EC 202
The quantity demanded of a good or service is the amount that (a) a consumer would like to buy but might not be able to afford. (b) consumers plan to buy at a given price. (c) firms are willing to sell at a given price
B
The supply curve slopes upward when graphed against ________, because of ________. (a) income; increasing marginal cost (b) the price of the good; increasing marginal cost (c) the price of the good; decreasing marginal cost (d) income; decreasing marginal cost
B
When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing (a) frictional unemployment. (b) structural unemployment. (c) frictional and cyclical unemployment. (d) cyclical unemployment.
B
Which of the following explains why supply curves slope upward? (a) prices and income (b) increasing marginal cost (c) resources and technology
B
Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced. (a) I and II (b) I and III (c) II and III (d) I, II and III
B
Which of the following is TRUE regarding the real wage rate? The real wage rate I. is always greater than the money wage. II. measures the quantity of goods and services an hour's work can buy. (a) only I (b) only II (c) both I and II (d) neither I nor II
B
Which of the following is consistent with the law of demand? (a) An increase in the price of a DVD causes an increase in the quantity of DVDs demanded. (b) An increase in the price of a soda causes a decrease in the quantity of soda demanded. (c) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded. (d) A decrease in the price of juice causes no change in the quantity of juice demanded.
B
Which of the following most likely would decrease frictional unemployment? (a) a decrease in the number of high school and college graduates (b) effective Internet-based employment services and job registries (c) an expansion of unemployment compensation benefits (d) All of the above would decrease frictional unemployment.
B
Which population category equals the sum of employed and unemployed people? (a) working-age population (b) labor force (c) young and institutionalized (d) not in the labor force
B
Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town is (a)There is not enough information provided to calculate the unemployment rate. (b)10/80×100. (c)10/70×100. (d)10 percent.
(a)
Which of the following statements is CORRECT? (a)None of the other statements are correct. (b)When the real wage increases, the labor supply curve shifts rightward. (c)When the real wage increases, the labor supply curve shifts leftward. (d)When the real wage decreases, the labor supply curve shifts leftward.
A
________ gross domestic product is the market value of ________ linked back to the prices of a single year. (a) Real; total production (b) Real; production possibilities (c) Productivity; the consumer price index (d) Nominal; total production
A
Which of the following is included in government expenditures when measuring GDP? (a) Social Security payments (b) unemployment compensation payments (c) pension payment made to past presidents (d) the current president's salary
D
Which of the following means that the CPI overstates the actual inflation rate? (a) new goods bias (b) quality change bias (c) outlet substitution bias (d) All of the above cause the CPI to overstate inflation.
D
Which of the following pieces of information do you need to calculate the labor force participation rate? I. the number of employed persons II. the number of unemployed persons III. the population IV. the working age population (a) I and II (b) I and III (c) I, II and III (d) I, II and IV
D
Which of the following statements are TRUE regarding the demand for labor? I. The quantity of labor demanded depends on the real wage rate. II. If the money wage rate increases and the price level remains the same, the quantity of labor demanded decreases. (a)neither I nor II (b)II only (c)I only (d)I and II
D
Which of the following statements is CORRECT? (a) When the real wage increases, the labor supply curve shifts rightward. (b) When the real wage increases, the labor supply curve shifts leftward. (c) When the real wage decreases, the labor supply curve shifts leftward. (d) None of the above statements are correct.
D
If the CPI is 120, this means that (a) prices are 120 percent higher than in the reference base period. (b) prices are 0.12 times higher than in the reference base period. (c) prices are 20 percent higher than in the reference base period. (d) the inflation rate must be positive.
C
In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million areof working age. How many people are not in the labor force? (a) 19 percent (b) 9 million (c) 5 million (d) 4 million
C
A loaf of bread purchased by one of your instructors would be best described as (a) an intermediate good. (b) a financial asset. (c) a used good. (d) a final good.
D
A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as (a) structurally unemployed. (b) seasonally unemployed. (c) cyclically unemployed. (d) frictionally unemployed.
D
A relative price is the (a) slope of the demand curve. (b) difference between one money price and another (c) slope of the supply curve. (d) ratio of one money price to another.
D
A relative price is the (a) slope of the supply curve (b)slope of the demand curve. (c) difference between one money price and another (d) ratio of one money price to another.
D
An advance in technology will (a) not shift the production function but will lead to a movement down along the production function. (b) shift the production function downward. (c) not shift the production function but will lead to a movement up along the production function. (d) shift the production function upward.
