ECON Potential Exam Questions

In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015?

$1450

Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard?

$20

In the economy of Talikastan in 2015, consumption was $800, GDP was $2000, government purchases were $400, and investment was $600. What were Talikastan's net exports in 2015?

$200

Most goods and services produced at home

and most goods and services produced illegally are excluded from GDP

Household spending on education is included in

consumption, although it might be argued that it would fit better in investment

The deviation of unemployment from its natural rate is called

cyclical unemployment

For any given year, the CPI is the price of the basket of goods and services in the

given year divided by the price of the basket in the base year, then multiplied by 100

In the CPI, goods and services are weighted according to

how much consumers buy of each good or service

Which of the following is not included in either M1 or M2?

US Treasury Bills

Which of the following best illustrates the medium of exchange function of money?

You pay for your oil change using currency

Which of the following is an example of a durable good?

a hair dryer

The CPI is a measure of the overall cost of the goods and services bought by

a typical consumer

The "yardstick" people use to post prices and record debts is called

a unit of account

In the calculation of the CPI, books are given greater weight than magazines if

consumers buy more books than magazines

If MPC is .75, what will be MPS and the government spending multiplier?

1/1-.75 = .25 1/4; multiplier is 4 (100/.25)

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $55. The value of the CPI in 2016 was

110.0

Refer to scenario 28-1. how many people are unemployed?

3 million (not 100% sure its correct)

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

5.0 percent

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

6 percent

Refer to Table 29-1. What is the value of M2 in billions of dollars?

8,315 billion

MPC is .75 and MPS is .25, what is the tax multiplier?

=-(MPC/MPS)=-(.75/.25)=-3

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

The value of the consumer price index is always 100 in the base year

A double coincidence of wants

All of the above are correct

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

All of the above are correct

Which of the following is a store of value?: Currency, U.S. government bonds, Fine art, all of the above

All of the above are correct.

Olga owns her own business. Sven is an unpaid worker in his family's business. Who is included in the bureau of labor statistics' "employed" category?

Both Olga and Sven

Refer to Table 29.01. Which, if any, pairs of traders has a double coincidence of wants?

Tim with Amy

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?

Ellen's but not Sam's

U.S. GDP and U.S. GNP are related as follows:

GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.

Included or not included in US GDP? A book publisher produces too many copies of a new book; the books don't sell this year, so the publisher adds the surplus books to inventories

Included

Included or not included in the GDP of the United States? The purchase of a new aircraft carrier by he Navy

Included

State whether the following transaction will be included or not included in the GDP of the United States: A California winery produces a bottle of Chardonnay and sells it to a customer in Montreal, Canada.

Included

State whether the following transactions will be included or not included in GDP for the United States Coca-Cola builds a new bottling plant in the United States

Included

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

M1 increases by $2,500 and M2 stays the same.

Moving money from Savings (M2) to Checking (M1), what happens to the size of M1 and M2?

M2 will stay the same but M1 will increase

In a barter system which of the following pairs has a double coincidence of wants? (Allen,Betty,etc.)

None of the above are correct.

Included or not included in US GDP? The purchase of a copy paper by Pepsico, which is used by the company staff

Not Included

State whether the following transaction will be included or not included in the GDP of the United States: An American buys a bottle of French perfume in Paris

Not Included

State whether the following transaction will be included or not included in the GDP of the United States: Delta sells one of its existing airplanes to Korean Air

Not Included

State whether the following transaction will be included or not included in the GDP of the United States: Ms. Moneybag buys an existing share of Disney stock

Not Included

Included or not included in the GDP of the United States: A deposit in your savings account as a result of a judgment in a law suit

Not included

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?

Only Joe's and Jim's grocery store purchases are included in GDP.

Treasury Bonds are

both liquid and a store of value

The inflation rate is calculated

by determining the percentage increase in the price index from the preceding period

Which of the following is not included in GDP?

carrots grown in your garden and eaten by your family

Which of the following is a store of value?

cash and stocks

Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is

included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself

As opposed to a payments system based on barter, a payments system based on money

makes trade less costly

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

surveying consumers

Which of the following agencies calculates the CPI?

the Bureau of Labor Statistics

Liquidity refers to

the ease with which an asset is converted to the medium of exchange

The natural rate of unemployment is the

unemployment rate that would exist in a growing and healthy economy

GDP is defined as the

value of all final goods and services produced within a country in a given period of time