MACROECONOMICS
REVIEW FOR TEST No. 2 Chapters 4, 5, & 6
Note: Study everything in the booklet, including the self-tests.
1
Practice Questions for Macro Economics Test # 2
Directions: It’s not enough to just take this practice test. Go back to your notes and to all the self-tests. Make sure to cover the How, Why and What of all required concepts. And for extra credit, don’t forget to log on to and read the top articles (pertinent to recent class discussions), listed under the heading “Today’s Topics.”
- The Labor force includes those who are 16 plus years of age, actively seeking a job, and the armed forces.
- ______causes structural unemployment.
- If total spending increases $400 billion, then how is the RGDP affected?
- The GDP is at its minimum during a ______
- Cyclical Unemployment is caused by ______
- Which of the four types of unemployment is not included in the UR?
- Which gap accounts for cyclical unemployment?
8. Give three ways that can be used to eliminate a recession?
a.
b.
c.
9. Price ceilings do the following:
a. Encourage consumers to demand more goods and services
b. Consumers don’t get gouged as prices remain low
c. Encourage sellers to compete prices down
d. Eliminate surpluses
e. None of the above
10. Price floors do the following:
a. Allow competition to reduce prices as much as possible
b. Prices tend to be higher as there’s no incentive to compete them down
c. Low-cost producers can especially take advantage, thus consumers benefit from
lower prices
d. None of the above
11.The US GNP would include the approximate $4 billion generated in the US by Indian-owned companies of some 8,707 firms.
12. The US GDP would include the clean up costs of oil spills, the percentage of GM Motors cars produced in Canada, the effort Americans put in power washing their homes in the summer.
13. Ifequilibrium price exists at $30 and the price floor at $33, then the following happens:
a. Quantity Supplied will permanently exceed Quantity Demanded
b. Quantity Demanded will permanently exceed Quantity Supplied
c. Demand will exceed Supply permanently
d. Supply will exceed Demand permanently
15. If nominal income is $60,000 & inflation rate is 3%, then which of the following is correct?
a. Real income is $58,200
b. Real income is $61,800
c. Purchasing power has increased by inflation minus 3% percent raise
d. Government will increase price floors by 3%
e. A raise of $1800 is necessary just to break even from the year before
f. B & D
g. AE
16. What does income inequality mean?
17. How does the government reduce income inequality?
18. If total production in the US increases from $15 Trillion to $15.5 Trillion, then ______would have increased by 3.3%.
19. Would the Halloween Bizarre Bazaar in Salem be considered a public good? Explain.
20. How does the government reduce negative externalities?
21. Which percentage of the GDP do the 4 expenditures make up approximately?
Consumption ______
Investments ______
Government ______
Net Exports ______
22. How does lack of competition cause market failure?
23. Do positive GDP gaps indicate increased unemployment? If yes, which type is especially associated with them, and why?
24. A peaking economy is efficient.
25. What justifies public goods?
26. Is there a correlation between production, incomes and inflation? Explain.
27. Explain how lack of public goods causes market failure.
More work:
- Median weekly earnings of $758
Increase in income of 0.4 percent higher than a year earlier, compared with a gain of 1.7 percent in the Consumer Price Index. What is the real wage?
- Median weekly earnings of $760
Increase in income of 0.2 percent higher than a year earlier, compared with a loss of 0.6 percent in the Consumer Price Index. What is the real wage?
1