D

Discouraged workers are A) considered cyclically unemployed. B) considered structurally unemployed. C) considered frictionally unemployed. D) not considered as part of the labor force.

D

During the Great Depression, real output fell by approximately ________ and the unemployment rate rose to about ________. A) 15%; 15% B) 25%; 30% C) 30%; 40% D) 30%; 25%

D

Gross national product is the total market value of A) all final and intermediate goods and service produced by resources owned by a country in a given year. B) all final and intermediate goods and services produced in a country, regardless of who owns the resources. C) all final goods and services produced in a country in a given year, regardless of who owns the resources. D) all final goods and services produced by resources owned by a country, regardless of where production takes place.

D

If GDP is $300 billion, depreciation is $30 billion, and net factor income from the rest of the world is -$40 billion, then net national product is A) $230 billion. B) $270 billion. C) $290 billion. D) $310 billion.

D

If receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world, then A) GDP is greater than GNP. B) GDP equals GNP. C) GNP equals NNP. D) GNP is greater than GDP.

D

In normal times the number of discouraged workers is approximately ________ of the labor force. A) .5% B) 4% C) 3% D) 1%

D

Net interest is the interest on loans paid by A) businesses, households, and the government. B) businesses and households. C) businesses and the government. D) businesses.

D

Related to the Economics in Practice on p. 109 [421]: The value of the used goods sold on eBay from a U.S. seller to a U.S. buyer is A) counted in U.S. GDP but not GNP. B) counted in U.S. GNP but not GDP. C) counted in both U.S. GDP and GNP. D) not counted in either U.S. GDP or GNP.

D

Related to the Economics in Practice on p. 99 [411]: John Maynard Keynes sought to solve the economic paradox of the Great Depression, which was the coexistence of A) low production and low unemployment. B) high production and low inflation. C) high production and high inflation. D) low production and high unemployment.

D

The GDP of the U.S. in 2002 was around $10 trillion. This means A) that the value of output in the U.S. in 2002 was around $10 trillion. B) that total income in the U.S. in 2002 was around $10 trillion. C) that total spending on final goods and services in the U.S. in 2002 was around $10 trillion. D) all of the above

D

The demanders in the goods-and-services market are A) households and business firms. B) households, the government, and the rest of the world. C) the government and business firms. D) households, the government, business firms, and the rest of the world.

D

The total value of all capital goods newly produced in a given period is A) the change in business inventories. B) depreciation. C) net investment. D) gross investment.

D

The unemployment rate equals A) labor force/population. B) unemployed/employed. C) (employed - unemployed)/labor force. D) (labor force - employed)/labor force.

D

The unemployment rate equals A) labor force/population. B) unemployed/employed. C) (employed - unemployed)/labor force. D) unemployed/labor force.

D

To get the economy out of a slump, Keynes believed that the government should A) cut both taxes and government spending. B) increase both taxes and government spending. C) increase taxes and/or decrease government spending. D) decrease taxes and/or increase government spending.

D

When an individual is not working and is not looking for a job because he/she lacks any marketable job skills, he/she is A) structurally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) none of the above

D

Bob is unemployed if he A) is temporarily laid off. B) is not looking for a job. C) has looked for a job for two months and then quit looking. D) A and C are correct

A

Gross national income is A) GNP converted into dollars using an average exchange rate over several years adjusted for rates of inflation. B) GDP converted into dollars using an average exchange rate over several years adjusted for rates of inflation. C) GNP measured using an incomes approach. D) GNP divided by population.

A

If real GDP in 2008 using 2007 prices is higher than nominal GDP of 2008, then A) prices in 2008 are lower than prices in the base year. B) nominal GDP in 2008 equals nominal GDP in 2007. C) prices in 2008 are higher than prices in the base year. D) real GDP in 2008 is larger than real GDP in 2007.

A

If the GDP deflator is greater than 100, then A) nominal GDP is greater than real GDP. B) nominal GDP is lower than real GDP. C) nominal GDP equals real GDP. D) prices decreased by more than half between the current and the base years.

