MACRO2

1. Michigan Cranberry Company sold $10 million worth of cranberries it produced. In producing cranberries, it purchased $1 million dollars' worth of supplies from foreign countries and paid workers who reside in Canada but commute to the U.S. $1 million. How much did these transactions add to U.S. GDP? a. $9million b. $12 million c. $11million d. $10 million

A

24. Last year real GDP in the imaginary nation of Populia was 907.5 billion and the population was 3.3 million. The year before real GDP was 750 billion and the population was 3 million. What was the growth rate of real GDP per person during the year? a. 10 percent b. 14 percent c. 17 percent d. 21 percent

A

25. Productivity is the a. key determinant of living standards, and growth in productivity is the key determinant of growth in living standards. b. key determinant of living standards, but growth in productivity is not the key determinant of growth in living standards. c. not the key determinant of living standards, but growth in productivity is the key determinant of growth in living standards. d. not the key determinant of living standards, and growth in productivity is not the key determinant of growth in living standards.

A

26. Which of the following can explain faster growth of real GDP in country A than in Country B? a. both greater population growth and greater productivity growth in Country A b. greater population growth in Country A, but not greater productivity growth in Country A c. greater productivity growth in Country A, but not greater population growth in Country A d. neither greater population growth nor greater productivity growth in Country A

A

37. Unemployment insurance tends to a. increase frictional unemployment. b. increase the number of discouraged workers. c. decrease structural unemployment. d. decrease cyclical unemployment.

A

39. If there were no factors keeping wages from reaching equilibrium then there would be no a. structural unemployment. b. cyclical unemployment. c. frictional unemployment. d. natural rate of unemployment.

A

9. Gasoline is considered a final good if it is sold by a a. gasoline station to a motorist in Los Angeles. b. gasoline station to a bus company that operates a bus route between San Francisco and Los Angeles. c. pipeline operator to a gasoline station in San Francisco. d. All of the above are correct.

A

13. Refer to the table above, which pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. If the base year is 2004, then the inflation rate in 2006 was a. 80%. b. 44.4%. c. 50%. d. 62.5%.

B

14. Refer to the table above, which applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. If the base year is 2010, then the economy's inflation rate in 2010 is a. 8 percent. b. 10 percent. c. 10.91 percent. d. 11.11 percent.

B

15. Refer to the table above. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750. Then the inflation rate for 2011 is about a. 9.08 percent. b. 9.52 percent. c. 10.24 percent. d. 10.78 percent.

B

18. Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct? a. The newspaper editorial is correct under all circumstances. b. The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI c. The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI. d. The newspaper editorial is incorrect under all circumstances.

B

20. Country A experienced a growth rate of real GDP per person of 0.5 percent per year throughout the 1900's. In view of other countries' experiences, country A's growth was a. exceptionally high. b. exceptionally low. c moderately high. d. moderately low

B

28. Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures of $30 billion. County B has private savings of $60 billion, and investment of $40 billion. Country C has GDP of $300 billion, investment of $90, consumption of $180 billion, taxes of $60 billion and transfers of $20 billion. From this information, we know that a. country A has the largest government budget deficit. b. country B has the largest government budget deficit. c. country C has the largest government budget deficit. d. The government budget deficit is equal in all three countries.

B

40. Which of the following is not an explanation for the existence of structural unemployment? a. efficiency wages b. job search c. minimum-wage laws d. unions

B

5. Which of the following always uses prices and quantities from the same period? a. both nominal and real GDP. b. nominal GDP but not real GDP. c. real GDP but not nominal GDP. d. neither nominal or real GDP.

B

7. An American soldier stationed in North Carolina receives a paycheck from the federal government for $300, which she uses to purchase a $100 MP3 player made in China by a Chinese firm and $200 for fruit and vegetables from a local farmers market. As a result, U.S. GDP increases by a. $300. b. $200. c. $500. d. $600.

B

11. Suppose that over the last year the price of copper increased from $1.70 a pound to $1.79 per pound. Over the same time a measure of the overall price level increased from 300 to 309. The price of copper increased by a. less than inflation, and this means it became relatively less scarce. b. less than inflation, and this means it became scarcer. c. more than inflation, and this means it became scarcer. d. more than inflation, but this doesn't necessarily mean that it become scarcer.

C

12. The table above reports nominal and real GDP for the U.S. from 1929 to 1932. If prices had remained constant between 1929 and 1930, Nominal GDP would have decreased a. 9.43%. b. 11.97%. c. 8.62%. d. 13.6%

C

16. Indexation refers to a. a process of adjusting the nominal interest rate so that it is equal to the real interest rate. b. using a price index to deflate dollar values. c. using a law or contract to automatically correct a dollar amount for the effects of inflation. d. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.

