ECON EXAM 2 MC
43) Which of the following measurements of inflation strips out volatile food and fuel prices? A) the core PCE B) the PCE deflator C) the GDP deflator D) the chained CPI
A) Core PCE
46) Substitution bias in the CPI refers to the fact that the CPIA) takes no account of the substitution of goods by consumers when relative prices change.B) substitutes quality changes whenever they occur without taking account of the cost of the quality changes. C) substitutes relative prices for absolute prices of goods.D) takes into account the substitution of goods by consumers when relative prices change.
A) Takes no account of the substitution of goods by consumers when relative prices change
13) When labor productivity increases, the demand for labor curve ________ and the supply of labor curve ________. A) shifts rightward; does not shift B) shift s leftward; does not shift C) shifts rightward; shifts rightward D) shifts leftward; shifts rightward
A) shifts rightward, does not shift
49) Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent. Then cyclical unemployment isA) -1 percent. B) 0 percent. C) 1 percent. D) 8 percent.
A) -1 percent
50) 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
24) The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year isA) 160. B) 140. C) 62.5. D) 1.60.
A) 160
17) 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) 225. B) 300.C) 250. D) 450.
A) 225
19) If the population is 300 million, with 70 million under the age of 16 and institutionalized, another 70 million not in the labor force, 10 million unemployed, and 150 million employed, the employment-to-population rate is A) 65.2 percent. B) 53.3 percent. C) 87.5 percent. D) 46.7 percent
A) 65.2 percent
21) Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices. II. Real GDP rises whenever inflation occurs III. Real GDP does not measure all that is produced A) I and IIB) I and III C) II and III D) I, II and III
B) 1 and 111
48) If this year the price level is 135 and last year it was 125, the inflation rate is A) 12 percent.B) 8 percent.C) 10 percent. D) none of the above.
B) 8%
A) Recession; growth rate of nominal GDP B) Productivity growth slowdown; growth rate of output per person C) Recession; growth rate of output per person D) Productivity growth slowdown; growth rate of real GDP
B) Productivity growth slowdown; growth rate of output per person
19) As labor increases, there is a A) movement along the aggregate production function, but no shift in it. B) movement along the aggregate production function and real GDP will increase less with each additional increase in labor. C) movement along the aggregate production function and real GDP will decrease less with each additional increase in labor. D) shift of the aggregate production function, but no movement along it.
B) movement along the aggregate PF and real GDP will icrease less with each additional increase in labor
5) Of the following sequences of price levels, which CORRECTLY represents a 5 percent inflation rate? A) 100, 105, 110, 115 B) 100, 105, 105, 105 C) 100, 100, 100, 100 D) 100, 105, 110.25, 115.76
D
6) 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 isA) constant. B) negative. C) increasing. D) decreasing.
D) decreasing
16) If the nation's capital stock increases so that workers become more productive, the A) supply of labor will increase. B) demand for labor will decrease. C) supply of labor will decrease. D) demand for labor will increase.
D) demand for labor will increase
14) From 1980 to 2000 the employment-to-population ratio generally ________ and from 2000 to 2015 the ratio generally ________. A) increased; decreased B) decreased; increasedC) increased; increased D) decreased; decreased
A) increased; decreased
24) In a country with a working-age population of 100 million, 70 million workers are employed and 5 million workers are unemployed. What is the labor force participation rate?A) 70 percent B) 75 percent C) 5 percent D) 7 percent
B) 75%
23) An advance in technology increases the productivity of labor. As a result, the nation's production function shifts ________ and the ________ labor curve shifts rightward. A) downward; supply of B) upward; demand for C) upward; supply of D) downward; demand for 2
B) upward, demand for
10) Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town isA) 10/80 × 100.B) 10 percent. C) 10/70 × 100.D) There is not enough information provided to calculate the unemployment rate.
D) there's not enough information
31) Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that A) Dingo's potential GDP fell in 2011. B) an expansion occurred after January 2011. C) Dingo did not experience a recession in 2010. D) real GDP in Dingo was increasing in January 2011.`
B) an expansion occurred after january 2011
49) The assumption that population growth will lead to a fall in real GDP per person rate back to subsistence level is A) central to the new growth theory. B) associated with Malthusians. C) part of the neoclassical school of growth theory. D) accepted by all economists today.
