WorksheetsUnit 2 Practice Test/Review Quiz
Total questions: 78
Worksheet time: 40mins
Which of the following is true regarding GDP?
Transfer payment are not included in GDP because government expenditures are not counted
GDP, adjusted for inflation, measures economic growth over time
Household production, like home auto repair, is counted in GDP
Intermediate goods are not counted because GDP does not include imports from foreign countries
GDP includes the purchase and sale of all goods and services in a country in one year
Which of the following is included in the calculation of the US GDP?
The money that consumers save when using coupons
A plane produced in the US but sold in Mexico
Online purchases of used products
The benefit society receives from a cleaner environment
A computer produced in China by a US owned company
The value of which of the following is counted in the US GDP?
Transfer payments to the elderly
Undeclared wages paid to illegal aliens
Foreign countries buying US treasury bills
Salary bonuses given to investment bankers
The change in value of real estate in the US
When calculating GDP, investment is best defined as
Spending by the central bank on government securities
Spending on stocks, bonds, and financial assets
Business spending on capital goods
Changes in private and business savings
Policies that lead to long run economic growth
If a country's nominal percent change in GDP is positive, which of the following must be true?
The Real GDP increased
Both the price level and real GDP increased
The inflation rate was negative
The price level increased
The real GDP and/or the price level has increased
Gross Domestic Product is equivalent to the sum of:
Consumer spending, consumption of fixed capital, government purchases and exports
Consumer spending, investment spending, government purchases and net exports
Consumer spending, investment spending, government purchases, exports, and imports
Consumer spending, investment spending, government purchases, and exports
Which of the following will be included in the current year's calculation of GDP?
The purchase of a vintage surfboard from thrift store
The purchase of a used car from a friend
$.50 cash earned but not reported by your neighbor for babysitting
Purchase of lifeguard equipment at a summer camp
Which of the following is true regarding nominal and real GDP?
The only thing that can increase nominal GDP is an increase in inflation
The only thing that can increase real GDP is an increase in output
The only thing that can increase nominal GDP is an increase in output
The only thing that can increase real GDP is an increase in nominal GDP
If real GDP is increasing at 5% per year and nominal GDP is increasing at 10% per year, which of the following is necessarily true?
The price level is increasing
Unemployment is increasing
The economy is in a recession
Imports exceed exports
If the nominal GDP in a given year is $500 billion and the GDP deflator for that year is 125, how much is the real GDP?
$1,125 billion
$500 billion
$625 billion
$400 billion
The nominal GDP for the year 2010 is $120 billion and the nominal GDP for the year 2012 is $240 billion. Assuming that the year 2010 is the base year and that the real GDP of the year 2012 is $200, what is the GDP deflator in 2012?
150
50
100
120
Which of the following is true regarding inflation?
Unanticipated inflation benefits lenders
When inflation increases, nominal interest rates decrease
Inflation decreases the purchasing power of a country's currency
Inflation causes unemployment
Which of the following is true regarding full employment?
Full employment occurs when there is only frictional unemployment
An economy is at full employment when the unemployment rate is 0%
An economy can never be at full employment since there are always leakages like taxes, savings, and imports
Full employment occurs when cyclical unemployment is zero
Which type of unemployment would most likely increase if workers were laid off due to a large decrease in consumer spending?
Structural
Seasonal
Cyclical
Frictional
Which of the following is the best example of structural unemployment?
New immigrants have a hard time finding jobs
Workers are laid off due to a recession
Workers quit their current job to go back to school to get better training
Workers are fired because they do not have the specific skills employers value
If the labor force participation rate increased at the same time that the unemployment rate stayed the same, which of the following must be true?
The total number of jobs in the economy stayed the same
Less workers were classified as part-time workers
The total number of jobs in the economy decreased
The total number of jobs in the economy increased
Which of the following individuals is clearly considered unemployed?
A lawyer that sold his firm and is now looking for a job as a teacher
A retired school teacher
An auto worker who has given up looking for a job
An electrician that is working part-time and is looking for a full-time job.
If a country's nominal percent change in GDP is positive, which of the following must be true?
Both the price level and real GDP increased
The inflation rate was negative
The real GDP increased
The real GDP and/or the price level has increased
When calculating GDP, investment is best defined as
Policies that lead to long run economic growth
Spending on stocks, bonds, and financial assets
Spending by the central bank on government securities
Business spending on capital goods
If the nominal GDP for a given year is $500 Billion and the real GDP for that year is $400 Billion then which of the following must be true?
