Econ 102 Midterm 2 Amani
6) In the above figure, household income is shown by flow A) A. B) B. B) net investment - depreciation + change in inventories. D) net investment + change in inventories.
A
29) Unemployment caused by the normal labor turnover is called ________ unemployment. A) cyclical B) frictional C)involuntary D) part-time
B) frictional
27) Which of the following is NOT included in the income approach to measuring GDP? A) compensation of employees B) net interest C) net exports D) corporate profits
C
36) A trough is the A) upper turning point of a business cycle when an expansion begins. B) upper turning point of a business cycle when a recession begins. C) lower turning point of a business cycle when an expansion begins. D) lower turning point of a business cycle when a recession begins.
C
45) If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals A) 450. B) 325. C) 225. D) 200.
C) 225
12) GDP equals A) the value of the aggregate production in a country during a given time period. B) aggregate expenditure. C) aggregate income. D) all of the above.
D
48) In the above figure, which point represents the under use of resources? A) point H B) point G C) point F D) point K
B
28) Catherine quit her job in order to look for a new one; therefore, she is best considered as A) cyclically unemployed. B) frictionally unemployed. C) structurally unemployed. D) seasonally unemployed.
B) frictionally unemployed
44) In the United States, the inflation rate has A) risen constantly over the past 30 years. C) risen and fallen since the 1970s B) remained almost constant over the past 25 years. D) fallen as a result of OPEC oil price hikes.
C) risen and fallen since the 1970s
48) Last year's price level was 120 and since then there has been a 5 percent inflation. This year's price level is A) 126. B) 130. C) 125 D) none of the above
A) 126
37) Labor productivity increases with A) increases in consumption expenditure. C) increases in depreciation. B) increases in capital. D) All of the above answers are correct
B) increases in capital
17) Countries or regions in which real GDP per person has not grown as fast as in the United States since 1960 include A) Japan. B) Canada. C) countries in Africa. D) Hong Kong
C) countries in Africa.
14) In the above figure, flow B represents households' ________. A) consumption expenditures B) investment C) income D) saving
A
15) A loaf of bread purchased by one of your instructors would be best described as A) a final good. B) a used good. C) a financial asset. D) an intermediate good.
A
21) When calculating the compensation of employees part of GDP A) Social Security contributions must be included. B) the value of vacation time must be included. C) fringe benefits are not included. D) taxes withheld on earnings are not included.
A
23) An increase in physical capital or a technological advance A) raises the real wage rate. B) decreases demand for labor. C) decreases the quantity of labor employed. D) shifts the production function downward.
A
24) If imports are $100 million less than exports, government expenditures are $500 million, consumer expenditures are $1 billion, and gross investment spending is $500 million, then GDP is A) $2.1 billion. B) $1 billion. C) $1.9 billion. D) $2 billion.
A
25) Last year in the country of Nerf imports equaled exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government expenditure on goods and services were ________. A) $100 million B) $500 million C) zero D) $900 million
A
29) In the equation, GDP = C + I + G + X - M, G refers to A) local, state, and federal government expenditure on goods and services, but does not include transfer payments. B) federal government expenditures plus all transfer payments. C) local, state, and federal government spending for all purposes. D) the taxes and expenditures of all government units.
A
3) ________ is gross investment minus ________. A) Net investment; depreciation C) The capital stock; depreciation B) The capital stock; net investment D) Depreciation; replacement investment
A
31) The four categories of expenditure used by the expenditure approach method to calculate GDP are A) consumption expenditure, investment, government expenditure and net exports. B) saving, taxes, government expenditure and investment. C) consumption expenditure, taxes, saving and investment. D) consumption expenditure, investment, net imports and saving.
A
32) The sum of compensation to employees, rental income, corporate profits, net interest, and proprietors' income is A) net domestic income at factor cost. B) gross domestic product. C) net domestic product. D) gross domestic income.
