Principles Of Macroeconomics
Principles Of Macroeconomics ECON 2020
Popular in Course
Popular in Economcs
This 35 page Class Notes was uploaded by Jada Mayer on Wednesday September 30, 2015. The Class Notes belongs to ECON 2020 at Western Michigan University taught by Chiayang Hueng in Fall. Since its upload, it has received 23 views. For similar materials see /class/216941/econ-2020-western-michigan-university in Economcs at Western Michigan University.
Reviews for Principles Of Macroeconomics
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 09/30/15
ECON 202 Chapter 5 Review Sheets Professor C James Hueng 1 A business cycle is the A pattern of short run upward and downward movements in production and jobs B increase in consumer spending that accompanies an increase in disposable income C cyclical dqange in the nation39s balance of trade D cyclical movement in the interest rates 2 Which of the following are parts of the business cycle A peak and potential GDP B real GDP and potential GDP C recession and expansion D inflation and recession 3 A popular working definition of a recession is a period with A negative growth rate in real GDP that lasts at least one quarter B positive growth rate in real GDP that lasts at least one quarter C positive growth rate in real GDP that lasts at least two quarters D negative growth rate in real GDP that lasts at least two quarters 4 The bottom or low point of a recession just before an expansion begins is called A the trough B the contraction C the peak D the pits 5 An expansion occurs when production of goods and services is A increasing B decreasing C at a cyclical peak D at a cyclical trough 6 Suppose the country of Dingo experienced an economic trough in January 2004 We can conclude that A real GDP in Dingo was increasing in January 2004 B an expansion occurred after January 2004 C Dingo did not experience a recession in 2003 D Dingo39s potential GDP fell in 2004 7 An observer of the economy notices that over the last nine months the unemployment rate has increased from 56 percent to 87 percent During the same time the rate of growth in real gross domestic product has become negative From this information we might conclude that A inflation is probably rampant in this economy B a recession is occurring in this economy C an expansionary phase of the business cycle is in process D a peak in the business cycle will soon be readied 8 A peak is the A lower turning point of a business cycle when an expansion ends B lower turning point of a business cycle when a recession ends C upper turning point of a business cycle when an expansion ends D upper turning point of a business cycle when a recession ends 9 Between the trough and the peak of the business cycle the economy A experiences rising unemployment B is in an economic expansion C experiences falling real GDP D is in an economic recession 10 Rece55ion5 A begin at the trough of the bu5ine55 cycle B are an y quot quot 39 the level of n mi a W M C end at the peak of the bu5ine55 cycle D have not occurred in the United State5 after 1963 11 Which of the following i5 a correct 5tatement about bu5ine55 cycle5 A Expan5ion5 follow eak5 B Expan5ion5 tend to la5t longer than rece55ion5 C The increa5e in real GDP from trough to peak i5 typically le55 than the decrea5e in real GDP from peak to troug D To count a5 a period of rece55ion real GDP mu5t decrea5e for at lea5t 1 year 5 T 13 o o o l quot5 m Time 12 In the above figure a rece55ion begin5 at point and an expan5ion begin5 at point ub Bbc Cbu Ddc 13 In the above figure a trough i5 at point and a peak i5 at point 11117 Bbc Cbu D11FC ak rece55ion trough expan51on C peak expan5ion trough rece55ion 14 Which i5 the proper order for the bu5ine55 cycle A B peak trough expan5ion rece55ion D peak rece55ion expan5ion trough 15 Suppo5e that real GDP ri5e5 in all four quarter5 of 2005 thu5 2005 would definitely be a year A o 39o with a bu5ine55 cycle pea C of rece55ion D with a bu5ine55 cycle trough 16 If the unemployment rate fa115 the labor force participation rate increa5e5 and the employmentrtorpopulation ratio increa5e5 then the economy i5 mo5t likely in A n expan5ion B a rece55ion a golden age D a trough 17 In 2003 the money wage rate was 3000 an hour and the real wage rate was 2400 an hour In 2004 the money wage rate was 4000 an hour and the real wage rate was 3000 an hour In 2003 the GDP deflator was and in 2004 it was 7 A 125 133 B 80 75 7 C 125 126 D 125 126 18 The consumer price index CPI A compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2 B compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period C measures the increase in the prices of the goods included in GDP D is the ratio of the average price of a typical basket of goods to the cost of producing those goods 19 If the CPI basket of goods cost 200 in the reference base period and 450 in a later year the CPI in the later year equals B 250 C 300 D 450 Price index 20 In the table above what inflation rate belongs in space A A 170 percent B 68 percent C 83 percent D 40 percent 21 In the table above what inflation rate belongs in space E A 170 percent B 68 percent C 83 percent D 40 percent 22 In the table above what inflation rate belongs in space C A 170 percent B 68 percent C 83 percent D 40 percent 23 In the table above what price level belongs in space D A 125 B 130 C 140 D 145 24 In the table above what inflation rate belongs in space E A 170 percent B 68 percent C 83 percent D 154 percent 25 If the CPI was 1325 at the end of 2003 and 1402 at the end of 2004 the inflation rate over these two years was A 77 percent B 54 percent C 44 percent D 58 percent 26 If the CPI was 1215 at the end of 2004 and 1383 at the end of 2005 the inflation rate over these two years was A 102 percent B 138 percent C 122 percent D 168 percent 27 If the CPI was 1223 at the end of 2004 and 1245 at the end of 2005 the inflation rate over these two years was A 18 percent B 25 percent C 225 percent D 180 percent 28 If the CPI was 1325 at the end of 2004 and 1375 at the end of 2005 the inflation rate over these two years was A 36 percent B 38 percent C 50 percent D None of the above answers is correct 29 In 2004 the Consumer Price Index was equal to 1638 and in 2005 it was equal to 1575 What is the inflation rate over this time period A 63 percent B 40 percent C 385 percent D 101 percent 30 The Consumer Price Index for country Beta in 2003 was equal to 2035 and for 2004 it was 1996 On the basis of this information which of the following statements is true A Beta experienced an inflation rate of 39 percent B Beta experienced a deflation rate of 39 percent C Beta experienced an inflation