MACROECONOMIC MEASURES PRACTICE TEST
1. A nation's gross domestic product (GDP):
A) is the dollar value of the total output produced within the borders of the nation.
B) is the dollar value of the total output produced by its citizens, regardless of where they are living.
C) can be found by summing C + In + S + Xn.
D) is always some amount less than its C + Ig + G + Xn.
2. Which of the following is an intermediate good?
A) the purchase of gasoline for a ski trip to Colorado.
B) the purchase of baseball uniforms by a professional baseball team.
C) the purchase of a pizza by a college student.
D) the purchase of jogging shoes by a professor
3. Tom Atoe grows tomatoes for home consumption. This activity is:
A) excluded from GDP in order to avoid double counting.
B) excluded from GDP because an intermediate good is involved.
C) productive but is excluded from GDP because no market transaction occurs.
D) included in GDP because it reflects production.
4. Net exports are:
A) that portion of consumption and investment goods sent to other countries.
B) exports plus imports.
C) exports less imports.
D) imports less exports.
5. Which of the following do national income accountants consider to be investment?
A) the purchase of an automobile for private, nonbusiness use
B) the purchase of a new house
C) the purchase of corporate bonds
D) the purchase of gold coins
6. The smallest component of aggregate spending in the United States is:
A) net exports.
B) government purchases.
C) investment.
D) consumption.
7. The largest component of total expenditures in the United States is:
A) net exports.
B) government purchases.
C) consumption.
D) gross investment.
8. Nominal GDP is:
A) the sum of all monetary transactions that occur in the economy in a year.
B) the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
C) the amount of production that occurs when the economy is operating at full employment.
D) money GDP adjusted for inflation
9. Real GDP refers to:
A) the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income.
B) GDP data that embody changes in the price level, but not changes in physical output.
C) GDP data that reflect changes in both physical output and the price level.
D) GDP data that have been adjusted for changes in the price level.
10. In the second quarter (3-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that:
A) nominal income declined by more than personal income.
B) the price level rose by more than nominal GDP.
C) real wages declined by more than real GDP.
D) the price level fell by more than real GDP.
11. A price index is:
A) a comparison of the price of a market basket from a fixed point of reference.
B) a comparison of real GDP in one period relative to another.
C) the cost of a market basket of goods and services in a base period divided by the cost of the same market basket in another period.
D) a ratio of real GDP to nominal GDP.
12. If nominal GDP rises:
A) real GDP may either rise or fall.
B) we can be certain that the price level has risen.
C) real GDP must fall.
D) real GDP must also rise.
Answer the next question(s) on the basis of the following information:
13. The economy above has experienced ___________ from Year 1 to Year 5:
A) a declining nominal GDP.
B) a rising price level.
C) a declining real GDP.
D) deflation.
14. In the economy above, real GDP for year 3 is:
A) $512.
B) $428.
C) $480.
D) $691.
15. Which of the following activities is excluded from GDP, causes GDP to UNDERSTATE a nation's well-being?
A) the services of health care workers
B) the services of military personnel
C) the construction of new buildings
D) goods and services produced in the underground economy.
16. The growth of GDP may understate changes in the economy's economic well-being over time if the:
A) distribution of income becomes increasingly unequal.
B) quality of products and services improves.
C) environment deteriorates because of pollution.
D) amount of leisure decreases.
17. Real GDP per capita is found by:
A) adding real GDP and population.
B) subtracting population from real GDP.
C) dividing real GDP by population.
D) dividing population by real GDP.
18. During a severe recession, we would expect output to fall the most in:
A) the health-care industry.
B) the clothing industry.
C) agriculture.
D) the construction industry.
19. In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
A) expansion
B) recession
C) peak
D) trough
Answer the next question(s) on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.
20. Refer to the above information. The labor force in Scoob is:
A) 95 million.
B) 102 million.
C) 105 million.
D) 145 million.
21. Refer to the above information. If the natural rate of unemployment in Scoob is 5 percent, then:
A) structural unemployment is about 3 percent.
B) frictional unemployment is about 2 percent.
C) cyclical unemployment is about 2 percent.
D) hidden unemployment is about 5 percent
22. Refer to the above information. The unemployment rate in Scoob is:
A) 2.5 percent.
B) 3.2 percent.
C) 5.0 percent.
D) 6.9 percent
23. The presence of discouraged workers:
A) increases the size of the labor force, but does not affect the unemployment rate.
B) reduces the size of the labor force, but does not affect the unemployment rate.
C) may cause the official unemployment rate to understate the amount of unemployment.
D) may cause the official unemployment rate to overstate the amount of unemployment
24. Demand-pull inflation:
A) occurs when prices of resources rise, pushing up costs and the price level.
B) occurs when total spending exceeds the economy's ability to provide output at the existing price level.
C) occurs only when the economy has reached its absolute production capacity.
D) is also called cost-push inflation.
25. Real income can be determined by:
A) dividing the price level by nominal income.
B) inflating nominal income for inflation.
C) dividing the annual rate of inflation into the number "70."
D) deflating nominal income for inflation.
26. Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will:
A) fall by about 1 percent.
B) remain constant.
C) rise by about 4 percent.
D) rise by about 1 percent.
27. Suppose the nominal annual interest rate on a two year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years. The annual real rate of interest is:
A) 6 percent.
B) 8 percent.
C) 2 percent.
D) 3 percent.
ALSO COMPLETE:
· Workbook pages 95-97, complete question numbers 3-14 and 16-20
ANSWERS FOR QUIZ QUESTIONS ON THE NEXT PAGE!!!!!!!!
PRACTICE QUIZ ANSWERS
1. A
2. B
3. C
4. C
5. B
6. A
7. C
8. B
9. D
10. DO NOT DO
11. A
12. A
13. D
14. C
15. D
16. DO NOT DO
17. C
18. D
19. A
20. B
21. DO NOT DO
22. D
23. C
24. DO NOT DO
25. D
26. D
27. D
WORKBOOK PRACTICE QUESTIONS
3. C
4. D
5. B
6. A
7. E
8. B
9. A
10. C
11. B
12. D
13. C
14. A
16. D
17. A
18. A
19. A
20. A