A
34) Gross Domestic Product is equal to the sum of consumption expenditure, investment, net exports, and ________. A) government expenditures on goods and services B) saving C) net taxes D) profits
A
4) Which of the following is used to calculate the standard of living? A) real GDP/population B) real GDP/aggregate hours C) ((real GDP in the current year - real GDP in previous year)/real GDP in previous year) × 100 D) the one-third rule
A
7) Gross domestic product (GDP) is the ________ in a given time period. A) market value of final goods and services produced by the economy B) sum of wage and salary compensation of employees and corporate profits C) value of all final and intermediate goods and services produced by the economy excluding those goods exported to foreign nations D) value of personal consumption expenditures, gross private domestic investment, and federal government expenditures
A
35) If the CPI this year is 220 and was 200 in last year, the annual inflation rate between the two years is A) 10 percent. B) 2 percent. C) 5 percent. D) 20 percent
A) 10 percent
42) The information in the table above gives the 2012 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2013 prices. What is the value of the CPI for the reference base period, 2012? A) 100 B) 140 C) 75 D) 133
A) 100
43) The information in the table above gives the 2012 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2013 prices. What is the value of the CPI for 2013? A) 140 B) 75 C) 100 D) 133
A) 140
8) In the above table, the number of marginally attached workers is A) 15 million. B) 40 million. C) 55 million. D) 100 million
A) 15 million
46) If the CPI was 132.5 at the end of last year and 137.5 at the end of this year, the inflation rate over these two years was A) 3.8 percent. C) 5.0 percent. B) 3.6 percent. D) None of the above answers is correct.
A) 3.8 percent
13) In the table above, the number of marginally attached workers is ________. A) 4 million B) 6 million C) 2 million (D) 40 million
A) 4 million
12) Using the information in the above table, the employment-to-population ratio is A) 64 percent. B) 62 percent. C) 67 percent D) 50 percent
A) 64 percent
7) Using the information in the above table, the labor force participation rate is A) 67.1 percent. B) 56 percent. C) 64.0 percent. D) 95.7
A) 67.1 percent
30) The unemployment rate is at the natural unemployment rate when A) cyclical unemployment equals zero. C) all types of unemployment equal zero. B) structural unemployment equals zero. D) frictional unemployment equals zero.
A) cyclical unemployment equals zero
21) Full employment occurs when A) cyclical unemployment is zero. C) cyclical and frictional unemployment are zero. B) structural unemployment is zero. D) frictional unemployment is zero.
A) cyclical unemployment is zero
46) Real GDP is not a perfect indicator of economic welfare because ________. A) economic welfare depends on many factors not measured or not measured accurately by real GDP B) it includes the underground economy C) it includes a direct measure of health and life expectancy D) it underestimates inflation
A) economic welfare depends on many factors not measured or not measured accurately by real GDP
31) Which of the following CORRECTLY describes "frictional unemployment"? A) Frictional unemployment is a normal occurrence in a growing economy. B) Frictional unemployment is due mainly to job losers. C) Frictional unemployment is due mainly to job leavers. D) Frictional unemployment occurs mainly during recessions.
A) frictional unemployment is a normal occurrence in a growing economy
18) When real GDP is ________ potential GDP, the unemployment rate is ________ the natural unemployment rate. A) greater than; less than B) equal to; greater than C) less than; equal to D) greater than; greater than
A) greater than; less than
40) If a new and better good replaced an older and less expensive good, then the price level measured by the CPI ________. A) is higher than the actual price level B) is lower than the actual price level C) is the same as the actual price level because it measures the prices of the actual goods D) might be either higher or lower than the actual price
A) is higher than the actual price level
4) The labor force participation rate is calculated as the A) labor force divided by the working age population then multiplied by 100. B) number of persons unemployed divided by the labor force then multiplied by 100. C) labor force divided by the unemployment rate then multiplied by 100. D) labor force divided by the number of persons employed then multiplied by 100.
A) labor force divided by the working age population then multiplied by 100
45) In the post-World War II period, considerable growth in total production took place in the United States. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where A) real GDP gives an overly positive view of economic welfare. B) the pollution counts as a final good. C) real GDP gives an overly negative view of economic welfare. D) investment would have been a better measure of total production
A) real GDP gives an overly positive view of economic welfare
38) The Industrial Revolution in England in large was the result of A) technological innovations encouraged by the patent system. B) growth in human capital. C) population growth. D) technological innovations that were financed mainly by government spending.
