Econ Practice Exam 2

If nominal GDP is 10 trillion an the real GDP is 8 trillion then the GDP deflator is

125, and this indicates that the price level has increased by 25 percent since the base year

Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?

28.5 million

which of the following contains natural resources, human capital and physical capital?

For a restaurant: the land the restaurant was built on, the things the Chef learned at Cooking School, the freezers where the chops and steaks are kept.

The steps involved in calculating the consumer price index and the inflation rate, in order are

fix the basket find the prices compute the basket cost choose base year an compute the index compute inflation rate

From time to time, the demand for workers has risen in one region of the US and fallen in another. this illustrates

frictional unemployment created by sectoral shifts

Other things equal, the likelihood that a country will experience a relatively high level of income is greater if the country

has natural seaports

Goods that go into inventory and are not sold during the current period are

included in current period GDP as inventory investment

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

increases ,so the CPI overstates the change in the cost of living if the quality change is not accounted for

In the long run, a higher savings rate

increases the level of productivity

Which of the following is not an explanation for the existence of structural unemployment?

job search

John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.

john is frictionally unemployed and curtis is structurally unemployed

In countries that experience political instability, standards of living tend to be low because of

lack of respect for property rights

If a reform of the tax laws encourages greater saving, the result would be the

lower interest rates and greater investment

If there is a surplus of loanable funds then

neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium

By not taking into consideration the possibility of consumer substitution, the CPI

overstates the cost of living

determining productivity

physical capital natural resources technological knowledge

You observe a closed economy that has a government deficit and positive investment. Which is correct

private saving is positive and public saving is negative

in the long run, an increase in the savings rate

raises the levels of both productivity and income

Cyclical unemployment

refers to the year to year fluctuation in unemployment around an economy's natural rate of unemployment

In the loanable funds model, an increase in investment tax credit would create a

shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate

An important difference between the GDP deflator and the consumer price index is that

the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers

If the price of italian shoes imported to the united states increases, then

the consumer price index will increase, but the GDP deflator will not increase

The inflation rate is

the percentage change in the price level from one period to another

Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also increased?

the total number of hours worked has stayed the same the total number of hours worked fell

GDP does not reflect

the value of leisure the value of goods and services produced at home the quality of the environment

what level does real GDP measure?

total real income

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare

Suppose that after the last 25 years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 % and prices rose by 100%. What happen to real GDP per person?

It increased, but less than it doubled

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain this?

The poor country has poorly developed property rights

A Minnesota farmer buys a new tractor made in Iowa by a German company, as a result

US investment and GDP increase, but german GDP is unaffected

Which of the following statements about real and nominal interest rates is correct?

When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate

Two of the economy's most important financial intermediaries are

banks and mutual fund

In the calculation of the CPI, coffee is given greater weight than tea if

consumers buy more coffee than tea

The consumption component of GDP includes spending on

durable goods, nondurable goods, and services

For an economy as a whole, income must equal expenditure because

every dollar of spending by some buyer is a dollar of income for some seller

Other things equal, relatively poor countries tend to grown

faster than relatively rich countries, this is called the catch up effect