ECON 201 TEST TWO REVIEW

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50) As the purchasing power of wealth increases, saving decreases.

TRUE

All of the following are indirect taxes EXCEPT A) liquor excise taxes. B) cigarette sales taxes. C) taxes on utility bills. D) income taxes.

40) A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from A) technological improvements. B) an increase in the real interest rate. C) tax cuts. D) decreases in the expected profit.

17) Labor growth depends mainly on ________ and labor productivity growth depends on ________. A) population growth; technological advances B) growth in real GDP per person; growth rate of capital C) population growth; increases in real GDP D) growth in real GDP per person; technological advances

37) Which type of price index theory uses base yearʹs quantities? A) Laspeyres B) Paasche C) Fisherʹs Mean D) Boskinʹs Index

38) Unemployment caused by the fluctuation of the business cycle is called ________ unemployment. A) cyclical B) recession-related C) frictional D) structural

39) Which type of price index theory uses current yearʹs quantities? A) Boskinʹs Index B) Paasche C) Laspeyres D) Fisherʹs Mean

4) We are interested in long-term growth primarily because it brings A) lower price levels. B) higher standards of living. C) trade wars with our trading partners. D) higher price levels.

Structural unemployment is the result of A) normal labor market turnover. B) technological change, absolute job skills, or foreign competition. C) a slowdown in the rate of economic expansion. D) irresponsible workers with poor work habits.

13) The curvature of the production function shows that as employment increases, the productivity of labor A) remains positive but decreases. B) remains constant. C) decreases and becomes negative. D) remains positive and increases.

14) The decreasing slope of a production function reflects A) diminishing returns. B) rising unemployment. C) increasing aggregate demand. D) decreasing costs.

18) Using the Rule of 70, if the country of Flowerdomʹs current growth rate of real GDP per person was 7 percent a year, how long would it take the countryʹs real GDP per person to double? A) 10 years B) 49 years C) 2 years D) 1 year

20) Labor productivity is A) real GDP per hour of labor. B) real GDP per hour of labor times the hours of work. C) the rate of change in real GDP per hour of labor. D) real GDP per hour of labor times the number of people.

22) As currently calculated, the CPI tends to overstate the true inflation rate because A) it fails to correctly measure quality changes for some products. B) the market basket selected is inappropriate. C) we cannot know what the true inflation rate is. D) the market basket fails to weigh housing costs sufficiently.

25) A higher savings rate that leads to an increase in the capital stock A) leads to increases in labor productivity. B) immediately decreases investment. C) is associated with a decrease in the rate of growth of the population. D) leads to higher interest rates.

25) An example of ʺinvestmentʺ in computing real GDP using the expenditure approach is the purchase of A) a new set of tools by an auto mechanic, for use in repairing cars. B) a 100 year old house by a married couple. C) 100 shares of IBM stock. D) computer chips by Dell to put in their personal computers.

26) The consumer price index (CPI) A) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period. B) measures the increase in the prices of the goods included in GDP. C) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2. D) is the ratio of the average price of a typical basket of goods to the cost of producing those goods.

3) The real wage rate equals A) (money wage rate)/(price level). B) (money wage) + (number of hours worked)/(price level). C) (price level)/(money wage rate). D) (money wage rate) × (price level).

30) Price indexes can overstate inflation because they A) omit some quality improvements. B) do not contain the prices of any used goods. C) do not contain the prices of services. D) do not contain the prices of foreign goods.

30) U.S. investment is financed from A) private saving, government budget surpluses, and borrowing from the rest of the world. B) private saving, government budget deficits, and borrowing from the rest of the world. C) private saving and borrowing from the rest of the world only. D) private borrowing, government budget deficits, and lending to the rest of the world.

32) In the loanable funds market, an increase in wealth shifts the ________ loanable funds curve ________. A) supply of; rightward B) demand for; leftward C) demand for; rightward D) supply of; leftward

In the above figure, a recession begins at point ________ and an expansion begins at point ________. A) a; b B) b; c C) d; c D) b; a

44) If the government has a budget deficit, crowding out might occur. Crowding out leads to all of the following EXCEPT A) decreased private saving. B) a higher real interest rate. C) a smaller capital stock in the future. D) a decreased quantity of investment.

