macro econ test 1

Changes in the GDP deflator reflect A)only changes in prices. B)only changes in the amounts being produced. C)both changes in prices and changes in the amounts being produced. D)neither changes in prices nor changes in the amounts being produced.

A)only changes in prices.

Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are 2,000. If national saving amounts to 1,000, then what is GDP? A. 9,500 B. 10,000 C. 10,500 D. 11,000

A. 9,500

The price index was 100 in 2000, and the inflation rate was 10 percent between 1999 and 2000. The price index in 1999 was A. 91 B. 90 C. 93 D. 110

A. 91

Which of the following statements is correct? A. The CPI can be used to compare dollar figures from different points in time. B. The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate. C. Compared to the consumer price index (CPI), the GDP deflator is the more common gauge of inflation. D.The GDP deflator better reflects the goods and services bought by consumers than does the CPI.

A. The CPI can be used to compare dollar figures from different points in time.

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it A. charged any ticket price above $0 for the three remaining seats. B. charged at least $18.50 for each of the three remaining seats. C. charged at least $37 for each of the three remaining seats. D. paid three people to occupy the three remaining seats.

A. charged any ticket price above $0 for the three remaining seats.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is A. productivity. B. population. C. preferences. D. prices.

A. productivity.

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute A$150 to GDP. B$250 to GDP. Cbetween $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. D$400 to GDP.

B$250 to GDP.

The price index was 92 in 2000, and the inflation rate was 13 percent between 1999 and 2000. The price index in 1999 was A. 79 B. 81.4 C. 103.96 D. 105

B. 81.4

Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is A. included in GDP whether Susan pays Speedy Lube to change it or changes it herself. B. included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself. C. included in GDP if Susan changes it herself, but not if she pays Speedy Lube to change it. D. not included in GDP whether Susan pays Speedy lube to change it or she changes it herself.

B. included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself.

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because A. the quality of these items is not high enough to contribute value to GDP. B. measuring them is so difficult. C. the government wants to discourage the production and consumption of these items. D. these items are not reported on income tax forms.

B. measuring them is so difficult.

In the long run, an increase in the saving rate A. doesn't change the level of productivity or income. B. raises the levels of both productivity and income. C. raises the level of productivity but not the level of income. D. raises the level of income but not the level of productivity.

B. raises the levels of both productivity and income.

In 2009, Angel Foods produced 300,000 bags of tortilla chips, employing 12,000 hours of labor. In 2010, Angel Foods produced 325,000 bags of tortilla chips, employing 13,000 hours of labor. Angel Food's productivity A. decreased by 2.1 percent. B. was unchanged. C. increased by 1.3 percent. D. increased by 2.3 percent.

B. was unchanged.

In 2009, the imaginary nation of Florastan had a population of 8,044 and real GDP of 36,198,000. In 2010 it had a population of 7,800 and real GDP of 35,880,000. What was the growth rate of real GDP per person in Florastan between 2009 and 2010? A. -2.2 percent B. -0.7 percent C. 2.2 percent D.4.5 percent

C. 2.2 percent

Strike Out Bowling Balls produces 800 bowling balls per day using 2 workers who each work 8 hours per day. What is Strike Out's productivity? A. 800 bowling balls B.100 bowling balls per hour C. 50 bowling balls per hour D. None of the choices is correct.

C. 50 bowling balls per hour

Which of the following is not correct? A. By saving a larger portion of its GDP, a country can raise its output per worker. B. Savers supply their money to the financial system with the expectation that they will get it back with interest at a later date. C. Financial intermediaries are the only type of financial institution. D. The financial system helps match people's saving with other people's borrowing.

C. Financial intermediaries are the only type of financial institution.

Which of the following lists contains, in this order, natural resources, human capital, and physical capital? A.For a shoe factory: leather, hand tools, the managers' knowledge of shoe making. B. for a steel mill: the blast furnaces, the workers, iron ore. C. For an airline: oil used to make jet fuel, the pilots' knowledge of flying, jets. D. None of the choices is correct.

C. For an airline: oil used to make jet fuel, the pilots' knowledge of flying, jets.

Which of the following statements about GDP is correct? A.GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy's labor force. B. Money continuously flows from households to government and then back to households, and GDP measures this flow of money. C. GDP is to a nation's economy as household income is to a household. D. All choices are correct.

C. GDP is to a nation's economy as household income is to a household.

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should A. compare the total cost of your education to the total benefits of your education. B. compare the total cost of your education to the benefits of staying one more semester. C. compare the cost of staying one more semester to the benefits of staying one more semester. D. compare the total benefits of your education to the cost of staying one more semester.

C. compare the cost of staying one more semester to the benefits of staying one more semester.

Gasoline is considered a final good if it is sold by a A.gasoline station to a bus company that operates a bus route between San Francisco and Los Angeles. B. pipeline operator to a gasoline station in San Francisco. Correct Answer C. gasoline station to a motorist in Los Angeles. D. All choices are correct.

C. gasoline station to a motorist in Los Angeles.

For an economy as a whole, A. wages must equal profit. B. consumption must equal saving. C. income must equal expenditure. D. the number of buyers must equal the number of sellers.

C. income must equal expenditure.

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that A. the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year. B. the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year. C. neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year. D. neither the price of pretzels nor the price of cookies changes from year to year.

C. neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.

When the government redistributes income from the wealthy to the poor A.efficiency is improved, but equality is not. B. both wealthy people and poor people benefit directly. C. people work less and produce fewer goods and services. D. the government collects more revenue in total.

C. people work less and produce fewer goods and services.

In a closed economy, if Y, C, and T remained the same, an increase in G would reduce A. private saving and public saving. B.private saving but not public saving. C. public saving but not private saving. D. neither private nor public saving.

