question
What are the three important macroeconomic goals about which most economists, and society at large, agree?
a. economic growth, full employment, and low interest rates
b. economic growth, full employment, and stable prices
c. economic growth, zero unemployment, and falling prices
d. economic growth, low unemployment, and a balanced budget
e. economic growth, a balanced budget, and balanced international trade
a. economic growth, full employment, and low interest rates
b. economic growth, full employment, and stable prices
c. economic growth, zero unemployment, and falling prices
d. economic growth, low unemployment, and a balanced budget
e. economic growth, a balanced budget, and balanced international trade
answer
b. economic growth, full employment, and stable price
question
Used car dealerships add nothing to GDP because the cars they sell were already recorded in GDP when they were new.
a. True
b. False
a. True
b. False
answer
false
question
Which of the following would be included in a year's GDP?
a. Susan cleans the fuel injectors on her car.
b. A private individual purchases 100 shares of IBM stock.
c. A timber company purchases land in Oregon.
d. A consumer buys an antique desk.
e. A college professor purchases a new computer.
a. Susan cleans the fuel injectors on her car.
b. A private individual purchases 100 shares of IBM stock.
c. A timber company purchases land in Oregon.
d. A consumer buys an antique desk.
e. A college professor purchases a new computer.
answer
e. A college professor purchases a new computer.
question
Goodyear produces tires for automobiles, 50,000 in all. Suppose 40,000 go on new cars and are sold as part of each car, while the other 10,000 are produced as replacement tires and are sold individually. How many tires would be counted in current GDP?
a. 50,000, because everything produced is counted
b. 40,000, because only the ones on new cars are counted
c. 10,000, because 40,000 will be counted in the value of the new cars
d. 0, because they are all intermediate goods
e. 10,000, because they are the only "final" goods and services in the total
a. 50,000, because everything produced is counted
b. 40,000, because only the ones on new cars are counted
c. 10,000, because 40,000 will be counted in the value of the new cars
d. 0, because they are all intermediate goods
e. 10,000, because they are the only "final" goods and services in the total
answer
c. 10,000, because 40,000 will be counted in the value of the new cars
question
Suppose a woman has an exterminator treat her house every month but she then marries the exterminator who now performs the service for free. As a result, given nothing else has changed, GDP would
a. increase
b. decrease
c. not change, because services are not counted in the first place
d. not change, as the activity occurred monthly
e. not chnage, because the activity is an intermediate good or service
a. increase
b. decrease
c. not change, because services are not counted in the first place
d. not change, as the activity occurred monthly
e. not chnage, because the activity is an intermediate good or service
answer
b. decrease
question
A Texas oil company extracts petroleum and sells it to a refinery for $1,000. After processing, the refinery sells the gasoline to a wholesaler for $1,500, who then sells it to a gas station for $1,700. The gas station sells it to customers for $2,500. In these transactions, how much has been added to GDP?
a. $1,000
b. $1,500
c. $1,700
d. $2,500
e. $6,700
a. $1,000
b. $1,500
c. $1,700
d. $2,500
e. $6,700
answer
d. $2,500
question
7. Susie grows corn in her backyard garden to feed her family. The corn she grows is not counted in GDP because
a. it was not produced for the marketplace
b. it is an intermediate good that Susie will process further before feeding her family
c. goods produced using land are not included in GDP
d. the corn has no value
a. it was not produced for the marketplace
b. it is an intermediate good that Susie will process further before feeding her family
c. goods produced using land are not included in GDP
d. the corn has no value
answer
a. it was not produced for the marketplace
question
Assume net exports are -$220, consumption is $5,000, tax revenues are $1,000, government purchases are $1,500, and 2003 GDP, calculated by the expenditure approach, is $8,000. We can conclude that