C

17. Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently 130 and was 125 a year ago, the firm should increase the hourly wages of its workers by a. $0.04. b. $0.29. c. $0.30. d. $0.50.

C

2. Refer to the table above. The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown. The base year is 2015. This country's inflation rate from 2016 to 2017 was a. 25.0%. b. 26.1%. c. 23.1%. d. 18.8%.

C

23. Phoenix furniture uses 12 workers, each working eight hours, to produce 192 rocking chairs. What is Phoenix's productivity? a. 192 rocking chairs b. 24 rocking chairs per hour c. 2 rocking chairs per hour d. 2 hours per rocking chair

C

30. You have some estimates of national accounts numbers for a closed economy for the coming year. Under one set of expectations, government purchases will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under another set of expectations, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 million, and investment will be $40 billion. Based on these numbers in the first case there should be a a. $15 billion surplus, and in the second case a $10 billion surplus. b. $15 billion surplus, and in the second case a $30 billion deficit. c. $5 billion surplus, and in the second case a $10 billion deficit. d. $5 billion surplus, and in the second case a $30 billion deficit

C

32. Suppose the government deficit increases, but the interest rate remains the same. Which of the following things might have happened simultaneously to keep interest rates the same? a. The government reduces the amount that people may put into savings accounts on which the interest is tax exempt. b. Because they are optimistic about the future of the economy, firms desire to borrow more to purchase physical capital. c. Consumers decide to decrease consumption and work more. d. All of the above could explain why the interest rate would be unchanged.

C

34. Which of the following bond buyers did not buy the bond that best met his or her objective? a. Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond. b. Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond. c. Cecilia held long-term bonds rather than short-term bonds to avoid risk. d. Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk.

C

35. You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds a. is not subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S. government. b. is subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S. government. c. is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government. d. is subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government.

C

36. For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must a. have tried to find employment during the previous week. b. have previously been employed. c. be available for work. d. All of the above are correct.

C

6. Real GDP will increase a. only when prices increase. b. when prices increase or output increases. c. only when output increases. d. All of the above are correct.

C

10. Suppose over the last five years that the price of recycled aluminum increased from $800 a ton to $900 a ton. Over the same time a measure of the overall price level increased from 120 to 138. The real price of recycled aluminum a. increased, so it became scarcer c. decreased, so it became scarcer b. increased, so it became less scarce d. decreased, so it became less scarce

D

21. Last year a country had 800 workers who worked an average of 8 hours and produced 12,800 units. This year the same country had 1000 workers who worked an average of 8 hours and produced 14,000 units. This country's productivity was a. higher this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. b. higher this year than last year. A change in the size of the capital stock does not affect productivity. c. lower this year than last year. A change in the size of the capital stock does not affect productivity. d. lower this year than last year. A possible source of this change in productivity is a change in the size of the capital stock.

D

22. Which of the following pairs of terms refer to the same thing? a. "technological knowledge" and "human capital" b. "standard of living" and "human capital" c. "standard of living" and "productivity" d. "capital" and "physical capital"

D

27. Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also has increased? a. The total number of hours worked rose. b. The total number of hours worked stayed the same. c. The total number of hours worked fell. d. Both b and c are correct.

D

29. If the government currently has a budget deficit, then a. it does not necessarily have a debt. b. its debt is increasing. c. government expenditures are greater than taxes. d. All of the above are correct.

D

3. Refer to the table above. The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown above. The base year is 2015. This country's output grew a. 31.3% from 2015 to 2016. b. 42.0% from 2016 to 2017. c. 53.6% from 2017 to 2018. d. 15.4% from 2016 to 2017

D

31. A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will a. demand the required funds by buying bonds. b. supply the required funds by buying bonds. c. supply the required funds by selling bonds. d. demand the required funds by selling bonds.

D

33. If the government currently has a budget deficit, then a. it does not necessarily have a debt. b. its debt is increasing. c. government expenditures are greater than taxes. d. All of the above are correct.

D

38. Unemployment insurance a. may improve the ability of the economy to match workers with appropriate jobs. b. reduces the job search efforts of the unemployed. c. increases the amount of frictional unemployment in the economy. d. All of the above are correct.

D

4. The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct? a. The value of the cars in inventory will not affect 2015 GDP, and the value of the cars sold in 2016 will increase 2016 GDP. b. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will increase 2016 GDP. c. The value of the cars in inventory will not affect 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP. d. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP

D

8. The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between a. personal income and personal disposable income. b. estimates of GDP and actual GDP. c. the quarterly and annual approaches to the calculation of GDP. d. the income and expenditure approaches to the calculation of GDP.

D