macro- econ 1113 exam 2 practice test

Strong property rights are important for modern economic growth because

people are more likely to invest if they don't fear that others can take their returns on investment without compensation.

The largest component of total expenditures in the United States is

personal consumption.

Factors that contributed to the higher U.S. labor productivity growth in 1995-2010 relative to the earlier period include the following, except

population growth.

Inflation rates in the United States reached double-digit rates in the

1970s

Increased optimism about the future will lead to

more current investment and more future consumption

Which of the following is a main source of increasing returns in recent years?

more learning by doing.

The total income earned through the use of resources, plus taxes on production and on imports, equals

national income.

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000 each. As a result,

nominal GDP decreases, while real GDP stays constant

which of the following is the best example of investment as defined by economist?

A restaurant owner buys a freezer to store ingredients for the restaurant meals

The economy described in the table** has experienced a ** a table showing nominal GDP increasing as price index decreases over a period of 5 years

rising real GDP.

At the core of understanding economic growth is the idea that to raise living standards over time, an economy must

save and invest

A nation's real GDP was $250 billion last year and $265 billion this year. Its population was 122 million last year and 125 million this year. What is the growth rate of real GDP per capita in this year?

3.4 percent

Growth-promoting institutional structures include the following, except

protection of domestic firms from foreign rivals.

In national income accounting, government purchases include

purchases by federal, state, and local governments.

The growth of GDP may understate changes in the economy's economic well-being over time if the

quality of products and services improves.

Suppose that prices are sticky in the short-run. Which of the following best describes the economy's response to a negative demand shock?

Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will decrease and unemployment will increase.

In determining real GDP, economists adjust the nominal GDP by using the

GDP price index.

Economic growth can best be portrayed as a

rightward shift of the production possibilities curve.

Refer to the diagram. Increases in the quantity and quality of human resources and capital are best represented by a

shift in the production possibilities curve from AB to CD.

The business cycle depicts

short-run fluctuations in output and employment

Which of the following is the largest contributor to the growth of labor productivity in the United States?

technological advance

The natural rate of unemployment is

that rate of unemployment occurring when the economy is at its potential output.

A large underground economy results in an

understated GDP.

If prices are "sticky" in the short run, then

The economy will respond to demand shocks primarily through changes in output and employment

A person's real income will increase by 3 percent if her nominal income

increases by 5 percent while the price index rises by 2 percent.

If both the real interest rate and the nominal interest rate are 3 percent, then the

inflation premium is zero.

Refer to the figure**. Assuming this market is representative of the economy as a whole, the economy is **Graph is between quantity(y-axis) and price(x-axis) with 3 lines sloping downward and to the right.

is capable of always producing at its optimal capacity

Gordon sells narcotics "on the street." This type of illegal activity

is excluded from GDP figures.

The Consider This box on patents and innovation demonstrates that

patent protection for U.S. companies may not be as effective when other countries do not respect or enforce U.S. patent laws.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are shown in the table. Real GDP for year 5 is

$40

all final goods and services produced in an economy in a given year

workers' wages and other compensation

Inflation rates in the United States from 2008 to 2018 were within the range of about

-0.5 percent to 4 percent.

The strategy for measuring the value of an economy's output has become more challenging over the past 20 years because

-it is increasingly difficult to properly account for quality improvements. -of the rapid change in Digital Age products like electronics, software, and video games. -many Internet products like Google maps and driving directions are provided free of charge.

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2015)

10th and 10th, respectively.

saving in the economy

Occurs when current spending is less than current incomes

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of

Okun's Law

Which of the following is most likely to indicate higher unemployment?

a decrease in real GDP

GDP is the market value of

all final goods and services produced in an economy in a given year.

A review of the trends in labor productivity growth in the U.S. for the periods 1973-1995, 1995-2010, and 2010-2018 suggests which of the following patterns?

an initial modest growth averaging 1.5 percent per year in 1973-1995, followed by much higher growth in 1995-2010, then a collapse to very slow growth in 2010-2018

The diagram** illustrates the pattern of **graph between time(x-axis) and level of business activity(y-axis), with a one trend line sloping upwards towards the right and one squiggly line showing different high and low points

business cycles.

Trends in educational attainment in the U.S. since 1960 indicate that the percentage of adults

completing college has been rising, and so has the percentage completing high school.

If the economy's real GDP doubles in 18 years, we can

conclude that its average annual rate of growth is about 3.9 percent.

Inflation initiated by increases in wages or other resource prices is labeled

cost-push inflation.

There is a trade off between

current consumption and future consumption

Real GDP measures

current output at base year prices.

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

cyclical unemployment

As applied to the price level, the "rule of 70" indicates that the number of years required for the price level to double can be found by

dividing the annual rate of inflation into 70.

The gross domestic product is not a good measure of the standard of living in a nation because it

does not account for the composition and distribution of output.

The statisticians at the BEA have decided that quality improvements matter and should be accounted for in GDP and inflation to the extent possible. The procedure for doing so is called the

hedonic adjustment.

Historically, the total amount of real capital per worker in the United States has

increased significantly and made labor more productive.