Econ 204

GDP is the market value of all ______ goods and services produced within an economy in a given period of time. A) used B) intermediate C) consumer D) final

D) final

Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income

D) income

If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal: Select one: a. 20,000. b. 200,000. c. 2,000,000. d. 10.

a. 20,000.

If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be ______ percent. Select one: a. 3 b. 11 c. 4 d. 9

a. 3

If disposable income is 4,000, consumption is 3,500, government purchases is 1,000, and taxes minus transfers are 800, national saving is equal to: Select one: a. 300 b. 500. c. 1,000. d. 700.

a. 300

If Y = AK0.5L0.5 and A, K, and L are all 100, the marginal product of capital is: Select one: a. 50. b. 1000. c. 100. d. 200.

a. 50.

According to the quantity theory of money, a 5 percent increase in money growth increases inflation by ___ percent. According to the Fisher equation, a 5 percent increase in the rate of inflation increases the nominal interest rate by ____ percent. Select one: a. 5; 5 b. 5; 1 c. 1; 1 d. 1; 5

a. 5; 5

All of the following actions are investments in the sense of the term used by macroeconomists except: Select one: a. Sandra Wu's buying 100 shares of IBM stock. b. IBM's building a new factory. c. John Simpson's buying a newly constructed home. d. corner candy store's buying a new computer

a. Sandra Wu's buying 100 shares of IBM stock.

If inflation was 6 percent last year and a worker received a 4 percent nominal wage increase last year, then the worker's real wage: Select one: a. decreased 2 percent. b. decreased 6 percent. c. increased 4 percent. d. increased 2 percent

a. decreased 2 percent

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are: A) $131. B) -$131. C) $31. D) -$31.

A) $131.

If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately ______ percent. A) 2 B) 3 C) 5 D) 8

A) 2

GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services. D) output of the economy.

A) expenditure of everyone in the economy.

All of the following are measures of GDP except the total: A) expenditures of all businesses in the economy. B) income from all production in the economy. C) expenditures on all final goods produced. D) value of all final production.

A) expenditures of all businesses in the economy.

If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent. A) increased ; 2 B) decreased; 2 C) increased; 8 D) decreased; 8

A) increased ; 2

In the long run, the level of national income in an economy is determined by its: Select one: a. factors of production and production function. b. rate of economic and accounting profit. c. real and nominal interest rate. d. government budget surplus or deficit.

a. factors of production and production function

The classical dichotomy: Select one:ca. is said to hold when the values of real variables can be determined without any reference to nominal variables or the existence of money. b. cannot hold if money is "neutral." c. fully describes the world in which we live, especially in the short run. d. arises because money depends on the nominal interest rate.

a. is said to hold when the values of real variables can be determined without any reference to nominal variables or the existence of money.

Okun's Law is the _______ relationship between real GDP and the _________. Select one: a. negative; unemployment rate b. positive; inflation rate c. negative; inflation rate d. positive; unemployment rate

a. negative; unemployment rate

In a system with 100-percent-reserve banking: Select one: a. no banks can make loans using deposits made at their institutions. b. all banks must hold reserves equal to 100 percent of their loans. c. no banks can accept deposits. d. the banking system completely controls the size of the money supply.

a. no banks can make loans using deposits made at their institutions.

A competitive firm chooses the: Select one: a. quantity of labor and capital to employ. b. price at which to sell the product produced. c. wage to pay labor. d. rental price to pay capital.

a. quantity of labor and capital to employ

The natural rate of unemployment is: Select one: a. the average rate of unemployment around which the economy fluctuates. b. about 10 percent of the labor force. c. a rate that never changes. d. the transition of individuals between employment and unemployment.

a. the average rate of unemployment around which the economy fluctuates.

Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is: A) $10,000. B) $12,000. C) $20,000. D) $22,000.

B) $12,000.

The real wage will increase if: Select one: a. the productivity of labor increases. b. the price of output increases. c. the supply of capital decreases. d. the supply of labor increases.

a. the productivity of labor increases.