a. private investment was $1,940
b. public investment was $310
c. private investment was $320
d. private investment was $1,720
e. public investment was $1,730
a. private investment was $1,940
b. public investment was $310
c. private investment was $320
d. private investment was $1,720
e. public investment was $1,730
answer
d. private investment was $1,720
question
An example of a capital good is
a. food produced by U.S. farmers in 2003
b. the pickup truck that your friend drives to school
c. a house owned and occupied by a family
d. the rent your friend paid last year for a college apartment
e. a share of General Electric Company stock
a. food produced by U.S. farmers in 2003
b. the pickup truck that your friend drives to school
c. a house owned and occupied by a family
d. the rent your friend paid last year for a college apartment
e. a share of General Electric Company stock
answer
c. a house owned and occupied by a family
question
10. Purchases of stocks and bonds are examples of investment spending.
a. True
b. False
a. True
b. False
answer
b. False
question
With which of the following responses would the Census Bureau declare the person unemployed?
a. "I am currently working full-time but my employer is going to lay me off tomorrow."
b. "I am currently working part-time but I would like to work full-time." c. "I was working at two different jobs, I lost my primary job a few weeks ago, and I am searching for a new job."
d. "I would love a job but I am not looking for one because I have no chance of finding one."
e. "I just turned 16 and I am looking for a job."
a. "I am currently working full-time but my employer is going to lay me off tomorrow."
b. "I am currently working part-time but I would like to work full-time." c. "I was working at two different jobs, I lost my primary job a few weeks ago, and I am searching for a new job."
d. "I would love a job but I am not looking for one because I have no chance of finding one."
e. "I just turned 16 and I am looking for a job."
answer
e. "I just turned 16 and I am looking for a job."
question
Workers laid off as a result of the 2007-2009 recession would suffer
a. Frictional unemployment
b. Seasonal unemployment
c. Cyclical unemployment
d. Structural unemployment
a. Frictional unemployment
b. Seasonal unemployment
c. Cyclical unemployment
d. Structural unemployment
answer
c. Cyclical unemployment
question
According to Okun's law, given that the natural unemployment rate is 5%, what would be the GDP gap if the actual unemployment is 8.1%? a. 3.1%
b. 6.2%
c. 10%
d. 13.1%
b. 6.2%
c. 10%
d. 13.1%
answer
b. 6.2%
question
Susie has lost her job in the Lordstown auto plant because of import competition. She intends to earn a degree in nursing at YSU and move to Oregon where she anticipates that a new job will be available. We can say that Susie is faced with:
a. seasonal unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
a. seasonal unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
answer
c. structural unemployment.
question
. An example of a frictionally unemployed individual is
a. Rod, the lifeguard, who cannot find a job because the temperature is too low in October
b. Ileana, a college student who quits her job to return to school
c. Steve, an individual does not have skills to keep his job as an aerospace engineer
d. Samantha, who quits her job to look for better one
a. Rod, the lifeguard, who cannot find a job because the temperature is too low in October
b. Ileana, a college student who quits her job to return to school
c. Steve, an individual does not have skills to keep his job as an aerospace engineer
d. Samantha, who quits her job to look for better one
answer
d. Samantha, who quits her job to look for better one
question
Some of the inaccuracies in measuring GDP are attributable to
a. monopolization
b. ignoring production by U.S.-owned plants abroad
c. the underground economy and quality changes
d. tax evasion and inflation
a. monopolization
b. ignoring production by U.S.-owned plants abroad
c. the underground economy and quality changes
d. tax evasion and inflation
answer
c. the underground economy and quality changes
question
During recessions, GDP falls and unemployment increases. Why might the actual output produced not fall as much as officially measured GDP during recessions?
a. There is an increase in involuntary part-time employment during recessions, the output from which is not accounted for in GDP.
b. Workers who became unemployed during the recession may produce goods in the underground economy.
c. Unemployment benefits to laid off workers will allow them to purchase nearly as much output as before.
d. Laid off workers may start their own businesses, but profit income from self-employment is not accounted for in GDP.
