Practice Questions EC202
10) Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million? A) 14 B) 7 C) 30 D) 4
A) 14
6) During 2017, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2016, real GDP was 105 billion and the population was 0.85 billion. Economia's growth rate of real GDP per person is 6) A) 3.23 percent. B) 9.52 percent. C) 5.88 percent. D) 5 percent.
A) 3.23 percent.
9) Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double? A) 7 years B) 0.7 years C) 20 years D) 10 years
A) 7 years
2) We are interested in long-term growth primarily because it brings 2) A) higher standards of living. B) higher price levels. C) trade wars with our trading partners. D) lower price levels.
A) higher standards of living.
10)People expect an inflation rate of 5 percent and the real interest rate is positive. Consequently thenominal interest rate will be10)A)more than 5 percent.B)less than 5 percent.C)5 percent.D)Without more information it is impossible to tell if the nominal interest rate will be more than,less than, or equal to 5 percent.
A) more than 5 percent.
12)In the above figure, which movement illustrates the impact of a rising price level and a constantmoney wage rate?12)A)E to FB)E to GC)E to KD)E to I
A)E to F
4)Which of the following items are considered physical capital?I.shares of Ford stock traded on the New York Stock ExchangeII.the Taco Bell store nearest youIII.the rental cars owned by Hertz Rental-A-CarIV.the salaries paid to Intel executives4)A)II and IIIB)I and IVC)I, II and IIID)I, II and IV
A)II and III
20)In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money,there is20)A)a movement to point C.B)a movement to point A.C)a shift to AD2.D)a shift to AD1.
A)a movement to point C.
22)If the real interest rate is below the equilibrium real interest rate22)A)a shortage of loanable funds will cause the real interest rate to rise.B)lenders will be unable to find borrowers willing to borrow all of the available funds and thesupply of loanable funds curve will shift leftward.C)borrowers will be unable to borrow all of the funds they want to borrow and the demand forloanable funds curve will shift leftward.D)borrowers will be unable to borrow all of the funds they want to borrow and the demand forloanable funds curve will shift rightward.
A)a shortage of loanable funds will cause the real interest rate to rise.
The AD curve slopes15)A)downward due to the wealth and substitution effects.B)upward due to the price and substitution effects.C)downward due to the wealth and price effects.D)upward due to the wealth and substitution effects.
A)downward due to the wealth and substitution effects.
7)The funds used to buy and operate physical capital are7)A)financial capital.B)depreciation.C)wealth.D)saving.
A)financial capital.
24)When a government has a budget surplus, the surplus24)A)helps finance investment.B)must be subtracted from private saving to get total saving.C)increases the world real interest rate.D)crowds-out private saving.
A)helps finance investment.
6)The labor force participation rate6)A)increases as the real wage rate increases.B)does not change when the real wage rate changes.C)decreases as the real wage rate rises.D)has an inverse effect of the supply of labor.
A)increases as the real wage rate increases.
15)An increase in education and training15)A)increases labor productivity.B)increases aggregate hours.C)increases the employment-to-population ratio.D)decreases real GDP growth.
A)increases labor productivity.
9)The real wage rate will fall if the9)A)labor supply curve shifts rightward and the labor demand curve does not shift.B)labor demand curve shifts rightward and the labor supply curve does not shift.C)labor demand curve shifts rightward more than the labor supply curve shifts rightward.D)labor supply curve shifts leftward and the labor demand curve does not shift.
A)labor supply curve shifts rightward and the labor demand curve does not shift.
32)In the above figure, the economy is at point A. Then the price level falls to 90 while the money wagerate does not change. Firms will be willing to supply output equal to32)A)less than $18.0 trillion.B)$18.0 trillion.C)more than $18.0 trillion.D)Without more information, it is impossible to determine which of the above answers iscorrect.
A)less than $18.0 trillion.
3)The country of Kemper is on its aggregate production function at point W in the above figure. Thegovernment of Kemper passes a law that makes 4 years of college mandatory for all citizens. Afterall citizens have their education, the economy will3)A)move to point such as Z.B)move to point such as X.C)remain at point W.D)move to point such as Y.
A)move to point such as Z.
11)Labor productivity is11)A)real GDP per hour of labor.B)real GDP per hour of labor times the hours of work.C)the rate of change in real GDP per hour of labor.D)real GDP per hour of labor times the number of people.
