Macroeconomics Test One

A statement that is often used to describe demand-pull inflation is:

"Too much money chasing too few goods" (Q5)

In year 1, nominal GDP for the United States was $2,250 billion and in year 2 it was $2,508 billion. The GDP deflator was 72 in year 1 and 79 in year 2. Between year 1 and year 2, real GDP rose by:

1.6 percent (Q3)

The table below shows the quantity of labor (measured in hours) and the productivity of labor (measured in real GDP per hour) in a hypothetical economy in three different years. Refer to the above table. Between Year 2 and Year 3, real GDP increased by:

10 percent (Q4)

Refer to the above table. What is the GDP price index in Year 1?

108.3 (Q3)

Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Refer to the above data. If year 2 is the base year, the price index for year 3 is:

133 (Q5)

During the Great Depression of the 1930s, U.S. real GDP fell by about ____ percent, in comparison to the ______ percent decline during the Great Recession of 2007-09.

27; 3.7 (Q5)

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is:

28 years (Q4)

At what average annual rate has real GDP and real GDP per capita, respectively, grown from 1950 to 2012?

3.1 percent and about 2 percent (Q4)

A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. Its population was 122 million in 2013 and 125 million in 2014. What is the growth rate of real GDP per capita in 2014?

3.4% (Q4)

In 2011, what percent of adults in the U.S. were college graduates or higher?

30% (Q4)

The table below shows the quantity of labor (measured in hours) and the productivity of labor (measured in real GDP per hour) in a hypothetical economy in three different years. Refer to the above table. Between Year 1 and Year 2, real GDP increased by:

5.0 percent (Q4)

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation is approximately:

5.9 percent (Q5)

The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is:

6.4 percent (Q5)

A person's real income will increase by 3% if her nominal income:

Increases by 5% while the price index rises by 2% (Q5)

Which of the following is the single most important source of U.S. economic growth?

Increases in labor productivity (Q4)

Which of the following is a measure of economic growth that is most useful for comparing living standards?

Increases in real GDP per capita (Q4)

A point or product-combination to the left of and inside a budget line:

Is attainable, but a combination or point to the right of the line is unattainable (Q1)

The best example of a "frictionally unemployed" worker is one who:

Is in the process of voluntarily switching jobs (Q5)

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

Kendra must decide between going to Colorado or Cancun for spring break (Q1)

The unemployment rate is interpreted as the percentage of the:

Labor force that are not employed (Q5)

Modern economic growth often results in the following, except:

Less time for ordinary people to enjoy leisure activities because the primary focus is on production and work (Q4)

Teresa eats three oranges during a particular day. The marginal benefit she enjoys from eating the third orange

can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges (Q1)

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

market prices (Q3)

If consumer incomes increase, the demand for product X:

may shift either to the right or left (Q2)

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because

measuring them is so difficult (Q3)

An antigrowth view would be that there may be a significant tradeoff between productivity and:

The quality of life (Q4)

The expenditures or output approach to GDP measures it by summing up:

The total spending for consumption, investment, net exports, and government purchases (Q3)

The opportunity cost of doing or getting something is best and fully defined as:

The value of the best alternative that is given up in order to do or get something (Q1)

The local Chevrolet dealership has an increase in inventory of 25 cars in 2006. In 2007, it sells all 25 cars. Which of the following statements is correct?

The value of the cars in inventory will be counted as part of 2006 GDP, and the value of the cars sold in 2007 will not increase 2007 GDP (Q3)

One concern regarding educational attainment in the U.S. is that:

There are fewer college graduates in science and engineering (Q4)

Traci is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $3,000 and replacing the roof will cost her $6,000. Traci expects the new carpeting to increase the value of her house by $2,500 and the new roof to increase the value of her house by $7,500.

Traci should replace the roof but not replace the carpeting (Q1)

Which of the following is the correct way to calculate the unemployment rate?

[(unemployed)/(labor force)] × 100 (Q5)

Which of the following is not an example of a durable good?

a business suit (Q3)

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes (Q2)

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP

necessarily increases (Q3)

What you give up to obtain an item is called your

opportunity cost (Q1)

If the supply and demand curves for a product both decrease, then equilibrium:

quantity must decline, but equilibrium price may rise, fall, or remain unchanged (Q2)

For which of the following individuals would the opportunity cost of going to college be highest?

a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree (Q1)

Which of the following is not an example of a nondurable good?

a microwave (Q3)

To compute GDP, we

add up the market values of all final goods and services (Q3)

One effect of the government-imposed seat belt law in the U.S. has been

an increase in the number of accidents (Q1)

Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called

an intermediate good (Q3)

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry (Q2)

People are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water (Q1)

GDP is defined as

the market value of all final goods and services produced within a country in a given period of time (Q3)

If there is a shortage of product X, and the price is free to change:

the price of the product will rise (Q2)

When computing the opportunity cost of attending a concert you should include

the price you pay for the ticket and the value of your time (Q1)

A good is produced by a firm in 2007, added to the firm's inventory in 2007, and sold to a household in 2008. It follows that

the value of the good is added to the investment category of 2007 GDP and subtracted from the investment category of 2008 GDP (Q3)

A good is produced by a firm in 2007, added to the firm's inventory in 2007, and sold to a household in 2008. It follows that

the value of the good is added to the investment category of 2007 GDP, added to the consumption category of 2008 GDP, and subtracted from the investment category of 2008 GDP (Q3)

For most students, the largest single cost of a college education is

the wages given up to attend school (Q1)

Firm A produces something that Firm B uses as an input. The product of Firm B, in turn, is purchased and used as an input by Firm C, and so on down the line through Firm E, which produces the end product. The total value added by Firms A-E from the production of the end product described here is:

$3,800 (Q3)

Refer to the above table. What was real GDP in Year 2?