A) technological innovations encouraged by the patent system.
46) Classical growth theory proposes that real GDP growth is ________ and that real GDP per person will ________ the subsistence level. A) temporary; temporarily be above B) permanent; always be above C) temporary; be above and below D) permanent; temporarily be above
A) temporary; temporarily be above
36) Assume the inflation rate falls from 4 percent to 2 percent. This means that A) the price level is increasing more slowly. B) the economy is experiencing deflation. C) the price level has fallen. D) real GDP is decreasing.
A) the price level is increasing more slowly
39) Using the notation Pt to designate this period's price level and Pt-1 to designate last period's price level, the formula for measuring the inflation rate from last period to this period is A) [(Pt - Pt - 1) / Pt - 1] × 100. B) [(Pt -1 - Pt) / Pt] × 100. C) [(Pt - Pt - 1) / Pt] × 100. D) [(Pt -1 - Pt) / Pt - 1] × 100.
A)[(Pt - Pt - 1) / Pt - 1] × 100.
10) According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Which of the following is TRUE? A) India's PPF has not shifted since 1997. B) India's PPF has been shifting rightward since 1997. C) India's PPF has been shifting leftward since 1997. D) India has been moving from a point within its PPF to points beyond its PPF.
B
10) Gross domestic product is the total ________ produced within a country in a given time period. A) market value of all goods and services B) market value of all final goods and services C) market value of all final and intermediate goods and services D) amount of final and intermediate goods and services
B
13) Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP? A) the sale of bonds to finance the construction of the assembly plant B) the purchase of new machine tools to manufacture the engines C) the purchase of new tires to be installed on the new vehicles D) the purchase of used welding robots to assemble to vehicles
B
17) In the circular flow model of an economy, households A) pay firms for the use of their factors. B) receive income from producers for the use of factors in the factor markets. C) receive income from the sale of factors in the goods markets. D) receive income from buyers of goods and services.
B
2) If Nike, an American corporation, produces sneakers in Thailand this would A) count as part of U.S. GDP since it is a U.S. corporation. B) add to Thailand's GDP but not to U.S. GDP. C) count for both Thailand's GDP and U.S. GDP. D) add to neither U.S. GDP nor Thailand's GDP.
B
2) If real GDP per person is growing at 4 percent per year, approximately how many years will it take to double? A) 25 B) 17.5 C) 4 D) 8
B
22) Net exports is negative if A) the tariff payments are included in the value of imported and exported items. B) the value of imports exceeds the value of exports. C) the value of exports exceeds the value of imports. D) too much production occurs in the exporting country during the year.
B
23) Real GDP is A) an increase in the average level of prices. B) the value of total production of all the nation's farms, factories, shops and offices measured in the prices of a single year. C) the value of total production when the unemployment rate is 6 percent. D) the value of total production of all the nation's farms, factories, shops and offices measured at the prices of the year it was produced.
B
26) Using the data in the table above, what is the value of GDP? A) $13,516 billion B) $8,403 billion C) $9,541 billion D) $10,679 billion
B
30) In the national income accounts, the purchase of a new house counts as A) an addition to inventory. B) investment. C) consumption expenditure. D) a transfer.
B
34) Human capital is the A) machinery used by humans to produce GDP. C) plant and equipment produced by humans and not by machines. B) skill and knowledge accumulated by humans. D) technology used by humans to produce GDP.
B
39) A worker's stock of knowledge is known as A) financial capital. C) monetary capital. B) human capital. D) physical capital
B
50) Which of the following are parts of the business cycles? A) real GDP and potential GDP B) recession and expansion C) peak and potential GDP D) inflation and recession
B
6) Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double? A) 0.7 years B) 7 years C) 10 years D) 20 years
B
9) In the circular flow diagram, aggregate expenditure includes A) consumption expenditure, saving, government expenditure and net exports. B) consumption expenditure, investment, government expenditure and net exports. C) consumption expenditure, saving, investment and government expenditure. D) consumption expenditure, saving, investment and net exports.