e. Unemployed workers have more leisure time to enjo
a. There is an increase in involuntary part-time employment during recessions, the output from which is not accounted for in GDP.
b. Workers who became unemployed during the recession may produce goods in the underground economy.
c. Unemployment benefits to laid off workers will allow them to purchase nearly as much output as before.
d. Laid off workers may start their own businesses, but profit income from self-employment is not accounted for in GDP.
e. Unemployed workers have more leisure time to enjo
answer
b. Workers who became unemployed during the recession may produce goods in the underground economy.
question
. Providing training to unemployed individuals will help to alleviate
a. frictional unemployment
b. seasonal unemployment
c. structural unemployment
d. cyclical unemployment
a. frictional unemployment
b. seasonal unemployment
c. structural unemployment
d. cyclical unemployment
answer
c. structural unemployment
question
Full employment occurs when
a. everyone has a job
b. everyone who wants a job has one
c. there is no frictional unemployment
d. there is no cyclical unemployment
e. there is no structural, frictional, and seasonal unemployment
a. everyone has a job
b. everyone who wants a job has one
c. there is no frictional unemployment
d. there is no cyclical unemployment
e. there is no structural, frictional, and seasonal unemployment
answer
d. there is no cyclical unemployment
question
When the economy is operating at an unemployment rate below the full employment rate,
a. actual output is above potential output
b. actual output equals potential output
c. actual output is below potential output
d. frictional unemployment has been eliminated
e. structural unemployment has been eliminate
a. actual output is above potential output
b. actual output equals potential output
c. actual output is below potential output
d. frictional unemployment has been eliminated
e. structural unemployment has been eliminate
answer
a. actual output is above potential output
question
Suppose that the government reports the following information on violent crime in a certain area: there were 1100 incidents in the base year (2001) and 1155 incidents in 2002. The person collecting these data wants to present them in the form of an index. What is the index for 2002?
a. 100
b. 110
c. 116
d. 105
a. 100
b. 110
c. 116
d. 105
answer
d. 105
question
Use the table below to find the real wage in 2003.
Year Nominal Wage($/hr) CPI
2002 $13.33 113.2
2003 $13.00 110
a. $13.00
b. $11.82
c. $14.30
d. $11.78
Year Nominal Wage($/hr) CPI
2002 $13.33 113.2
2003 $13.00 110
a. $13.00
b. $11.82
c. $14.30
d. $11.78
answer
b. $11.82
question
In which of the following situations would an individual experience an increase in real wages?
a. receiving a 5 percent increase in nominal wages while inflation was 6 percent
b. receiving a 3 percent increase in nominal wages while inflation was 2 percent
c. taking a 1 percent cut in nominal wages while inflation was 2 percent
d. receiving a 3 percent increase in nominal wages while inflation was 3 percent
a. receiving a 5 percent increase in nominal wages while inflation was 6 percent
b. receiving a 3 percent increase in nominal wages while inflation was 2 percent
c. taking a 1 percent cut in nominal wages while inflation was 2 percent
d. receiving a 3 percent increase in nominal wages while inflation was 3 percent
answer
b. receiving a 3 percent increase in nominal wages while inflation was 2 percent
question
Suppose Mike agrees to borrow $100 from Renee for one year at a one-time interest payment of 5%. They both expected the inflation rate to be 2% during the one-year period. However, during that year the inflation rate was actually 1%. Which of the following has occurred?
a. The unexpectedly low inflation rate has hurt Mike's purchasing power and benefited Renee.
b. The unexpectedly low inflation rate has benefited Mike and hurt Renee.
c. The unexpectedly high inflation rate has benefited Renee and hurt Mike.
d. There have not been any redistribution costs to either party.
a. The unexpectedly low inflation rate has hurt Mike's purchasing power and benefited Renee.
b. The unexpectedly low inflation rate has benefited Mike and hurt Renee.
c. The unexpectedly high inflation rate has benefited Renee and hurt Mike.
d. There have not been any redistribution costs to either party.