A)real GDP per hour of labor.
9)The long-run aggregate supply curve illustrates the9)A)relationship between the price level and real GDP when the economy is at full employment.B)amount of products producers offer at various prices when money wages and other resourceprices are fixed.C)relationship between the price level and real GDP when the economy is at zerounemployment.D)surpluses, shortages and equilibrium level of GDP.
A)relationship between the price level and real GDP when the economy is at full employment.
15)Other things remaining the same, the greater the expected profit15)A)the greater the amount of investment.B)the flatter is the investment demand curve.C)the steeper is the investment demand curve.D)the less the amount of investment.
A)the greater the amount of investment.
3)The term "capital," as used in macroeconomics, refers to3)A)the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.B)investment.C)the sum of investment and government purchases of goods.D)financial wealth.
A)the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.
2)The long-run aggregate supply curve is the relationship between the quantity of real GDPsupplied and ________ when ________.2)A)the price level; real GDP equals potential GDPB)real GDP demanded; the price level does not changeC)the price level; real GDP equals nominal GDPD)real GDP demanded; the wage rate is constant
A)the price level; real GDP equals potential GDP
27)The long-run aggregate supply curve is the relationship between the quantity of real GDPsupplied and ________ when ________.27)A)the price level; real GDP equals potential GDPB)real GDP demanded; the price level does not changeC)the price level; real GDP equals nominal GDPD)real GDP demanded; the wage rate is constant
A)the price level; real GDP equals potential GDP
7)In the above figure, at the real wage rate of $507)A)there is a surplus of 60 billion hours per year.B)there is a surplus of 100 billion hours per year.C)there is shortage of 20 billion hours per year.D)there is a shortage of 100 billion hours per year.
A)there is a surplus of 60 billion hours per year.
16)Which of the following explains why the demand for loanable funds is negatively related to the realinterest rate?16)A)Consumers are willing to spend less and hence save more at higher real interest rates.B)A lower real interest rate makes more investment projects profitable.C)Interest rate flexibility in financial markets assures an equilibrium in which saving equalsinvestment.D)All of the above are reasons why the demand for loanable funds is negatively related to thereal interest rate.
B)A lower real interest rate makes more investment projects profitable.
1) The best definition for economic growth is A) a sustained expansion of consumption goods over a given period. B)a sustained expansion of production possibilities measured as the increase in real GDP over a given period C)a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period. D) a sustained expansion of production goods over a given period.
B)a sustained expansion of production possibilities measured as the increase in real GDP over a given period
18)Which of the following does NOT shift the aggregate demand curve?18)A)an increase in people's expected future incomesB)an increase in the price levelC)an increase in current foreign incomeD)a decrease in the quantity of money
B)an increase in the price level
1)According to UNESCO reporting, "Governments in North America and Western Europe investedthe highest shares of national resources in education: 5.6 percent of GDP." As a result, we wouldexpect ________, all else held constant. A)lower economic growth rates in the countries because fewer resources can be devoted toinnovationB)higher economic growth rates in these countries compared to other countriesC)lower research and development spending and lower economic growth unless thegovernments can raise taxesD)lower saving rates and slower economic growth
B)higher economic growth rates in these countries compared to other countries
13)The figure above shows the U.S. production function. From 1986 to 2008 the United Statesexperienced major advances in technology as well as an increase in the working-age population.The combined effect can best be shown by a A)movement from point Y to point Z.B)movement from point W to point Z.C)movement from point Y to point X.D)movement from point W to point X.
B)movement from point W to point Z.
18)In the above figure, a decrease in the real interest rate will result in a movement from point E to18)A)point F.B)point G.C)point H.D)point I.
B)point G.
14)All of the following contribute to labor productivity growth EXCEPT14)A)human capital growth.B)population growth.C)physical capital growth.D)technological advancements.
B)population growth.
25)The term "crowding out" relates to the decrease in25)A)consumption expenditure from an increase in investment.B)private investment from a government budget deficit.C)the real interest rate from a government budget deficit.D)saving from an increase in disposable income.
B)private investment from a government budget deficit.
8)National saving is defined as the amount of8)A)business saving and household saving.B)private saving and government saving.C)household saving.D)business saving.
