WorksheetsExam 2 Review
Total questions: 60
Worksheet time: 30mins
Investment happens when:
current income is greater than current spending.
current consumption is greater than current output.
resources are devoted toward increasing current output.
resources are devoted toward increasing future output.
Which among the following countries had the highest GDP per person in 2020?
Switzerland
United States
Japan
China
If prices of goods and services were inflexible, then:
a negative demand shock would lead to increased real GDP in the short run.
a positive demand shock would lead to increased real GDP in the short run.
a negative demand shock would have no short-run effect on real GDP.
there would be no short-run demand shocks.
Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?
Nominal GDP doubles.
Nominal GDP is halved.
Nominal GDP doesn't change.
There is not enough information to determine what happens to nominal GDP.
In the very short run, firms tend to respond to demand shocks by changing their prices.
True
False
If nominal GDP is rising faster than real GDP, then inflation must be occurring.
True
False
If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?
Nominal and real GDP would both rise.
Nominal and real GDP would both be unchanged.
Real GDP would rise, but nominal GDP would be unchanged.
Nominal GDP would rise, but real GDP would be unchanged.
The term "economic investment" refers to money spent purchasing newly created capital goods such as factories and wireless networks.
True
False
Which of the following statements is true?
Short-run economic fluctuations are made worse because prices are flexible.
Short-run economic fluctuations would be less severe if prices were inflexible.
If prices were fully inflexible, there would be no short-run economic fluctuations.
If prices were fully flexible, there would be no short-run economic fluctuations.
High rates of unemployment are undesirable because they
always lead to a decline in nominal GDP.
are associated with higher levels of crime and illness.
cannot be reduced through government policy.
are associated with increases in the price level.
For an economy to increase investment, it must
increase saving.
increase present consumption.
buy more stocks and bonds.
increase nominal GDP.
In macroeconomic models, prices are assumed to be completely inflexible in
the very short run only.
the short run and remains so over time.
the very long run.
situations when the changes in demand appear to be permanent.
Refer to the figure. Assuming this market is representative of the economy as a whole, this economy:
is highly susceptible to inflation.
faces fluctuating output levels whenever there is a demand shock.
is capable of always producing at its optimal capacity.
is largely immune to business cycles.
Refer to the figures. Which figure(s) represent(s) a situation where prices are flexible?
A only
B only
both A and B
neither A nor B
Suppose a firm is currently producing 500 computers per week and charging a price of $1000. What happens to the firm's inventory of computers if there is a negative demand shock and prices are inflexible?
The firm's inventories will not change.
The firm's inventories will increase by 200 computers per week.
The firm's inventories will decrease by 150 computers per week.
The firm's inventories will increase by 350 computers per week.
If in some year gross investment was 120billionandnetinvestmentwas 65 billion, then in that year the country's capital stock:
may have either increased or decreased.
increased by $65 billion.
increased by $55 billion.
decreased by $55 billion.
A firm buys components from a supplier that they use to make 1,500 units of product. They later sell their output for 8each,makingthefirm 12,000. If the value added amount from their production is $2,700, how much did they pay for the inputs?
$9,300
$12,000
$8,400
$3,000
Net exports: - are found by subtracting foreign spending on U.S. produced goods from U.S. spending on foreign-produced goods. - were - 918billionin2021sinceAmericansspent 918 billion more on imports than foreigners spent on U.S. exports. - are found by subtracting Imports - Exports. - are always some positive amount that is added to U.S. GDP.
are found by subtracting foreign spending on U.S. produced goods from U.S. spending on foreign-produced goods.
were - 918billionin2021sinceAmericansspent 918 billion more on imports than foreigners spent on U.S. exports.
are found by subtracting Imports - Exports.
are always some positive amount that is added to U.S. GDP.
Gross domestic private investment, as defined in national income accounts, would include the following, except:
changes to business inventories.
all domestic construction done by the private sector.
government construction of new highways and dams.
the value of all capital goods bought by business firms.