5) Greater labor force participation for households at higher real wage rate is one reason that A) the supply of labor curve is upward sloping. B) the supply of labor curve is downward sloping. C) the demand for labor curve is upward sloping. D) the demand for labor curve is downward sloping

6) The three types of unemployment are A) frictional, structural, and cyclical. B) voluntary, part-time, and cyclical. C) frictional, part-time, and involuntary. D) voluntary, involuntary, and structural.

All of the following are included in gross private domestic investment expenditure EXCEPT a A) businessʹs purchase of another companyʹs stock. B) a retail storeʹs purchase of shoes to add to its inventory. C) businessʹs purchase of a fleet of cars. D) householdʹs purchase of a new house.

Based on the following data for the country of Tiny Town, the employment-to-population ratio equals ________ multiplied by 100. Population = 200 Working age population = 100 Labor Force = 90 Number of employed persons = 75 A) 75/100. B) 90/200. C) 90/100. D) 75/200

Cyclical unemployment A) fluctuates over the business cycle. B) is always present in an economy. C) is higher during an expansion. D) decreases during a recession.

Depreciation is subtracted from gross domestic product to determine directly A) net domestic product. B) national income. C) consumption expenditures plus investment expenditures plus government expenditure plus net exports. D) disposable income.

Gross domestic product is the total ________ produced within a country in a given time period. A) market value of all final goods and services B) market value of all final and intermediate goods and services C) market value of all goods and services D) amount of final and intermediate goods and services

In the computation of GDP, Social Security payments count as A) transfer payments and are not included in GDP. B) transfer payments and are included in GDP. C) government expenditure on goods and services and are included in GDP. D) government expenditure on goods and services and are not included in GDP.

Intermediate goods are excluded from GDP because A) their inclusion would involve double counting. B) they represent goods that have never been purchased so they cannot be counted. C) the premise of the question is incorrect because intermediate goods are directly included in calculating GDP. D) their inclusion would understate GDP

Let C represent consumption expenditure, S saving, I gross private domestic investment, G government expenditure on goods and services, and X - M net exports of goods and services. Then GDP equals A) C + I + G + X - M. B) C + I + G - X - M. C) C + S + G + X - M. D) C + S + G - X - M.

Potential GDP is A) the value of production when all the nationʹs resources are fully employed. B) the maximum GDP that an economy actually achieves throughout its entire history. C) the level of GDP achieved during periods when 100 percent of the labor force is employed. D) a goal that can never be achieved by the economy

The five categories of income used in the income approach to the measurement of GDP are A) employee compensation, net interest, rental income, corporate profits, and proprietorʹs income. B) employee compensation, consumption, rental income, corporate profits, and proprietorʹs income. C) employee compensation, saving, rental income, corporate profits, and investment. D) consumption, saving, rental income, corporate profits, and investment.

The productivity growth slowdown refers to the A) period during the 1970s and for some years afterwards. B) situation in foreign nations but not in the United States. C) years during the 1990s. D) years following the 1930s depression

1) Economic growth is measured by A) changes in nominal GDP. B) changes in real GDP. C) changes in the employment rate. D) All of the above are used to measure economic growth

10) Suppose there are currently 100 people unemployed, 1500 people employed, and 2000 people in the working age population. The labor force participation rate equals 100 times A) 100/1600. B) 1600/2000. C) 100/1500. D) 1500/2000.

12) Moving along the aggregate production function shows the relationship between ________, holding all else constant. A) labor input, capital input and real GDP B) labor input and real GDP C) capital input and real GDP D) technology and real GDP

12) The employment-to-population ratio is defined as A) total employment divided by the labor force then multiplied by 100. B) total employment divided by the working-age population then multiplied by 100. C) total employment divided by labor hours then multiplied by 100. D) the labor force divided by the working-age population then multiplied by 100.