The GDP deflator is 150
The GDP deflator is 125
The country is experiencing deflation
The unemployment rate will increase as the economy improves
The unemployment rate measures the percentage of
People in the adult population who do not have jobs
People in the adult population who have temporary jobs
People who do not have jobs and have given up looking for work
People in the labor force who are actively looking, but do not have jobs
The official unemployment rate is not always the most accurate indicator of actual unemployment in the economy because
The official rate does not include persons who have given up looking for work
Part time workers are considered unemployed
Full employment is greater than the labor force
The unemployment rate is greater than natural unemployment
What type of GDP is calculated with the current year's prices?
GDP per capita
Real GDP
Base Year GDP
Nominal GDP
Expectant parents buy supplies for the nursery. Would this be included in GDP?
Yes - Consumer Spending
Yes - Investment
No - Non-market activity
No - Intermediate goods
Each individual on food stamps in Delaware can receive up to $194 a month. Is this included in government spending?
Yes - Government spending
Yes - Consumer Spending
No - Intermediate Goods
No - Transfer Payment
Mr. Johns is quitting his job as a teacher and moving to California. He is
Structurally Unemployed
Seasonally Unemployed
Cyclically unemployed
Frictionally Unemployed
The unemployment rate does not account for which two types of people?
discouraged workers (hidden unemployed) and those employed
discouraged workers (hidden unemployed) and underemployed
full time carers and those in school
retirees and those in prison
Who is most likely to be hurt by inflation?
the U.S. government
someone who borrowed money
a retiree on a fixed income
a business owner
Which of the following would not affect the size of real GDP?
Consumer purchase of a rare renaissance painting.
Government purchase of a new car for the military
Business purchase of a new car for a delivery vehicle.
Consumer purchase of a new car for personal use.
Which of the following people would be considered structurally unemployed?
A high school student who mows lawns during the summer, but is out of work because it is winter
An auto assembly line worker who quit her job to go back to school full-time to improve her job skills
Unemployed auto assembly line factory worker who was replaced with a robot
Unemployed auto assembly line factory worker during a recession
In a typical circular flow model describing the interaction of businesses and households, which of the following is/are true?
I. Households buy factors of production and goods
II. Firms buy factors of production and goods
III. Households buy factors of production
IV. Firms buy factors of production
V. Firms buy goods
VI. Households buy goods
I only
IV and VI only
II only
III and IV only
Frictional unemployment
is present even when labor markets are working well.
is the result of worker skills not matching the jobs available.
is zero when we have achieved the Natural rate of unemployment.
would be eliminated if the economy were operating at full employment levels of GDP.
An increase in the international value of the dollar (appreciation) would most likely benefit who the most?
citizens traveling or living abroad from the United States
Canadian citizen looking to buy property in the U.S.
domestic producers who export
German citizens vacation in the U.S.
If the U.S. dollar depreciates relative to another currency, which of the following is most likely to occur?
U.S. exports will increase to that country
U.S. government will increase the tariff on goods from that country
U.S. tourists will visit that country in greater numbers
U.S. trade deficit will become larger to that country
What are two of the three causes of Inflation?
Gas Prices
Overspending
Federal Reserve
Supply Chain
Wage measured by dollars rather than purchasing power.
Net Wage
Real Wage
Normal Wage
Nominal Wage
Wage adjusted for inflation.
Net Wage
Normal Wage
Real Wage
Nominal Wage
Who is Hurt by Inflation? Pick 3
Savers
People with fixed incomes
Borrowers
Lenders
People who are helped by inflation. Pick 2.
A business where the price of the product increases faster than the price of resources
Borrowers
Savers
Lenders
The percent change in prices from year to year.
GDP Rate
Market Rate
Inflation Rate
Price Indices
Index numbers assigned to each year that show how prices have changed relative to a specific base year.
GDP Rate
Price Indices
Market Rate
Inflation Rate
_____ is GDP measured in current prices. It does not account for inflation from year to year.
Nominal GDP
Real GDP
Inflation Rate
Inflation GDP
_____ is GDP expressed in constant, or unchanging, dollars.
Inflation Rate
Real GDP
Inflation GDP
Nominal GDP
When Inflation occurs,
Price decreases in the economy
The dollar appreciates on foreign exchange markets
The purchasing power of money decreases in the economy
Basic necessities become cheaper
Money loses its value when it
becomes too portable
is divisible
is durable
It becomes too plentiful
Someone buys a house with a 30 year fixed rate loan
helped by inflation
hurt by inflation
unaffected by inflation
irrelevant to inflation
Which explanation best explains the effects of inflation?
