Econ 201 Online Midterm Exam (Questions Only)

If the cost of a market basket is $150 in year 1 and $200 in year 2, the price index for year 1 using year 2 as the base is:

( ) 75. ( ) 150. ( ) 100. ( ) 133.

Which of the following best represents the equation for GDP?

( ) GDP = C + I + G + X - IM ( ) GDP = C + I + G + taxes - value added ( ) GDP = C + I + G + taxes + X + IM ( ) GDP = C+ I + G - X + IM

Reference: Ref 22-18 (Table: GDP II) Using the information in the table provided, calculate the GDP deflator for 2011.

( ) I, G, and value added from GDP. ( ) exports from imports. ( ) out all intermediate goods. ( ) imports from exports.

The General Theory of Employment, Interest, and Money, written by _______ and published in _______, transformed the way economists thought about macroeconomics.

( ) Milton Friedman; 1946 ( ) Paul Samuelson; 1940 ( ) Paul Lucas; 1966 ( ) John Maynard Keynes; 1936

Which one of the following is an example of consumption expenditure?

( ) Mr. Smith spent $1,500 to buy a used car for his son. ( ) Jim purchased 200 shares of Google stock. ( ) Samantha bought an oven for her cooking show on Food Network. ( ) Stephanie bought a laptop for her brother.

Economists say that long-run economic growth is almost entirely due to:

( ) a balanced budget. ( ) a democratically elected government. ( ) population growth. ( ) rising productivity.

Long-run growth is represented by:

( ) a reduction in the price level over decades. ( ) an increase in the overall output of the economy over a three- or four-year period. ( ) the sustained upward trend in the economy's overall output per person that generates higher incomes and a higher standard of living for its members. ( ) an increase in the rate of inflation across time which reduces real salaries.

Opportunity cost is:

( ) about half of the monetary cost of a product. ( ) the benefit derived from a product. ( ) the value of the best alternative forgone in making any choice. ( ) the dollar payment for a product.

A price index:

( ) always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year. ( ) measures the cost of purchasing a market basket of output across different years. ( ) always includes a base year. ( ) is normalized to 100 for the base year.

A typical family in the United States in 1900 had a purchasing power equal to _____ of the real U.S. GDP per capita in 2010.

( ) 70% ( ) 13% ( ) 136% ( ) 1%

Reference: Ref 22-18 (Table: GDP II) Using the information in the table provided, calculate the GDP deflator for 2011.

( ) 104 ( ) 111 ( ) 96 ( ) 90

The rule of 70 indicates that a 6% annual increase in the potential level of real GDP would lead to the potential output doubling in _______ years.

( ) 24 ( ) 30 ( ) 12 ( ) 6

Reference: Ref 2-1 (Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. If the economy produces 2 units of consumer goods per period, it also can produce at most ________ units of capital goods per period.

( ) 28 ( ) 24 ( ) 18 ( ) 30

Reference: Ref 2-1 (Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. If the economy produces 10 units of capital goods per period, it also can produce at most ________ units of consumer goods per period.

( ) 3 ( ) 4 Correct ( ) 5 ( ) 2

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate

( ) 4%. ( ) 7.5%. ( ) 67.5%. ( ) 10%.

When disinflation occurs:

( ) and inflationary expectations do not change, unemployment rates will fall. ( ) the natural rate of unemployment rises. ( ) and inflationary expectations do not change, an economy may experience a recession. ( ) with inflationary expectations unchanging, aggregate output will rise.

Real GDP is:

( ) calculated by adding up only the real number of all items sold in the United States regardless of their prices. ( ) the projected future value of GDP. ( ) the value of the production of all final goods and services measured in current prices. ( ) the value of the production of all final goods and services adjusted for price changes.

The budget balance is equal to:

( ) consumption plus investment. ( ) taxes minus government spending. ( ) taxes plus government spending. ( ) imports minus exports.

Investment spending represents spending on:

( ) corporate bonds. ( ) stocks. ( ) mutual funds. ( ) productive physical capital.

Unit-of-account costs of inflation are the:

( ) costs associated with businesses changing prices. ( ) costs associated with money being a less reliable unit of measurement. ( ) transfers the government gets from printing money. ( ) costs of transactions associated with avoiding the inflation tax.

The onset of the Great Depression:

( ) created a disagreement between the Hoover administration and conventional economists because Hoover wanted the government to intervene much more quickly than most others. ( ) came as a considerable shock to the conventional wisdom of economics at that time and opened the door for critiques of mainstream thought by economists like John Maynard Keynes. ( ) was in 1918 at the end of World War I. ( ) was not a shock to anyone, since most economists predicted the roaring '20s were bound to end in disaster.

GDP excludes all of the following EXCEPT:

( ) damage done to the environment. ( ) the value of housework. ( ) the value of owner-occupied housing. ( ) the value of leisure.

The short-run alternation between economic downturns and recessions, then economic upturns and expansions is known as the:

( ) expansionary cycle. ( ) business cycle. ( ) contractionary cycle. ( ) disequilibrium cycle.

An example of a government transfer is a(n):

( ) expenditure on an interstate highway. ( ) bequest from a deceased relative. ( ) salary for a member of the armed forces. ( ) Social Security payment.

Frictional unemployment is considered to be:

( ) good, since that means people may be seeking for jobs that match their job skills. ( ) good, because people learn how other folks live. ( ) bad, because people are not getting a paycheck. ( ) bad, because people are out of work.

National savings is the sum of private savings and:

( ) government tax revenue. ( ) trade surplus. ( ) private consumption. ( ) the budget balance.

If resources are "scarce," it means that they:

( ) have an unlimited supply. ( ) cannot provide enough goods or services to satisfy all human material wants and needs. Correct ( ) have no opportunity cost. ( ) are probably not valued by consumers.