15) The ________ is calculated as the number of people ________ divided by the labor force multiplied by 100. A) employment rate; employed B) unemployment rate; unemployed C) employment-to-population ratio; in the working age population D) employment-to-population ratio; unemployed

16) The Consumer Price Index is a measure of the average of the prices paid by ________ for a fixed basket of consumer goods and services. A) consumers living in cities with a population greater than 100,000 B) urban consumers C) urban wage earners and clerical workers D) all consumers

2) Discouraged workers ________ counted as officially unemployed because they ________. A) are not; are not qualified to work B) are not; are not actively seeking work C) are; are still in the labor force D) are; are not working

20) Question Year---- Nominal Income-- Price Index 1990---- 9800-------- 99 1991---- 10000-------- 95 1992---- 15000------- 100 1993---- 17000------- 110 1994---- 23000------- 115 1995---- 33000------- 123 Calculate the change in inflation, nominal income, and real income from 1990 to 1995 A) 75%, 37%, 22% B) 24%, 237%, 171% C) 33%,17%,-12% D) 235%, 233%, -275% E) None of the above

24) Substitution bias in the CPI refers to the fact that the CPI A) substitutes quality changes whenever they occur without taking account of the cost of the quality changes. B) takes no account of the substitution of goods by consumers when relative prices change. C) takes into account the substitution of goods by consumers when relative prices change. D) substitutes relative prices for absolute prices of goods.

27) Looking at inflation rates in the United States since the 1970s we see that A) the inflation rate increased with the increased growth of the 1990s. B) the 1970s experienced the highest inflation rates. C) the highest inflation rates were the double digits during the 1990s. D) inflation fell the most during the 1970s productivity slowdown.

3) When a student finishes college and begins looking for work A) frictional and cyclical unemployment increase. B) frictional unemployment increases. C) structural unemployment increases. D) cyclical unemployment increases.

31) The biases in the CPI include the A) substitution, new goods, and old goods biases. B) new goods, quality change, and substitution biases. C) old goods, new goods, and quality change biases. D) old goods, unemployment, and inflation biases.

33) If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals A) 450. B) 225. C) 250. D) 300.

34) When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing A) frictional and cyclical unemployment. B) structural unemployment. C) cyclical unemployment. D) frictional unemployment.

35) Ms. Krupsky has shorthand and typing skills and still finds herself unemployed. In todayʹs economy, Ms. Krupsky is an example of what type of unemployment? A) frictional unemployment B) structural unemployment C) cyclical unemployment D) None of the above answers is correct.

39) Which type of price index theory uses current yearʹs quantities? A) Boskinʹs Index B) Paasche C) Laspeyres D) Fisherʹs Mean

5) In a country with a working-age population of 130 million, 90 million workers are employed and 10 million workers are unemployed. What is the unemployment rate? A) 5.0 percent B) 10.0 percent C) 7.7 percent D) 7.1 percent

7) Marginally attached workers fall into which of the following population categories? A) unemployed B) not in the labor force C) labor force D) employed

9) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is A) 7.1 percent. B) 9.1 percent. C) 10 percent. D) 6.6 percent.

Business cycles A) are unpredictable due to political upheavals and global markets. B) follow a pattern of trough, expansion, peak and recession. C) are more volatile during a Republican administration. D) are all identical in duration over the last century.

Depreciation is defined as the A) increase in the stock of capital due to investment by firms. B) decrease in the stock of capital due to wear and tear. C) increase in the stock of capital due to wear and tear. D) decrease in the stock of capital due to investment by firms.

Full-time students and prisoners are ________. A) in the labor force B) not in the labor force C) counted as unemployed D) counted as discouraged workers

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 Thailandʹs GDP but not to U.S. GDP. C) count for both Thailandʹs GDP and U.S. GDP. D) add to neither U.S. GDP nor Thailandʹs GDP.

If consumption expenditures are $500 million, net investment is $100 million, depreciation equals $5 million, imports are $50 million, exports are $55 million, government expenditure on goods and services is $220 million, and government transfer payments are $20 million, then GDP is A) $790 million. B) $830 million. C) $850 million. D) $800 million.

Net investment equals A) the total quantity of plant, equipment and buildings. B) gross investment minus depreciation. C) capital stock minus depreciation. D) gross investment/depreciation

Net investment equals A) the total quantity of plant, equipment and buildings. B) gross investment minus depreciation. C) capital stock minus depreciation. D) gross investment/depreciation.

Nominal GDP is A) real GDP valued at base year prices. B) GDP valued at prices of that year. C) real GDP adjusted for price changes. D) GDP valued at constant prices.