B)private saving and government saving.
0)An increase in the working-age population results in a10)A)rightward shift of demand for labor curve and an increase in potential GDP.B)rightward shift of the supply of labor curve and an increase in potential GDP.C)leftward shift of the supply of labor curve and a decrease in potential GDP.D)rightward shift of the demand for labor curve and no change in potential GDP.
B)rightward shift of the supply of labor curve and an increase in potential GDP.
20)The quantity of ________ by households will be less ________.20)A)consumption; the higher is disposable incomeB)saving; the lower is the real interest rateC)consumption; the lower is the inflation rateD)saving; the higher is disposable income
B)saving; the lower is the real interest rate
9)A financial decision should be pursued when9)A)the interest rate rises.B)the net present value is positive.C)the interest rate falls.D)the net present value is negative.
B)the net present value is positive.
21)Changes in all of the following SHIFT the supply curve of loanable funds EXCEPT21)A)disposable income.B)the real interest rate.C)wealth.D)expected future income.
B)the real interest rate.
3) In 2016, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In2017, real GDP was $4.59 billion and population was 2.97 million. From 2016 to 2017, Armenia's standard of living 3) A) decreased. B) did not change. C) increased. D) might have increased, decreased, or remained unchanged but more information is needed to determine which.
C) increased.
18)This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in thisyear is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________.18)A)$1.0 billion; $0.7 billionB)$1.3 billion; $1.6 billionC)$1.3 billion; $1.0 billionD)$1.0 billion; $1.3 billion
C)$1.3 billion; $1.0 billion
6)At the beginning of the year, your wealth is $10,000. During the year, you have an income of$90,000 and you spend $80,000 on consumption. You pay no taxes. Your wealth at the end of theyear is6)A)$0.B)$90,000.00.C)$20,000.00.D)$100,000.00.
C)$20,000.00.
17)In January 2017, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, themarket value of the equipment fell by 30 percent. During 2017, Tim spent $200,000 on newmachines. During 2017, Tim's net investment totaled17)A)$1 million.B)-$300,000.C)-$100,000.D)$200,000.
C)-$100,000.
10)In the above figure, which movement illustrates the impact of the price level and money wage ratefalling at the same rate?10)A)E to GB)E to HC)E to JD)E to K
C)E to J
19)In the above figure, the economy is initially at point B. If the government decreases transferpayments, there is19)A)a movement to point C.B)a movement to point A.C)a shift to AD2.D)a shift to AD1
C)a shift to AD2.
30)In the above figure, the short-run aggregate supply curve is SAS1. If the money wage rateincreases, there is30)A)an upward movement along SAS1.B)a downward movement along SAS1.C)a shift to SAS0.D)a shift to SAS2.
C)a shift to SAS0.
14)All of the following shift the LAS curve EXCEPT14)A)a change in the capital stock.B)technological progress.C)an increase in the money wage rate.D)an increase in the stock of human capital.
C)an increase in the money wage rate.
13)Which of the following shifts the short-run aggregate supply curve?I.changes in the size of the labor forceII.changes in the money wage rate A)I onlyB)II onlyC)both I and IID)neither I nor II
C)both I and II
12)If the nation's capital stock increases so that workers become more productive, the12)A)supply of labor will decrease.B)supply of labor will increase.C)demand for labor will increase.D)demand for labor will decrease.
C)demand for labor will increase.
23)Suppose the market for loanable funds is in equilibrium. If the expected profit falls, the equilibriumreal interest rate ________ and the quantity of loanable funds ________.23)A)rises; decreasesB)rises; increasesC)falls; decreasesD)falls; increases
C)falls; decreases
17)Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a________ shift in the ________ loanable funds curve.17)A)rightward, supply ofB)rightward; demand forC)leftward; demand forD)rightward; supply of
C)leftward; demand for
4)The real wage rate measures the4)A)dollar value of what a worker could earn in another job.B)average weekly earnings in dollars of a worker.C)quantity of goods and services that an hour of work will buy.D)dollar value of an hour of work.
C)quantity of goods and services that an hour of work will buy.
19)In the loanable funds market, the supply comes from19)A)only the government budget surplus and international borrowing.B)only saving and the government budget surplus.C)saving, the government budget surplus and international borrowing.D)only saving.