rate of 19 percent D Beta experienced a deflation rate of 19 percent 31 The biases in the CPI include the old goods unemployment and inflation biases new goods quality change and substitution biases old goods new goods and quality change biases substitution new goods and old goods biases Unm gt 32 The biases in the CPI are not important since they are so small important only to economists not the real world important since they effect nearly 13 of federal government spending not important although they are large Unm gt 33 Because of the biases in calculating the CPI actual inflation is A accurately measured B less than the measured inflation rate by about 1 percent per year C more than the measured inflation rate by about 1 percent per year D more than the measured inflation rate by about 1 percent per month 34 Price indexes can overstate inflation because they A omit some quality improvements B do not contain the correct collection of goods purchased by consumers C do not contain the prices of foreign goods D do not contain the prices of services 35 The technique currently used to calculate the CPI implicitly assumes that over time consumers buy A relatively more of goods whose relative prices are rising B relatively less of goods whose relative prices are rising C the same relative quantities of goods as in a base year D goods and services whose quality improves at the rate of growth of real income 36 Substitution bias in the CPI refers to the fact that the CPI A takes into account the substitution of goods by consumers when relative prices change B takes no account of the substitution of goods by consumers when relative prices dqange C substitutes quality dqanges whenever they occur without taking account of the cost of the quality changes D substitutes relative prices for absolute prices of goods 37 The commodity substitution bias is that consumers substitute high quality goods for low quality goods government spending is a good substitute for investInent expenditures national saving and foreign borrowing are interchangeable consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls Umm gt 38 If a new and better good replaced an older and less expensive good then the price level measured by the CPI if A is lower than the actual price level B is higher than the actual price level C might be either higher or lower than the actual price D is the same as the actual price level because it measures the prices of the actual goods 39 The CPI baslltet contains 400 oranges and 800 pens In the base year the price of an orange is 100 and the price of a pen is 075 This year urban consumers each buy 300 oranges at 200 each and 850 pens at 100 ead The CPI this year is i A 160 B 625 C 160 D 140 40 If the number of people unemployed and the number of people in the labor force grow at the same rate then the i A labor force participation rate will decrease B unemployment rate will increase C unemployment rate will stay the same D labor force participation rate will increase 2004 2005 IItem I Quantity I Price I Quantity I Price IBooks 10 30 8 50 IPens 20 1 15 2 41 In 2004 consumers in Dexter consumed only books and pens The prices and quantities for 2004 and 2005 are listed in the table above The reference base period for Dexter39s CPI is 2004 What is the cost of the CPI basket in 2004 A 430 B 335 C 320 D 540 42 In 2004 consumers in Dexter consumed only books and pens The prices and quantities for 2004 and 2005 are listed in the table above The reference base period for Dexter39s CPI is 2004 What is the CPI in 2004 A 320 B 100 C 320 D 100 43 In 2004 consumers in Dexter consumed only books and pens The prices and quantities for 2004 and 2005 are listed in the table above The reference base period for Dexter39s CPI is 2004 What is the cost of the CPI basket in 2005 A 430 B 335 C 320 D 540 44 In 2004 consumers in Dexter consumed only books and pens The prices and quantities for 2004 and 2005 are listed in the table above The reference base period for Dexter39s CPI is 2004 What is the CPI in 2005 29 C 16 D 102 45 In 2004 consumers in Dexter consumed only books and pens The prices and quantities for 2004 and 2005 are listed in the table above The reference base period for Dexter39s CPI is 2004 What is the inflation rate in 2005 A 69 percent B zero C 31 percent D 2 percent 46 The working age population can be divided into two groups A people in the labor force and people looking for work B people in the labor force and people with a job C people looking for work and those in the armed forces D people in the labor force and people who are not in the labor force 47 Unemployment as measured includes the total number of people who A have jobs or are currently looking for jobs B are available and looking for work but unable to find employment C would like to have a job but have stopped seeking work D would like to have a full time job but are working part time 48 Which of the following people would be counted as is employed in the Current Population Survey A April who just graduated from college and is looking for work B Misty who just quit her job to return full time to school C Ridq who is working 20 hours a week but wants a full time job D Jason who was laid off from work less than 6 months ago but who has stopped looking for work 49 Which of the following is M considered to be in the labor force A a student who works part time B a person who is not working but who has tried to find a job in the past week a person who is waiting to start a new job in the next 30 days C D a person who is not working and who has not tried to find a job 50 Which of the following people is NOT considered unemployed in the Current Population Survey A The person has just finished school and has entered the labor force to look for work B The person has been laid off and is looking for a new job C The person is looking for work after not doing so for a time D The person is discouraged about finding a job and so does not search for work 51 The unemployment rate is calculated as 100 times A labor force 7 population B unemployment 7 population C unemployment 7 labor force D labor force 7 unemployment 52 Suppose the population of Tiny Town is 100 people and the working age population is 70 If 10 of these people are unemployed the unemployment rate in Tiny Town is A 10 percent B 1070 x 100 C 1080 x 100 D There is not enough information provided to calculate the unemployment rate 53 Based on the following data for the country of Tiny Town the unemployment rate equals Population 100 Labor force 80 Number of employed persons 70 Number of discouraged workers 5 A 10100 x 100 B 1080 x 100 C 1580 x 100 D 570 x 