$4,875 billion (Q3)

Refer to the diagram. If this is a competitive market, price and quantity will move toward:

$40 and 150, respectively (Q2)

Assume that an economy has 1500 workers, each working 2000 hours per year. If the average real output per worker-hour is $20, then total output or real GDP will be:

$60 million (Q4)

Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Refer to the above data. In year 4, nominal GDP would be:

$90 (Q3)

Over a ten-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately:

7 percent (Q5)

Roughly, consumer spending (C) accounts for how much of GDP?

70% (Q3)

Assume that a consumer has a given budget or income of $12, and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. Refer to the information given above. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?

8 apples or 16 bananas (Q1)

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

8 percent (Q5)

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods (Q2)

The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using:

A monetary measure (Q3)

Which of the following would not shift the demand curve for beef?

A reduction in the price of cattle feed (Q2)

Which of the following will cause the demand curve for product A to shift to the left?

An increase in money income if A is an inferior good (Q2)

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

An increase in supply (Q2)

A point inside the production possibilities curve is ____ while a point outside the curve is ____.

Attainable; unattainable (Q1)

If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms. We refer to that adjustment as:

Deflating GDP (Q3)

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking the marginal:

Cost of going to the movies is less than the marginal benefit of going to the movies (Q1)

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Cyclical (Q5)

Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?

D only (Q2)

In an economy, the value of inventories was $75 billion in 2009 and $63 billion in 2010. In calculating total investment for 2010, national income accountants would:

Decrease it by $12 billion (Q3)

The main cause for the vast differences in per capita GDP levels seen across the globe today is the:

Different starting dates of modern economic growth in different parts of the world (Q4)

Human capital refers to the:

Education, training, and skills of workers (Q4)

An example of final goods in national income accounts would be:

Flowers and pots purchased by homeowner Joe Smith (Q3)

In the modern economic growth process, it is typical to find that:

Follower countries can grow faster than leader countries (Q4)

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

GDP increases by $5.00 (Q3)

Which of the following statements about GDP is correct?

GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. GDP is generally regarded as the best single measure of a society's economic well-being. (Q3)

Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800 once the repairs are complete. Mike discovers that, in addition to the $500 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $800 to potential buyers. He can sell the boat as it is now for $300. What should he do?

He should complete the repairs and sell the boat for $800 (Q1)

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual(s) would be included in the calculation of the natural unemployment rate?

Mollie and Jeanette (Q5)

Nation A's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation B's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is true?

Nation A's and Nation B's GDP per capita both increased from 2013 to 2014 (Q4)

Nation A's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation B's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is true?

Nation A's real GDP growth in 2014 is higher than Nation B's (Q4)

The rate of unemployment when the economy is at its potential output is called the:

Natural rate of unemployment (Q5)

The GDP deflator or price index equals:

Nominal GDP divided by real GDP (Q3)

The largest expenditure component of GDP is:

Personal consumption expenditures (Q3)

If the price index in year A is 130, this means that:

Prices in year A are on average 30 percent higher than in the base year (Q5)

Which of the following is not included in personal consumption expenditures?

Purchases of mutual funds by consumers (Q3)

A recession is a decline in:

Real GDP that lasts six months or longer (Q5)

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Real estate and financial markets (Q5)

Which phase of the business cycle would be most closely associated with an economic contraction?

Recession (Q5)

For a person to keep his real income steady at a certain level from one year to the next, his nominal income must:

Rise as fast as the price index (Q5)

A major effect of the rise in the rate of productivity growth in the United States is a(n):

Rise in the growth of living standards (Q4)

The basic truth that underlies the study of economics is the fact that we all face:

Scarcity (Q1)

Assume a nation's current production possibilities are represented by the curve AB in the above diagram. Economic growth would best be indicated by a:

Shift in the curve from AB to CD (Q4)

The factor accounting for the largest increase in the productivity of labor in the United States has been:

Technological advance (Q4)

What does "there is no such thing as a free lunch" mean in economics?

That scarce resources are used up to provide "freebies" and giveaways (Q1)

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

The Consumer Price Index (Q5)

The total volume of business sales in our economy is several times larger than GDP because:

The GDP excludes intermediate transactions (Q3)

Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

caused measured GDP to rise (Q3)

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

compare the cost of staying one more semester to the benefits of staying one more semester (Q1)

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:

decrease, quantity demanded will increase, and quantity supplied will decrease (Q2)

Economists use the word equality to describe a situation in which

each member of society has the same income (Q1)

Gasoline is considered a final good if it is sold by a

gasoline station to a motorist in Los Angeles (Q3)

One can say with certainty that equilibrium price will decline when supply:

increases and demand decreases (Q2)

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that

people face trade-offs (Q1)

The demand curve shows the relationship between:

price and quantity demanded (Q2)

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right (Q2)

An increase in product price will cause:

quantity demanded to decrease (Q2)