B
33) The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________. A) $9 trillion B) $14 trillion C) $25 trillion D) $40 trillion
B) $14 trillion
6) Suppose that the total labor force is 100 individuals with 10 unemployed. The unemployment rate is ________. Now assume that 10 people drop out of the labor force and that 10 remain unemployed. The new unemployment rate is ________.A) 9 percent; 10 percent B) 10 percent; 11 percent C) 10 percent; 9 percent D) 11 percent; 10 percent
B) 10 percent; 11 percent
21) Over the past 100 years, real GDP per person in the United States has grown at an average of ________ percent a year. A) 1 B) 2 C) 3 D) 4
B) 2
50) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the inflation rate in 2013? A) 31 percent B) 69 percent C) zero D) 2 percent
B) 69 percent
Person A Now that the kids are in school for a full day, this person is looking for work and has interviewed for three jobs during the past two weeks. Person B This person has been laid off from a job but expects to be called back as soon as the economy improves. Person C This person has just graduated from college and will start a new job in three weeks. In the meantime this person will tour the great American beaches. Person D This person was laid off last year when new equipment was installed at the plant, reducing the number of workers needed. Shortly after being laid off, this person looked for a new job, was unable to find one and then stopped looking, even though this person still wants a job and is available for work. 1) The above table shows answers given by people interviewed in a government survey of households. Which individuals are considered to be a part of the labor force? A) A, C, and D B) A, B, and C C) C and D D) B, C, and D
B) A, B, and C
30) If the price level increases, but workers' money wage rates remain constant,which of the following is TRUE? I. The quantity of labor demanded will increase II. The real wage rate will decrease III. The demand for labor curve shifts rightward A) I only B) I and II C) II and III D) I, II and III
B) I and II
41) Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that A) Dingo did not experience a recession in 2010. B) an expansion occurred after January 2011. C) Dingo's potential GDP fell in 2011. D) real GDP in Dingo was increasing in January 2011.
B) an expansion occurred after January 2011
40) Saving and investment that increase a nation's capital lead to A) slower growth because there is a lack of consumption. B) an increase in labor productivity. C) a decrease in labor productivity as capital is used to replace labor. D) a decrease in the amount of capital per worker.
B) an increase in labor productivity
34) Structural unemployment is A) associated with the general downturns in the economy. B) associated with the general decline of specific industries. C) associated with the normal changing of jobs in a dynamic economy. D) almost always short-term in nature.
B) associated with the general decline of specific industries
35) Which of the following would lead GDP to overstate economic welfare? A) a self-employed CPA who takes a longer than normal vacation B) electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution C) restaurant workers that under-report tip income D) the existence of home-cooked meals
B) electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution
23) Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment. Matt is best be considered as A) cyclically unemployed. B) frictionally unemployed. C) still being employed. D) included in the economy's "hidden employment."
B) frictionally unemployed
42) An increase in saving that leads to more capital accumulation ________ labor productivity. A) probably changes but in an ambiguous direction B) increases C) decreases D) does not change
B) increases
36) Technological change A) decreases labor productivity. C) lowers the real wage rate. B) increases potential GDP. D) has no effect on employment.
B) increases potential GDP
49) The biases in the CPI include the A) substitution, new goods, and old goods biases. C) old goods, new goods, and quality change biases. B) new goods, quality change, and substitution biases. D) old goods, unemployment, and inflation biases.
B) new goods, quality change, and substitution biases
31) If the price level rises by 3 percent and workers' money wages increase by 3 percent, then the A) quantity of labor demand will decrease. B) quantity of labor demanded does not change because there is no change in the real wage rate. C) quantity of labor demand will increase. D) Any of the above could occur depending on the magnitude on the dollar increase in the price level versus the dollar increase in the wage rate.
B) quantity of labor demanded does not change because there is no change in the real wage rate
42) The relationship between real GDP and potential GDP is that A) real GDP always equals potential GDP. C) real GDP is always below potential GDP. B) real GDP fluctuates about potential GDP. D) real GDP never equals potential GDP.