Pollution is a by-product of some production processes, so on this count real GDP as measured A) is adjusted downward to take into account the pollution. B) tends to overstate economic welfare. C) is adjusted upward to take into account the expenditures that will be made in the future to clean up the pollution. D) tends to understate economic welfare.

The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will A) move to point such as Y. B) move to point such as Z. C) remain at point W. D) move to point such as X.

The labor force is the sum of the A) total population and the number of unemployed people. B) number of employed people and the number of unemployed people. C) working-age population and the number of unemployed people. D) number of employed people and the working-age population.

The unemployment rate is at the natural unemployment rate when A) frictional unemployment equals zero. B) cyclical unemployment equals zero. C) all types of unemployment equal zero. D) structural unemployment equals zero.

When the unemployment rate is below the natural unemployment rate, A) real GDP equals potential GDP. B) real GDP is greater than potential GDP. C) real GDP is less than potential GDP. D) None of the above is possible because it is impossible for the unemployment rate to be less than the natural rate.

Which of the following best represents an indirect tax? A) federal income tax B) sales taxes paid on goods and services C) state income tax D) local property tax

Which of the following is NOT included in real GDP? A) production of goods that do not last more than one year, such as gasoline B) production in the home C) production of goods that last more than one year, such as television sets D) production of services, such as the services of doctors

Which of the following is NOT part of the expenditure approach to measuring GDP? A) personal consumption expenditures B) net interest C) net exports of goods and services D) gross private domestic investment

31) If the nominal interest rate is 8 percent and the current inflation rate is 3 percent, approximately what is the real interest rate? A) 8 percent B) 3 percent C) 5 percent D) 11 percent

10) If the population increases, then potential GDP ________ and employment ________. A) decreases; decreases B) decreases; increases C) increases; increases D) increases; decreases

13) The labor force is defined as A) people with full time jobs. B) all people capable of work. C) workers with jobs and unemployed workers. D) All of the above answers are correct.

15) If a rich country grows at a faster rate than a poor one, then A) whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates. B) the gap in their standard of living will close over time. C) the gap in their standard of living will widen over time. D) the difference in their living standards will not change over time.

19) Deflation represents: A) a recession. B) an increase in the unemployment rate. C) a reduction in the aggregate price level. D) a reduction in output.

19) In 2010, of the following ________ had the highest real GDP per person. A) Canada B) Japan C) the United States D) the Europe Big 4 countries

2) The labor demand curve slopes downward because A) the firm maximizes profits by hiring more labor when the real wage rate rises. B) workers supply fewer hours of work when the real wage rate rises. C) the firm maximizes profits by hiring more labor when the real wage rate falls. D) workers supply more hours of work when the real wage rate rises.

21) If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________. A) increases; increases B) increases; decreases C) stays the same; increases D) decreases; stays the same

21) The currently used method for calculating the CPI A) accounts for people increasing consumption of a good that falls in relative price. B) has no effect on government expenditures. C) probably overstates inflation by about 1 percentage point. D) None of the above answers are correct.

22) All of the following contribute to labor productivity growth EXCEPT: A) human capital growth. B) technological advancements. C) population growth. D) physical capital growth.

23) The Industrial Revolution in England in large was the result of A) population growth. B) technological innovations that were financed mainly by government spending. C) technological innovations encouraged by the patent system. D) growth in human capital.

24) The term ʺcapital,ʺ as used in macroeconomics, refers to A) the sum of investment and government purchases of goods. B) investment. C) the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. D) financial wealth.

28) Real Gross Domestic Product is A) the productivity of labor. B) the most that can be produced when the economyʹs resources are fully employed. C) the value of total production linked back to the prices of a single year. D) the amount of people unemployed divided by the total labor force.

32) Because of a bank merger, Ms. Davis lost her position as Vice President and had to seek work with other banks. Ms. Davis has the skills necessary to find a new job, thus she is best considered as A) structurally unemployed. B) naturally unemployed. C) frictionally unemployed. D) cyclically unemployed.

34) The funds used to buy and operate physical capital are A) depreciation. B) saving. C) financial capital. D) wealth.

