Chapter 1+2 Revision KTEE203.3

Which of the following is an example of a factor of production?

• a.     A want

• b.     A bank

• c.    A bond

• d.    Capital

• e.    Stock

  Which of the following describes scarcity?

• Wants are limited

• Wants exceed resources

• Resources are unlimited

• Resources are fully employed

• Resources are allocated efficiently

All societies face a trade-off for every decision for which of the following reasons?

• A decision entails zero opportunity cost

• Resources are scare

• Some resources are always unemployed

• Resources have no alternative uses

• Resources are not allocated efficiently

The circular flow model illustrates the equality of which of the following?

• Total expenditure and total income

• Savings and consumption

• Total income and government spending

• Total expenditure and wages

• Exports and imports

GDP does not account for which of the following?

• The value added by all firms in the economy

• The depletion of natural resources

• Wages, rent, profit and interest payments

• The value of final goods and services produced domestically

• Imports from foreign countries

Which of the following transactions will be included in the calculation of country X’s Gross Domestic Product (GDP) in 2022?

• The sales of corporate stocks

• The exchange of a used automobile for a used boat

• The purchase of new construction equipment

• Social security checks received by retirees

• Carrots grown in a household’s backyard and consumed by the family

As a measure of economic performance, GDP accounts for which of the following?

• Used books donated to a local library

• Depletion of durable consumer goods

• Increased leisure time

• Souvenir gifts purchased by tourists domestically

• Cash transaction in the underground economy

Which of the following explains why the rate of change of the consumer price index (CPI) tends to overstate the actual inflation rate?

• Consumers will require more income to buy goods whose prices have increased

• Nominal wages do not always increase by as much as prices do

•   When real wages increase, consumers can afford higher priced goods

• Consumers tend to substitute lower priced goods that may not be represented in the basket of goods

• The basket of goods in the base year is frequently updated with new products

In 2022, Sabrina earned an annual salary of $100,000 as an engineer. In 2022, her income rose to $105,000. The inflation rate in 2022 was 2%. How did Sabrina’s nominal income and real income change in 2022 compared to 2021?

• Nominal income decreased and real income decreased

• Nominal income decreased and real income did not change

• Nominal income increased and real income decreased

• Nominal income increased and real income did not change

• Nominal income increased and real income increased

In 2016 the nominal GDP for Country X was $330 billion and the GDP deflator was 110. The real GDP for 2016 was

• $110 billion

• $220 billion

• $300 billion

• $330 billion

• $440 billion