1. Nominal GDP is measured as a:
a. percent. b. dollar amount. c. index value d. level of good and services.
e. None of the above.
2. Which of the following is not included in GDP for the reason of avoiding double counting?
a. imports b. bonds c. stocks d. intermediate goods
e. all of the above
3. Consumption makes up about _____ of overall GDP.
a. two-thirds b. half c. three-quarters d. one-third e. one-quarter
4. Inventories are included in what component of GDP?
a. Consumption b. Investment c. Government Purchases
d. Net Exports e. Inventories are not included in GDP.
5. Which of the following components of GDP is most volatile?
a. Consumption b. Investment c. Government Purchases
d. Net Exports
6. Which of the following reasons is why real GDP per capita may not be the perfect measure of overall economic well-being in a society?
a. It is not adjusted for inflation over time.
b. It is not adjusted for the population.
c. It does not include health measures.
d. It does not include goods bought/sold on the black market.
e. All of the above.
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7. If the GDP deflator in 2012 has a value of 98.0, then
a. prices have increased 9.8 percent between the base year and 2012.
b. the inflation rate in 2012 is 2 percent.
c. prices have decreased 2 percent between the base year and 2012.
d. the inflation rate in 2012 is -2 percent.
e. not enough information to answer the question
8. Do you agree or disagree with the following statement and why: “Whenever real GDP declines, nominal GDP must also decline?”
a. Agree. Both real GDP and nominal GDP decline if price falls and output remains constant.
b. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise.
c. Agree. Both real GDP and nominal GDP decline if output falls and prices remain constant.
d. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices fall.
9. The current official unemployment rate (U-3) in the US is:
a. 4.8% b. 4.9% c. 5.0% d. 5.1% e. none of the listed numbers
10. Janelle is an electrical engineer who loses her job during the most recent recession. She continues to look for work but can’t find a job. Economists would classify her as:
a. Structurally Unemployed b. Cyclically Unemployed c. Frictionally Unemployed
d. A Discouraged Worker e. Not in the Labor Force
11. The natural rate of unemployment is when:
a. Only structural and frictional unemployment exists in an economy.
b. Only structural and cyclical unemployment exists in an economy.
c. Only frictional and cyclical unemployment exists in an economy.
d. Only cyclical unemployment exists in an economy.
e. Only frictional unemployment exists in an economy.
15. The natural rate of unemployment tends to be lower when
a. firms pay efficiency wages. b. unemployment insurance benefits are lower.
c. labor unions are more effective. d. the government sets an effective minimum wage.
16. Suppose that Apple and the investors buying the firm’s bonds both expect a 4 percent inflation rate for the year. Further, suppose the nominal interest rate on bonds is 8 percent and the expected real interest rate is 4 percent. Now suppose that a year after the investors purchase the bonds, the inflation rate turns out to be 3 percent, rather than the 4 percent that had been expected. In this situation, investors _____ and borrowers ______.
a. win; lose
b. lose; win
c. lose; lose
d. win; win
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17. Nominal incomes generally increase with inflation because
a. when inflation is anticipated, average nominal incomes also increase by the same percentage as the rate of inflation.
b. even anticipated inflation causes average nominal incomes to fall as prices increase.
c. when inflation is anticipated, real incomes also increase by the same percentage as inflation.
d. when inflation is unanticipated, average nominal incomes also increase by the same percentage as inflation.
18. “The average hourly wage, adjusted for inflation, increased from $19 in 1990 to $22 in 2015, or 16% in 25 years,” According to the statement above, how much of the increase in the wage was due to inflation, if the CPI was 135.9 in 1990 and 244.3 in 2015?
a. 79% b. 16% c. 0%
d. the annual average of 2% e. not enough information to answer this question
20. You lend $5,000 to a friend for one year at a nominal interest rate of 10%. The CPI over that year rises from 180 to 190. What is the real rate of interest you will earn?
a. 0%
b. 4.4%
c. 5.5%
d. 5.8%
e. 10%
21. When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called
a. discrimination bias. b. outlet bias. c. new product bias.
d. increase in quality bias. e. substitution bias.
22. In terms of economic growth, the key measures of the standard of living is:
a. real GDP b. nominal GDP c. real GDP per capita
d. nominal GDP per capita e. labor productivity
26. New growth theory states that increases in ________ capital will result in ________ at the ________ level.
a. knowledge; decreasing returns to scale; economy
b. knowledge; increasing returns to scale; economy
c. knowledge; decreasing returns to scale; firm
d. knowledge; increasing returns to scale; firm
e. physical; increasing returns to scale; firm
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27. Countries that are more globalized tend to have
a. lower levels of real GDP per capita.
b. higher growth rates in real GDP per capita.
c. a higher likelihood of war or revolution.
d. lower levels of foreign direct investment.
28. What two cities were shown on the PowerPoint presentation to start the Growth lesson (Lesson 7)?
a. Beijing and London b. New York City and Baghdad
c. Tokyo and New Delhi d. Singapore and Kabul
e. Pyongyang and Sydney
29. If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from:
a. 23.3 years to 17.5 years.
b. 11.2 years to 10.8 years.
c. 23.3years to 20.6 years.
d. 28.0 years to 21 years.
e. 17.5 years to 23.3 years.
30. The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as:
a. technology. b. labor productivity. c. real GDP.
d. human capital. e. capital stock.
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