C)saving, the government budget surplus and international borrowing.
4)In a change to immigration policy during 2012, "people younger than 30 who came to the UnitedStates before the age of 16, pose no criminal or security threat, and were successful students orserved in the military can get a two-year deferral from deportation", then-Homeland SecuritySecretary Janet Napolitano said, according to CNN, 06/16/2012. If many of these immigrants hadpreviously been afraid to work, now as a result of being able to work legally4)A)the short-run aggregate supply curve shifts rightward but potential GDP does not increase.B)the long-run aggregate supply curve shifts leftward and potential GDP decreases.C)the long-run aggregate supply curve shifts rightward and potential GDP increases.D)neither the short-run nor the long-run supply curve shifts.
C)the long-run aggregate supply curve shifts rightward and potential GDP increases.
7) During 2017, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2016, real GDP was 105 billion and the population was 0.85 billion. In 2017, real GDP per person was A) $135. B) $124. C) $117. D) $128
D) $128
5)In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, themarket value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on newmachines. During 2015, Tim's gross investment totaled5)A)$1 million.B)$900,000.C)$300,000.D)$200,000
D)$200,000
23)If the present value of $220 one year from now is $200, then the interest rate is23)A)4 percent.B)8 percent.C)6 percent.D)10 percent.
D)10 percent.
28)For movements along the short-run aggregate supply curve28)A)the real wage rate changes.B)potential GDP remains constant.C)the money wage rate is constant.D)All of the above are correct.
D)All of the above are correct
3)For movements along the short-run aggregate supply curve3)A)the real wage rate changes.B)potential GDP remains constant.C)the money wage rate is constant.D)All of the above are correct.
D)All of the above are correct.
19)National saving equals19)A)household saving + business saving.B)household saving + business saving + net taxes - government expenditure.C)household saving + business saving + government saving.D)Both answers B and C are correct.
D)Both answers B and C are correct.
11)In the above figure, which movement illustrates the impact of a falling price level and a constantmoney wage rate?11)A)E to HB)E to JC)E to FD)E to I
D)E to I
20)Investment is financed by which of the following?I.Government spendingII.National savingIII.Borrowing from the rest of the world20)A)I, II, and IIIB)I and II onlyC)I and III onlyD)II and III only
D)II and III only
31)When the quantity of capital increases, then the31)A)SAS curve shifts rightward and the LAS curve shifts leftward.B)SAS curve shifts rightward and the LAS curve does not shift.C)LAS curve shifts rightward and the SAS curve does not shift.D)SAS curve shifts rightward and the LAS curve shifts rightward.
D)SAS curve shifts rightward and the LAS curve shifts rightward.
6)When the quantity of capital increases, then the6)A)SAS curve shifts rightward and the LAS curve shifts leftward.B)SAS curve shifts rightward and the LAS curve does not shift.C)LAS curve shifts rightward and the SAS curve does not shift.D)SAS curve shifts rightward and the LAS curve shifts rightward.
D)SAS curve shifts rightward and the LAS curve shifts rightward.
16)Substitution effects help explain the slope of the aggregate demand curve. One substitution effectrefers to the16)A)direct relationship between the interest rate and the real value of wealth.B)inverse relationship between the interest rate and the price level.C)change in wealth that results from a change in the interest rate.D)effect on investment expenditures that result from a change in interest rates produced by achange in the price level.
D)effect on investment expenditures that result from a change in interest rates produced by achange in the price level.
12)Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bondincreases from $1,000 to $1,250, then the interest rate on the bond12)A)rises from 8 percent to 10 percent.B)does not change because it is not affected by the price of the bond.C)falls from 10 percent to 6 percent.D)falls from 10 percent to 8 percent.
D)falls from 10 percent to 8 percent.
Suppose there is a rise in the price level, but no change in the money wage rate. As a result, thequantity of labor demanded5)A)decreases only if the money wage rate also decreases.B)decreases.C)does not change because there is no change in the real wage rate.D)increases.
D)increases.
13)If a bank's net worth is negative, then the bank definitely is13)A)illiquid.B)liquid.C)solvent.D)insolvent.
D)insolvent.
17)In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealtheffect will help17)A)move the economy to point D.B)keep the economy at point B.C)move the economy to point C.D)move the economy to point A.