100 54 Which of the following will decrease the unemployment rate A Discouraged workers leave the labor force B More women enter the labor force and seek jobs C Young people graduate from college and start to look for their first full time job D None of the above because they all increase or do not change the unemployment rate Person A Now that the kids are in sd rool for a full day this person is looking for work and has interviewed for three jobs during the past two weeks Person B This person has been laid off from a job but expects to be called back as soon as the economy improves Person C This person has just graduated from college and will start a new job in three weeks In the meantime this person will tour the great American beadqes Person D This person was laid off last year when new 1 391 was installed at the plant reducing the number of workers needed Shortly after being laid off this person looked for a new job was unable to find one and then stopped looking for work 55 The above table shows answers given by people interviewed in a government survey of households Which individuals are considered to be a part of the labor force A C and D B B C and D C A C and D D A B and C 56 The above table shows answers given by people interviewed in a government survey of households Which individuals are considered unemployed A A B and C B B C and D C A C and D D C and D 57 The above table shows answers given by people interviewed in a government survey of households Which person is a discouraged worker A A B B C C D D Not working Want to work but and looking for no longer looking work for work millions millions Total Currently r r 39 employed millions millions 80 40 58 In the table above the size of the labor force is A 80 million B 46 million C 42 million D 40 million 59 In the table above the number of people officially unemployed is A 40 million B 6 million C 4 million D 2 million 60 In the table above the unemployment rate is A 50 percent B 15 percent C 10 percent D 5 percent 61 The labor force participation rate is calculated as the A labor force divided by the number of persons employed then multiplied by 100 B number of persons unemployed divided by the labor force then multiplied by 100 C labor force divided by the unemployment rate then multiplied by 100 D labor force divided by the working age population then multiplied by 100 62 Suppose the labor force in Tiny Town is 100 people If the if in Tiny Town is 150 people the labor force participation rate equals 100 times if A working age population 100150 B working age population 100250 C number of employed persons 100250 D number of employed persons 100150 63 Which labor market statistic tends rise during recessions and fall during expansions A the unemployment rate B the labor force participation rate C the employment to population ratio D aggregate hours 64 Suppose the number of people employed is 25 million and the number of people in the labor force is 75 million What is the employment to population ratio A 33 percent B 25 percent C 75 percent D There is not enough information given to answer the question 65 Based on the following data for the country of Tiny Town the employment to population ratio equals 100 times Population 200 Working age population 100 Labor Force 90 Number of employed persons 75 A 90100 B 75200 C 90200 D 75100 66 In the above table the working age population is A 225 million B 100 million C 140 million D 155 million 67 In the above table the size of the labor force is A 210 million B 155 million C 140 million D 100 million 68 In the above table the unemployment rate is A 6 percent B 24 percent C 18 percent D 29 percent 69 In the above table the labor force participation rate is A 55 percent B 44 percent C 62 percent D 69 percent 70 In the above table the employment to population ratio is A 51 percent B 42 percent C 62 percent D 44 percent Component 71 Using the information in the table above calculate the number of people in the labor force A 2500 B 2100 C 1500 D 800 72 Using the information in the table above calculate the unemployment rate A 533 percent B 308 percent C 133 percent D 77 percent 73 Using the information in the table above calculate the employment to population ratio A 75 percent B 65 percent C 50 percent D 232 percent Component 74 Using the information in the above table the unemployment rate is A 45 percent B 43 percent C 28 percent D 60 percent 75 The labor force participation rate is A 671 percent B 640 percent C 957 percent D 56 percent 76 The employment to population ratio is A 67 percent B 64 percent C 50 percent D 62 percent 77 Which of the following best measures the total amount of labor used to produce GDP A the total number of people employed B the total number of people employed full time C the total hours worked by full time employees D the total hours worked by full and part time employees 78 If aggregate hours worked grows more slowly than the number of people employed then A people are working fewer hours on average B people are working more hours on average C there must be fewer part time workers D None of the above is correct because aggregate hours cannot grow more slowly than the number of people employed 79 The money wage rate equals 10 per hour If the price level rises and the money wage does not change A the real wage decreases B the quantity of goods and services that an hour of work can buy decreases C the real wage increases D Both answers A and B are correct 80 Who of the following is unemployed A Rene a retired dqemist B Homer a full time student at a vocational school C Kim a worker on strike from her company for a week D Glenn a student who just graduated from college last week and is currently looking for a job 81 The percentage of the people of working age who have jobs is called the 7 A labor force employment to population ratio inverse of the unemployment rate 1 i 1 1 p j t v i mg mg r r 0001 ratio 82 The i fluctuates more than does the i A labor force participation rate employrnent to population ratio B labor force participation rate unemployment rate C employrnent to population ratio labor force participation rate D p I t p 1mlution ratio r 1 rate 83 In an economy 19 million people are employed and 3 million are unemployed but 2 million part time workers would prefer full time work In addition there are 2 million discouraged workers How many people are in the labor force A 23 million B 19 million C 21 million D 22 million 84 In an economy 23 million people are employed and 2 million are unemployed but 5 million part time workers would prefer full time work What is the unemployment rate A 232 percent B 67 percent C 8 percent D 