Inflation erodes (take away from) the purchasing power of the dollar.
Demand increases because prices are higher.
Consumers have more products to choose from.
Inflation results in lower prices.
Fill in the blank: When inflation is high the ____________ of the dollar decreases.
purchasing power
value
interest rate
supply
An index that measures the prices of a market basket of goods that typical consumers purchase.
Deflation
Federal Reserve
Bank
Consumer Price Index
According to the wage-price spiral, if a company gives a worker a raise in pay, what must they also do?
Raise the price of their products
Go out of business
Lower the price of their products
Merge with a competitor
What causes cost-push inflation?
An increase in demand for goods and services
A fall in the price of imports
An increase in supply
A rise in production costs passed on to consumers
What causes demand pull inflation?
A rise in price level due to an increase in consumption
Rise in price due to a decrease in supply
A decrease in price due to a decrease in supply
A rise in price due to an increase in the cost of production
The Consumer Price Index (CPI) is best used to determine
The rate of inflation.
The Dow Jones Index.
Currency exchange rates.
The unemployment rate.
Let C represent consumption expenditure, S saving, I gross private domestic investment, G government purchases of goods and services, and NX net exports of goods and services. Then GDP equals
C + I + G – NX
C + S + G + NX
C + S + G – NX
C + I + G + NX
Which of the following is NOT part of GDP?
General Motors’ purchases of new capital equipment
Expenditures by the federal government for national defense
Social security payments made to the elderly
The purchase of new homes by consumers
Real GDP measures the
changes in the prices of output measured in dollars
general upward drift in prices
value of total production linked to prices of a single year
total profits earned by all businesses valued using prices from a single year
Tropical Republic produces only bananas and coconuts. The base year is 2016, and the tables give the quantities produced and the prices. Calculate nominal GDP in 2016 and 2017. Calculate real GDP in 2017 expressed in base-year prices.
In 2016, 800 Banana bunches were produced at $2 a bunch, 400 Coconut bunches were also produced at $10 a bunch.
In 2017 900 bunches of bananas were produced at $4 a bunch, 500 bunches of coconuts were produced at $5 a bunch.
Nominal $5700 in 2016, Nominal $6100 in 2017, Real GDP-2017-$6800
Nominal $5600 in 2016, Nominal $6100 in 2017, Real GDP-2017-$6700
Nominal $5600 in 2016, Nominal $6200 in 2017, Real GDP-2017-$6800
Nominal $5600 in 2016, Nominal $6100 in 2017, Real GDP-2017-$6800
An economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices. Calculate nominal GDP in 2015 and 2016.
In 2015 there were 60 apples produced at $.50 each and 80 oranges produced at $.25 each.
In 2016, 160 apples at $1.00 each and 220 oranges at $2.00 each.
In 2015 nominal GDP is $50 and in 2016 nominal GDP is $700.
In 2015 nominal GDP is $40 and in 2016 nominal GDP is $600.
In 2015 nominal GDP is $50 and in 2016 nominal GDP is $600.
In 2015 nominal GDP is $50 and in 2016 nominal GDP is $600.
An economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices. Calculate real GDP in 2015 and 2016 expressed in base-year prices.
In 2015 there were 60 apples produced at $.50 each and 80 oranges produced at $.25 each.
In 2016, 160 apples at $1.00 each and 220 oranges at $2.00 each.
Real GDP in 2015 is $50 and in 2016 is $135
Real GDP in 2015 is $50 and in 2016 is $135
Real GDP in 2015 is $60 and in 2016 is $135
Real GDP in 2015 is $50 and in 2016 is $135
Which statement is true about the circular flow diagram of an economy?
The market for factors of production connects spending by firms to household income.
The market for goods and services connects household spending to government spending.
The market for goods and services connects labor income to firms as employers.
Which statement is true about the approaches used to measure the value of a nation’s gross domestic product?
The expenditure approach to calculating GDP sums consumption spending, investment spending, government spending, and net exports.
The value-added approach to calculating GDP sums the final monetary value of output at each stage of production.
The income approach to calculating GDP sums the income earned by the factors of production excluding profits.
Calculate Country X's nominal gross domestic product (GDP) for 2017 using the expenditures approach.