Value added by a firm is the market value of the firm's output minus the:
total wages paid to its employees.
value of inputs bought from other firms.
profits that the firm's owners earn.
total costs of all inputs used.
Assume an economy that is producing only one product. Output and price data for a three-year period are shown in the table. If Year 2 is chosen as the base year, in Years 1 and 3 the price index values are:
A) 4 and 6, respectively.
B) 6 and 4, respectively.
C) 120 and 100, respectively.
D) 100 and 150, respectively.
If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately:
$3,846 billion.
$3,925 billion.
$4,108 billion.
$4,379 billion.
Which of the following accounts is the smallest dollar amount in the United States?
disposable income
personal income
gross domestic product
national income
Assume that a manufacturer of stereo speakers purchases 40worthofcomponentsforeachspeaker.Thecompletedspeakersellsfor 120. The value added by the manufacturer for each speaker is:
$40.
$160.
$120.
$80.
$4,800.
There are several ways to measure aggregate output. The one favored by the Bureau of Economic Analysis is:
national income.
gross output.
net domestic product.
gross domestic product.
Refer to the accompanying national income data (in billions of dollars). The national income in this economy can be estimated by adding items: 1 through 7. 8 through 11. 2 through 7. 1 through 13.
1 through 7
8 through 11
2 through 7
1 through 13
Net domestic product is:
$400 billion.
$442 billion.
$483 billion.
$517 billion.
Refer to the accompanying national income data (in billions of dollars). In these data, U.S. exports are:
$28 billion.
$52 billion.
$17 billion.
$16 billion.
Refer to the accompanying data (all figures in billions of dollars). NI is: - $362. - $382. - $447. - $402.
$362
$382
$447
$402
Refer to the accompanying national income data. All figures are in billions of dollars. U.S. imports are: - $26. - $16. - $24. - $14.
$26
$16
$24
$14
If the growth trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about
15 years.
17 years.
10 years.
23 years.
If the number of hours worked in an economy is 100 and its labor productivity is $5 of output per hour worked, the economy's real GDP
is $20.
is $500.
is $5,000.
cannot be calculated.
The following factors tend to make the real GDP growth rate understate the growth of economic well-being, except
improved product quality.
added leisure.
debasement of the environment.
a stress-free lifestyle.
A nation's real GDP was 270billionlastyearand 285 billion this year. Its population was 142 million last year and 145 million this year. What is the growth rate of real GDP per capita in this year?
3.4 percent
2.5 percent
1.1 percent
5.0 percent
Nation A's real GDP was 520billioninYear1and 550 billion in Year 2. Its population was 150 million in Year 1 and 155 million in Year 2. On the other hand, Nation B's real GDP was 200billioninYear1and 210 billion in Year 2; and its population was 53 million in Year 1 and 55 million in Year 2. Which of the following statements is true?
Nation A's real GDP growth in Year 2 is higher than Nation B's.
Nation B's real GDP growth in Year 2 is higher than Nation A's.
Nation A's real GDP growth in Year 2 is identical to Nation B's.
Nation A's and Nation B's real GDP growth rates in Year 2 are both higher than 10 percent.
U.S. GDP growth statistics may overstate the gain in well-being.
since the average workweek is now longer than before.
since today's products, such as automobiles and cell phones, are not as good as those that were made decades ago.
if growth leads to a more secure and stress-free lifestyle.
if growth creates a more stressful work environment.
Strong property rights are important for modern economic growth because
they allow governments to extract the gains from private citizens' investments.
people are more likely to invest if they don't fear that others can take their returns on investment without compensation.
they ensure an equitable distribution of income.
business cycle fluctuations will be smaller and less likely to disrupt investment patterns.
Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between Year 1 and Year 2. We could conclude that this economy's
real GDP remained constant.
capital stock increased by 3 percent.
production possibilities curve shifted inward.
production possibilities curve shifted outward.