D
If the CPI basket costs $35 in the base period but costs $42 in the next period, what is the CPI in the next period? (a) 83.3 (b) $42 (c) 20 percent (d) 120
D
Auto and steel workers commonly experience this type of unemployment in a recession. (a) frictional unemployment (b) cyclical unemployment (c) structural unemployment (d) natural unemployment rate
B
A fall in the unemployment rate could be caused by (a) unemployed workers giving up looking for a job. (b) full-time workers becoming part-time workers. (c) part-time workers becoming full-time workers. (d) discouraged workers starting to look for jobs again.
A
A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of (a) frictional unemployment. (b) cyclical unemployment. (c) seasonal unemployment. (d) structural unemployment.
A
According to the Bureau of Economic Analysis, in the second quarter of 2012 personal consumption expenditures grew by 1.7 percent, gross private domestic investment grew by 3.0 percent, government expenditure on goods and services decreased by -0.9 percent, imports grew by 2.9%, and exports grew by 6.0%. Given these data, it is most likely that (a) GDP growth was positive in the 2nd quarter. (b) GDP growth was negative in the 2nd quarter. (c) the economy hit a business cycle peak. (d) the economy hit a business cycle trough.
A
Activities that encourage faster growth are (a) investment in new capital and human capital. (b) high levels of consumption and low levels of savings. (c) taxes on saving that serve to encourage more spending and less saving. (d) developing trade barriers to protect national industries.
A
Gross domestic product (GDP) is the ________ in a given time period. (a)market value of final goods and services produced by the economy (b) value of personal consumption expenditures, gross private domestic investment, and federal government expenditures (c) sum of wage and salary compensation of employees and corporate profits (d) value of all final and intermediate goods and services produced by the economy excluding those goods exported to foreign nations
A
Holding capital constant, the aggregate production function shows how ________ varies with ________. (a)real GDP; labor (b)leisure time; labor (c)labor; capital (d)labor; leisure time
A
If real GDP per person is growing at 4 percent per year, approximately how many years will it take to double? (a) 17.5 (b) 25 (c) 4 (d) 8
A
If the CPI was 122.3 at the end of last year and 124.5 at the end of this year, the inflation rate over these two years was (a) 1.8 percent. (b) 2.5 percent. (c) 22.5 percent. (d) 18.0 percent.
A
If the price of a hot dog is $2 and the price of a hamburger is $4, then the (a) relative price of a hot dog is 1/2 of a hamburger per hot dog. (b) money price of a hot dog is 2 hamburgers per hot dog. (c) relative price of a hamburger is 1/2 of a hot dog per hamburger. (d) money price of a hamburger is 2 hot dogs per hamburger.
A
If this year's price level exceeds last year's (a)the inflation rate between these years has been positive. (b)no relative price changes are occurring. (c)deflation is occurring. (d)the inflation rate is accelerating.
A
If this year's price level is 126 and last year's price level was 120, the inflation rate is (a)5% (b)1.05% (c)0.95% (d)6%
A
If unemployment is at the natural rate, then there (a) is no cyclical unemployment. (b) is no frictional unemployment. (c) will be cyclical and frictional unemployment but not structural unemployment. (d) will be only cyclical unemployment.
A
In September 2014, the labor force participation rate fell from 62.8 percent to 62.7 percent. This change could have been caused by (a) unemployed workers giving up looking for a job. (b) full-time workers becoming part-time workers. (c) unemployed workers getting full-time jobs. (d) discouraged workers starting to look for jobs again.
A
Moving along the aggregate production function, all of the following are held constant EXCEPT (a) labor. (b) capital. (c) human capital. (d) technology.
A
People base their labor supply on the ________ because they care about ________.(a)real wage; what their earnings will buy (b)real wage; the equality of money wages and the price level (c)money wage; a surplus of labor (d)money wage; the amount of labor firms demand
A
Suppose there is a rise in the price level, but no change in the money wage rate. As a result, the quantity of labor demanded (a) increases. (b) decreases. (c) does not change because there is no change in the real wage rate. (d) decreases only if the money wage rate also decreases.
A
The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises (a) there is a movement up along the demand curve to a smaller quantity demanded. (b) the demand curve shifts rightward. (c) there is a movement down along the demand curve to a larger quantity demanded. (d) the demand curve shifts leftward.
A
The circular flow shows that the household sector earns its income by (a) selling factors of production. (b) buying factors of production. (c) selling goods and services. (d) selling financial assets.