B) real GDP fluctuates about potential GDP
38) The first step in measuring the CPI is to A) collect prices for the basket of goods and services. C) conduct a monthly survey. B) select the market basket. D) interview businesses.
B) select the market basket
20) The unemployment rate will never equal zero percent because A) there are some people who do not want to work. C) there will always be discouraged workers. B) some portion of the labor force will always be between jobs. D) cyclical unemployment will always exist.
B) some portion of the labor force will always be between jobs
35) Most ________ is embodied in physical capital. A) economic growth B) technological C) human capital D) labor productivity
B) technological
32) If the real wage rate is such that the quantity of labor supplied by workers is less than the quantity of labor demanded by firms A) the real wage rate will fall to restore equilibrium. B) there is a shortage of labor. C) the economy is at full employment. D) actual real GDP equals potential GDP because firms make the decision about how many workers to hire.
B) there is a shortage of labor
1) Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and $16 trillion in 2018. Over this time period, the real GDP growth rate is A) increasing. B) constant. C) decreasing. D) negative.
C
11) In 2011, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. From 2011 to 2012, Armenia's standard of living ________. A) decreased B) did not change C) increased D) might have increased, decreased, or remained unchanged but more information is needed to determine which
C
11) The above table shows data from the GDP accounts of Hypothetica. Hypothetica's GDP is ________ billion. A) $210 B) $270 C) $160 D) $190
C
16) If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________. A) increases; increases B) does not change; increases C) increases; does not change D) increases; decreases
C
19) The above table shows some national income accounting data for a nation. In this nation, gross domestic product is equal to ________ billion. A) $2,000 B) $2,300 C) $2,800 D) $2,500
C
5) Economic growth is measured by A) changes in nominal GDP. B) changes in the employment rate. C) changes in real GDP. D) All of the above are used to measure economic growth.
C
5) Gross investment equals A) depreciation + change in inventories. C) net investment + depreciation. B) net investment - depreciation + change in inventories. D) net investment + change in inventories.
C
7) We are interested in long-term growth primarily because it brings A) higher price levels. C) higher standards of living. B) trade wars with our trading partners. D) lower price levels.
C
8) During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2014, real GDP per person was A) $135. B) $117. C) $128. D) $124.
C
9) In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 3.8 percent B) 0.38 percent C) 9.0 percent D) 8.3 percent
C
14) Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor force participation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed? A) 5 million people B) 25 million people C) 20 million D) 100 million
C) 20 million
5) Using the information in the above table, the unemployment rate is A) 6.0 percent. B) 2.8 percent. C) 4.3 percent. D) 4.5 percent.
C) 4.3 percent
20) Between which pair of countries or continents listed below has real GDP per person converged the most since 1960? A) Canada and South America B) United States and Africa C) Canada and Japan D) United States and South America
C) Canada and Japan
16) Who of the following is counted as unemployed? A) Kim, a worker on strike from her company for a week B) Homer, a full-time student at a vocational school C) Glenn, a student who just graduated from college last week and is currently looking for a job D) Rene, a retired chemist
C) Glenn
25) Which of the following statements are TRUE regarding the demand for labor? I. The quantity of labor demanded depends on the real wage rate. II. If the money wage rate increases and the price level remains the same, the quantity of labor demanded decreases. A) I only B) II only C) I and II D) neither I nor II
C) I and II
45) Which of the following is associated with classical growth theory? I. II. III. A) I Growth in real GDP can continue indefinitely. Technological growth increases as the population grows. Population explosions bring real GDP per person back to subsistence levels. B) II C) III D) I and III
C) III
16) During the 1990s, which of the following experienced the slowest rate of growth in real GDP per person? A) The big 4 nations of Europe B) Canada C) Japan D) United States
C) Japan
18) Over the past four decades A) U.S. real GDP per person has fallen below that of the other rich industrial countries. B) the growth rate of real GDP per person in the United States has been increasing. C) U.S. real GDP per person has increased. D) Both answers A and C are correct.
C) U.S. real GDP per person has increased.
26) An increase in a nation's population results in A) a rightward shift in the labor demand curve. C) a movement along the nation's production function. B) an upward shift of the nation's production function. D) a decrease in the full-employment quantity of labor.