25 percent 85 If the people who take early retirement are not counted in the working age population then A the unemployment rate would be lower B the labor force participation rate would be less C the unemployment rate would be higher D the labor force participation rate would be higher 86 Most unemployed people are unemployed because they are A job leavers B job losers C reentrants into the labor force D new entrants into the labor force 87 The smallest and most stable source of unemployment is A job leavers B job losers C reentrants into the labor force D new entrants into the labor force 88 The duration of unemployment is the length of time a person A is employed while looking for work is unemployed while looking for work is unemployed even though that person is not looking for work spends working in a job 0001 89 Frictional unemployment A includes discouraged workers B is voluntary part time unemployment C is unemployment associated with the dqanging of jobs in a dqanging economy D is unemployment associated with declining industries 90 Frictional unemployment is the result of A technological change or foreign competition B normal labor market turnover C a slowdown in the rate of economic expansion D irresponsible workers with poor work habits 91 Suppose the country of Tiny Town experienced frictional unemployment This frictional unemployment would A definitely signal that the country is in a recession B be considered a natural occurrence in a growing economy C signal that there are more job leavers than job losers D signal that the number of discouraged workers is growing 92 When a worker quits a job to look for a better job A structural and cyclical unemployment increase B structural unemployment decreases C cyclical unemployment increases D frictional unemployment increases 93 Which of the following most likely would decrease frictional unemployment A an increase in the number of high school and college graduates B effective Internet based employment services and job registries C an expansion of unemployment compensation benefits D All of the above would decrease frictional unemployment 94 Structural unemployment is A associated with the normal dqanging of jobs in a dynamic economy B associated with the general downturns in the economy C associated with the general decline of specific industries D almost always short term in nature 95 Structural unemployment is the result of A technological change or foreign competition B normal labor market turnover C a slowdown in the rate of economic expansion D irresponsible workers with poor work habits 96 Structural unemployment A falls during the expansion phase of the business cycle B falls as the pace of technological progress increases C generally lasts longer than frictional unemployment D falls when the government provides more generous unemployment compensation benefits 97 When the automobile replaced horse drawn carriages as the principal means of transportation firms producing horse drawn carriages went bankrupt and permanently laid off all their workers thereby increasing A frictional unemployment B structural unemployment C frictional and cyclical unemployment D cyclical unemployment Person A This person has just graduated from high school and is working at a part time job but wants a full time job Person B At the age of 45 this person was laid off from the quot industry when new equipment was installed and the person did not have the skills necessary to use the equipment This person now is searching to find a new job Person C As a result of this person39s spouse be ing transferred to a job in a new city this person is looking for a new job Person D This person just graduated from college and is looking for an engineeringjob In the meantime this person is working full time waiting tables 98 The above table shows answers given by people interviewed in the Current Population Survey Wthh person people is are structurally un employed AAandB BB CC DBandD 99 Cyclical unemployment A is due mainly to job leavers B may increase or decrease during an expansion C occurs when technology improvements dqange job requirements D fluctuates over the business cycle 100 Which type of unemployment increases during a recession A cyclical unemployment B frictional unemployment C structural unemployment D the natural rate of unemployment 101 Auto and steel workers commonly experience this type of unemployment in a recession A frictional unemployment B cyclical unemployment C structural unemployment D natural rate of unemployment 102 Full employment occurs when A structural unemployment is zero B cyclical unemployment is zero C frictional unemployment is zero D cyclical and frictional unemployment are zero 103 Full employment occurs when the A unemployment rate equals the natural rate of unemployment B structural unemployment rate equals the frictional unemployment rate C natural unemployment rate equals the frictional unemployment rate D cyclical unemployment rate equals the natural rate of unemployment 104 Full employment occurs A only if the unemployment rate is zero B only if the unemployment rate is equal to the natural rate of unemployment C only if unemployment is equal to structural unemployment plus cyclical unemployment D None of the above answers are correct 105 Suppose the natural rate of unemployment equals 6 percent and the current unemployment rate is 8 percent We can conclude that A there is no structural unemployment B there is no frictional unemployment C there is no cyclical unemployment D full employment is not occurring 106 The natural rate of unemployment is A not a fixed percentage of the labor force B occurs when only there is no cyclical unemployment present C the unemployment rate when the economy is at potential GDP D All of the above answers are correct 107 When the economy moves into and out of recessions and expansions the unemployment rate fluctuates around the A natural rate of unemployment B structural unemployment rate C cyclical unemployment D frictional unemployment rate 108 Suppose the economy is experiencing frictional unemployment of 1 percent structural unemployment of 3 percent and cyclical unemployment of 4 percent What is the natural rate of unemployment A 3 percent B 4 percent C 5 percent D 7 percent 109 Suppose that the natural rate of unemployment is 45 percent and the actual rate of unemployment is 35 percent Then cyclical unemployment is A 1 percent B 1 percent C 8 percent D 0 percent 110 Which of the following statements is true A Real GDP fluctuates around potential GDP B Potential GDP fluctuates around real GDP C Potential GDP is the same as real GDP D When all of the