Multiple choice questions from exam one (during a prior semester):
1) The
quantity demanded is
A) always equal to the equilibrium quantity.
B) independent of consumers' buying plans.
C) independent of the price of the good.
D) the amount of a good that consumers plan to purchase at
a particular price.
2) The law of
demand states that the quantity of a good demanded varies
A) inversely with its price.
B) inversely with the price of substitute goods.
C) directly with population.
D) directly with income.
3) The demand
curve for a normal good shifts leftward if income ____ or the expected future
price ____.
A) decreases; rises B) decreases; falls C) increases; falls D) increases; rises
4) Which of
the following will shift the supply curve for good X leftward?
A) A technological improvement in the production of X.
B) A situation in which quantity demanded exceeds quantity
supplied.
C) An increase in the cost of the machinery used to
produce X.
D) A decrease in the wages of workers employed to produce X.
5) If the
price of a good changes but everything else influencing suppliers' planned sales
remains constant, there is a
A) movement along the supply curve.
B) rotation of the initial supply curve around the initial
price.
C) new supply curve that is to the right of the initial
supply curve.
D) new supply curve that is to the left of the initial
supply curve.
6) A price
below the equilibrium price results in
A) a further price fall. B) a shortage.
C) excess supply. D) a surplus.
7) Goods A
and B are complementary goods (in consumption). The cost of a resource
used in the production of A decreases. As a result,
A) the equilibrium price of B will rise and the
equilibrium price of A will fall.
B) the equilibrium prices of both A and B
will rise.
C) the equilibrium price of B will fall and the
equilibrium price of A will rise.
D) the equilibrium prices of both A and B
will fall.
8) Economic
growth is measured using the increase in ____.
A) the consumer price index B) real gross domestic product
C) the inflation rate D) nominal gross domestic product
9) Which of
the following is NOT included in real GDP?
A) Production of goods that last less than a year, such as
production of hot dogs.
B) Production of goods that last more than a year, such as
a pair of roller blades.
C) Production that takes place in the underground economy.
D) Production of services, such as the services of hair
dressers.
10) In the
figure above, long-term economic growth can be seen as
A) the growth in potential GDP from 1990 to 1998.
B) the fluctuations of real GDP around potential GDP.
C) the growth in actual GDP from 1990 to 1998.
D) the maximum point of real GDP as the economy moves
through the business cycles.
11) In the
figure, a recession begins in _____
and an expansion begins in ______.
A) 1992; 1996 B) 1990; 1994 C) 1992;
1994 D) 1990; 1992
12) An
observer of the economy notices that over the last nine months the unemployment
rate has increased from 5.6 percent to 8.7 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) an expansionary phase of the business cycle is in
process.
B) a peak in the business cycle will soon be reached.
C) a recession is occurring in this economy.
D) inflation is probably rampant in this economy.
13) If real
GDP increases by 2 percent and population increases by 7 percent,
A) inflation per person decreases. B) inflation
per person rises.
C) real GDP per person decreases. D) real
GDP per person increases.
14) Over the
last 100 years in the United States, the unemployment rate reached its highest
rate
A) in the 1990s. B) in the 1930s. C) in
the 1920s. D) in the 1970s.
15) Which of
the following is TRUE regarding the social costs of unemployment?
I.
The costs of unemployment are spread equally across economic classes.
II.
Prolonged unemployment causes a loss of human capital.
III.
Because of unemployment benefits, there is no loss of income to an
unemployed worker.
A) I and III. B) I
only. C) I and II. D) II
only.
16) In 1999,
____ people held jobs in the U.S. economy.
A) between 100 and 105 million. B) between
75 and 100 million.
C) between 125 and 135 million. D) between
250 and 270 million.
17) Which of
the following economies has consistently achieved the lowest unemployment rate
over the past 20 years?
A) Canada B) United
States
C) Japan D) Western
Europe
18) Inflation
is
A) a general rise in prices.
B) a rise in prices that is faster than the rise in wages.
C) a rise in wages that is faster than the rise in prices.
D) a general rise in all macroeconomic variables-prices,
interest rates and unemployment.
19) The cost
of inflation to society includes
I.
The opportunity costs of resources used by people to protect themselves
against inflation.
II.
The diversion of productive resources to forecasting inflation.
A) Both I and II. B) Neither I nor II. C) II
only. D) I only.
20) All of
the following are part of fiscal policy EXCEPT
A) setting tax rates.
B) controlling the money supply.
C) setting government spending.
