SAMPLE TEST TWO FOR ECON 102 SECTION5
CHAPTER 5 (ANSWER KEY FOR CHAPTER 5 ON PAGE 4)
1)All people in the working-age population can be divided into
A)labor force participants.
B)either employed, unemployed, or not in the labor force.
C)either over-employed or under-employed.
D)potential employees.
2)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)I only.
B)II only.
C)Both I and II.
D)Neither I nor II.
3)In the U.S. in 1996, the population was 265.5 million and the working age population was 200.6 million. There were 133.9 million people in the labor force and 126.7 of them were considered employed. The unemployment rate equaled ____.
A)7.2 percent
B)5.4 percent
C)3.6 percent
D)33 percent
4)The employment-to-population ratio equals
A)(labor force)/(working-age population) x 100.
B)(number of people employed)/(labor force) x 100.
C)(number of people with full-time jobs)/(labor force) x 100.
D)(number of people employed)/(working-age population) x 100.
5)To prevent frictional unemployment, we would have to
A)eliminate recessions.
B)eliminate the business cycle.
C)prevent people from leaving their jobs.
C)make sure everyone went to college.
6)A person quits her job in order to spend time looking for a better-paying job. This is an example of
A)frictional unemployment.
B)cyclical unemployment.
C)seasonal unemployment.
D)structural unemployment.
7)An individual is structurally unemployed if
A)there is a recession and the individual is laid off.
B)the individual wants to work just during certain months of the year.
C)the individual quits a job in order to search for a better one.
D)the individual lacks marketable job skills.
8)Unemployment that is caused by recessions is called
A)frictional unemployment.
B)cyclical unemployment.
C)downtime unemployment.
D)structural unemployment.
9)When the economy is operating at full employment, the natural rate of unemployment is greater than zero. This full employment level of unemployment consists of
A)only cyclical unemployment.
B)only frictional and structural unemployment.
C)only frictional and cyclical unemployment.
C)only structural and cyclical unemployment.
10)If unemployment is at the natural rate, then there
A)is no cyclical unemployment.
B)is no frictional unemployment.
C)will be cyclical and frictional unemployment but not structural unemployment.
D)will be only cyclical unemployment.
11)An unemployment rate of zero cannot be expected because
A)there are some people who do not want to work.
B)there will always be discouraged workers.
C)some portion of the labor force will always be between jobs.
D)cyclical unemployment will always exist.
12)When computing the consumer price index (CPI), the base year is
A)the earliest year for which the CPI was ever calculated.
B)the year that is chosen as the point of reference for comparison of prices with other years.
C)the most recent year for which data are available.
D)the most recent year in which the inflation rate was close to zero.
13)The GDP deflator is
A)an index that measures real production.
B)a measure of the average level of prices of all goods and services included in GDP.
C)an index used to calculate inflation at the wholesale level.
D)the least used price index because it is so costly to calculate.
14)The rate of inflation can be measured by
A)the level of the GDP deflator.
B)the level of the CPI.
C)the percentage change in the CPI from one year to the next.
D)the GDP deflator minus the CPI index.
15)The ____ is the total number of people aged 16 years and older (and not in jail, hospital or institutional care) while the ____ is the number of people employed and the unemployed.
A)labor force; working-age population
B)labor force participation rate; labor force
C)working-age population; labor force
D)working-age population; labor force participation rate
16)Which of the following individuals is counted as an unemployed worker in the United States?
A)an individual who works ten hours part-time but would like to work full-time.
B)a worker who has quit looking for work because he or she is convinced that no jobs are available.
C)an individual who in the past month actively looked for work without finding it.
D)a person working in the home without pay.
17)Suppose the money wage rate increases from $10 to $12. If nothing else changes,
A)the real wage increases.
B)the real wage decreases.
C)the quantity of goods and services that an hour of work can buy increases.
D)Both answers A and C are correct.
18)Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment. Matt would be best be considered as
A)still being employed.
B)included in the economy’s “hidden employment.”
C)frictionally unemployed.
D)cyclically unemployed.
19)Suppose that over a period of years the country of Quasiland switched from being an agriculturally-based economy to a technologically-based economy. As a result, many people lost jobs because they lacked the correct skills. These people would be considered part of
A)frictional unemployment.
B)structural unemployment.
C)cyclical unemployment.
D)discouraged workers.
20)Suppose the country of Quasiland experienced a decrease in real GDP and people were laid off from their jobs. The people would be considered part of
A)frictional unemployment.
B)structural unemployment.
C)cyclical unemployment.
D)discouraged workers.
21)When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is
A)falling over time.
B)equal to zero.
C)equal to the actual amount of unemployment.
D)greater than the level of deficient demand unemployment.
22)Fiscal policy involves
A)the use of interest rates to influence the level of GDP.
B)the use of tax and spending policies by the government.
C)decreasing the role of the Federal Reserve in the everyday life of the economy.
D)the use of tax and money policies by government to influence the level of interest rates.