economy39s resources are fully employed the value of production is called real GDP 111 When the unemployment rate is below the natural rate of unemployment A real GDP is greater than potential GDP B real GDP is less than potential GDP C real GDP equals potential GDP D None of the above is possible because it is impossible for the unemployment rate to be less than the natural rate 112 If more unemployed workers stop looking for work the unemployment rate will A not dqange B fall C rise D probably dqange but in an unpredictable direction 113 During a recession the 7 A number of aggregate hours worked increases B unemployment rate decreases C employment to population ratio increases D number of discouraged workers increases 114 People enter the labor force 7 A by being hired or recalled B when they switd r from being unemployed to being employed C when their unemployment benefits run out D as entrants or reentrants 115 When cyclical unemployment increases and other things remain the same A the natural rate of unemployment increases B the amount of frictional unemployment increases C the amount of structural unemployment decreases D the natural rate of unemployment does not change Answer Key Testname CH5 16 Answer Key Testname CH5 DDCDBADADCDDDAADDACDCDCCBBABDADDBCDCDBABCBBDBCAC mU339 W Dn4933amp DD WampWU3 WWDDQQQQ 455555555556666666666777777777788880000000000009999999 17 Answer Key Testname CH5 BBDABBABDDABBAABDDD 7890123456789012345 9990000000000111111 11 18 ECON 202 Chapter 4 Review Sheets Professor C James Hueng 1 Gross domestic product is the total 7 produced within a country in a given time period A market value of all final and intermediate goods and services B market value of all final and intermediate goods and services plus investInent and depreciation C amount of final and intermediate goods and services D market value of all final goods and services 2 The government39s budget deficit is the excess of government A purdiases of goods and services over its interest payments on the government debt B purdiases of goods and services over its net taxes C net taxes over its purdiases of goods and services D interest payments on the government debt over its net taxes 3 If US imports are less than US exports the A rest of the world borrows from the US economy B US economy borrows from the rest of the world C US government has a budget surplus D US government has a budget deficit 4 If the rest of the world lends to the US economy A the US government has a budget surplus B the US government has a budget deficit C US imports are less than US exports D US imports exceed than US exports 5 Which of the following are equal to one another I aggregate production 11 aggregate expenditure Ill aggregate income A 1 equals 11 but not 111 B 1 equals 111 butnot II C II equals 111 but not I D 1 equals 11 equals 111 6 If our exports are 12 billion and our imports are 17 billion A the United States is lending to the rest of the world B US national saving is too high C the United States is borrowing from the rest of the world D US investInent must decrease 7 Depreciation is subtracted from gross domestic product to determine directly r Jquot plus lll i Llllt llL r JI plus 5U tiiuiltilL purchases plus net exports B disposable income C net domestic product D national income 8 GDP equals net domestic product plus A transfer payments and business transfers B depreciation C indirect business taxes and personal taxes D retained earnings 9 In the nation of Nirvana depreciation is 22 billion GDP is 2604 billion and national income is 2152 billion Net domestic product is A smaller than national income C 2384 billion B 2152 billion D 4452 billion 10 Which of the following is NOT a final good A a new computer sold to an NYU student B a new car sold to Avis for use in their fleet of rental cars C a purse sold to a foreign visitor D a hot dog sold to a spectator at a Chicago Bears football game 11 GDP equals A aggregate expenditure B aggregate income C the value of the aggregate production in a country during a given time period D all of the above 12 A nation39s inves 39nent must be financed by A national saving only B the government39s budget deficit C borrowing from the rest of the world only D national saving plus borrowing from the rest of the world 13 Depreciation equals 7 A capital minus gross inves 39nent C net inves 39nent minus gross investment B capital minus net inves 39nent D gross inves 39nent minus net investment is greater than saving increases 14 When A income government purchases wealth B income consumption expenditure wealth C r I r Jquot 5U tiiuiltilL r wealth D 5U tiiuilcileuidm i r I r I taxes dollars interest income income 15 Use the information in the table above to calculate the value of net domestic income at factor cost A 80 billion B 140 billion C 100 billion D 90 billion 16 Which of the following is NOT part of the expenditure approadq to measuring GDP B net exports of goods and services A gross private domestic investInent D personal consumption expenditures C net interest 17 To measure GDP using the expenditure approach you must collect data on A inflation B exports C wages D saving 18 Aggregate expenditures include all of the following EXCEPT A consumption of food B purd ases of intermediate goods C purd ases of a piece of capital equipment D purd ases of guns by the government 19 In the expenditure approad r to GDP the largest component is A government purd rases B personal consumption expenditures C gross private domestic investInent D net exports 20 Let C represent consumption expenditure S saving I gross private domestic investment G government purchases of goods and services and NX net exports of goods and services Then GDP equals ACSGNX BCSG NX CCIGNX DCIG NX 21 Personal consumption expenditures include A expenditures by households on goods and services produced only in the United States B expenditures by households on goods and services produced in the United States and the rest of the world C the purchase of new homes D the purchase of used goods and new goods 22 All of the following household expenditures are included in consumption expenditure EXCEPT A payment to a dentist for filling a tooth B purd ase of corporate stock C purd ase of a new purse D purd ase of hair styling 23 The difference between gross investment and net investment is A inflation B depreciation C initial capital D consumption 24 Goods that are produced this year stored in inventories and then sold to consumers next year A count in this year39s GDP B count in next year39s GDP C count in both this year39s and next year39s GDP D are not counted as a part of GDP 25 An example of investment