36) Cyclical unemployment occurs when A) individuals with skills no longer valued in the labor market cannot find employment. B) individuals enter into the labor market making the rounds of potential employers. C) a business cycle recession decreases employment. D) individuals give up the search for employment.

4) Frictional unemployment comes about because of A) a general economic slowdown. B) friction between labor and management. C) normal labor market turnover. D) a mismatch between skills and available jobs.

45) The term ʺcapital,ʺ as used in macroeconomics, refers to A) investment. B) financial wealth. C) the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. D) the sum of investment and government purchases of goods.

6) The supply of labor curve is A) downward sloping. B) vertical at potential GDP. C) upward sloping. D) horizontal at the equilibrium wage rate.

7) The real wage rate will fall if the A) labor demand curve shifts rightward more than the labor supply curve shifts rightward. B) labor demand curve shifts rightward and the labor supply curve does not shift. C) labor supply curve shifts rightward and the labor demand curve does not shift. D) labor supply curve shifts leftward and the labor demand curve does not shift.

8) During a recession, the ________. A) number of discouraged workers decreases B) employment-to-population ratio increases C) number of marginally attached workers increases D) unemployment rate decreases

9) In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment. A) raises; decreases B) lowers; increases C) raises; increases D) lowers; decreases

Component Amount (dollars) Net taxes 10 Personal consumption expenditure 50 Depreciation 8 Government expenditure 20 Gross investment 26 Net exports -10 Compensation of employees 65 12) Using the information in the table above, calculate gross domestic product. A) $78 B) $108 C) $86 D) $118

Component Amount (dollars) Net taxes 10 Personal consumption expenditure 50 Depreciation 8 Government expenditure 20 Gross investment 26 Net exports -10 Compensation of employees 65 34) Using the information in the table above, calculate gross domestic product. A) $78 B) $108 C) $86 D) $118

Component Amount (dollars) Net taxes 10 Personal consumption expenditure 50 Depreciation 8 Government expenditure 20 Gross investment 26 Net exports -10 Compensation of employees 65 Using the information in the table above, calculate gross domestic product. A) $78 B) $108 C) $86 D) $118

Component Number of people (millions) Under 16 50 Working full-time 90 Working part-time 30 Retired 40 Unemployed 5 47) Using the data in the above table, the unemployment rate is A) 4.16 percent. B) 28.0 percent. C) 4.0 percent. D) 5.55 percent.

Full employment occurs A) only if the unemployment rate is zero. B) only if unemployment is equal to structural unemployment plus cyclical unemployment. C) only if the unemployment rate is equal to the natural rate of unemployment. D) None of the above answers are correct.

GDP declines during A) a decrease in unemployment. B) the movement from below potential GDP back to potential GDP. C) the movement from peak to trough. D) the movement from trough to peak.

In the expenditure approach to GDP, the largest component is A) net exports. B) government expenditure on goods and services. C) personal consumption expenditures. D) gross private domestic investment.

Question -- Given the following: Consumption of fixed capital (depreciation) $1,257 Rents $170 Indirect business taxes less subsidies $682 Social security contributions $800 Corporate income taxes $500 Undistributed Corporate Profits-retained earnings $274 Transfer payments $2,000 Personal income taxes $1,500 Compensation of employees (wages) $5,739 Net interest $571 Profits-(Corporate and Proprietors Income) $1,668 Personal Consumption expenditures $6,089 Gross private domestic investment $1,855 Government purchases $1,843 Net Exports (X-M) $300 Statistical discrepancy $50 What is net domestic income at factor prices? A) $9,572 B) $10,087 C) $8,098 D) $10,037 E) none of the above

The base-year method of calculating real GDP compared A) quantities produced in different years with the prices that prevailed during the year in which the output was produced. B) prices at different points in time using a sample of goods that is representative of goods purchased by households. C) quantities produced in different years using prices from a year chosen as a reference period. D) the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output.

The largest component of GDP in the expenditures approach is A) government expenditure on goods and services. B) gross private domestic investment. C) personal consumption expenditures. D) net exports.

The underground economy exists for all of the following reasons EXCEPT the A) avoidance of government regulation. B) production of illegal goods. C) desire to maintain accurate records of economic transactions. D) avoidance of taxes.

