AP MACRO
QUIZ : CH. 7 & 8
1. GDP is defined as
a. personal consumption expenditures and gross private domestic investment;
b. the sum of wage and salary compensation of employees, corporate profits, and interest income;
c. the market value of final goods and services produced within a country in 1 year;
d. the market value of all final and intermediate goods and services produced by the economy in 1 year.
2. To include the value of the parts used in producing the automobiles turned out during a year in gross domestic product for that year would be an example of
a. including a nonmarket transaction;
b. including a nonproduction transaction;
c. multiple counting through counting intermediate goods;
d. including a noninvestment transaction.
3. Which of the following is a public transfer payment transaction, excluded from GDP?
a. the sale of a used ironing board at a garage sale;
b. the sale of shares of stock in the U.S. Steel Corporation;
c. the payment of social security benefits to a retired worker;
d. the birthday gift of a check for $25 sent by a grandmother to her grandson.
4. GDP in an economy is $3452 billion. Consumer expenditures are $2343 billion, government purchases are $865 billion; and gross investment is $379 billion. Net exports are
a. -$45 billion;
b. -$135 billion;
c. +$93 billion;
d. +$123 billion;
e. +$135 billion.
5. If China’s GDP is growing at a rate of 9% each year, we can expect the country’s GDP to double within
a. 2.5 years
b. 7.8 years
c. 9 years
d. The data provided is insufficient to make this prediction.
6. Which is a major reason why GDP is NOT an accurate index of a society’s well-being?
a. it includes population changes;
b. it excludes many improvements in product quality;
c. it includes transactions from the underground economy;
d. it excludes transactions from the buying and selling of stocks.
7. Which is a benefit of real economic growth to a society?
a. the society is less able to satisfy new wants;
b. everyone enjoys a greater nominal income;
c. the burden of scarcity increases;
d. the standard of living increases.
8. Which is one of the four phases of a business cycle?
a. inflation; b. recession; c. unemployment; d. hyperinflation.
9. A worker who loses a job at a petroleum refinery because consumers and business firms switch from the use of oil to the burning of coal is an example of ______unemployment.
a. frictional; b. structural ; c. cyclical ; d. seasonal.
10. Production and employment would be least affected by a severe depression in which type of industry?
a. nondurable consumer goods; b. durable consumer goods; c. capital goods; d. labor goods.
11. The unemployment rate in an economy is 8%. The total population of the economy is 250 million, and the size of the civilian labor force is 150 million. The number of employed workers
in this economy is
a. 12 million; b. 20 million; c. 138 million; d. 140 million.
12. A worker who has quit one job and is taking two weeks off before reporting to a new job is an example of ______unemployment.
a. frictional; b. structural; c. cyclical; d. seasonal.
13. The natural rate of unemployment in the economy is the
a. frictional unemployment rate;
b. frictional + structural rates;
c. frictional + cyclical rates;
d. cyclical rate.
14. Inflation initiated by increases in resource prices is
a. Demand –pull inflation
b. Demand-push inflation
c. Cost-push inflation
d. Cost-pull inflation.
15. The burden of unemployment is least felt by
a. Teenagers; b. males; c. college-educated workers; d. high school dropouts.
16. If the consumer price index was 110 in one year and 117 in the next year, then the rate of inflation ( rounded to nearest tenth) from one year to the next was
a. 3.5%; b. 4.7% c. 6.4% d. 7.1%
17. Okun’s Law predicts that when the actual unemployment rate exceeds the natural rate of unemployment by 2 percentage points, the GDP gap will equal
a. 2% of the potential GDP;
b. 3% of the potential GDP;
c. 4% of the potential GDP;
d. 5% of the potential GDP.
18. Stagflation means that
a. prices are dropping and the GDP is rising;
b. the economy isn’t growing but prices are rising;
c. the GDP is rising but prices are stable;
d. the unemployment rate is dropping and economy is growing.
19. During which part of the business cycle is inflation MOST LIKELY to be a problem?
a. recession; b. trough; c. expansion; d. deflationary cycle.
For #20, mark A for true and B for false.
20. True or false : Unanticipated inflation benefits some groups in the economy.