Econ 1051: Exam #3 - Practice Exam

If your nominal wage rises faster than the price level, we can say your real wage has ______ and the purchasing power of your income has _____.

risen; risen

The ________ curve has a positive slope because as prices of final goods and services rise, prices of inputs rise more slowly.

short-run aggregate supply

Typically, as an economy begins to emerge from a recessionary phase of the business cycle, _______

unemployment continues to rise.

GDP Deflator?

(Nominal GDP / Real GDP) * 100

If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?

5%

Real GDP Growth Rate?

= ((new - old) / old) * 100

Labor Force Participation Rate?

= (Labor force / working-age population) * 100

CPI?

= (cost of expenditures in one year / cost of expenditures in a base year) * 100

Number of years to double money?

= 70 / Growth Rate

Which of the following could cause nominal GDP to increase, but real GDP to decrease?

The price level rises and the quantity of final goods and services produced falls.

Which of the following best describes the "wealth effect"?

When the price level falls, the real value of household wealth rises.

Which of the following will shift the aggregate demand curve to the right, ceteris paribus?

an increase in net exports

If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then

changes in the CPI overstate the true rate of inflation

A student who just graduated from college but has not found a job would most likely be

frictionally unemployed

Legalizing all forms of illegal activities ___________

increases GDP and reduces the size of the underground economy.

Potential GDP

the level of real GDP in the long run.

Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result, _________

the short-run aggregate supply curve will shift to the left as wages increase.

Level of Public Saving?

= T - TR - G

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

Decreases in the price level raise real wealth and increase consumption spending.

Which of the following transactions would be included in the official calculation of GDP?

You buy a new iPod.

Which of the following transactions represents the purchase of a final good?

Your father buys a new John Deere riding lawn mower.

Which of the following is an example of human capital?

a college education

On the long-run aggregate supply curve, ______

a decrease in the price level has no effect on the aggregate quantity of GDP supplied.

An example of business fixed investment spending is ________

a purchase of a computer by an accounting firm.