The GDP deflator is equal to: Select one: a. the ratio of nominal GDP to real GDP. b. the ratio of real GDP to nominal GDP. c. real GDP minus national GDP. d. nominal GDP minus real GDP.

a. the ratio of nominal GDP to real GDP

The value added of an item produced refers to: Select one: a. the value of a firm's output less the value of the intermediate goods that the firm purchases. b. the value of a firm's output less the value of its costs. c. the value of the labor inputs in the production of an item. d. a firm's profits on the item sold.

a. the value of a firm's output less the value of the intermediate goods that the firm purchases.

A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is: A) $1. B) $2. C) $3. D) $6.

B) $2

The real wage is the return to labor measured in: Select one: a. units of output. b. units of capital. c. dollars. d. units of labor.

a. units of output.

People use money as a medium of exchange when they: Select one: a. use money to buy goods and services. b. hold money to transfer purchasing power into the future. c. use money as a measure of economic transactions. d. hold money to gain power and esteem

a. use money to buy goods and services

A policy that decreases the job separation rate _____ the natural rate of unemployment. Select one: a. will decrease b. will increase c. will not change d. could either increase or decrease

a. will decrease

If total investment (measured in billions of current dollars) equals $741, business fixed investment is $524, and residential fixed investment is $222, then inventory investment is: A) $5. B) -$5. C) $15. D) -$15.

B) -$5

All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of a: A) book printed in 2009, entitled The Year 3000. B) 2001 Jeep Cherokee. C) year 2010 calendar printed in 2009. D) ticket to see the movie 2001

B) 2001 Jeep Cherokee.

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent. A) 3.5 B) 4.7 C) 4.9 D) 7

B) 4.7

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ______ percent. A) 4.9 B) 7.4 C) 7.9 D) 9.4

B) 7.4

Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given these data, a Paasche index for 2009 using 2004 prices would be: A) 1.05. B) approximately 1.07. C) approximately 1.33. D) 1.50.

B) approximately 1.07.

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. The marriage: A) does not change GDP . B) decreases GDP by $60,000. C) increases GDP by $60,000. D) increases GDP by more than $60,000.

B) decreases GDP by $60,000.

The market value of all final goods and services produced within an economy in a given period of time is called: A) industrial production. B) gross domestic product. C) the GDP deflator. D) general durable purchases.

B) gross domestic product.

An example of an imputed value in the GDP is the: A) value-added of meals cooked at home. B) housing services enjoyed by homeowners. C) services of automobiles to their owners. D) value of illegal drugs sold.

B) housing services enjoyed by homeowners

The best measure of the economic satisfaction of the members of a society is: A) nominal GDP . B) real GDP . C) the rate of inflation. D) the value of corporate profits

B) real GDP

If the GDP deflator in 2009 equals 1.25 and nominal GDP in 2009 equals $15 trillion, what is the value of real GDP in 2009? Select one: a. $18.75 trillion b. $12 trillion c. $12.5 trillion d. $15 trillion

b. $12 trillion

If the monetary base is denoted by B, rr is the ratio of reserves to deposits, and cr is the ratio of currency to deposits, then the money supply is equal to ______ multiplied by B. Select one: a. (rr + cr)/ (cr + 1) b. (cr + 1)/ (cr + rr) c. (rr + cr)/ (rr + 1) d. (rr + 1)/ (rr + cr)

b. (cr + 1)/ (cr + rr)

If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals ______ million. Select one: a. 11.28 b. 200 c. 176.72 d. 188

b. 200

"Inflation tax" means that: Select one: a. as the price level rises, taxpayers are pushed into higher tax brackets. b. as the price level rises, the real value of money held by the public decreases. c. in a hyperinflation, the chief source of tax revenue is often the printing of money. d. as taxes increase, the rate of inflation also increases.

b. as the price level rises, the real value of money held by the public decreases.

Table: Bank Balance SheetBased on the table, what is the reserve-deposit ratio at the bank? Look at pic saved Select one: a. 15 percent b. 3 percent c. 5 percent d. 10 percent

d. 10 percent

The marginal product of capital is: Select one: a. additional output produced when one additional unit of capital and one additional unit of labor are added. b. the value of additional output when one dollar's worth of additional capital is added. c. output divided by capital input. d. additional output produced when one additional unit of capital is added.

d. additional output produced when one additional unit of capital is added.