C) a movement along the nation's production function
A recent article states that "...gains from two centuries of rapid technological innovation are largely exhausted, and new discoveries lack the same revolutionary quality...{Further}, 80 percent of the growth between 1950 and 1993 came from the new application of old ideas, and these old ideas are now mostly wrung dry." (The Economist, 03/03/2011) 50) If this quote is TRUE, what would the neoclassical growth theory predict? A) Economic growth will persist indefinitely because technological change will accelerate again as firms seek profits. B) Economic growth is temporary regardless of technological change and GDP per person returns to subsistence levels. C) Economic growth stops because most technological advances have already been made. D) Economic growth will accelerate because these technological changes are permanent.
C) economic growth stops because most technological advances have already been made
43) Business cycles A) are all identical in duration over the last century. B) are unpredictable due to political upheavals and global markets. C) follow a pattern of trough, expansion, peak and recession. D) are more volatile during a Republican administration.
C) follow a pattern trough, expansion, peak and recession
12) The historical record for the United States for the past 100 years shows A) economic growth for about half the years and economic decline for the other half. B) growth until 1970 and then a period of constant per person real GDP. C) growth in real GDP per person during most years. D) continuous economic growth, although at different rates, throughout the entire century.
C) growth in real GDP per person during most years.
25) The natural unemployment rate A) is attained whenever the unemployment rate is less than 5 percent because 95 percent employment is considered full employment. B) estimated to be close to 9 percent in recent years in the United States. C) has been estimated to range between 4 percent and 6 percent in the United States in recent years. D) occurs when 100 percent of the labor force is employed.
C) has been estimated to range between 4 percent and 6 percent in the United States in recent years
43) ________ is the knowledge and skill that people have obtained from education and on-the-job training. A) Capital B) Technology C) Human capital D) Labor productivity
C) human capital
47) The business cycle is the A) regular growth rate of the real GDP. B) regular fluctuations of real GDP below potential GDP. C) irregular fluctuations of real GDP around potential GDP. D) irregular fluctuations of prices around real GDP.
C) irregular fluctuations of real GDP around potential GDP
27) If unemployment equals the natural unemployment rate, then there A) are no job openings existing at the time. C) is only frictional or structural unemployment. B) is less than full employment. D) is zero unemployment.
C) is only frictional or structural unemployment
26) The natural unemployment rate A) rises with a decrease in frictional unemployment. C) rises with an increase in structural unemployment. B) rises with an increase in cyclical unemployment. D) falls with an increase in cyclical unemployment
C) rises with an increase in structural unemployment
18) According to the BEA, in the second quarter of 2012 purchases of new residential structures rose by 8.9 percent. Using the expenditure approach, this change increases A) government expenditure on goods and services. B) personal consumption expenditures. C) net exports of goods and services. D) gross private domestic investment.
D
20) Using the information in the table above, calculate gross domestic product. A) $108 B) $118 C) $78 D) $86
D
28) According to the BEA, in the second quarter of 2012 federal government spending on goods and services changed by -0.1 percent. This decrease could have been caused by a decrease in spending on A) interest payments on the national debt. B) Social Security. C) unemployment benefits. D) national defense.
D
3) According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Based on this story, it is most likely that the slowdown reflects a A) change to India's long-term economic growth rate. B) shrinkage of India's economy. C) temporary business cycle expansion. D) temporary business cycle slowdown.
D
33) The income approach to measuring GDP A) sums all incomes earned in the United States and makes no other adjustments because other adjustments are not necessary. B) measures the cost of producing GDP rather than the market value. C) sums the value at each stage of production plus the value of depreciation. D) determines the cost of production, then adjusts it to equal the market value of production.
D
4) Gross domestic product (GDP) is A) the sum of compensation of employees, proprietors' income, net interest, rental income, corporate profits, depreciation, and indirect business taxes minus subsidies. B) the value of all final goods and services produced in a country during a year. C) the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports. D) all of the above.