To be counted as unemployed, one must:

( ) have had a job previously. ( ) be out of work and be actively looking for a job. ( ) be actively looking for a job and have at least a high-school diploma or its equivalent. ( ) have had a job before and be actively looking for work.

Macroeconomics deals with:

( ) how individuals make decisions. ( ) the question of how a business unit should operate profitably. ( ) bits and pieces of the economy. ( ) the working of the entire economy or large sectors of it.

If an economy is producing at a point on its production possibilities frontier:

( ) it is efficient in production and allocation. ( ) it is efficient in allocation but not necessarily in production. ( ) it is not necessarily efficient in production or allocation. Incorrect ( ) it is efficient in production but not necessarily in allocation.

The main role of financial systems is to:

( ) make the capitalist class richer. ( ) provide credit cards to as many people as possible. ( ) channel goods and services to the people willing to pay for them. ( ) channel funds from savers into investments.

In an open economy, total investment is equal to:

( ) national savings plus capital inflow. ( ) private savings plus national savings plus capital inflow. ( ) private savings plus capital inflow. ( ) national savings minus private savings minus capital inflow.

Which of the following will NOT increase labor's productivity?

( ) new capital ( ) growth in the population ( ) technology ( ) education

Recessions are periods when:

( ) output rises. ( ) output and employment are falling. ( ) the aggregate price level rises. ( ) the unemployment rate is falling.

The official unemployment rate ignores:

( ) people with professional jobs. ( ) discouraged workers who have given up looking for a job. ( ) people who work on commission. ( ) people with professional jobs, people who work on commission, and discouraged workers who have given up looking for a job.

If nominal GDP increases from one year to the next:

( ) prices must have risen from one year to the next. ( ) either output or prices or both must have risen from one year to the next. ( ) prices and real GDP must have risen from one year to the next. ( ) real GDP must have risen from one year to the next.

Banks are financial intermediaries that:

( ) provide liquid assets to lenders and long-term financing to borrowers. ( ) are types of mutual funds. ( ) have customer deposits as the primary asset and loans to borrowers as the primary liability. ( ) have customer deposits as the primary asset and that provide liquid assets to lenders.

A country's living standard is best measured by the:

( ) real GDP. ( ) per capita real GDP. ( ) nominal GDP. ( ) per capita nominal GDP.

The savings-investment spending identity says that:

( ) savings must equal government investment for the economy as a whole. ( ) each person in the economy must save as much as he or she invests. ( ) each person in the economy must invest as much as he or she saves. ( ) savings and investment spending are always equal for the economy as a whole.

An increase in capital stock would:

( ) shift the production function upward. ( ) shift the production function inward. ( ) shift the production function downward. ( ) cause a movement to the right along a stationary production function.

Structural unemployment consists of people who are unemployed because of:

( ) temporary changes in jobs. ( ) the time it takes for employers and workers to find each other. ( ) more people seeking jobs in a labor market than there are jobs available at the current wage rate. ( ) an excess in the quantity of labor demanded over the quantity of labor supplied.

Which of the following is an index of 30 leading companies, such as Microsoft, Walmart, and General Electric?

( ) the S&P 500 ( ) the Dow Jones Industrial Average ( ) the producer price index ( ) the NASDAQ

Which of the following is the index that includes the most companies and provides the broadest measure of stock market performance?

( ) the S&P 500 ( ) the NASDAQ ( ) the Dow Jones Industrial Average ( ) the Producer Price Index

During inflation:

( ) the average price level increases. ( ) the average price level falls. ( ) the real price level falls. ( ) the average price level becomes negative.

Capital inflows represent:

( ) the net inflow of funds into a country. ( ) the excess of domestic physical capital exported minus the amount of physical capital imported. ( ) the net outflow of funds from a country. ( ) the amount that domestic savings exceeds foreign savings.

The unemployment rate is:

( ) the ratio of the labor force to the number of people unemployed. ( ) the average length of time someone is unemployed. ( ) the percent of the labor force that is unemployed. ( ) the number of people unemployed.

The best currently available measure of the standard of living in a country is:

( ) the real GDP per capita. ( ) the growth rate of productivity. ( ) the nominal GDP per capita. ( ) the unemployment rate.

A key statistic to measure economic growth is:

( ) the size of the government's budget. ( ) life expectancy. ( ) real GDP per capita. ( ) the Dow Jones stock market index.

The labor force is:

( ) the total of people employed and unemployed. ( ) the total of the population of working age. ( ) the total of people employed. ( ) the total population.

A household's wealth is:

( ) the value of a household's accumulated savings. ( ) what a household earns each period. ( ) what a household saves each period. ( ) the value of a household's financial assets.

Intermediate goods are not counted in the calculation of GDP because:

( ) these goods are not produced for the market. ( ) these goods are produced in the underground economy. ( ) to do so involves double counting. ( ) these goods involve financial transactions.

GDP is the:

( ) total market value of all final goods and services produced in one year. ( ) volume of all dollar transactions made in an economy in one year. ( ) dollar amount of all sales made in the economy in one year. ( ) total accumulated wealth of an economy.

A production possibility frontier illustrates the ________ facing an economy that ________ only two goods.

( ) trade-offs; consumes ( ) shortages; produces ( ) prices; sells ( ) trade-offs; produces

A period of rising real GDP is a(n):

( ) trough. ( ) expansion. ( ) peak. ( ) recession.

Cyclical unemployment is characterized as:

( ) unemployment that occurs when people are between jobs. ( ) the deviation in the actual rate of unemployment away from the natural rate. ( ) the normal unemployment around which the actual unemployment rate fluctuates. ( ) a lack of good matches between available jobs and the skills people have.