econ test 1

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP? A. Real GDP doubles B. Real GDP is halved C. There is not enough information to determine what happens to real GDP D. Real GDP doesn't change

D

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors? A. Consumer and government spending B. Gold market and stock market C. International trade and foreign exchange markets D. Real estate and financial markets

D

2. A nation produces three products, A, B, and C. Over two years, the prices of these products change while the quantities produced remain constant, as follows: Over the period referred to, the nation's nominal GDP increased by 5 percent. The nation's real GDP changed by approximately: A. 0 percent B. 3 percent C. 2 percent D. -2 percent

a

14. If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is: A. 4 percent B. 6 percent C. 2 percent D. 3 percent

A

17. Which of the following is a measure of economic growth that is most useful for comparing living standards? A. Increases in real GDP per capita B. Growth in nominal GDP C. Decreases in the rate of unemployment D. Increases in real GDP

A

36. In the U.S. in the past six decades or so, we saw the following trends, except: A. Rising birthrates kept the native-born population growing at a steady rate B. The size of the labor force expanded C. Women's labor-force participation rate surged D. The average length of the workweek remained relatively constant

A

37. Economists are sharply divided over how to best fight the Great Recession. The majority of economists favor the "Stimulus Solution," which involves: A. Government actions to increase the total demand for output in the economy B. Relying on the invisible hand of the market to set things right C. Stimulus from abroad through international trade and treaties D. Making prices become more flexible so that equilibrium can be attained once more

A

Assume that an economy has 1500 workers, each working 2000 hours per year. If the average real output per worker-hour is $20, then total output or real GDP will be: A. $60 million B. $3 million C. $30 million D. $45 million

A

GDP estimates account for which of the following items? A. Household spending for health and home insurance B. Do-it-yourself activities C. "Psychic income" people derive from their work D. Improvements in product quality

A

GDP in an economy is $11,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports must be: A. -$84 billion B. +$53 billion C. -$161 billion D. -$47 billion

A

In the expansion phase of a business cycle: A. Employment and output increase B. The inflation rate and productive capacity decrease C. The inflation rate decreases, but productive capacity increases D. Employment increases, but output decreases

A

Saving in the economy: A. Occurs when current spending is less than current incomes B. Is generally not a determinant of future output C. Occurs when current consumption is more than current output D. And investment are essentially the same concept

A

Sharply rising oil prices are most likely to lead to a: A. Negative supply shock B. Negative demand shock C. Positive supply shock D. Positive demand shock

A

The reasons why per capita GDP in the U.S. is significantly higher than in some other rich countries like, say, France include the following, except: A. Differences is the communication technology due to language differences B. Cultural differences between the U.S. and France regarding the right balance between labor and leisure C. U.S. citizens put in substantially more work hours than do citizens of France D. Differences in the tax structure and the resulting incentive effects of taxes

A

Which of the following groups is the principal source of savings in an economy? A. Households B. Banks C. Government D. Businesses

A

Which of the following is a correct statement? A. Demand-pull inflation will continue so long as there is excess total spending in the economy B. A supply shock will cause a variation of demand-pull inflation that can lead to hyperinflation C. It is relatively easy to distinguish between cost-push and demand-pull inflation even if you don't know the source of the inflation D. Demand-pull inflation is usually accompanied by higher unemployment rates

A

1. Historically, the total amount of real capital per worker in the United States has: A. Been the single most important determinant of economic growth B. Increased significantly and made labor more productive C. Remained relatively constant, although the quality of capital has improved dramatically D. Provided financing for the industrial expansion of business

B

A peak in the business cycle: A. Is a temporary minimum point B. Is a temporary maximum point C. Occurs when the unemployment rate is its greatest D. Occurs when the inflation rate is its lowest

B

Economists and policy makers are committed to encouraging a high and growing level of real GDP because: A. This implies an increase in investment B. This means greater consumption opportunities C. This means a higher level of unemployment D. This implies a lower price level

B

In macroeconomic models, prices are assumed to be completely inflexible in: A. Situations when the changes in demand look to be permanent B. The very short run only C. The very long run D. The short run and remains so over time

B

Money spent on the purchase of a new house is included in the GDP as a part of: A. Personal saving B. Gross domestic private investment C. Personal consumption expenditures D. Household expenditures on durable goods

B

The basic truth that underlies the study of economics is the fact that we all face: A. Death B. Scarcity C. Taxes D. Risk