A

In 2006 final sales equal $350 billion and the change in business inventories is -$60 billion. GDP in 2006 A) is $290 billion. B) is $295 billion. C) is $410 billion. D) cannot be determined from this information.

A

In 2007 final sales equal $200 billion, and the change in business inventories is $50 billion. GDP in 2007 A) is $250 billion. B) is $200 billion. C) is $150 billion. D) is $40 billion.

A

In a business cycle, a peak represents the end of ________ and a trough represents the end of ________. A) an expansion; a recession B) a depression; an expansion C) a trough; a peak D) a recession; an expansion

A

In the U.S. the highest unemployment rate is for ________ and the lowest is for ________. A) African-American teenagers; white males B) men over 55; women below 25 C) African-American teenagers; white females D) African-American women over 25; white males

A

Increasing the efficiency of various employment agencies to find better matches for those looking for jobs will A) reduce the natural rate of unemployment. B) reduce structural unemployment. C) reduce cyclical unemployment. D) not affect frictional unemployment.

A

Proprietors' income is A) the income of unincorporated businesses. B) the income of all businessesincorporated and unincorporated. C) the income of sole proprietorships. D) the income of partnerships.

A

Rapid increases in the price level during periods of recession or high unemployment are known as A) stagflation. B) stagnation. C) depression. D) inflation.

A

The base year of an index is A) the year chosen for the weights in a fixed weight procedure. B) the year currently being calculated. C) the last year of the index. D) the first year of the index.

A

The capital per worker ratio is a measure of A) how many tools or machines each worker has to work with. B) how productive workers are. C) how much GDP is growing. D) how much borrowed money is needed per worker.

A

What should be subtracted from GDP to calculate national income? A) depreciation B) indirect taxes C) personal income taxes. D) net factor payments to the rest of the world

A

When an economics professor quits his/her job at a university and starts looking for a better job in another university, he/she is A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) naturally unemployed.

A

Which of the following is subtracted from national income to get to personal income? A) retained earnings B) personal interest income C) depreciation D) personal Taxes

A

Which of the following statements is TRUE? A) The unemployment rate does not tell us anything about the duration of unemployment. B) The duration of unemployment decreases during recessions. C) The duration of unemployment increases during economic expansions. D) The median duration of unemployment is usually greater than the average duration.

A

Recessions today may cause lost output in the future because during a recession A) consumption tends to fall. B) investment tends to fall. C) imports tend to fall. D) government spending tends to increase.

B

The change in capital stock in a period is equal to A) the ratio of the amount of the capital at the beginning of the period to the amount of depreciation. B) the amount of the capital stock at the beginning of the period plus gross investment minus depreciation. C) the amount of the capital at the beginning of the period plus gross investment. D) the amount of the capital at the beginning of the period minus net investment.

B

The productivity of workers is defined as the A) total output produced by the labor force. B) output produced by a worker per hour. C) number of hours a worker spends at work. D) number of workers needed to produce one day's volume of output.

B

The total income of households is A) net national product. B) personal income. C) national income. D) production income.

B

When calculating GDP, exports are ________ and imports are ________. A) added; added B) added; subtracted C) subtracted; added D) subtracted; subtracted

B

Which of the following groups has the highest unemployment rate among teenagers? A) white males B) African American males C) white females D) African American females

B

Which of the following is NOT included in 2008's GDP? A) the value of a motorcycle produced in the United States and exported to Japan B) the profit earned in 2008 from selling a stock that you purchased in 2005 C) the value of a motor that is used in the production of a lawn mower D) the commission earned by a headhunter when she locates a job for a client

B

Which of the following statements is FALSE? A) The rate of change in economic activity is used to assess whether an economy is expanding or contracting. B) Short-term ups and downs in the economy are known as business cycles. C) During a recession, output and employment are falling. D) Business cycles are always symmetricthe length of an expansion is the same as the length of a contraction.

D

The employment rate is the number of people employed divided by number of people in the labor force.

