econ. Matt's test 2

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying? A. 15% B. 5% C. -1.1% D. -6.1%

D. -6.1%

Which of the following government provisions will help increase the accumulation of knowledge capital? A. patents B. copyrights C. education subsidies D. All of the above are correct

D. All of the above are correct

The nominal GDP of the US in 2012 was approximately $16.2 trillion. This means that A. total spending on final goods and services in 2012 was around $16.2 trillion B. the value of final output in 2012 was around $16.2 trillion C. total income in 2012 was around $16.2 trillion D. All of the above are true

D. All of the above are true

The economic growth model predicts that A. GDP per capita of rich countries will grow more rapidly than in poor countries B. GDP per capita of poor countries will never change C. Governments must centrally direct the economy for growth to occur D. GDP per capita of poor countries will grow more rapidly than in rich countries.

D. GDP per capita of poor countries will grow more rapidly than in rich countries.

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing? A. frictional B. cyclical C. structural D. Sarah is not not experiencing unemployment of any kind, because she is not currently part of the labor force.

D. Sarah is not not experiencing unemployment of any kind, because she is not currently part of the labor force.

If GDP is currently $13 trillion and is growing at a rate of 2.3% per year; how long will it take GDP to reach $26 trillion? A. about 15 years B. about 17 years C. about 25 years D. about 30 years

D. about 30 years

In the long run, a country will experience an increasing standard of living only if it experiences A. a high rate of consumption B. a slow rate of population growth C. a high rate of labor force growth D. continuous technological change

D. continuous technological change

Which of the following causes the unemployment rate to understate the true extent of joblessness? A. Discouraged workers are not counted as unemployed B. Persons who collect unemployment benefits report themselves to be searching for a job C. Discouraged workers are counted are unemployed D. Many full time workers really want to be part time workers E. A drug dealer reports herself as unemployed

A. Discouraged workers are not counted as unemployed

If a US firm produces cars in Mexico, that production should count towards A. US GNP B. US GDP C. Mexico's GNP D. it will not affect either US GNP or US GDP

A. US GNP

Which of the following transactions would be included in the official calculation of GDP? A. You buy a new iPod B. You wash and wax your father's car as a favor to him C. Firestone sells $2 million worth of tires to General Motors D. A student buys a used textbook at the bookstore E. You illegally download music off the internet to put on your new iPod.

A. You buy a new iPod

Which of the following would not be included in the expenditure category called investment expenditures? A. a purchase of shares of preferred stock B. a purchase of a copy machine by FedEx Office C. spending on new houses D. the cars held in inventory on a local Ford dealer's lot

A. a purchase of shares of preferred stock

Which of the following is an example of a worker experiencing frictional unemployment? A. a worker quits his job at the Post Office to find more interesting work B. an employee is laid off because the economy is suffering a recession C. a United Airlines pilot loses her job because of lack of demand for air travel D. a computer programmer loses her job because it is outsources to India

A. a worker quits his job at the Post Office to find more interesting work

Which of the following policies are designed specifically to directly promote technological change in an economy? A. government subsidization of research and development B. laws to strengthen property rights C. tax incentives to promote investment in 401K plans D. a vaccination program to combat infectious diseases

A. government subsidization of research and development

Gross domestic product understates the total production of final goods and services because of the omission of A. household production B. inflation C. intermediate goods D. exports

A. household production

If inflation increases unexpectedly, then A. lenders receive a lower real interest rate than they expected B. lenders gain and borrowers gain C. neither borrowers nor lenders lose D. borrowers pay a higher real interest rate than they expected

A. lenders receive a lower real interest rate than they expected

Which of the following is true statement about real and nominal GDP? A. Nominal GDP is a better measure than real GDP in comparing changes in the production of goods and service year after year B. If real GDP increases from one year to the next, we know that production of goods and services has risen. C. If nominal GDP increases from one year to the next, we know that production of goods and services has risen D. increases in average prices do not affect the calculation of nominal GDP

B. If real GDP increases from one year to the next, we know that production of goods and services has risen.

Which of the following policies would NOT help promote economic growth? A. a law that subsidizes research in nanotechnology B. a law requiring that the funds in an individual retirement account be taxed C. a law restricting elected officials from accepting expensive gifts and trips from private individuals D. a law that funds prenatal care for all expectant mothers

B. a law requiring that the funds in an individual retirement account be taxed

Which of the following will increase the real interest rate? A. an increase in the budget surplus B. an increase in the demand for loanable funds C. an increase in household saving D. an increase in the supply of loanable funds

B. an increase in the demand for loanable funds

An increase in the government budget surplus will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ___________. A. supply; left; rise B. demand; left; fall C. demand; right; rise D. supply; right; fall

C. demand; right; rise

In 1986, an Apple lle computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI A. substitution bias B. outlet bias C. increase in quality bias D. new product bias

C. increase in quality bias

Enforcing property rights in an economy will A. encourage corruption and expand the underground economy B. decrease the level of foreign portfolio investment C. raise the level of investment D. cause the market system to work less efficiently

C. raise the level of investment

Potential GDP is always greater than real GDP in an economy. (T/F)

False