D
49) Which of the following is NOT included in real GDP? A) production of services, such as the services of hair dressers B) production of goods that last more than a year, such as a pair of roller blades C) production of goods that last less than a year, such as production of hot dogs D) production that takes place in the underground economy
D
8) Which of the following is TRUE regarding the circular flow diagram? I. "Aggregate income" is the flow of income earned by firms. II. Retained earnings are considered income earned by firms rather than part of households' income. III. The government, households, and firms all have transactions in the goods market. A) I only B) I and II C) I and III D) III only
D
15) In the above table, the employment-to-population ratio is A) 51 percent. B) 62 percent. C) 42 percent. D) 44 percent.
D) 44 percent
17) In an economy, 23 million people are employed and 2 million are unemployed, but 5 million part-time workers would prefer full- time work. What is the unemployment rate? A) 25 percent B) 6.7 percent C) 23.2 percent D) 8 percent
D) 8 percent
41) Labor productivity, real GDP per labor hour, increases if A) there is an increase in the accumulation of human capital. B) new technologies are continuously discovered. C) saving and investment cause an increase in the quantity of capital per worker. D) All of the above answers are correct.
D) All of the above answers are correct
19) In 2010, of the following which nations had the highest level of real GDP per person? A) Europe Big 4 B) Japan C) China D) Canada
D) Canada
13) Convergence of the income gap has been most dramatic between A) South America and the United States. B) the Central European countries and the United States. C) Africa and the United States. D) Hong Kong and the United States.
D) Hong Kong and the United States.
38) Real GDP can be criticized as a measure of economic welfare because it A) does not take account of the degradation of environmental quality. B) does not include leisure time available to a society. C) does not include the value of products produced in the household. D) All of the above answers are correct.
D) all of the above
37) Inflation is a problem when A) it causes resources to be diverted from productive uses. C) it causes the value of money to vary unpredictably. B) it is unpredictable. D) All of the above answers are correct
D) all of the above are correct
32) The unemployment rate generally falls during ________ in the business cycle. A) a trough B) a peak C) a recession D)an expansion
D) an expansion
22) If a worker is temporarily laid off because the economy is in a recession A) structural unemployment increases. B) the size of the labor force rises. C) frictional unemployment increases. D) cyclical unemployment increases.
D) cyclical unemployment increases
49) The relationship between education and economic growth can best be summarized by saying that A) educated people are less apt to consume goods that deplete economic resources, which encourages economic growth. B) educational expenditures tend to be inflationary, which discourages economic growth. C) educational expenditures tend to divert funds from productive investments, which discourages economic growth. D) education has benefits beyond those who receive the education, which encourages economic growth.
D) education has benefits beyond those who receive the education, which encourages economic growth
47) The biases in the CPI are A) not important although they are large. B) important only to economists, not the real world. C) not important since they are so small. D) important since they effect nearly 1/3 of federal government spending.
D) important since they effect nearly 1/3 of federal government spending
47) If the saving rate increases, a country's growth rate of real GDP per hour of labor ________ and capital per hour of labor ________. A) increases; decreases B) decreases; increases C) decreases; decreases D) increases; increases
D) increases; increases
40) An expansion occurs when the level of real GDP is A) decreasing. B) at a cyclical peak. C) at a cyclical trough. D) increasing.
D) increasing
14) The gap between real GDP per person in Africa and real GDP per person in the United States has been A) decreasing. B) there is no gap in real GDP per person between Africa and the United States. C) remaining fairly constant. D) increasing.
D) increasing.
28) The demand for labor curve A) shifts rightward when the real wage rate rises. B) is upward sloping and the supply curve of labor is downward sloping. C) is upward sloping because productivity of labor diminishes as more workers are employed. D) is downward sloping because productivity of labor diminishes as more workers are employed.
D) is downward sloping because productivity of labor diminishes as more workers are employed
24) The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as Z. B) remain at point W. C) move to point such as Y. D) move to point such as X.
D) move to point such as X
24) When the economy moves into and out of recessions and expansions, the unemployment rate fluctuates around the A) frictional unemployment rate. B) cyclical unemployment. C) structural unemployment rate. D) natural unemployment rate.