A
The decreasing slope of a production function reflects (a) diminishing returns. (b) rising unemployment. (c) decreasing costs. (d) increasing aggregate demand.
A
The more education that workers have, the ________ is their human capital and the ________ is their productivity. (a) larger; higher (b) larger; smaller (c) smaller; higher (d) smaller; smaller
A
The relationship between the labor employed by a firm and the real wage rate is shown by the (a)demand for labor curve. (b)supply of jobs curve. (c)supply of labor curve. (d)demand for jobs curve.
A
When the quantity of labor demanded exceeds the quantity of labor supplied, the real wage rate (a) rises to eliminate the labor-market shortage. (b) falls to eliminate the labor-market surplus. (c) rises to eliminate the labor-market surplus. (d) falls to eliminate the labor-market shortage.
A
All of the following are components of the expenditure approach to measuring GDP EXCEPT (a)Ford Motor Company buying new Dell computers for use in its marketing department in Dearborn, Michigan. (b)a Senator from Iowa being paid the monthly salary. (c)the army buying new M1 Abram tanks. (d) Shaniq's purchase of a meal at the Olive Garden in Atlanta
B
An aggregate production function shows the relationship between (a) real GDP and leisure. (b) real GDP and the quantity of labor employed. (c) leisure and unemployment. (d) real GDP and unemployment.
B
Assume the inflation rate falls from 4 percent to 2 percent. This means that (a) the price level has fallen. (b) the price level is increasing more slowly. (c) the economy is experiencing deflation. (d) real GDP is decreasing.
B
At the natural unemployment rate, there is no (a)Unemployment (b)Cyclical unemployment (c)Frictional unemployment (d)Structural unemployment
B
CPI basket quantity 2009 price 2015 priceBlu-rays 10 discs . . . . . . . . . $16 per disc $ 12.00 per discBottled water 200 bottles . . . $1.00 per bottle $1.25 per bottle33. If 2009 is the reference base period, what is the price index for the CPI basket of goods for 2015 in the abovetable?(a) 97.3(b) 102.8(c) 128.0(d) zero because the price of Blu-rays fell and the price of water increasedAnswer: B
B
During a recession, people drop out of the labor force because they are unable to find a job. All else the same, this (a) increases the official U-3 unemployment rate. (b) decreases the official U-3 unemployment rate. (c) does not change the official U-3 unemployment rate. (d) increases the official U-3 unemployment rate and the labor force participation rate.
B
During a recession, people drop out of the labor force because they are unable to find a job. All else the same,this (a) increases the official U-3 unemployment rate. (b) decreases the official U-3 unemployment rate. (c) does not change the official U-3 unemployment rate. (d) increases the official U-3 unemployment rate and the labor force participation rate.
B
Figure 1: Circular Flow 16. In the above figure, flow B represents households' (a) income. (b) consumption expenditures. (c) saving. (d) investment.
B
Frictional unemployment is the result of (a) technological change or foreign competition. (b) normal labor market turnover. (c) a slowdown in the rate of economic expansion. (d) irresponsible workers with poor work habits.
B
Holding capital constant, a movement along the aggregate production function is the result of a change in (a)interest rates (b)the quantity of labor. (c)technology. (d)inputs
B
If a new and better good replaced an older and less expensive good, then the price level measured by the CPI (a) is lower than the actual price level. (b) is higher than the actual price level. (c) might be either higher or lower than the actual price. (d) is the same as the actual price level because it measures the prices of the actual goods.
B
If the economy enters an expansion (a)cyclical unemployment increases. (b)cyclical unemployment decreases. (c)structural unemployment increases. (d)structural unemployment decreases.
B
If the price level rises by 3 percent and workers' money wage rate increase by 1 percent, then the (a)quantity of labor supplied does not change because there is no change in the real wage rate. (b)quantity of labor supplied decreases. (c)quantity of labor supplied increases. (d)real wage rate increases.
B
If there is surplus of a good, then the quantity demanded the quantity supplied and the price will . (a) is less than; rise 1 (b) is less than; fall (c) is greater than; rise (d) is greater than; fall
B
In a period of rapid, unexpected inflation, resources can be lost (a)when firms invest in research and development instead of forecasting inflation. (b)when firms use resources to forecast inflation. (c)because rapid inflation almost always turns into a hyperinflation. (d)Both answers B and C are correct.
B
In the United States, GDP is typically measured (a) monthly. (b) quarterly. (c) daily. (d) weekly.
