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WorksheetsMultiple Choice Macroeconomics MIDTERM
Total questions: 95
Worksheet time: 48mins
Which of the following involve a tradeoff?
Buying a new car
Going to college
Watching a football game on Saturday afternoon
Taking a nap
All of the above involve tradeoff
Tradeoffs are required because wants are unlimited and resources are
efficient.
economical.
scarce.
unlimited.
marginal.
Economics is the study of
how to fully satisfy unlimited wants.
how society manages its scarce resources.
how to reduce our wants until we are satisfied.
how to avoid having to make tradeoff
how society manages its unlimited resources.
A rational person does not act unless
the action makes money for the person.
the action is ethical.
the action produces marginal costs that exceed marginal benefits.
the action produces marginal benefits that exceed marginal costs.
none of the above.
Suppose you find $20. If you choose to use the $20 to go to the football game, your opportunity cost of going to the game is
nothing, because you found the money.
$20 (because you could have used the $20 to buy other things).
$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game.
$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchase at the game.
none of the above.
Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%,
students will shift majors from education to accounting.
students will shift majors from accounting to education.
fewer students will attend college.
none of the above.
Workers in the United States enjoy a high standard of living because:
unions in the United States keep the wage high.
they have protected their industry from foreign competition.
the United States has a high minimum wage.
workers in the United States are highly productive.
none of the above.
The Phillips curve suggests that:
an increase in inflation temporarily increases unemployment.
a decrease in inflation temporarily increases unemployment.
inflation and unemployment are unrelated in the short run.
none of the above.
An increase in the price of beef provides information which:
tells consumers to buy more beef.
tells consumers to buy less pork.
tells producers to produce more beef.
provides no information because prices in a market system are managed by planning boards.
You have spent $1000 building a hot dog stand based on estimates of sales of $2000. The hot dog stand is nearly completed but now you estimate total sales to be only $800. You can complete the hot dog stand for another $300. Should you complete the hot dog stand?
Yes.
No.
There is not enough information to answer this question.
Two reasons for a government to intervene in a market are to:
raise revenues and to promote stability.
promote equity and to promote efficiency.
promote equity and to promote stability.
promote efficiency and to promote stability.
Because it is difficult for economists to use experiments to generate data, they generally must:
do without data.
use whatever data the world gives them.
select a committee of economists to make up data for all economists to use.
use hypothetical, computer-generated data.
What is the goal of theories?
to provide an interesting, but not useful, framework of analysis
to provoke stimulating debate in scientific journals
to demonstrate that the developer of the theory is capable of logical thinking
to help scientists understand how the world works
Good economic models
often leave out important variables, causing serious errors.
omit many details to allow us to see what is truly important.
are designed to give a complete picture of a given relationship.
cause economics to be misunderstood by the general public.
Which of the following would NOT be considered a factor of production?
labor
land
capital
mon
An economic outcome is said to be efficient if the economy is
using all of the resources it has available.
conserving on resources and not using all it has.
getting all it can from the scarce resources it has available.
able to produce more than its current production without additional resources.
Which of the following would be considered a topic of study in macroeconomics?
the impact of agricultural price support programs in the cotton industry
the effect on U.S. steel producers of an import quota imposed on foreign steel
the effect of an increase in the price of imported oil on the U.S. inflation rate
the effect of an increase in the price of imported coffee beans on the U.S. coffee industry
Which of the following is an example of a positive statement?
Prices rise when the government prints too much money.
If welfare payments increase, the world will be a better place.
Inflation is more harmful to the economy than unemployment.
The benefits to the economy of improved equity are greater than the costs of reduced efficiency.
When economists are speaking as policy advisors, they are more likely to use
normative statements.
positive statements.
objective statement
all answers are correct
Which of the following is an example of a normative statement?
If the price of a product decreases, quantity demanded increases.
Reducing tax rates on the wealthy would be good for the country.
If the national saving rate were to increase, so would the rate of economic growth.
All of the above are correct.
An example of a transfer payment is
wages.
profit.
rent.
government purchases.
unemployment benefits.
The value of plant and equipment worn out in the process of manufacturing goods and services is measured by
consumption.
depreciation.
Net National Product.
investment.
intermediate production.