D) natural unemployment rate
37) A recession is commonly defined as occurring when A) real GDP decreases for a period of 12 or more months. B) the unemployment rate rises above 7.5 percent for 6 or more months. C) the unemployment rate rises above 5.0 percent for 12 or more months. D) real GDP decreases for a period of 6 or more months.
D) real GDP decreases for a period of 6 or more months
22) By measuring ________ we can see that the economies of Hong Kong and Singapore are catching up to the economies of North America but that the economies of Central and South America are not. A) inflation per person B) real GDP C) the population D) real GDP per person
D) real GDP per person
44) The term "business cycle" most closely refers to the A) alternating periods of expansions and recessions. B) accounting period used by firms. C) fluctuating profits of firms. D) fiscal year.
A) alternating periods of expansion and recessions
9) The labor force is defined as the number of people who A) are employed plus the number of people who are unemployed. B) would like to have a full-time job but are working part-time. C) are available and looking for work but are unable to find employment. D) would like to have a job but have stopped seeking work.
A) are employed plus the number of people who are unemployed
27) An increase in labor productivity shifts the labor ________ curve ________. A) demand; rightward B) supply; leftward C) demand; leftward D) supply; rightward
A) demand; rightward
44) Which of the following statements regarding human capital is INCORRECT? A) Education is the only vehicle for the creation of human capital because training simply reinforces what has already been learned. B) The accumulation of human capital is the source of both increased productivity and technological advance. C) Writing and mathematics, the most basic of human skills, are crucial elements in economic progress. D) Human capital is the accumulated skill and knowledge of human beings.
A) education is the only vehicle for the creation of human capital because training simply reinforces what has already been learned.
10) The percentage of the people of working age who have jobs is called the ________. A) employment-to-population ratio C) employment-to-working-age-population ratio B) inverse of the unemployment rate D) labor force
A) employment-to-population ratio
33) Frictional unemployment is the result of A) normal labor market turnover. B) a slowdown in the rate of economic expansion. C) irresponsible workers with poor work habits. D) technological change or foreign competition.
A) normal labor market turnover
3) Which of the following best fits the definition of unemployed? A) not working but looking for a job B) not working and not looking for work C) working less than a full work week D) retired and not working
A) not working but looking for a job
19) If the economy is at full employment A) real GDP equals potential GDP. B) the entire population is employed. C) the entire labor force is employed. D) the only unemployment is frictional unemployment plus discouraged workers.
A) real GDP equals potential GDP
2) The labor force participation rate is percentage of the ________ who are in the labor force. A) working-age population B) people under age 65 C) population D) people over age 16
A) working-age population
29) Which of the following is TRUE regarding the real wage rate? The real wage rate I. is always greater than the money wage. II. measures the quantity of goods and services an hour's work can buy. A) only I B) only II C) both I and II D) neither I nor II
B) only II
48) The notion that technological change is not random but instead is driven by the pursuit of profits is an essential element of A) neoclassical growth theory. B) the new growth theory. C) perpetual growth theory. D) classical growth theory.
B) the new growth theory
11) The labor force is defined as the A) number of people who are working. B) number of employed people plus the number of unemployed people. C) number of people who are working in labor-type jobs. D) number of union members who are working.
B) the number of employed people plus the number of unemployed people
15) The gaps between the United States and the Asian countries of Honk Kong, Singapore, Korea and China have been A) there are no gaps between these Asian countries and the United States B) remaining fairly constant C) decreasing D) increasing
C) decreasing
39) Potential GDP is A) the level of GDP achieved during periods when 100 percent of the labor force is employed. B) a goal that can never be achieved by the economy. C) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation. D) the maximum GDP that an economy actually achieves throughout its entire history.
C) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation
41) In a period of rapid, unexpected inflation, resources can be lost A) because rapid inflation almost always turns into a hyperinflation. B) when firms invest in research and development instead of forecasting inflation. C) when firms use resources to forecast inflation. D) Both answers B and C are correct.
C) when firms use resources to forecast inflation
1) Suppose Mail Boxes Etc. buys a new copier for its store for $1000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, ________ has occurred. A) net investment B) gross investment C) replacement investment D) depreciation
D