B) associated with Malthusians
23) The commodity substitution bias is thatA) government spending is a good substitute for investment expenditures.B) consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls.C) consumers substitute high-quality goods for low-quality goods.D) national saving and foreign borrowing are interchangeable.
B) consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative prices fall
5) The percentage of people employed aged 16 years and older divided by the working-age population is known as the A) labor force participation rate.B) employment-to-population ratio.C) working-age population ratio. D) employment rate.
B) employment-population ratio
39) The cost of inflation to society includesI. the opportunity costs of resources used by people to protect themselves against inflation. II. the diversion of productive resources to forecasting inflation.A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
17) The largest component of national income is A) proprietors' income. C) compensation of employees. B) corporate profits. D) rental income.
C) compensation of employees
42) If a new and better good replaced an older and less expensive good, then the price level measured by the CPI A) is the same as the actual price level because it measures the prices of the actual goods.B) is lower than the actual price level.C) is higher than the actual price level. D) might be either higher or lower than the actual price.
C) is higher than the actual price level
17) 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) 100 million people D) 20 million people
D) 20 million
24) All of the following are components of the expenditure approach to measuring GDP EXCEPT A) Shaniq's purchase of a meal at the Olive Garden in Atlanta. B) the army buying new M1 Abram tanks. C) Ford Motor Company buying new Dell computers for use in its marketing department in Dearborn, Michigan. D) a Senator from Iowa being paid the monthly salary.
D) A senator from Iowa being paid the monthly salary
0) The natural unemployment rateI. occurs when only there is no cyclical unemployment present.II. is the unemployment rate when the economy is at potential GDP. A) I only.C) neither I nor II B) II only D) I and II
D) I and II
43) The natural unemployment rateA) 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) occurs when 100 percent of the labor force is employed.D) has been estimated to range between 4 percent and 6 percent in the United States in recent years.
D) has been estimated to range between 4-6 % in the US in recent years
22) As currently calculated, the CPI tends to overstate the true inflation rate because A) the market basket fails to weigh housing costs sufficiently.B) the market basket selected is inappropriate.C) we cannot know what the true inflation rate is. D) it fails to correctly measure quality changes for some products.
D) it fails to correctly measure quality changes for some products
18) The real wage rate will fall if the A) labor demand curve shifts rightward and the labor supply curve does not shift. B) labor supply curve shifts leftward and the labor demand curve does not shift. C) labor demand curve shifts rightward more than the labor supply curve shifts rightward. D) labor supply curve shifts rightward and the labor demand curve does not shift.
D) labor supply curve shifts rightward and the labor demand curve does not shift
7) In September 2014, the official U-3 unemployment rate dropped from 6.1 percent to 5.9 percent. This change could have been caused byA) workers who had previously given up looking for a job starting to look again.B) part-time workers getting a full-time job. C) full-time workers becoming part-time workers. D) unemployed workers giving up looking for a job.
D) unemployed workers giving up looking for a job
35) Purchasing power parity prices are used to construct GDP data that A) can be used to make more valid comparisons between one country and another. B) is a proper measure of economic welfare. C) do not omit the underground economy. D) adjust for differences in population.
A) can be used to make more valid comparisons between one country and another
22) To measure GDP using the expenditure approach you must collect data on A) exports. B) wages. C) saving. D) inflation.
A) exports
45) Classical growth theory states that A) growth is followed by increases in the population, eventually leaving real GDP per person unchanged. B) growth is maximized when everyone is fully employed. C) growth in real GDP per person is difficult in the beginning but easier in the later stages. D) advances in technology will always insure a permanent increase in real GDP per person.
