Econ 102

SI session wk 9/17/07

Handout ch 4 and part of ch5

(Supplemental Test Bank by Jeffrey Johnson)

Key Terms

Economic Growth, Stable Prices, Full employment, Real GDP, Percentage growth vs Actual Growth, joblessness, Unemployment, expansion, recession, depression, GDP, Nominal GDP vs Real GDP, Expenditure Approach, Value added approach, Factor payments approach, Intermediate goods vs final goods, structural, frictional, seasonal and cyclical unemployment, Full employment, labor force, unemployment rate, potential output

Practice quiz

  1. Rapid Economic Growth, stable prices and ...... are the three important macroeconomics goals about which most economist agree
  2. An unemployment rate of zero
  3. Full employment
  4. High inflation
  1. For the average living standards of a nation to ...... , ...... must increase faster than the price level
  2. Increase, nominal GDP
  3. Decrease nominal GDP
  4. Decrease, real GDP
  5. What are the two phases of business cycle
  6. During the contraction phase of the business cycle
  7. Employment and output are both rising
  8. Employment and output are both falling
  9. Employment is rising and output is falling
  10. The phase of a business cycle characterized by rising employment
  11. Recession
  12. Depression
  13. Expansion
  14. If an economy Is currently experiencing a high rate of unemployment the greatest cost is
  15. Lost output
  16. The extra cost of funding job fairs
  17. Extra government spending
  18. The inflation rate in the USA has always been positive
  19. True
  20. False
  21. Policymakers have the goal of stable prices because
  22. Inflation is always associated with wars
  23. Stable prices always keep the economy in expansion
  24. Inflation imposes cost on society
  25. During the current year Jessica sold her house, built 2 years ago, to Kim for $175000, Kim then sold the house to Dave for $18500. How much does real GDP increase due to these transactions
  26. $360000
  27. $185000
  28. $10000
  1. Assume that net exports are -$340, private investments is $1500, tax revenues are $8000, government purchases are $2000 and GDP using expenditure approach is $9000. In this case consumption expenditure C must be
  2. $5840
  3. $12960
  4. $4360
  5. $5160
  6. If we include intermediate goods in the calculation of GDP, We would be
  7. Underestimating GDP
  8. measurements problems would be offset by including the sale of new goods
  9. Overestimating GDP
  10. Which of the following might result in an underestimation of Real GDP?
  11. Sales of used cars
  12. Many intermediate goods,
  13. Significant underground trade such as in illegal drugs
  14. Using the table given on the board calculate Real GDP
  15. $2600
  16. $4800
  17. $1800
  18. $2200
  19. Inventory changes are important in calculating Real GDP because
  20. Inventories are important for tax purposes
  21. They are an example of transfer payments
  22. We want to measure all current production when computing inventory
  23. Suppose a US car manufacturer produces $200 million worth of cars in 2004 but $50 million went unsold. How much was the company’s contribution to GDP
  24. $200 million
  25. $$250 million
  26. $50 million
  27. $150 million
  28. In factor payments approach owners f land receive
  29. Suppose a company purchases $100 case from a supplier and $300 computer chip from another. He sells his computer for $1000. How much has this company contributed too GDP
  30. $400
  31. $1000
  32. $600