One of the main arguments against further growth for industrialized nations focuses on the problem of
technological knowledge.
environmental quality.
feedback mechanisms.
infrastructure.
Real per-capita GDP in the United States in 2021 was approximately
$18,571.
$47,845.
$58,481.
$18.6 trillion.
In the U.S. economic-growth experience, most capital is:
substitutes for labor.
complementary to labor.
the amount of capital available per worker has been relatively constant.
the amount of capital available per worker has been decreasing.
One major economic benefit of global competition is:
lower unemployment.
increased protection of domestic firms.
pressure to innovate.
more leisure opportunities.
Technological advance is tightly intertwined with:
capital formation.
household consumption.
government spending.
population growth.
Which set of items in the accompanying list would shift an economy's production possibilities curve outward?
A) 2, 5, and 6 only
B) 2, 4, 5, and 6 only
C) 1, 2, 5, and 6 only
D) 1, 3, and 4 only
Unanticipated inflation helps some groups in the economy.
True
False
Search unemployment is a type of:
frictional unemployment.
hidden unemployment.
structural unemployment.
cyclical unemployment.
Economic growth can best be portrayed as a:
leftward shift of the production possibilities curve.
movement from a point inside to a point outside the production possibilities curve.
movement from a point near the vertical axis to a point near the horizontal axis on the production possibilities curve.
rightward shift of the production possibilities curve.
Okun's law indicates that for:
a 2 percent GDP gap, a 2 percent increase in the actual unemployment rate is generated.
every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated.
a 5 percent GDP gap, a 1 percent increase in the natural rate of unemployment is generated.
every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 5 percent GDP gap is generated.
When unanticipated deflation occurs:
A) debtors are hurt, but creditors benefit.
B) both creditors and debtors are hurt.
C) creditors are hurt, but debtors benefit.
D) both creditors and debtors benefit.
According to the Bureau of Labor Statistics, to be officially unemployed a person must:
A) be 21 years of age or older.
B) not only want a job but also be actively seeking employment.
C) have lost a job.
D) be waiting to be called back from a layoff.
Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because:
A) cycles include a trough phase, while fluctuations do not.
B) fluctuations are relatively predictable events.
C) fluctuations include an expansion phase, while cycles do not.
D) cycles imply regularity, while fluctuations do not.
Refer to the given information about a hypothetical economy. The unemployment rate is:
12.5 percent.
16.7 percent.
25 percent.
18.8 percent.
U.S. GDP growth statistics may overstate the gain in well-being:
if growth creates a more stressful work environment.
since the average workweek is now longer than before.
since today's products, such as automobiles and cell phones, are not as good as those that were made decades ago.
if growth leads to a more secure and stress-free lifestyle.
If the natural rate of unemployment is 3 percent and the actual unemployment rate is 8.4 percent, there is a negative GDP gap of:
3.0 percent.
5.4 percent.
2.0 percent.
10.8 percent.
Cost-push inflation: - raises the natural rate of unemployment. - reduces real output. - increases real output. - reduces the unemployment rate.
raises the natural rate of unemployment.
reduces real output.
increases real output.
reduces the unemployment rate.
Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:
5 percent.
2 percent.
3 percent.
7 percent.
Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?
There is not enough information to determine what happens to nominal GDP.
Nominal GDP is halved.
Nominal GDP doubles.
Nominal GDP doesn't change.
If the average level of nominal income in a nation is $44,600 and the price level index is 250, the average real income would be about:
$17,840.
$77,000.
$44,000.
$18,857.
The total population of an economy is 255 million, the labor force is 205 million, and the number of employed workers is 137 million. The unemployment rate for this economy is:
5.8 percent.
7.8 percent.
3.3 percent.
33.2 percent.
When the economy goes into a recession and firms require less labor, managers tend to:
reduce wages to reflect the lower demand for labor.
avoid cutting wages, for fear of drops in worker productivity.
lay off workers and keep wages of the remaining workers constant.
keep all of their workers by spreading work more thinly.