A) growth is followed by population increases, eventually leaving the real GDP per person unchanged
11) A discouraged worker ________ counted as officially unemployed and ________ counted as in the labor force. A) is not; is not B) is; is not C) is; is D) is not; is
A) is not, is not
16) From 1980 to 2000 the labor force participation rate generally ________ and from 2000 to 2015 the rate generally ________. A) decreased; decreased B) increased; decreased C) increased; increased D) decreased; increased
B) increased; decreased
42) Which growth theory predicts perpetual growth? A) classical growth theory B) new growth theory C) neoclassical growth theory D) None of the above answers is correct.
B) new growth theory
43) New growth theory proposes that real GDP per person grows because of ________ and that growth ________. A) productivity shocks; occurs randomly B) the pursuit of profit; can persist indefinitely C) technological change; can only increase above the subsistence level temporarily D) productivity shocks; can persist indefinitely
B) pursuit of profit, can persist indefinitely
34) Which of the following measurements of inflation tracks the rate at which infrequently changed prices are changing? A) the PCE deflator B) the sticky-price CPIC) the core PCE D) the chained CPI
B) the sticky price CPI
3) The cost of inflation to society includesA) the lost spending when people do not have enough money. B) unpredictable changes in the value of money.C) higher interest rates paid by borrowers.D) higher interest rates paid by the government on its debt.
B) unpredictable changes in the value of money
44) A central proposition of the new growth theory is that A) government direction and oversight is necessary for consistent growth. B) growth is often just an illusion fostered by growth accounting. C) knowledge is not subject to diminishing returns. D) growth will cease but prosperity will persist.
C) knowledge is not subject to diminishing returns
29) Suppose that the unemployment rate equals 4.5 percent and that the natural unemployment rate is 5.5 percent. We can conclude thatA) the output gap equals zero.B) we have mismeasured the natural unemployment rate. C) the output gap is positive. D) the output gap is negative.
C) output gap is positive
14) In July 2014, the CPI inflation rate was 0.3 percent while the core CPI inflation rate was 0.1 percent. The difference between these two measurements of inflation indicatesA) a negative underlying inflation rate.B) prices for food and fuel were increasing less rapidly than prices for other goods. C) prices for food and fuel were increasing more rapidly than prices for other goods. D) the underlying inflation rate was higher than the overall inflation rate.
C) prices for food and fuel were increasing more rapidly than prices for other goods
48) Which of the following ideas apply to the neoclassical growth theory? I. The rate of tech change influences the rate of economic growth II. tech change promotes saving and investment III. convergence of economic growth rates across countries A) I only B) III only C) I and II D) I, II and III
D) I, II, and II
23) When calculating the compensation of employees part of GDP A) fringe benefits are not included. B) the value of vacation time must be included. C) taxes withheld on earnings are not included. D) Social Security contributions must be included.
D) Social Security contributions must be included
8) Which of the following means that the CPI overstates the actual inflation rate? A) quality change biasB) new goods biasC) outlet substitution bias D) All of the above cause the CPI to overstate inflation.
D) all of the above
44) Reported GDP increases when, in fact, total production is unchanged when I. there is a shift from household production to market production. II. a previously illegal activity is legalized. A) I only B) II only C) neither I nor II D) both I and II
D) both I and II
22) Marginally attached workers fall into which of the following population categories? A) unemployed B) employed C) labor force D) not in the labor force
D) not in labor force
17) In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment. A) lowers; decreases B) raises; decreases C) lowers; increases D) raises; increases
D) raises, increases
50) Neoclassical growth theory proposes that A) real GDP growth is caused by growth in the population. B) discoveries result from choices that increase profits. C) technological progress increases the population growth rate and drives down real wages. D) real GDP per person grows because technological change increases profit opportunities.
D) real GDP per person grows because tech change increases profit opportunities
44) In the United States, the inflation rate hasA) risen constantly over the past 30 years.B) fallen as a result of OPEC oil price hikes.C) remained almost constant over the past 25 years. D) risen and fallen since the 1970s.
D) risen and fallen since the 1970s
38) The Industrial Revolution in England in large was the result of A) growth in human capital. B) population growth. C) technological innovations that were financed mainly by government spending. D) technological innovations encouraged by the patent system.
D) tech innovations encouraged by the patent system