in computing real GDP using the expenditure approad r is the purchase of A a new set of tools by an auto medianic for use in repairing cars B 100 shares of IBM stock C a 100 year old house by a married couple D computer dqips by IBM to put in their personal computers 26 An example of investment in the national income accounts is the purd ase of A a new van by a potter who packs it with his wares and travels to art shows B 100 shares of Canadian stock on the New York Stock Exchange C a 100 year old house that was just put on the protected historic sites list in the year in question D a US government bond 27 In the national income accounts the purchase of a new house counts as A consumption expenditure B investInent C a transfer D an addition to inventory 28 All of the following are included in gross private domestic invesiInent expenditure EXCEPT a A business39s purd ase of a fleet of cars B household39s purd ase of a new house business39s purd ase of another company39s stock D a retail store39s purchase of shoes to add to its inventory 0 29 In the national income accounts government purd ases of goods and services refer to those purd ases made by A federal and state governments only B the federal government only C state and local governments only D all levels of government 30 In the national income accounts government purd ases of goods and services exclude A transfer payments E state and local government purd rases C local government purchases but include state government purchases D spending on national defense 31 Which of the following is included in the government purchases component of the expenditure approach to GDP A state government expenditure on local schools B transfer payments C changes in inventories D taxes 32 Which one of the following transactions in a particular year is included in gross domestic product for that year A Social Security payments to retirees B The government pays a computer services company that assisted in the delivery of Social Security payments to retirees C A car is produced in the previous year and remains in inventory for the entire year under consideration D A stay at home parent performs housework that the family would otherwise have paid a maid 20000 a year to perform 33 In the computation of GDP social security payments count as A transfer payments and are included in GDP B transfer payments and are not included in GDP C government purd ases of goods and services and are included in GDP D government purd ases of goods and services and are not included in GDP 34 Which of the following is M part of GDP A General Motors39 purd ases of new capital equipment B expenditures by the federal government for national defense C Social security payments made to the elderly D the purchase of new homes by consumers 35 Transfer payments are not part of government purchases of goods and services because transfer payments A are not predictable given the nature of their appropriation and allocation B do not represent the purchase of a final good or service C are not always spent on goods produced in the US D The premise of the question is incorrect because transfer payments are part of government purchases of goods and services 36 Net exports of goods and services equal the A exports of goods and services divided by the imports of goods and services B exports of goods and services plus the imports of goods and services C exports of goods and services minus the imports of goods and services D imports of goods and services minus the exports of goods and services 37 In the calculation of GDP by the expenditure approadq exports from the United States must be A subtracted because they are included in the consumption of a foreign country B ignored because they are not bought by US citizens C subtracted if they are bought by foreign firms for investment purposes D added services income taxes taxes interest 38 From the data in the above table GDP equals A 1120 B 1280 C 1290 D 1360 39 Using the data in the above table net domestic product equals A 1120 B 1280 C 1290 D 1360 40 The approadq to GDP that sums compensation of employees rental income corporate profits net interest proprietors39 income depreciation and indirect taxes and subtracts subsidies is the A opportunity cost approach B expenditure approach C added cost approadq D income approadq 41 The income approach to measuring GDP sums together A compensation of employees rental income corporate profits net interest proprietors39 income subsidies paid by the government indirect taxes paid and capital consumption expenditures B compensation of employees rental income corporate profits net interest proprietors39 income indirect taxes paid and capital consumption expenditures and subtracts subsidies paid by the government C the sales of ead firm in the economy D the costs of ead firm in the economy and then subtracts indirect business taxes and the capital consumption allowance 42 Proprietors39 income is a component of whid approadq to measuring GDP A incomes approadq B expenditure approach C cost approadq D output approadq 43 Which of the following is a component of the incomes approadq to GDP A consumption expenditure B wages and salaries C investInent D government purd ases of goods and services 44 The largest component of national income is A compensation of employees B rental income C corporate profits D proprietors39 income 45 Which of the following is included in quotcompensation of employees part of the income approach to measuring GDP 1 Wages and salaries ll Pension fund contributions 111 Social security contributions A I only B land 11 C land 111 D I II and Ill 46 When 39 U the r 39 of p 1 part of GDP A social security contributions must be included B fringe benefits are not included C taxes withheld on earnings are not included D the value of vacation time must be included 47 In the national income accounts net interest is the total interest payments received by households on loans made by them minus A interest received from households39 ownership of government bonds B interest payments made by households on their own borrowing C interest payments made by households to foreign lenders D taxes paid by households on their interest income 48 Rental income includes A the payment for the use of land B the payment for the use of all rented inputs no income from rental housing because most houses are occupied by their owners C D Both answers A and B are correct 49 Which of the following are included in the category of corporate profits when measuring GDP 1 Profits paid as dividends ll Undistributed profits 111 Income received by owners and operators of businesses A I only B l and II