23)Monetary policy consists of
A)changing the amount of money in the economy.
B)tax policy.
C)change government spending.
D)following congressionally established rules concerning the interest rates.
ANSWER KEY FOR SAMPLE TEST TWO: CHAPTER 5
1)B2)B
3)B
4)D
5)C
6)A
7)D
8)B / 9)B
10)A
11)C
12) B
13) B
14) C
15) C
16) C / 17) D
18) C
19) B
20) C
21) C
22) B
23) A
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CHAPTERS 6 AND 7 (ANSWER KEY FOR CHAPTERS 6 AND 7 ON LAST PAGE)
1)When talking about aggregate supply, it is necessary to
A)focus on the short run.
B)focus on the long run.
C)distinguish between long-run aggregate supply and short-run aggregate supply.
D)distinguish between long-run full employment and short-term full-employment.
2)We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run
A)technology is fixed but not in the short run.
B)the price level is constant but in the short run it fluctuates.
C)the aggregate supply curve is horizontal while in the short run it is upward sloping.
D)real GDP equals potential GDP.
3)Along a short-run aggregate supply curve, a decrease in the price level causes
A)more output to be produced as consumer demand increases.
B)less output to be produced as firms decrease production.
C)more output to be produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers.
D)no change in output because firms do not change the quantity they produce.
4)The curve labeled A in the above figure will shift rightward when
A)the price level falls.
B)technology increases.
C)population falls.
D)the price level rises.
5)A change in ____ causes a movement along the short-run aggregate supply curve but no shift in the short-run aggregate supply curve.
A)wage rates (the cost of labor)
B)technology
C)the quantity of capital
D)the price level
6)A major technological advance causes
A)the long-run aggregate supply curve to shift rightward and the short-run aggregate supply curve to shift leftward.
B)the long-run aggregate supply curve to shift rightward and the short-run aggregate supply curve to remain where it is.
C)the short-run aggregate supply curve to shift rightward and the long-run aggregate supply curve to remain where it is.
D)both the long-run and the short-run aggregate supply curves to shift rightward.
7)In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. Technological advances cause the long-run aggregate supply curve and short-run aggregate supply curve to
A)remain B and E.
B)shift to A and D, respectively.
C)shift to C and F, respectively.
D)shift to C and remain E, respectively.
8)All of the following shift the short-run
aggregate supply curve EXCEPT
A)a change in the price level.
B)a change in the money wage rate.
C)a change in the price of a needed raw material.
D)technological progress.
9)A change in which of the following shifts the short-run aggregate supply curve?
A)A change in the wage rate.
B)An advance in technology.
C)A change in the quantity of capital.
D)All of the above shift the short-run aggregate supply curve.
10)Which of the following cause the short-run aggregate supply curve to shift?
I.Changes in the size of the labor force.
II.Changes in money wages.
A)I only.
B)II only.
C)Both I and II.
D)Neither I nor II.
11)The aggregate demand curve shows
A)total expenditures at different levels of national income.
B)the quantity of real GDP demanded at different price levels.
C)that real income is directly (positively) related to the price level.
D)All of the above answers are correct.
12)The aggregate demand curve shows the ____ relationship between the price level and ____.
A)positive; quantity of real GDP demanded
B)negative; aggregate labor demanded
C)positive; aggregate labor demand
D)negative; quantity of real GDP demanded
13)The aggregate demand curve illustrates a(n) ____ relationship between the price level and the quantity of real GDP demanded.
A)multiplied
B)direct and proportional
C)direct but not necessarily proportional
D)inverse
14)In the above figure, the short-run aggregate supply curve is SAS1. If money wages in the economy increase, there is a
A)movement upward along SAS1.
B)movement downward along SAS1.
C)shift to SAS0.
D)shift to SAS2.
15)In the above figure, the short-run aggregate supply curve is SAS1. If the prices of resources in the economy drop because of reductions in tariffs and quotas placed on imports, there is a
A)movement upward along SAS1.
B)movement downward along SAS1.
C)shift to SAS0.
D)shift to SAS2.
16)The quantity of real GDP demanded equals $7.2 trillion when the GDP deflator is 90. If the GDP deflator rises to 95, the quantity of real GDP demanded equals
A)less than $7.2 trillion.
B)$7.2 trillion.
C)more than $7.2 trillion but less than $7.8 trillion.
D)more than $7.2 trillion but without more information it is not possible to determine how much more.
17)A movement along the aggregate demand curve but no shift in the aggregate demand curve is caused by which of the following?
A)A change in tax rates.
B)A change in the price level.
C)A change in fiscal policy.
D)None of the above because they all shift the aggregate demand curve.
18)If you have 1,000 dollars in wealth and the GDP deflator increases 20 percent, then
A)the 1,000 dollars will buy 20 percent fewer goods and services.
B)the 1,000 dollars will buy 20 percent more goods and services.
C)the real value of the 1,000 dollars increases.
D)you will be able to buy fewer goods, but the real value of those goods will increase.