B
Normally in the United States the relationship between nominal and real GDP for a given year is (a) real GDP is greater than nominal GDP because of price increases. (b) nominal GDP is greater than real GDP because of price increases. (c) nominal GDP equals real GDP. (d) nominal GDP is greater than real GDP because of price decreases.
B
Substitution bias in the CPI refers to the fact that the CPI (a) takes into account the substitution of goods by consumers when relative prices change. (b) takes no account of the substitution of goods by consumers when relative prices change. (c) substitutes quality changes whenever they occur without taking account of the cost of the quality changes. (d) substitutes relative prices for absolute prices of goods.
B
Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and$16 trillion in 2018. Over this time period, the real GDP growth rate is (a) increasing. (b) decreasing. (c) constant. (d) negative.
B
The aggregate production function (a)cannot show the impacts of productivity improvements. (b)shows that real GDP can increase because of increased productivity as well as increased labor hours. (c)measures the productivity of labor as leisure decreases. (d)increases only with increases in productivity.
B
The best example of a cyclically unemployed individual is (a)Alice who quits her job to enter college. (b)Charles who lost his job as a real estate salesperson when the housing market went soft because of a recession. (c)Mary who lost her job in the textile industry following a decrease in the tariff on textiles. (d)Bob who has just graduated from college and is entering the labor market.
B
The circular flow diagram shows that (a)firms generally are the demanders in the goods markets and suppliers in the factor markets. (b)governments purchase goods and services. (c) households transact only in the goods market.
B
The consumer price index (CPI) (a) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2. (b) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period. (c) measures the increase in the prices of the goods included in GDP. (d) is the ratio of the average price of a typical basket of goods to the cost of producing those goods.
B
The currently used method for calculating the CPI (a) accounts for people increasing consumption of a good that falls in relative price. (b) probably overstates inflation. (c) has no effect on government expenditures. (d) None of the above answers are correct.
B
The economy is at full employment when (a) there are no unemployed workers. (b) all unemployment is frictional or structural. (c) there are fewer unemployed workers than available jobs. (d) all unemployment is cyclical.
B
The largest component of US GDP in the expenditure approach is (a)government expenditure on goods and services. (b)personal consumption expenditures. (c)gross private domestic investment. (d)net exports
B
Intermediate goods are excluded from GDP because (a)the premise of the question is incorrect because intermediate goods are directly included in calculating GDP. (b)their inclusion would understate GDP. (c) their inclusion would involve double counting. (d) they represent goods that have never been purchased so they cannot be counted.
C
Over the past 100 years, in the United States the average growth rate of ______ grew at a faster rate than ______. (a) real GDP; nominal GDP (b) the population; real GDP (c) real GDP; the population (d) inflation; real GDP
C
Pollution is a by-product of some production processes, so on this count real GDP as measured (a) is adjusted downward to take into account the pollution. (b) is adjusted upward to take into account the expenditures that will be made in the future to clean up the pollution. (c) tends to overstate economic welfare. (d) tends to understate economic welfare.
C
Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation ratebetween these years? (a) 30.7 percent (b) 6.7 percent (c) 5.4 percent (d) 5.1 percent
C
Suppose that the price level was 100 in 2008, 110 in 2009, and 130 in 2010. Over these three years (a)deflation occurred at an accelerating rate. (b)prices were stable. (c)the inflation rate was positive and accelerating. (d)the inflation rate was positive but slowing.
C
Suppose that the total labor force is 100 individuals with 10 unemployed. The unemployment rate is .Now assume that 10 people drop out of the labor force and that 10 remain unemployed. The new unemployment rate is . (a) 9 percent; 10 percent (b) 10 percent; 9 percent (c) 10 percent; 11 percent (d) 11 percent; 10 percent
C
Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor forceparticipation rate is 80 percent and the working-age population is 500 million people. What number of peopleare unemployed? (a) 100 million people (b) 25 million people (c) 20 million people (d) 5 million people
C
Suppose there are 100 million in the labor force, and 6 million unemployed people. During the next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed persons is and the new unemployment rate is. (a) 100.1 million; 5.8 percent (b) 100 million; 6.1 percent (c) 94.1 million; 5.9 percent (d) 93.9 million; 6.1 percent
C
The "law of demand" states that changes in (a) demand are related directly to changes in supply. (b) the quantity demanded of a good are not related to changes in the quantity supplied. (c) the quantity demanded of a good are inversely related to changes in its price. (d) demand are inversely related to changes in supply.
C
The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will (a)move to point such as X. (b)remain at point W. (c)move to point such as Z. (d)move to point such as Y.