The supply of loanable funds is equivalent to: Select one: a. private saving. b. public saving. c. investment. d. national saving.

d. national saving

All of the following are considered major functions of money except as a: Select one: a. store of value. b. unit of account. c. medium of exchange. d. way to display wealth

d. way to display wealth

The underground economy: A) is included in the latest GDP accounts. B) includes only illegal activities. C) includes domestic workers for whom Social Security tax is not collected. D) excludes the illegal drug trade.

C) includes domestic workers for whom Social Security tax is not collected.

When a firm sells a product out of inventory, GDP: A) increases. B) decreases. C) is not changed. D) increases or decreases, depending on the year the product was produced.

C) is not changed.

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. If GDP were changed so that it truly measured the sum of all final economic activity, the marriage would: A) decrease GDP. B) increase GDP . C) leave GDP unchanged. D) first decrease and then increase GDP .

C) leave GDP unchanged.

The household survey conducted by the Bureau of Labor Statistics provides estimates of the number of workers ______, while the establishment survey provides estimates of the number of workers ______. A) self-employed; unemployed B) unemployed; self-employed C) with jobs; on firms' payrolls D) on firms' payrolls; with jobs

C) with jobs; on firms' payrolls

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then government purchases are: A) $2,977. B) $1,910. C) -$843. D) $1,067.

D) $1,067.

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If ten apples and five oranges were purchased in 2002, and five apples and ten oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is: A) 0.75. B) 0.80. C) 1. D) 1.25

D) 1.25

Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given this data, a Laspeyres price index of 2009 prices using 2004 as the base year would be: A) 1.05. B) approximately 1.07. C) approximately 1.33. D) 1.50.

D) 1.50

Wage rigidity: Select one: a. increases the rate of job finding. b. prevents labor demand and labor supply from reaching the equilibrium level. c. is caused by sectoral shifts. d. forces labor demand to equal labor supply.

b. prevents labor demand and labor supply from reaching the equilibrium level.

An increase in the price of goods bought by firms and the government will show up in: Select one: a. neither the CPI nor the GDP deflator. b. the GDP deflator but not in the CPI. c. the CPI but not in the GDP deflator. d. both the CPI and the GDP deflator.

b. the GDP deflator but not in the CPI.

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is: Select one: a. 0.80. b. 0.75. c. 1.25. d. 1.

c. 1.25.

If the consumption function is given by the equation C = 500 + 0.5Y, the production function is Y = 50K0.5L0.5, where K = 100 and L = 100, then C equals: Select one: a. 5,000. b. 1,000. c. 3,000. d. 2,500.

c. 3,000.

Payment is deferred by using _______, but immediate access to funds occurs when using ______. Select one: a. demand deposits; savings deposits b. debit cards; credit cards c. credit cards; debit cards d. currency; demand deposits

c. credit cards; debit cards

An example of an imputed value in the GDP is the: Select one: a. value of illegal drugs sold. b. rental services of automobiles to their owners. c. housing services enjoyed by homeowners. d. value added of meals cooked at home.

c. housing services enjoyed by homeowners

According to the classical theory of money, inflation does not make workers poorer because wages increase: Select one: a. faster than the overall price level. b. more slowly than the overall price level. c. in proportion to the increase in the overall price level. d. in real terms during periods of inflation.

c. in proportion to the increase in the overall price level.

A fixed-weight price index like the CPI ______ the change in the cost of living because it ______ take into account that people can substitute less expensive goods for ones that have become more expensive. Select one: a. overestimates; does b. underestimates; does not c. overestimates; does not d. accurately estimates; does

c. overestimates; does not

All of the following are a flow except: Select one: a. the number of people losing their jobs. b. the number of new automobile purchases. c. the government debt. d. business expenditures on plant and equipment.

c. the government debt.

The CPI is determined by computing: Select one: a. an average of prices of all goods and services. b. nominal GDP relative to real GDP. c. the price of a fixed basket of goods and services, relative to the price of the same basket in a base year. d. the price of a basket of goods and services that changes every year, relative to the same basket in a base year.

c. the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.