answer
a. The unexpectedly low inflation rate has hurt Mike's purchasing power and benefited Renee.
question
Suppose to borrow money at a 9% nominal rate and the inflation rate is 2%, what is the real interest rate on the loan?
a. 9%
b. 11%
c. 7%
d. 4.5%
a. 9%
b. 11%
c. 7%
d. 4.5%
answer
c. 7%
question
Suppose you recently took a pay cut of 2% at your job. You expect the price level to fall by 3% during this year. What would be the impact on your real wage?
a. The real wage would fall by 3%.
b. The real wage would rise by 3%.
c. The real wage would fall by 1%.
d. The real wage would rise by 1%
a. The real wage would fall by 3%.
b. The real wage would rise by 3%.
c. The real wage would fall by 1%.
d. The real wage would rise by 1%
answer
d. The real wage would rise by 1%
question
According to the classical model, if there are too many elementary school teachers in the labor market,
a. the government should institute a retraining program to give the unemployed teachers new job skills
b. the wages for elementary teachers will fall, eventually causing the number of excess teachers to shrink
c. the wage for elementary teachers will increase for those who are employed, but unemployment of teachers will remain high
d. this situation provides an example of frictional unemployment, which often occurs in the long run
a. the government should institute a retraining program to give the unemployed teachers new job skills
b. the wages for elementary teachers will fall, eventually causing the number of excess teachers to shrink
c. the wage for elementary teachers will increase for those who are employed, but unemployment of teachers will remain high
d. this situation provides an example of frictional unemployment, which often occurs in the long run
answer
b. the wages for elementary teachers will fall, eventually causing the number of excess teachers to shrink
question
. If the labor supply and demand curves cross at a wage of $20,
a. a wage rate of $10 per hour would lead to an excess demand for labor
b. a wage rate of $10 per hour would lead to an excess supply of labor
c. The wage of $20 causes a high rate of cyclical unemployment
d. employees are overpaid
a. a wage rate of $10 per hour would lead to an excess demand for labor
b. a wage rate of $10 per hour would lead to an excess supply of labor
c. The wage of $20 causes a high rate of cyclical unemployment
d. employees are overpaid
answer
a. a wage rate of $10 per hour would lead to an excess demand for labor
question
According to the Classic Model, what is the relationship between household saving and taxes?
a. taxes = income - consumption - household saving
b. household saving = income + taxes - consumption
c. taxes = income - consumption + household saving
d. household saving = consumption + income - taxes
e. taxes = household saving - income - consumption
a. taxes = income - consumption - household saving
b. household saving = income + taxes - consumption
c. taxes = income - consumption + household saving
d. household saving = consumption + income - taxes
e. taxes = household saving - income - consumption
answer
a. taxes = income - consumption - household saving
question
According to the classical macroeconomic model, in the long run, if household saving is $2 trillion, net taxes is $2.5 trillion, and consumption spending is $5.5 trillion, then the disposable income should be
a. $10 trillion
b. $8 trillion
c. $7.5 trillion
d. $4.5 trillion
a. $10 trillion
b. $8 trillion
c. $7.5 trillion
d. $4.5 trillion
answer
c. $7.5 trillion
question
According to the classical macroeconomic model, in the long run, if household saving is $2 trillion, net taxes is $2.5 trillion, consumption spending is $5.5 trillion, and planned investment spending is $3 trillion, then the government has a
a. surplus of $1 trillion
b. surplus of $0.5 trillion
c. deficit of $1 trillion
d. deficit of $0.5 trillion
a. surplus of $1 trillion
b. surplus of $0.5 trillion
c. deficit of $1 trillion
d. deficit of $0.5 trillion
answer
a. surplus of $1 trillion
question
Which of the following is a common way of measuring the average standard of living?