C
Unemployment caused by people voluntarily leaving their jobs is classified as (a) part-time unemployment. (b) cyclical unemployment. (c) frictional unemployment. (d) seasonal unemployment.
C
Which of the following is NOT illustrated by a production possibilities frontier? (a)efficient outcomes (b) scarcity (c) opportunity cost (d) who gets which goods
D
Using the official measure of unemployment, which of the following people is considered unemployed? (a) a part-time worker who wishes to work full time (b) a person who gave up looking for jobs because he or she was discouraged about his or her job prospects (c) a person who has been searching for work, but turns down a job paying a lower wage rate than desired (d) a person who is working but expects to be laid off at the end of the month
C
We are interested in long-term growth primarily because it brings (a) higher price levels. (b) lower price levels. (c) higher standards of living. (d) trade wars with our trading partners.
C
Which of the following is a final good? (a) the memory chips in your new smart phone (b) a share of IBM stock (c) flour purchased at the store to bake cookies at home (d) flour used by the bakery to bake cookies
C
GDP can be computed as the sum of (a) all sales that have taken place in an economy over a period of time. (b) the total expenditures of consumers and business over a period of time. (c) the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time. (d) the total expenditures of consumption, investment, government expenditure on goods and ser- vices, and net exports over a period of time.
D
Gross domestic product (GDP) is the in a given time period. (a) value of personal consumption expenditures, gross private domestic investment, and federal gov- ernment expenditures (b) sum of wage and salary compensation of employees and corporate profits (c) value of all final and intermediate goods and services produced by the economy excluding those goods exported to foreign nations (d) market value of final goods and services produced by the economy
D
If the CPI was 132.5 at the end of last year and 140.2 at the end of this year, the inflation rate over these two years was (a) 7.7 percent. (b) 5.4 percent. (c) 4.4 percent. (d) 5.8 percent.
D
In the equation, GDP = C +I +G +X −M, G refers to (a) federal government expenditures plus all transfer payments. (b) local, state, and federal government spending for all purposes. (c) the taxes and expenditures of all government units. (d) local, state, and federal government expenditure on goods and services, but does not include transfer payments.
D
Price indexes can overstate inflation because they (a)do not contain the prices of foreign goods. (b)do not contain the prices of any used goods. (c)do not contain the prices of services. (d)omit some quality improvements.
D
Real GDP grows when I. the quantities of the factors of production grow. II. persistent advances in technology make factors of production increasingly productive. III. human capital grows. (a) only I (b) both I and III (c) only II (d) I, II, and III
D
Reported GDP increases when, in fact, total production is unchanged when i. there is a shift from household production to market production. ii. a previously illegal activity is legalized. (a) i only (b) ii only (c) Neither i nor ii (d) Both i and ii.
D
Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 ofthese people are unemployed, the unemployment rate in Tiny Town is (a) 10 percent. (b) 10/70 ×100. (c) 10/80 ×100. (d) There is not enough information provided to calculate the unemployment rate.
D
Suppose there are currently 100 people unemployed, 1500 people employed, and 2000 people in the working age population. The labor force participation rate equals 100 times (a) 100/1500. (b) 100/1600. (c) 1500/2000. (d) 1600/2000.
D
The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will (a) move to point such as Y. (b) remain at point W. (c) move to point such as X. (d) move to point such as Z.
D
The decreasing slope of a production function reflects (a)decreasing costs. (b)increasing aggregate demand. (c)rising unemployment. (d)diminishing returns.
D
The nation's structural unemployment will increase when (a) bad economic policies send the economy into a recession. (b) there is influx into the labor market of new college graduates. (c) there is an increase in post-Christmas layoffs of workers. (d) an increase in textile imports displaces older textile workers who do not have the skills necessary to find new jobs.
D
The production possibilities frontier represents (a) the maximum rate of growth of capital and labor in a country. (b)combinations of goods and services among which consumers are indifferent. (c) the maximum amount of labor and capital available to society. (d) the maximum levels of production that can be attained.
D
The relationship between the labor employed by a firm and the real wage rate is shown by the (a) supply of labor curve. (b) supply of jobs curve. (c) demand for jobs curve. (d) demand for labor curve.
D
Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income (a) I equals II, but not III. (b) I equals III, but not II. 2 (c) II equals III, but not I. (d) I equals II equals III.
D
Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP? (a) the sale of bonds to finance the construction of the assembly plant (b) the purchase of used welding robots to assemble vehicles (c) the purchase of new tires to be installed on the new vehicles (d) the purchase of new machine tools to manufacture the engines
D