Transfer payments A) refer to all payments made to households by governments. B) are included in the government expenditure category in gross domestic product. C) refer to payments made by the government that are not made to purchase a good or service. D) are made by households to firms in exchange for goods and services.

Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include A) exports and imports. B) depreciation and investment. C) indirect taxes and subsidies. D) personal taxes and corporate taxes.

When calculating GDP, underground economic activity is A) an aspect of the quality of life, such as health and life expectancy. B) the production of goods and services in the home. C) the part of the economy purposely hidden. D) that portion of the time when we are enjoying leisure activities and not producing marketable goods

Year Price index Inflation rate (percent) 1 100 2 117 A 3 125 B 4 120 C 5 D 8.3 6 150 E 18) In the table above, what inflation rate belongs in space A? A) 8.3 percent B) -4.0 percent C) 17.0 percent D) 6.8 percent

1) Which of the following statements is INCORRECT? A) The labor-force participation rate is the labor force divided by the working-age population then times 100. B) The labor force is equal to the number of people employed plus the number of people unemployed. C) The unemployment rate is the number of persons who are unemployed divided by the labor force then times 100. D) The working age population includes everyone over the age of 16.

14) The unemployment rate measures the percentage of A) people who want full-time jobs, but canʹt find them. B) the working age population that canʹt find a full-time job. C) the working-age population who canʹt find a job. D) people in the labor force who canʹt find a job.

16) During 2009, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2008, real GDP was 105 billion and the population was 0.85 billion. Economiaʹs growth rate of real GDP per person is A) 5 percent B) 5.88 percent C) 9.52 percent D) 3.23 percent

17) Because of the biases in calculating the CPI, actual inflation is A) more than the measured inflation rate by about 1 percent per month. B) more than the measured inflation rate by about 1 percent per year. C) accurately measured. D) less than the measured inflation rate by about 1 percent per year.

23) Suppose the CPI last year is 121 and the CPI this year is 137. The correct method to calculate the inflation rate is A) 137 × 121 = 258. B) (137/121) × 100 = 113.2. C) (137 - 121)/100 = 0.16. D) [(137 - 121)/121] × 100 = 13.2.

26) The nominal interest rate minus the real interest rate approximately equals the A) the rate of increase in the income. B) rate of increase in the amount of investment. C) the rate the bank receives to cover lending costs. D) inflation rate.

27) Net investment equals A) gross investment/depreciation. B) the total quantity of plant, equipment and buildings. C) capital stock minus depreciation. D) gross investment minus depreciation.

28) If a bankʹs net worth is negative, then the bank definitely is A) solvent. B) liquid. C) illiquid. D) insolvent.

29) Suppose the Consumer Price Index is 143.6. What does that number mean? A) Prices rose 143.6 percent over the reference base period, on average. B) On average, goods cost $143.60. C) On average, goods cost $243.60. D) Prices rose 43.6 percent over the reference base period, on average.

35) U.S. investment is financed from A) private saving, government budget deficits, and borrowing from the rest of the world. B) private saving and borrowing from the rest of the world only. C) private borrowing, government budget deficits, and lending to the rest of the world. D) private saving, government budget surpluses, and borrowing from the rest of the world.

8) During 2011, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2010, real GDP was 105 billion and the population was 0.85 billion. In 2010, real GDP per person was A) $135 B) $117 C) $128 D) $124

All of the following are indirect taxes EXCEPT A) liquor excise taxes. B) cigarette sales taxes. C) taxes on utility bills. D) income taxes

All of the following household expenditures are included in consumption expenditure EXCEPT A) purchase of a new purse. B) payment to a dentist for filling a tooth. C) purchase of hair styling. D) purchase of corporate stock.

Economists distinguish real GDP from nominal GDP to A) measure the change in nominal interest rates. B) determine whether economic welfare has changed. C) determine whether the government sector is growing. D) determine whether real production has changed.

From 1961 to 2005, the labor force participation rate of women in the United States ________ at a ________ rate than the labor force participation rate of men ________. A) increased; faster; increased B) decreased; faster; decreased C) increased; slower; decreased D) increased; faster; decreased

Goods that are produced this year, stored in inventories, and then sold to consumers next year A) count in both this yearʹs and next yearʹs GDP. B) are not counted as a part of GDP. C) count in next yearʹs GDP. D) count in this yearʹs GDP.