TRUE

A promissory note issued by a corporation when it borrows money is a A) share. B) corporate bond. C) corporate dividend. D) stock

B

Exports equal A) imports - net exports. B) net exports + imports. C) net exports - imports. D) imports + (exports + imports)

B

If GNP is $600 billion, receipts of factor income from the rest of the world are $50 billion, and payments of factor income to the rest of the world are $30 billion, then GDP is A) $520 billion. B) $580 billion. C) $620 billion. D) $680 billion.

B

If the personal saving rate is 5% and personal saving is $10 billion, the value of personal disposable income A) is $100 billion. B) is $200 billion. C) is $500 billion. D) cannot be determined from this information.

B

In the goods-and-services market, households A) only supply. B) only demand. C) both supply and demand. D) neither supply nor demand.

B

Nominal GDP is gross domestic product measured A) in the prices of a base year. B) in current dollars. C) at a constant output level but at the base-year prices. D) as the difference between the current year's GDP and last year's GDP.

B

Nominal GDP measures the value of all goods and services A) in constant dollars. B) in current dollars. C) in fixed dollars. D) without inflation.

B

Per capita gross national income (GNI) decreases when A) GNI and the population increase at the same rate. B) GNI does not change and the population increases. C) GNI and the population decrease at the same rate. D) GNI increases and the population does not change.

B

Depreciation is A) subtracted from national income to get GDP. B) added to national income to get GDP. C) subtracted from GNP to get NNP. D) added to GNP to get NNP.

C

During the U.S. recession of 1980-1982, the unemployment rate reached a high of ________ percent. A) 7.6 B) 8.8 C) 10.7 D) 22.4

C

During the severe recession of the early 1980s, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment would have A) increased the natural rate of unemployment. B) decreased the natural rate of unemployment. C) had no effect on the natural rate of unemployment. D) caused structural unemployment to decrease.

C

For the 1952-2003 period in the United States, output per worker hour A) increased at a constant rate. B) decreased during the 1960s. C) fluctuated around an upward trend. D) showed the largest increase during the 1980s.

C

Gross domestic product measured in terms of the prices of a fixed, or base, year is A) current GDP. B) base GDP. C) real GDP. D) nominal GDP.

C

If national income is $600 billion, personal income is $400 billion, personal taxes are $120 billion, then disposable income equals A) $480 billion. B) $320 billion. C) $280 billion. D) $80 billion.

C

If net investment is zero, then A) gross investment is greater than depreciation. B) gross investment is less than depreciation. C) gross investment equals depreciation. D) depreciation is zero.

C

If real GDP in 2007 using 2006 prices is lower than nominal GDP of 2007, then A) prices in 2007 are lower than prices in 2006. B) nominal GDP in 2007 equals nominal GDP in 2006. C) prices in 2007 are higher than prices in 2006. D) real GDP in 2007 is larger than real GDP in 2006.

C

If the unemployment rate is 6.2% and the number of people employed is 200,000, the labor force is approximately A) 212,400 people. B) 210,970 people C) 213,220 people. D) cannot be determined from this information

C

If the unemployment rate is 6.2% and the number of people employed is 200,000, the total number of people unemployed is approximately A) 12,400 people B) 10,970 people. C) 13,220 people. D) cannot be determined from this information

C

In 2008 the change in business inventories is -$70 billion and GDP is $200 billion. Final sales in 2008 A) are $130 billion. B) are $200 billion. C) are $270 billion. D) are $340 billion.

C

In which of the following markets are funds demanded and supplied? A) the labor market B) the goods and services market C) the money market D) the factor market

C

Net national product is A) GDP plus depreciation. B) GDP minus depreciation. C) GNP minus depreciation. D) GNP plus depreciation.

C

According to Keynes, aggregate supply determines the level of economic activities in the economy.

FALSE

GDP measures the total income of everyone and the total spending by everyone in the economy.

FALSE

Keynes believed that expansionary fiscal policy could help get an economy out of an inflation.

FALSE

Stock market transactions are part of GNP

FALSE