The Variables are consumption spending (in billions of dollars)- 13; employee compensation (Wages)- 12; Government spending- 3 ; interest payments- 1; investment spending- 4; net exports- Negative 1; profit- 5
19 billion dollars
14 billion dollars
18 billion dollars
20 billion dollars
Which of the following describes a limitation of gross domestic product?
It fails to make adjustments for the value of services consumed for free such as browsing on the Web.
It understates the value of output by accounting for negative environmental side effects of production.
It does not account for the distribution of income in a nation or income inequality.
It includes the value of all goods and services produced.
Which of the following is true about gross domestic product?
Calculations of GDP do not include the monetary value of production activities involving negative environmental side effects such as pollution.
Calculations of GDP include the sale of used goods.
Calculations of GDP include the unsold inventories of goods produced within the borders of the country.
Calculations of GDP include the value of household work.
As a measure of economic performance, the United States gross domestic product (GDP) accounts for which of the following?
The cleanup of an oil spill
The use of open-source, free Web browsers
A parent’s care of children in the home
The production of goods and services
Which of the following is classified as a discouraged worker?
Max decided to be a stay-at-home dad after he lost his job.
Peter earned a degree in business and is actively seeking a job in the financial sector.
Ella has been unable to find a job and abandoned her job search.
John is working part-time but wants a full-time job.
What type of unemployment describes the situation of factory workers displaced by automation?
Structural
Frictional
Cyclical
Given the labor market data above, what are the labor-force participation rate (LFPR) and the unemployment rate (UR)?
The LFPR is 60% and the UR is 3.3%.
The LFPR is 60% and the UR is 6.0%.
The LFPR is 60% and the UR is 10.0.
Suppose the consumer price index (CPI) was 100 on January 1st, 2017 and 110 on January 1st, 2018 with no changes in nominal wages. Which of the following is definitely true about the economy between January of 2017 and January of 2018?
The inflation rate was –10 percent.
The inflation rate was 10 percent.
Real wages increased by 10 percent.
Jan works a 30-hour week for a minimum wage of $10 an hour. Suppose that last year is the base year for the Consumer Price Index (CPI). Which of the following is true about Jan’s real wage if at the end of this year the CPI is 125?
Jan’s real wage is $8 per hour at the end of the year.
Jan’s real wage is 25% higher because the CPI increased from 100 to 125.
Jan’s real wage at the end of this year is $10 an hour because the base year equals 100.
Which of the following terms describes a slowdown in the rate of increase in the consumer price index?
Disinflation
Inflation
Deflation
Last year, Myron purchased a $10,000 certificate of deposit with a 3% rate of interest from his bank. The government reported that prices, on average, have fallen by 5% during the current year. Which of the following can be concluded as a result of this transaction?
Myron loses, while the bank gains.
Both Myron and the bank equally gain.
Myron gains, while the bank loses.
Myron and the bank both lose.
Which of the following will happen when the actual inflation rate exceeds the expected inflation rate?
This will benefit lenders with fixed-interest rate loans.
This will harm borrowers with fixed-interest rate loans.
This will harm lenders with fixed-interest rate loans.
This will have no effect on lenders or borrowers.
Labor unions negotiated a 3-year contract with employers in the automobile industry. They agreed to a 3 percent per year increase in pay over the 3 years. How would each group be affected by an actual inflation rate of 4% next year?
Workers would be worse off, and the employers would be better off.
Workers would be better off, and the employers would be worse off.
Workers would be worse off, and the employers would be unaffected.
Workers and employers would both be better off.
Which of the following describes a difference between nominal gross domestic product (nGDP) and real GDP (rGDP)?
Nominal GDP takes into account the size of the population while real GDP does not.
Nominal GDP uses constant prices to measure the value of final output, while real GDP uses current prices.
Nominal GDP uses current prices to measure the value of final output, while real GDP uses constant prices.
Nominal GDP and real GDP both use constant prices.
Suppose Miguel wants to know the value of real gross domestic product (GDP) for 2011 in terms of the base year 1984 dollars. In 1984 nominal GDP was $10 billion. In 2011 nominal GDP was $15 billion and the price deflator was 200. Real GDP in 1984 dollars would be equal to which of the following?
$10 billion
$5 billion
$7.5 billion
$15 billion
On the Business Cycle, the output gap is measured by which of the following?
The difference between actual and potential GDP.
The difference between the actual rate of unemployment and the natural rate of unemployment.
The difference between nominal and real GDP.
When an economy is at the trough of the business cycle, which of the following is then true about the state of the economy?
There is an inflationary gap.
There is a recessionary gap.
The economy is producing at its potential output level.