D)move the economy to point A.
2)As labor increases, there is a2)A)movement along the aggregate production function, but no shift in it.B)movement along the aggregate production function and real GDP will decrease less with eachadditional increase in labor.C)shift of the aggregate production function, but no movement along it.D)movement along the aggregate production function and real GDP will increase less with eachadditional increase in labor.
D)movement along the aggregate production function and real GDP will increase less with each additional increase in labor.
16)Human capital is16)A)the investment people make in industries that make capital goods.B)the saving done by human beings.C)a measure of the labor productivity of workers.D)people's knowledge and skills.
D)people's knowledge and skills.
33)The quantity of real GDP supplied depends on the33)A)quantity of capital, bonds, and stocks.B)price level, the unemployment rate, and the quantity of government expenditures on goodsand services.C)level of aggregate demand.D)quantity of labor, the quantity of capital, and the state of technology.
D)quantity of labor, the quantity of capital, and the state of technology.
1)The aggregate production function describes the relationship between1)A)real GDP and the price level.B)real GDP and the unemployment rate.C)the rate of growth of real GDP and inflation.D)real GDP and the quantity of labor employed.
D)real GDP and the quantity of labor employed.
14)When the inflation rate is zero, the14)A)real interest rate is greater than the nominal interest rate.B)real interest rate is less than the nominal interest rate.C)nominal interest rate is zero.D)real interest rate equals the nominal interest rate.
D)real interest rate equals the nominal interest rate.
2)Most ________ is embodied in physical capital.2)A)labor productivityB)economic growthC)human capitalD)technological change
D)technological change
national saving (saving)
the total income in the economy that remains after paying for consumption and government purchases
4) Using the Rule of 70, if China's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double? 4) A) 14 years B) 10 years C) 49 years D) 35 years
B) 10 years
8)Suppose a nation's population grows by 2 percent and, at the same time, its GDP grows by 5 percent. Approximately how fast will real GDP per person increase? A) 5 percent per year B) 3 percent per year C) 2 percent per year D) 10 percent per year
B) 3 percent per year
5) According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Which of the following is TRUE? A) India has been moving from a point within its PPF to points beyond its PPF. B) India's PPF has been shifting rightward since 1997. C) India's PPF has not shifted since 1997. D) India's PPF has been shifting leftward since 1997.
B) India's PPF has been shifting rightward since 1997.
11)The present value of $200 two years from now when the interest rate is 7 percent is11)A)$214B)$175C)$207D)$187
B)$175
22)If national saving (S) is $100,000, net taxes (T) equal $100,000 and government expenditure (G) is$25,000, how much are households and businesses saving?22)A)$225,000B)$25,000C)-$25,000D)none of the above
B)$25,000
In a change to immigration policy during 2012, "people younger than 30 who came to the UnitedStates before the age of 16, pose no criminal or security threat, and were successful students orserved in the military can get a two-year deferral from deportation", then-Homeland SecuritySecretary Janet Napolitano said, according to CNN, 06/16/2012. If many of these immigrants hadpreviously been afraid to work, now as a result of being able to work legally29)A)the short-run aggregate supply curve shifts rightward but potential GDP does not increase.B)the long-run aggregate supply curve shifts leftward and potential GDP decreases.C)the long-run aggregate supply curve shifts rightward and potential GDP increases.D)neither the short-run nor the long-run supply curve shifts.
C)the long-run aggregate supply curve shifts rightward and potential GDP increases.
24)Other things remaining the same, if the interest rate falls,24)A)the net present value of a project always falls.B)the net present value of a project will be always be positive.C)the net present value of a project always rises.D)the net present value of a project will be always be negative.
C)the net present value of a project always rises.
1)An aggregate supply curve depicts the relationship between1)A)the money wage rate and the quantity of real GDP supplied.B)the price level and the quantity of nominal GDP supplied.C)the price level and the quantity of real GDP supplied.D)household expenditures and household income.
C)the price level and the quantity of real GDP supplied.
26)An aggregate supply curve depicts the relationship between26)A)the money wage rate and the quantity of real GDP supplied.B)the price level and the quantity of nominal GDP supplied.C)the price level and the quantity of real GDP supplied.D)household expenditures and household income.
C)the price level and the quantity of real GDP supplied.