a. the unemployment rate plus the inflation rate
b. real GDP divided by the price level
c. the unemployment rate multiplied by the population
d. real GDP divided by the population
e. inflation rate divided by the population
a. the unemployment rate plus the inflation rate
b. real GDP divided by the price level
c. the unemployment rate multiplied by the population
d. real GDP divided by the population
e. inflation rate divided by the population
answer
d. real GDP divided by the population
question
An increase in the supply of labor will, everything else equal,
a. increase the real wage rate and increase employment
b. increase the real wage rate and decrease employment
c. reduce the real wage rate and increase employment
d. reduce the real wage rate and decrease employment
e. increase the demand for labor and increase employment
a. increase the real wage rate and increase employment
b. increase the real wage rate and decrease employment
c. reduce the real wage rate and increase employment
d. reduce the real wage rate and decrease employment
e. increase the demand for labor and increase employment
answer
c. reduce the real wage rate and increase employment
question
8. If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size?
a. 18
b. 25
c. 29
d. 36
a. 18
b. 25
c. 29
d. 36
answer
c. 29
question
The formula for labor productivity is given by
a. employment/output
b. output/population
c. output/employment
d. population/output
a. employment/output
b. output/population
c. output/employment
d. population/output
answer
c. output/employment
question
Why does increasing employment not necessarily increase living standards?
a. Productivity always increases as employment increases.
b. Living standards and employment are always positively related.
c. Increasing employment may not be accompanied by higher real wages.
d. There is no upper limit to labor force participation.
a. Productivity always increases as employment increases.
b. Living standards and employment are always positively related.
c. Increasing employment may not be accompanied by higher real wages.
d. There is no upper limit to labor force participation.
answer
c. Increasing employment may not be accompanied by higher real wages.
question
The following data ($trillions) are for the country called Pseudomonia. It has a closed economy, which means there is no trade between this country and any other country.
Total Real Output $15
Consumption $10.5
Government spending $2.5
Households saving $3
Assume that the economy of Pseudomonia is at its long run equilibrium. Calculate each of the following items:
a. planned investment spending
b. net taxes
c. disposable income
d. government budget balance (deficit or surplus)
Total Real Output $15
Consumption $10.5
Government spending $2.5
Households saving $3
Assume that the economy of Pseudomonia is at its long run equilibrium. Calculate each of the following items:
a. planned investment spending
b. net taxes
c. disposable income
d. government budget balance (deficit or surplus)
answer
a. planned investment spending total output = total income = total spending, therefore, C+IP+G = 15; So, IP = 15 - C - G = 15 - 10.5 - 2.5= 2
b. net taxes 15 = C+S+T. So, T=15-C-S=15-10.5-3=1.5
c. disposable income Yd = C+S=10.5+3=13.5
d. government budget balance (deficit or surplus) Government budget = G - T=2.5-1.5=1 (deficit
b. net taxes 15 = C+S+T. So, T=15-C-S=15-10.5-3=1.5
c. disposable income Yd = C+S=10.5+3=13.5
d. government budget balance (deficit or surplus) Government budget = G - T=2.5-1.5=1 (deficit
question
Which of the following is a common way of measuring the average standard of living?
a. the unemployment rate plus the inflation rate
b. real GDP divided by the price level
c. the unemployment rate multiplied by the population
d. real GDP divided by the population
e. inflation rate divided by the population
a. the unemployment rate plus the inflation rate
b. real GDP divided by the price level
c. the unemployment rate multiplied by the population
d. real GDP divided by the population
e. inflation rate divided by the population
answer
d. real GDP divided by the population
question
An increase in the supply of labor will, everything else equal,
a. increase the real wage rate and increase employment
b. increase the real wage rate and decrease employment
c. reduce the real wage rate and increase employment
d. reduce the real wage rate and decrease employment
e. increase the demand for labor and increase employment
a. increase the real wage rate and increase employment
b. increase the real wage rate and decrease employment
c. reduce the real wage rate and increase employment
d. reduce the real wage rate and decrease employment
e. increase the demand for labor and increase employment
answer
c. reduce the real wage rate and increase employment
question
Which combination of government policies would be most likely increase labor demand?