19)If you have 5,000 dollars in wealth and the GDP deflator decreases 20 percent, then
A)the 5,000 dollars will buy 20 percent fewer goods and services.
B)the 5,000 dollars will buy 20 percent more goods and services.
C)the real value of the 5,000 decreases.
D)the real value of the 5,000 dollars remains constant.
20)A rise in the price level will have an effect on aggregate demand because
A)people like to spend more when prices are higher.
B)the real value of people’s wealth varies directly with the price level and so does their spending.
C)the real value of people’s wealth decreases and so they decrease their consumption.
D)the more money people have, the more it is worth and hence the more goods and services they demand.
21)According to the intertemporal substitution effect, when the price level increases, the interest rate
A)increases and the quantity of real GDP demanded increases.
B)increases and the quantity of real GDP demanded decreases.
C)decreases and the quantity of real GDP demanded decreases.
D)is not affected.
22)When the price level in France increases while the exchange rate and the price level in the U.S. remain the same, the result is
A)U.S.-made goods become relatively cheaper compared to French-made goods.
B)French citizens are more likely to buy U.S.-made goods.
C)U.S. citizens are less likely to buy French-made goods.
D)All of the above answers are correct.
23)Which of the following increases aggregate demand?
A)A decrease in tax rates.
B)A decrease in foreign income.
C)A decrease in government spending.
D)A decrease in the money supply.
24)When the quantity of money in the economy increases,
A)the long-run aggregate supply curve shifts leftward.
B)the aggregate demand curve shifts rightward.
C)the aggregate demand curve does not shift but the economy moves along it.
D)the wealth effect is no longer operable.
25)In the above figure, the movement from point B to point A may be the result of
A)an increase in government purchases because of a war.
B)an increase in government purchases because of increases in education expenditures.
C)an increase in the demand for manufacturing goods because of new technology.
D)a fall in the price level.
26)In the above figure, the movement from point A to point B may be the result of
A)an increase in the real value of wealth.
B)a decrease in the real value of wealth.
C)a decrease in interest rates.
D)an increase in exports.
27)In the above figure, the shift from point C to point B may be the result of
A)an increase in the price level.
B)a decrease in the price level.
C)a decrease in government purchases.
D)an increase in the quantity of money.
28)In the short run, at the point of intersection between the aggregate demand and the short-run aggregate supply curves,
A)the equilibrium price level is established.
B)there is neither a surplus nor a shortage of goods on the market.
C)the equilibrium level of real GDP is established.
D)All of the above answers are correct.
29)In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $8.0 trillion, then it must be the case that
A)aggregate demand has increased.
B)aggregate demand has decreased.
C)aggregate supply has decreased.
D)aggregate supply has increased.
30)One possible result of decreases in aggregate demand coupled with a stable aggregate supply is
A)a recession.
B)an increase in employment levels.
C)an economic expansion.
D)a rise in the price level.
31)If the level of real GDP exceeds potential GDP,
A)there is a long-run and a short-run equilibrium.
B)there is neither a long-run nor a short-run equilibrium.
C)there can be a short-run equilibrium with an inflationary gap.
D)there can be a short-run equilibrium with a recessionary gap.
32)In the above figure, the three curves are:
A)A is long-run aggregate supply, B is short-run aggregate supply, and C is aggregate demand.
B)A is aggregate demand, B is short-run aggregate supply, and C is long-run aggregate supply.
C)A is short-run aggregate supply, B is long-run aggregate supply, and C is aggregate demand.
D)A is long-run aggregate supply, B is aggregate demand, and C is short-run aggregate supply.
33)An above full-employment equilibrium occurs when
A)aggregate demand decreases while neither the short-run nor long-run aggregate supply changes.
B)short-run aggregate supply decreases while neither aggregate demand nor long-run aggregate supply changes.
C)the equilibrium level of real GDP is greater than potential GDP.
D)the equilibrium level of real GDP is less than potential GDP.
34)Suppose the current situation is such that the price level is 120, real GDP is $4 trillion, and GDP along the long-run aggregate supply is $3.6 trillion. What will take place to restore the long-run equilibrium?
A)The price level will fall until long-run aggregate supply increases to $4 trillion.
B)The price level will fall and money wages will rise until real GDP along the long-run aggregate supply curve is $4 trillion.
C)Money wages will rise until real GDP is $3.6 trillion.
D)Aggregate demand will increase until both short-run and long-run aggregate supply equal $4 trillion.
35)The long-run aggregate supply curve is vertical at $5 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $6 trillion. We know that
A)the economy is operating below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment.
B)the price level is too high. The long-run equilibrium will occur with a lower price level.
C)adjustments will occur so that the long-run aggregate supply equals $6 trillion.
D)adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $5 trillion.
36)In the above figure, suppose the economy had been at point A and now is at B. What could have caused the movement to B?
A)Unusually good weather causes the wheat crop to be larger than normal.
B)Government purchases increased.