e322 sample test 1

A firm sells apple juice using apples it buys from another firm for $20,000. It pays its workers $35,000, pays $1,000 in taxes, and has profits of $3,000. What is its value added? A) $3000 B) $19,000 C) $39,000 D) $59,000

C $39K VA=L+I+T+P

2) Which of the following will be counted as an expenditure in the measurement of GDP? A) the value of a used automobile that remains unsold on the dealer's lot B) purchase of a lamp at a neighborhood garage sale C) purchase, using food stamps, of a loaf of bread D) payment by a parent to her child for helping sweep the floor.

C) Purchase, using food stamps of a loaf of bread.

If bread is produced by using a constant returns to scale production function, then if the: A) number of workers is doubled, twice as much bread will be produced. B) amount of equipment is doubled, twice as much bread will be produced. C) amounts of equipment and workers are both doubled, twice as much bread will be produced. D) amounts of equipment and workers are both doubled, four times as much bread will be produced.

C) amounts of equipment and workers are both doubled, twice as much bread will be produced.

15) Firms hire labor at the point where the A) nominal wage rate equals the marginal product of labor. B) real wage rate equals the value of the marginal product of labor. C) nominal wage rate equals the value of the marginal product of labor. D) real wage rate equals marginal revenue.

C) nominal wage rate equals the value of the marginal product of labor.

Word Problems: 1. How to calculate # of workers to hire? ( 3 steps) 2. Formula for max profit:

1. A. Calculate MP (output generated per additional worker) B. Calculate MPR (Additional Revenue generated per additional worker soo... MP* Fixed Price) C. Identify MRC (additional cost to hire E/A additional worker) MRC=MRP-W Answer is the < MRP Return! 2. Max Profit= TR (total revenue)- TC (total cost) **TC= w*MRP + fixed Price*Y

Consider the table below. Year CPI 2005 126.1 2006 133.8 2007 137.9 2008 141.9 2009 145.8 In which year was the inflation rate the highest? A) 2006 B) 2007 C) 2008 D) 2009

A 2006

10) Suppose we are comparing GDP in 2011 and 2012. The Laspeyres index would make the comparison using as benchmark A) 2011 prices B) 2012 prices C) 2011 quantities D) 2012 quantities

A P2011

8) According to the circular flow model, A) Expenditure = Production + Income B) Expenditure = Production = Income C) Income =Expenditure - Production D) Income =Expenditure/ Production

B) Expenditure = Production = Income

1) The reason only newly produced goods and services are counted in GDP is that A) it is very difficult to input a value to used goods B) most expenditures on used goods and services take place outside the market C) it does not help economists make better economic predictions because second-hand goods rarely have any value D) it allows economists to avoid double counting the production of goods and services

It allows economist to avoid double counting the production of goods and services

9) GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad. A) plus; plus B) minus; minus C) minus; plus D) plus; minus

Minus, plus

4) If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals ______ percent (rounded to the nearest percent). A) 0 B) 9 C) 10 D) 20

9% U= U/U+Em

16) Which of the following would be considered unemployed by the Bureau of Labor Statistics? A) Brenda does not currently have a job. She has sent her resume to several school districts in the past week in hope of finding a teaching position. B) Frank is attending college full-time to earn a degree in elementary education. C) Kyle does not currently have a job. He wants to be an elementary-school teacher. He has the appropriate degree. He has not looked for a position in the last month because he doesn't believe schools are currently hiring. D) Martin is working as a high school social science teacher but is at home sick with the flu.

A

Consider two competitive economies that have the same quantities of labor (L = 400) and capital (K = 400), and the same technology (A = 100). The economies of the countries are described by the following Cobb-Douglas production functions. We can conclude the following: A) GDP is the same in both countries. B) The North economy has a higher GDP. C) The South economy does not exhibit constant returns to scale. D) Labor's share of income is smaller in the South economy.

A) GDP is the same in both countries

13) The core inflation rate is calculated in the same way as the CPI except that A) food and energy items are excluded B) foreign goods (imports) are excluded C) used goods are included D) both A and B

A) food and energy items are excluded

7) If the GDP deflator in 2016 equals 125 and nominal GDP in 2016 equals $15 trillion, what is the value of real GDP for the year? A) $0.12 trillion B) $12 trillion C) $15 trillion D) 18.75 trillion

B $12T

5) If we add______to net national product, we will get A) net interest; gross domestic product B) depreciation; gross national product C) depreciation; gross domestic product D) private disposable income; gross national product

B Depreciation; gross national product

14) We have deflation when ) the consumer price index is greater than the GDP deflator B) the consumer price index decreases C) the rate of inflation falls, for example, from 4% to 2% D) nominal GDP does not change

B consumer price index decreases

11) Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation A) provides a real, rather than a nominal, rate of inflation. B) gives a better measure of the long-term trend in prices' .C) is more consistent with measures of inflation used in other countries. D) fluctuates more than the other measures of inflation that include food and energy prices.

B) gives a better measure of long term trend in prices.

17) Based on the data in the table below, we can conclude the following. Nominal GDP ($ billions) 2009 $14,700 & 2010 $15,200 RealGDP ($ billions) 2009 $12,100 & 2010 $11,900 A) Real GDP decreased, indicating that the production of final goods and services was lower in 2010 than in 2009. B) Nominal GDP increased, which indicates that prices, on average, were higher in 2010 than in 2009. C) Output decreased, but we cannot say anything about what happened to prices, in general. D) A) and B)

D) A & B

3) When GDP is measured using the income or expenditure approach, we account for the following: A) total payments made to all workers in the economy or the total profits of all firms and businesses in the economy. B) total expenditures on all goods produced in the economy or the total income earned from producing all services in the economy. C) total profits of all firms and businesses in the economy or the total consumption of goods and services by all households in the economy. D) total income of everyone in the economy or the total expenditure on the economy's output of goods and services.

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

The property of diminishing marginal product means that, after a point, when additional quantities of: A) a factor are added, output diminishes. B) both labor and capital are added, output diminishes. C) both labor and capital are added, the marginal product of labor diminishes. D) a factor are added when another factor remains fixed, the marginal product of the first factor diminishes.

D) a factor are added when another factor remains fixed, the marginal product of the first factor diminishes.