C land 111 D I II and Ill 50 An indirect tax is a tax paid by consumers A to a state or local government B when they purchase goods and services C on unearned income as opposed to wages and salaries D that is a percentage of the value of their real property 51 All of the following are indirect taxes EXCEPT A cigarette sales taxes B income taxes C liquor excise taxes D taxes on utility bills 52 The sum of compensation to employees rental income corporate profits net interest and proprietors39 income is A gross domestic product B gross domestic income C net domestic income at factor cost D net domestic product 53 Reasons why valuing goods at their market prices is different than valuing them at their factor costs include A depreciation and investInent B exports and imports C personal taxes and corporate taxes D indirect taxes and subsidies 54 Gross domestic product minus net domestic product equals A exports minus imports B imports minus exports C net taxes D depreciation interest taxes income consumption services services 55 Using the data in the table above gross domestic product equals A 1920 B 1940 C 2150 D 2400 56 Using the data in the above table gross private domestic inves 39nent equals A 250 B 260 C 460 D some amount that cannot be determined without more information 57 Using the data in the above table net private domestic inves 39nent equals Component billions of investment 58 The above table gives data for a hypothetical nation Gross domestic product is A 4049 billion B 4079 billion C 4054 billion D 4339 billion 59 The above table gives data for a hypothetical nation Net domestic product is A 4039 billion B 4044 billion C 4054 billion D 4314 billion 60 Which of the following is NOT a component of the incomes approach to GDP A net exports B wages and salaries C corporate profits D proprietors39 income 61 Government purchases include i A social security and education B net exports C buying a new bomber D Both answers A and C are correct 62 Gross Domestic Product is equal to the sum of consumption expenditure investInent net exports and A government purd ases B saving C profits D net taxes 63 Intermediate goods and services i A are double counted in GDP B are used to produce final goods and services C include used goods D are included in GDP 64 The income approach measures GDP by adding together r ion of p I proprietor 39 income A net investInent saving and farmers39 income B net interest rental income and corporate profits C net investInent rental income and corporate profits D net saving investInent income and profits 65 Which of the following items is not a component of the expenditure approad r to measuring US GDP A purd ases of food made by families B social security payments made by the government C purd ases of US made movies by Europeans D purd ases of new homes made by families 66 Which of the following items is not a component of the income approach to measuring US GDP A interest earned on savings deposits B profits made by businesses C income earned by businesses that export goods D investInent 67 Which of the following items are counted in GDP A taxi company39s 7 A sale of some bonds to finance its purchases B purd ase of new trip meters for its cabs C sale of 5 old cabs D purd ase of 5 new cabs dollars 30 services taxes investInent services 68 Using the information in the table above calculate the value of GDP A 185 million B 145 million C 195 million D 140 million 69 Use the information in the table above to calculate the value of net exports A 10 million B 0 C 10 million D 30 million dollars interest income income 70 Use the information in the table above plus the fact that indirect taxes less subsidies are 10 billion and depreciation is 30 billion to calculate the value of GDP A 180 billion B 150 billion C 140 billion D 130 billion 71 In 2004 the country of Nerf39s imports equaled its exports Nerf39s GDP was 500 million its consumer expenditure was 380 million and its investInent was 20 million Nerf39s government purd ases were A 100 million B 900 million C 500 million D zero 72 In the country of Darrowby net domestic income at factor cost is 20 million Gross domestic product is 30 million and depreciation is 05 million Indirect taxes less subsidies i A are 1 million B are 05 million C cannot be calculated D are 05 million 73 Real GDP measures the A total profits earned by all businesses valued using prices from a single year B changes in the prices of output measured in dollars C general upward drift in prices D value of total production linked to prices of a single year 74 The old traditional base year method of calculating real GDP compared A the quantities of goods produced in consecutive years using prices in both years and averaging the percentage dqanges in the value of output B quantities produced in different years using prices from a year chosen as a reference period C quantities produced in different years with the prices that prevailed during the year in which the output was produced D prices at different points in time using a sample of goods that is representative of goods purd rased by households 75 Which of the following relationships is correct A Nominal GDP GDP DeflatorReal GDP x 100 B Real GDP Nominal GDP x GDP Deflator100 C GDP Deflator Nominal GDPReal GDP x 100 D Real GDP Nominal GDP x 100 76 To calculate real GDP the GDP deflator can used to adjust nominal GDP for dqanges in A national income B the unemployment rate C the cost of the typical urban worker39s market basket D the general price level 77 Economists distinguish real from nominal GDP to A determine whether the government sector is growing B measure the change in nominal interest rates C determine whether economic welfare has changed D determine whether real production has changed 78 In years with inflation nominal GDP increases i real GDP A faster than B slower than C at the same rate as D sometimes faster sometimes slower and sometimes at the same rate as 79 If nominal GDP is 5 trillion and the GDP deflator is 125 what is real GDP A 4 trillion B 04 trillion C 625 trillion D 625 trillion 80 What is the value of real GDP if the value of the GDP deflator is 1225 and nominal GDP is 825 billion A 6735 billion B 6735 billion C 7025 billion D 10106 billion 81 The dqain weighted output index method of calculating real GDP compares A compares the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output B quantities produced in different years using prices from a year chosen as a reference period C quantities produced in different years with the prices that prevailed during the year in which the output was produced D prices at different points in time using a