C. public saving but not private saving.

GDP is defined as the A. value of all goods and services produced within a country in a given period of time. B. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. C. value of all final goods and services produced within a country in a given period of time. D. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

C. value of all final goods and services produced within a country in a given period of time.

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00. Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7. Taking these four transactions into account, how much is added to GDP? A.$31 B.$25 C.$19

C.$19

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year? A. 12 percent B. 10 percent C. 4 percent D. 2 percent

D. 2 percent

If the CPI was 125 this year and 120 last year, then A. the cost of the CPI basket of goods and services increased by 4.2 percent this year. B. the price level increased by 4.2 percent this year. C. the inflation rate for this year was 4.2 percent. D. All choices are correct.

D. All choices are correct.

In a simple circular-flow diagram, firms use the money they get from a sale to A.pay wages to workers. B.pay rent to landlords. C.pay profit to the firms' owners. D.All choices are correct.

D. All choices are correct.

Categories of U.S. consumer spending, ranked from largest to smallest, are A.housing, food & beverages, education & communication, and transportation. B.education & communication, housing, food & beverages, and transportation. C.food & beverages, housing, transportation, and medical care. D. housing, transportation, food & beverages, and medical care.

D. housing, transportation, food & beverages, and medical care.

In a closed economy, what does (Y - T - C) represent? A. national saving B. government tax revenue C. public saving D. private saving

D. private saving

A low price-earnings ratio indicates that either the stock is A.undervalued or people are relatively optimistic about the corporation's prospects. B.overvalued or people are relatively optimistic about the corporation's prospects. C. overvalued or people are relatively pessimistic about the corporation's prospects. D. undervalued or people are relatively pessimistic about the corporation's prospects.

D. undervalued or people are relatively pessimistic about the corporation's prospects.

Ralph pays someone to mow his lawn, while Mike mows his own lawn. Regarding these two practices, which of the following statements is correct? a) Only Ralph's payments are included in GDP. b) Ralph's payments as well as the estimated value of Mike's mowing services are included in GDP. c) Neither Ralph's payments nor the estimated value of Mike's mowing services is included in GDP. d) Ralph's payments are definitely included in GDP, while the estimated value of Mike's mowing services is included in GDP only if Mike voluntarily provides his estimate of that value to the government.

a) Only Ralph's payments are included in GDP.

In computing GDP, market prices are used to value final goods and services because a) market prices do not change much over time, so it is easy to make comparisons between years. b) market prices reflect the values of goods and services. c) if market prices are out of line with how people value goods, the government sets price ceilings and price floors. d) None of the above is correct; market prices are not used in computing GDP.

b) market prices reflect the values of goods and services.

Gross domestic product measures two things at once: a) the total spending of everyone in the economy and the total saving of everyone in the economy. b) the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. c) the value of the economy's output of goods and services for domestic citizens and the value of the economy's output of goods and services for the rest of the world. d) the total income of households in the economy and the total profit of firms in the economy.

b) the total income of everyone in the economy and the total expenditure on the economy's output of goods and services.

The GDP deflator reflects the a. level of prices in the base year relative to the current level of prices. b. current level of prices relative to the level of prices in the base year. c. level of real output in the base year relative to the current level of real output. d. current level of real output relative to the level of real output in the base year.

b. current level of prices relative to the level of prices in the base year.

A good is considered scarce in a society when a. more output of the good is possible. b. everyone in that society cannot have all they want of the good. c. the government restricts production of the good. d. only the richest people in the economy can buy all they want of the good.

b. everyone in that society cannot have all they want of the good.

A circular-flow diagram is a model that a. illustrates cost-benefit analysis. b. explains how the economy is organized. c. shows the flow of traffic in an economic region. d. Explains how banks circulate money in the economy.

b. explains how the economy is organized.

The CPI is a measure of the overall cost of a. inputs purchased by a typical producer. b. goods and services purchased by a typical consumer. c. goods and services produced in the economy. d. stocks on New York Stock Exchange.

b. goods and services purchased by a typical consumer.

If the CPI was 110 this year and 100 last year, then a. cost of the CPI basket increased by 110% this year. b. price level increased by 10% this year. c. inflation rate for this year was 10% higher than the inflation rate for last year. d. All of the above are correct.

b. price level increased by 10% this year.

Each of the following are determinants of demand EXCEPT a. tastes. b. technology. c. income. d. the price of related goods.

b. technology.

Last year real GDP per person in the imaginary nation of Olympus was 4,500. The year before it was 4,250. By about what percentage did Olympian real GDP per person grow during the period? a) 4.6% b)5.2% c) 5.9% d) 6.5%

c) 5.9%

Productivity is defined as a) the amount of difficulty that is involved in producing a given quantity of goods and services. b) the quantity of labor that is required to produce one unit of goods and services. c) the quantity of goods and services produced from each unit of labor input. d) the quantity of goods and services produced over a given amount of time.

c) the quantity of goods and services produced from each unit of labor input.

If there is an increase in both demand and supply, then a. There is an increase in both equilibrium price and quantity. b. There is a decrease in both equilibrium price and quantity. c. Equilibrium quantity goes up, but the effect on equilibrium price is ambiguous. d. Equilibrium price goes up, but the effect on equilibrium quantity is ambiguous.

c. Equilibrium quantity goes up, but the effect on equilibrium price is ambiguous.

For an economy as a whole, a. wages must equal profit. b. consumption must equal saving. c. income must equal expenditure. d. the number of buyers must equal the number of sellers.

c. income must equal expenditure.

Which of the following statements about GDP is correct? a. GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. b. Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. c. GDP, especially per capita GDP, is generally regarded as the best single measure of a society's economic well-being. d. All of the above are correct.

d. All of the above are correct.