B

The factor accounting for the largest increase in the productivity of labor in the United States has been: A. The quantity of capital B. Technological advance C. Improved resource allocation D. The education and training of workers

B

Which phase of the business cycle would be most closely associated with an economic contraction? A. Peak B. Recession C. Trough D. Recovery

B

38. Price wars among firms: A. Tend to reduce short-run price stickiness because firms know they can lower their own prices without rival firms lowering their prices B. Have no impact on the degree of short-run price stickiness C. Occur when one firm lowers its price and rival firms react by lowering their prices D. Occur when firms use advertising to take customers away from rival firms

C

A higher rate of investment now will generate: A. More saving now B. More current consumption C. More future production D. More future inflation

C

New college graduates still looking for their first jobs would be classified in the BLS data as: A. Not yet in the labor force B. Part of structural unemployment C. Frictionally unemployed D. Cyclically unemployed

C

One concern regarding educational attainment in the U.S. is that: A. Fewer high school graduates are going on to college B. Students are graduating later and later C. There are fewer college graduates in science and engineering D. The percentage of adults finishing college is falling

C

One year nominal GDP was $286 billion and the price index was 88. Real GDP that year was: A. $252 billion B. $308 billion C. $325 billion D. $262 billion

C

The "rule of 70" is a formula for determining the approximate number of: A. Times a value (like real GDP) is a multiple of 70 B. Times one could double a certain value (like real GDP) over 70 years C. Years that it would take for a value (like real GDP) to double D. Years that it would take for a value (like real GDP) to expand 70 times

C

The GDP deflator or price index equals: A. Gross national product less net foreign factor income earned in the United States B. Gross private domestic investment less the consumption of fixed capital C. Nominal GDP divided by real GDP D. Real GDP divided by nominal GDP

C

The opportunity cost to a consumer who smokes cigarettes consists of the: A. Amount of cigarette-taxes paid by this consumer B. Costs imposed on others who inhale second-hand smoke C. Products that the consumer could have bought instead of cigarettes D. Cost of complementary products such as lighters, ashtrays, and cigarette holders

C

The recurrent ups and downs in the level of economic activity extending over several years are referred to as: A. Economic phases B. Noncyclical fluctuations C. Business cycles D. Business startups

C

When local police and fire departments buy new cars for their operations, these are counted as part of: A. C B. Ig C. G D. Xn

C

8. Over a ten-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately: A. 9 percent B. 5 percent C. 10 percent D. 7 percent

D

A person's real income will increase by 3% if her nominal income: A. Increases by 2% while the price index rises by 5% B. Increases by 5% while the price index falls by 2% C. Increases by 2% while the price index falls by 5% D. Increases by 5% while the price index rises by 2%

D

Increasing returns would be a situation where a firm increases its workforce and other inputs by: A. 8 percent and its output increases by 5 percent B. 12 percent and its output increases by 10 percent C. 8 percent and its output increases by 8 percent D. 5 percent and its output increase by 8 percent

D

Which of the following factors has been the dominant source of economic growth in the U.S. (except in 1973-1995)? A. Increase in hours per worker B. Increase in population C. Increase in labor force D. Increase in labor productivity

D

If the price index is rising over a period of time, then the real GDP in years: A. Prior to the base year will be larger than the nominal GDP B. Prior to the base year will be less than the nominal GDP C. After the base year will be higher than the nominal GDP D. After the base year will be rising faster than the nominal GDP

a

The production possibilities curve is a graph of: A. The maximum combinations of products that can be produced B. The maximum amount of capital and labor that the economy can employ C. The maximum amounts of labor and capital resources available for production D. Various combinations of goods and services among which consumers are indifferent

a

3. Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Refer to the above data. If year 2 is the base year, the price index for year 3 is: A. 125 B. 133 C. 150 D. 120

b

The following are examples of final goods in national income accounting, except: A. Laptop computer purchased by an executive for personal use B. Lumber and steel beams purchased by a construction company C. Desktop computer purchased by an executive for business use D. Tractor purchased by a construction company

b

7. Suppose a small economy produces only HD TV sets. In year 1, 100,000 sets are produce and sold at a price of $1,200 each. In year 2, 100,000 sets are produced and sold at a price of $1,000 each. As a result: A. Nominal GDP stays constant, while real GDP decreases B. Nominal GDP and real GDP both decrease C. Nominal GDP decreases, and real GDP decreases even more D. Nominal GDP decreases, while real GDP stays constant

d