Econ test 1

One year nominal GDP was $286 billion and the price index was 88. Real GDP that year was:

325 billon

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:

4 percent

Increasing returns would be a situation where a firm increases its workforce and other inputs by:

5 percent and its output increase by 8 percent

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:

60 millon

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:

7 percent

The recurrent ups and downs in the level of economic activity extending over several years are referred to as:

Business cycles

In the expansion phase of a business cycle

Employment and output increase

New college graduates still looking for their first jobs would be classified in the BLS data as:

Frictionally unemployed

When local police and fire departments buy new cars for their operations, these are counted as part of:

G

Economists are sharply divided over how to best fight the Great Recession. The majority of economists favor the "Stimulus Solution," which involves:

Government actions to increase the total demand for output in the economy

Money spent on the purchase of a new house is included in the GDP as a part of:

Gross domestic private investment

GDP estimates account for which of the following items?

Household spending for health and home insurance

Which of the following groups is the principal source of savings in an economy?

Households

Which of the following factors has been the dominant source of economic growth in the U.S. (except in 1973-1995)?

Increase in labor productivity

Historically, the total amount of real capital per worker in the United States has:

Increased significantly and made labor more productive

A person's real income will increase by 3% if her nominal income:

Increases by 5% while the price index rises by 2%

Which of the following is a measure of economic growth that is most useful for comparing living standards?

Increases in real GDP per capita

A peak in the business cycle

Is a temporary maximum point

The following are examples of final goods in national income accounting, except:

Lumber and steel beams purchased by a construction company

A higher rate of investment now will generate:

More future production

Sharply rising oil prices are most likely to lead to a:

Negative supply shock

In the U.S. in the past six decades or so, we saw the following trends, except:

Rising birthrates kept the native-born population growing at a steady rate

The basic truth that underlies the study of economics is the fact that we all face:

Scarcity

The factor accounting for the largest increase in the productivity of labor in the United States has been:

Technological advance

The production possibilities curve is a graph of:

The maximum combinations of products that can be produced

In macroeconomic models, prices are assumed to be completely inflexible in:

The very short run only

One concern regarding educational attainment in the U.S. is that:

There are fewer college graduates in science and engineering

Economists and policy makers are committed to encouraging a high and growing level of real GDP because:

This means greater consumption opportunities

The "rule of 70" is a formula for determining the approximate number of:

Years that it would take for a value (like real GDP) to double

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:

-$84 billion

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Real estate and financial markets

Which of the following statements is true?

Demand-pull inflation will continue so long as there is excess total spending in the economy

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:

Differences is the communication technology due to language differences

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:

Nominal GDP decreases, while real GDP stays constant

The GDP deflator or price index equals:

Nominal GDP divided by real GDP

Price wars among firms:

Occur when one firm lowers its price and rival firms react by lowering their prices

Saving in the economy

Occurs when current spending is less than current incomes

If the price index is rising over a period of time, then the real GDP in years:

Prior to the base year will be larger than the nominal GDP

The opportunity cost to a consumer who smokes cigarettes consists of the:

Products that the consumer could have bought instead of cigarettes

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?

Real GDP doesn't change

Which phase of the business cycle would be most closely associated with an economic contraction?

Recession