D) choosing the size of the government deficit.
21) In the
expenditure approach to GDP, the largest component is
A) net exports. B) personal consumption expenditures.
C) government purchases. D) gross private domestic investment.
22) An
example of "investment" in computing real GDP using the expenditure
approach is the purchase of
A) a 100 year old house by a married couple.
B) 100 shares of IBM stock.
C) a new set of tools by an auto mechanic, for use in
repairing cars.
D) computer chips by IBM to put in their personal
computers.
23) Which one
of the following transactions in a particular year is included in gross domestic
product for that year?
A) The government pays a computer services company that
assisted in the delivery of Social Security payments to retirees.
B) A stay-at-home parent performs housework that the
family would otherwise have paid a maid $20,000 a year to perform.
C) A car is produced in the previous year and remains in
inventory for the entire year under consideration.
D) Social Security payments to retirees.
24) The
income approach to measuring GDP
A) determines the cost of production, then adjusts it to
equal the market value of production.
B) sums all incomes earned in the U.S. and makes no other
adjustments because other adjustments are not necessary.
C) sums the value added at each stage of production plus
the value of depreciation.
D) measures the cost of producing GDP rather than the
market value.
25) Suppose
that a firm in a particular year had $75 million in revenue and purchased $40
million of intermediate inputs, leaving $35 million. This $35 million counts as
A) investment.
B) value added.
C) profit.
D) both value added and profit, because they are the same
thing.
26) Suppose
the Consumer Price Index for the year 2000 is 143.6. What does that number mean?
A) Prices rose 143.6 percent over the base year, on
average.
B) On average, goods cost $143.60 each in 2000.
C) On average, goods cost $243.60 each in 2000.
D) Prices rose 43.6 percent over the base year, on
average.
27) If
nominal GDP is $5 trillion and the GDP deflator is 125, what is real GDP?
A) $.04 trillion B) $625 trillion C) $4
trillion D) $6.25 trillion
28) If the
objective were to measure economic welfare, then what adjustments would have to
be made to the GDP to make it a better measure of economic welfare?
A) The effect of pollution on the environment would need
to be included.
B) Household production would need to be included.
C) The amount of leisure time that households have would
need to be included.
D) All of the above adjustments would need to be made.
29) Estimates
of GDP are used for
A) business cycle forecasting. B) adjusting
for household production.
C) estimating the CPI. D) Both answers A and B are correct.
30) If the
GDP deflator is biased by quality changes, the result is that
A) real GDP is overstated.
B) there is no effect upon the correct level of real GDP.
C) nominal GDP is understated.
D) real GDP is understated.
31) The
working-age population is defined as the number of
A) people working full-time jobs who are over the age of
16.
B) people over the age of 16 who are not in jail,
hospital, or other institution.
C) people looking for work.
D) people who have a job.
32) Which of
the following people would be considered unemployed by the Bureau of Labor
Statistics?
I.
Mrs. X retires from her job at the age of 55 and does not
look for another job.
II.
Mr. Y was laid off from his job as a welder, but expects
to be rehired in 8 months.
A) II only. B) Both
I and II. C) I only. D) Neither
I nor II.
33) The
official unemployment estimates
A) count discouraged workers as unemployed.
B) count as unemployed people with part-time jobs who want
full-time jobs.
C) include persons without a job, whether they are
actively searching for work or not.
D) include persons without a job who say they are actively
searching for a job.
34) An
individual who has stopped looking for a job because he is convinced that he
cannot find a job is referred to as
A) a discouraged worker. B) an unemployed worker.
C) a contingent worker. D) a productive worker.
35) Which of
the following measures best records the steady increase in the number of
housewives in the U.S. who have moved out of staying home full-time and into the
workplace?
A) the unemployment rate B) the labor force participation rate
C) labor productivity D) consumption
36) The
largest category of the unemployed are
A) reentrants. B) job leavers. C) job
losers. D) new entrants.
37) Using the
information in the above table, the unemployment rate is
A) 2.9 percent. B) 6.0 percent. C) 4.3
percent. D) 4.5 percent.
38) The labor
force participation rate is
A) 64.0 percent. B) 95.7 percent. C) 56.5
percent. D) 67.1 percent.
39) The
employment-to-population ratio is
A) 67 percent. B) 62 percent. C) 54
percent. D) 64 percent.
40) Full
employment means
A) only cyclical unemployment.
B) only frictional and structural unemployment.
C) zero unemployment.
D) None of the above answers are correct.