Item Billions of dollars Compensation of employees 80 Net interest and rental income 30 Corporate profits 10 Proprietorʹs income 20 30) Use the information in the table above plus the fact that indirect taxes less subsidies are $10 billion and depreciation is $30 billion to calculate the value of GDP. A) $140 billion B) $130 billion C) $150 billion D) $180 billion

Personal consumption expenditures include all of the following EXCEPT spending on A) consumer services. B) consumer durable goods. C) consumer nondurable goods. D) new housing.

Question -- Given the following: Consumption of fixed capital (depreciation) $1,257 Rents $170 Indirect business taxes less subsidies $682 Social security contributions $800 Corporate income taxes $500 Undistributed Corporate Profits-retained earnings $274 Transfer payments $2,000 Personal income taxes $1,500 Compensation of employees (wages) $5,739 Net interest $571 Profits-(Corporate and Proprietors Income) $1,668 Personal Consumption expenditures $6,089 Gross private domestic investment $1,855 Government purchases $1,843 Net Exports (X-M) $300 Statistical discrepancy $50 What is GDP (expenditure approach)? A) $10,037 B) $8,098 C) $9,572 D) $10,087 E) none of the above

Question -- Given the following: Consumption of fixed capital (depreciation) $1,257 Rents $170 Indirect business taxes less subsidies $682 Social security contributions $800 Corporate income taxes $500 Undistributed Corporate Profits-retained earnings $274 Transfer payments $2,000 Personal income taxes $1,500 Compensation of employees (wages) $5,739 Net interest $571 Profits-(Corporate and Proprietors Income) $1,668 Personal Consumption expenditures $6,089 Gross private domestic investment $1,855 Government purchases $1,843 Net Exports (X-M) $300 Statistical discrepancy $50 What is GDP (income approach)? A) $10,087 B) $9,572 C) $8,098 D) $10,037 E) none of the above

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 the value of products produced in the household. C) does not include leisure time available to a society. D) All of the above answers are correct.

The difference between gross investment and net investment is A) consumption. B) inflation. C) initial capital. D) depreciation

The labor force participation rate is calculated as the A) labor force divided by the number of persons employed then multiplied by 100. B) labor force divided by the unemployment rate then multiplied by 100. C) number of persons unemployed divided by the labor force then multiplied by 100. D) labor force divided by the working age population then multiplied by 100.

The largest component of national income is A) rental income. B) proprietorsʹ income. C) corporate profits. D) compensation of employees.

The unemployment rate equals A) (number of people employed/number of people age 16 and over) × 100. B) (number of people employed/working age population) × 100. C) (labor force/working age population) × 100. D) (number of people unemployed/labor force) × 100.

The use of purchasing power parity prices A) weakens the validity of cross country comparisons of economic welfare. B) decreases the real GDP per person statistics published by the International Monetary Fund. C) increases the amount by which U.S. GDP is larger than that of any other nation. D) accounts for differences in the prices of the same goods in different countries when measuring real GDP.

The working-age population is defined as the number of A) people who have a job. B) people looking for work. C) people working full-time jobs who are over the age of 16. D) people over the age of 16 who are not in jail, hospital, or other institution.

Two methods of measuring GDP are A) the goods approach and the services approach. B) the saving approach and the investment approach. C) the income approach and the receipts approach. D) the income approach and the expenditure approach

When using the income approach to measure GDP, the largest share of GDP generally consists of: A) capital income. B) interest income. C) indirect taxes. D) labor income. E) profits.

Which of the following changes causes reported GDP to increase when, in fact, total production is unchanged? A) The legalization of previously illegal activities. B) A shift from household production to market production. C) Neither of the above will cause reported GDP to increase when total production does not change. D) Both answers A and B are correct.

Which of the following is NOT considered to be in the labor force? A) a student who works part-time B) a person who is not working but who has tried to find a job in the past week C) a person who is waiting to start a new job in the next 30 days D) a person who is not working and who has not tried to find a job

ECON 201 TEST TWO REVIEW

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