a. increasing subsidies to education and increasing subsidies to businesses for hiring new employees
b. reducing income tax rates and cutting transfer payments to the needy
c. raising income tax rates and cutting transfer payments to the needy d. reducing subsidies to education and increasing subsidies to businesses for hiring new employees
e. increasing subsidies to education and reducing subsidies to businesses for hiring new employee
a. increasing subsidies to education and increasing subsidies to businesses for hiring new employees
b. reducing income tax rates and cutting transfer payments to the needy
c. raising income tax rates and cutting transfer payments to the needy d. reducing subsidies to education and increasing subsidies to businesses for hiring new employees
e. increasing subsidies to education and reducing subsidies to businesses for hiring new employee
answer
a. increasing subsidies to education and increasing subsidies to businesses for hiring new employees
question
Why does increasing employment not necessarily increase living standards?
a. Productivity always increases as employment increases.
b. Living standards and employment are always positively related.
c. Increasing employment may not be accompanied by higher real wages.
d. There is no upper limit to labor force participation
a. Productivity always increases as employment increases.
b. Living standards and employment are always positively related.
c. Increasing employment may not be accompanied by higher real wages.
d. There is no upper limit to labor force participation
answer
c. Increasing employment may not be accompanied by higher real wages.
question
Which of the following is a stock variable?
a. The interest rate
b. Real consumption spending
c. Human capital
d. Net exports
a. The interest rate
b. Real consumption spending
c. Human capital
d. Net exports
answer
c. Human capital
question
The formula for labor productivity is given by
a. employment/output
b. output/population
c. output/employment
d. population/output
a. employment/output
b. output/population
c. output/employment
d. population/output
answer
c. output/employment
question
Which of the following could cause the production function to shift upward?
a. a decrease in the capital stock
b. an increase in the capital stock
c. an increase in population
d. a decrease in population
a. a decrease in the capital stock
b. an increase in the capital stock
c. an increase in population
d. a decrease in population
answer
b. an increase in the capital stock
question
An increase in the government's budget surplus will
a. reduce the demand for loanable funds, lower the interest rate, and increase investment spending
b. reduce the demand for loanable funds, raise the interest rate, and increase investment spending
c. increase the supply of loanable funds, lower the interest rate, and increase investment spending
d. reduce the supply of loanable funds, raise the interest rate, and decrease investment spending
a. reduce the demand for loanable funds, lower the interest rate, and increase investment spending
b. reduce the demand for loanable funds, raise the interest rate, and increase investment spending
c. increase the supply of loanable funds, lower the interest rate, and increase investment spending
d. reduce the supply of loanable funds, raise the interest rate, and decrease investment spending
answer
c. increase the supply of loanable funds, lower the interest rate, and increase investment spending
question
If households experienced greater uncertainty about their economic future, which of the following would occur in the market for loanable funds?
a. The supply of funds would decrease, raising the interest rate and lowering investment spending.
b. The supply of funds would decrease, lowering both the interest rate and investment spending.
c. The supply of funds would increase, lowering both the interest rate and investment spending.
d. The supply of funds would increase, lowering the interest rate and raising investment spending
a. The supply of funds would decrease, raising the interest rate and lowering investment spending.
b. The supply of funds would decrease, lowering both the interest rate and investment spending.
c. The supply of funds would increase, lowering both the interest rate and investment spending.
d. The supply of funds would increase, lowering the interest rate and raising investment spending
answer
d. The supply of funds would increase, lowering the interest rate and raising investment spending
question
Which of the following would encourage the development of new technologies?
a. rising interest rates
b. reduced government subsidies for research and development
c. increased tax rates on corporate profits
d. increased patent protection for invention
a. rising interest rates
b. reduced government subsidies for research and development
c. increased tax rates on corporate profits
d. increased patent protection for invention
answer
d. increased patent protection for invention
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