sample of goods that is representative of goods purd rased by households 82 The GDP deflator equals 100 times nominal GDP divided by real GDP real GDP divided by nominal GDP gross domestic product divided by net domestic product net domestic product divided by gross domestic product Unm gt 83 Suppose that nominal GDP per person is 18000 in 2004 the 1998 GDP deflator is 100 and the 2004 GDP deflator is 110 The approximate real per person GDP in 2004 is A 16364 B 16634 C 18000 D 19800 84 Suppose that nominal GDP per person is 17000 in 2004 the 1998 GDP deflator is 100 and the 2004 GDP deflator is 90 The approximate real GDP per person in 2004 is A 17000 B 18889 C 32300 D 15300 85 Suppose that nominal GDP per person is 21000 in 2004 the 1998 GDP deflator is 100 and the 2004 deflator is 105 The approximate real GDP per person in 2004 is A 20000 B 21000 C 19048 D 22050 86 The implicit GDP deflator is calculated by A comparing the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output B comparing the quantities produced in different years using prices from a year chosen as a reference period C comparing the quantities produced in different years with the prices that prevailed during the year in whid the output was produced D dividing nominal GDP by real GDP 87 Real GDP in 2002 is 100 Between 2002 and 2003 using 2002 prices GDP grew 8 percent and using 2003 prices real GDP grew 4 percent What does real GDP in 2003 equal A 104 B 106 C 108 D None of the above answers is correct 88 If the GDP deflator for 2004 is 125 nominal GDP A equals real GDP in 2004 B is greater than real GDP in 2004 C is less than real GDP in 2004 D in 2003 will be less than real GDP in 2004 Nominal GDP Real GDP Year billions of billions of GDP deflator dollars dollars 2004 2500 i 105 2005 i 2400 117 89 Using the data in the above table what is real GDP in 2004 A 2137 billion B 2520 billion C 2381 billion D 2051 billion 90 Using the data in the above table what is nominal GDP in 2005 A 2400 billion B 2381 billion C 2808 billion D 2520 billion 91 GDP deflator equals 7 7 A Nominal GDP 7100 x eal GDP B Nominal GDP 7 Real GDP x100 C nominal GDP D Real GDP 7 Nominal GDP x 100 92 Paying higher prices means that our A standing of living has decreased B cost of living has increased C cost of living has increased and our standard of living has increased D standard of living has increased 93 One year after the base year the price level rises In this year nominal GDP is 77 real GDP and the GDP deflator is if A less than less than 100 B equal to equal to 10 C greater than greater than 100 D less than greater than 100 94 Which of the following is NOT included in real GDP A production of services such as the services of hair dressers B production of goods that last less than a year such as production of hot dogs C production that takes place in the underground economy D production of goods that last more than a year sud as a pair of roller blades 95 The underground economy exists for all of the following reasons EXCEPT the production of illegal goods avoidance of taxes desire to maintain accurate records of economic transactions avoidance of government regulation Umm gt 96 Because pollution reduces economic welfare real GDP A decreases as pollution increases B increases to take into account the expenditures that will be made in the future to clean up the pollution C overstates economic welfare D understates economic welfare 97 In the post World War 11 period considerable growth in total production took place in the US But at the same time businesses were able to produce by dumping their waste into the Great Lakes with minimal cost significantly polluting the bodies of water as a result This occurrence is an example where A real GDP gives an overly positive view of economic welfare B real GDP gives an overly negative view of economic welfare C investment would have been a better measure of total production D the pollution counts as a final good 98 Which of the following would lead GDP to overstate economic welfare A the existence of home cooked meals B restaurant workers that under report tip income C a self employed CPA who takes a longer than normal vacation D electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution 99 Purchasing power parity prices are used to construct GDP data that A do not omit the underground economy B can be used to make more valid comparisons between one country and another C is a proper measure of economic welfare D adjust for differences in population 100 Pollution is a by product of some production processes so real GDP as measured A is adjusted downward to take into account the pollution B is adjusted upward to take into account the expenditures that will be made in the future to clean up the pollution C tends to overstate economic welfare D tends to understate economic welfare 101 Which of the following is M a reason that real GDP is a poor measure of a nation39s economic welfare A Real GDP omits measures of political freedom B Real GDP does not take into account the value of people39s leisure time C Real GDP does not include the underground economy D Real GDP overvalues household production 102 What we produce during our working time is 77 as part of GDP and the enjoyment we gain from our leisure time is 7 as part of GDP A included not included B included included C not included included D not included not included 103 Real GDP is not a good indicator of economic welfare because 7 A it includes the underground economy B it includes a direct measure of health and life expectancy C it underestimates inflation D economic welfare depends on many factors not measured or not measured accurately by real GDP 104 If real GDP in 2003 is 9 trillion and real GDP in 2004 is 927 trillion then the economic growth rate in 2004 is 7 A 27 percent B 027 trillion C 30 percent D 927 trillion 105 Real GDP fluctuations tend to 7 fluctuations in total production because household production overstate increases during a recession and decreases during an expansion overstate decreases during a recession and increases during an expansion understate decreases during a recession and increases during an expansion understate increases during a recession and decreases during an expansion Unm gt 106 In the country of Kemper real GDP in 2003 was 5 billion and real GDP in 2004 was 55 billion The economic growth rate in 2004 was 7 A 167 percent a year B 05 billion C 10 percent a year D 1 percent a year Answer Key Testname CH4 Answer Key Testname CH4 BBBCDDDCABCACABBBDDDAAABDBCDDAABAAABADBBCCBBCCCC wmmmmMwwwwmwQM0wmnWRMwmmwmmewwwmw 16 Answer Key Testname CH4 ADBCDADCAC 70090123456 9990000000 1111111 17