ECON - Exam 2
A nation's real GDP was $200 billion in Year 1 and $220 billion in Year 2. Its population was 120 million in Year 1 and 125 million in Year 2. What is its real GDP growth rate in Year 2? A) 20 percent B) 10 percent C) 6 percent D) 8.9 percent
b
If a nation's real GDP is growing by 7 percent per year, its real GDP will double in approximately A) 10 years. B) 28 years. C) 7 years. D) 14 years.
a
If the inflation rate is 2 percent and the real interest rate is 10 percent, the nominal interest rate is A) 12 percent. B) 8 percent. C) 2 percent. D) 0 percent.
a
If the rate of inflation is 8 percent per year, the price level will double in about A) 8.8 years. B) 5.3 years. C) 10 years. D) 16 years.
a
Assume the natural rate of unemployment in the U.S. economy is 4 percent and the actual rate of unemployment is 7 percent. According to Okun's law, the GDP gap as a percentage of potential GDP is A) 3 percent. B) 6 percent. C) 11 percent. D) 4 percent.
b
If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $120 billion in the second round, the multiplier in the economy is A) 10. B) 2.5. C) 6. D) 5.
b
If actual GDP is $500 billion and there is a negative GDP gap of $25 billion, potential GDP is A) $975 billion. B) $525 billion. C) $25 billion. D) $475 billion.
b
If the number of worker-hours in an economy is 500 and its real labor productivity is $3 of output per worker-hour, the economy's real GDP A) is $167. B) is $1,500. C) is $15,000. D) cannot be calculated.
b
(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9 Y, where C is consumption and Y is disposable income. At a(n) $1,200 level of disposable income, the level of saving is A) $1,100. B) $18. C) $100. D) $180.
c
Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is A) 53 percent. B) 7 percent. C) 6 percent. D) 3 percent.
c
If actual GDP is $340 billion and there is a positive GDP gap of $40 billion, potential GDP is A) $640 billion. B) $40 billion. C) $300 billion. D) $380 billion.
c
If the natural rate of unemployment was 6 percent, the current unemployment rate was 8 percent, and potential GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed A) $240 billion in output not produced. B) $480 billion in output not produced. C) $160 billion in output not produced. D) $360 billion in output not produced.
c
A nation's average annual real GDP growth rate is 2.8 percent. Based on the rule of 70, the approximate number of years that it would take for this nation's real GDP to double is A) 5. B) 196. C) 9. D) 25.
d
A nation's real GDP was $250 billion in Year 1 and $258 billion in Year 2. Its population was 120 million in Year 1 and 125 million in Year 2. What is its real GDP per capita in Year 2? A) $133 per person B) $20,640 per person C) $206 per person D) $2,064 per person
d
Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,800. The expected rate of return on this machine is A) 80 percent. B) 7 percent. C) 30 percent. D) 40 percent.
d
If the MPC is 0.8 and investment increases by $5 billion, the equilibrium GDP will A) increase by $4 billion. B) decrease by $6.25 billion. C) increase by $6.25 billion. D) increase by $25 billion.
d
If the marginal propensity to consume is 0.75 then the marginal propensity to save must be A) 0.75. B) 1. C) 1.25. D) 0.25.
d
If the marginal propensity to save is 0.1 in an economy, a $20 billion rise in investment spending will increase consumption by A) 200. B) 20. C) 2. D) 180.
d
If the nominal interest rate is 10 percent and the real interest rate is 7 percent, the inflation rate is A) 7 percent. B) 10 percent. C) 17 percent. D) 3 percent.
d
Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $104,000. The expected rate of return on this tool is A) 70 percent. B) 24 percent. C) 40 percent. D) 30 percent.
d