Which of the following would be excluded from 1989 GDP?
a 1989 Honda made by HondaVN.
a haircut.
a realtor’s services.
a home build in 1988 and first sold in 1989.
all of the above should be counted in 1989 GDP.
Gross Domestic Product can be measured as the sum of
consumption, investment, government purchases, and net exports.
consumption, transfer payments, wages, and profits.
investment, wages, profits, and intermediate production.
Net National Product, Gross National Product, and Disposable personal income.
VN’s Gross Domestic Product measures the production and income of
Vietnamese and their factories no matter where they are located in the world.
people and factories located within the borders of VN.
the domestic service sector only.
the domestic manufacturing sector only.
Gross Domestic Product is the sum of the market value of the
intermediate goods.
manufactured goods.
normal goods and services.
inferior goods and services.
final goods and services.
Nominal GDP in 2000 exceeds nominal GDP in 1999, then the production of output must have
risen.
fallen.
stayed the same.
risen or fallen because there is not enough information to determine what happen to real output.
If a cobbler buys leather for $100 and thread for $50 and uses them to produce and sell $500 worth to shoes to consumers, the contribution of the cobbler to GDP is
$150.
$350.
$500.
$600.
$650.
GDP would include which of the following?
housework
illegal drug sales
intermediate sales
consulting services
the value of taking a day off from work.
If GDP exceeds GNP, then
foreigners are producing more in VN than Vietnamese are producing in foreign countries.
Vietnamese are producing more in foreign countries than foreigners are producing in VN.
real GDP exceeds nominal GDP.
real GNP exceeds nominal GNP.
intermediate production exceeds final production.
How is your purchase of a $40000 BMW automobile that was entirely produced in Germany recorded in the VN’s GDP accounts?
investment increases by $40000 and the net export increases by $40000.
consumption increases by $40000 and net exports decreases by $40000.
net exports decreases by $40000.
there is no impact because this transaction does not involve domestic production.
GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is
GDP per person.
the consumption component of GDP.
government expenditures per person.
the level of business investment.
If a country reported nominal GDP of 200 billion in 2002 and 180 billion in 2001 and reported a GDP deflator of 125 in 2002 and of 105 in 2001, then from 2001 to 2002 real output
and prices both rose.
rose and prices fell.
fell and prices rose.
and prices both fell.
Which of the following statements about nominal GDP and real GDP is most accurate?
Nominal GDP is a better gauge of economic well-being than is real GDP.
Real GDP is a better gauge of economic well-being than is nominal GDP.
Real GDP and nominal GDP are equally good measures of economic well-being.
Whether real GDP or nominal GDP is a better measure of economic well-being depends on what sort of goods are produced.
Transfer payments are
included in GDP because they represent income to individuals.
not included in GDP because they are not payments for currently produced goods or services.
included in GDP because the income will be spent for consumption.
not included in GDP because taxes will have to be raised to pay for them.
After the terrorist attack on September 11, governments raised expenditures to increase security at airports. These purchases of goods and services are
not included in GDP since they are not productive.
not included in GDP since the government will have to raise taxes to pay for them.
included in GDP since government expenditures are included in GDP.
included in GDP only to the extent that the Federal, and not state or local governments, paid for them.
A German citizen buys an automobile produced in the United States by a Japanese company. As a result,
U.S. net exports increase, U.S. GNP and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.
U.S. net exports, GNP, and GDP increase, Japanese GDP increases, German net exports decrease, and German GDP is unaffected.
U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GDP and GNP are unaffected.
U.S. net exports, GNP, and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GDP and GNP fall.
When a firm produces consumer goods and adds some to inventory rather than selling it.
not counted in the current quarter GDP.
counted in the current quarter GDP as investment.
counted in the current quarter GDP as consumption.
counted in the current quarter GDP as a statistical discrepancy.
In computing GDP, investment is spending on
stocks, bonds, and other financial assets.
real estate and financial assets.
new capital equipment, inventories, and structures, including new housing.
capital equipment, inventories, and structures, excluding household purchases of new housing.
A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. This move
necessarily raises GDP.
necessarily decreases GDP.
doesn’t change GDP because gambling is never included in GDP.
doesn’t change GDP because in either case his income is included.
The inflation rate is defined as the
price level.
change in the price level.
price level divided by the price level in the previous period.
percentage change in the price level from the previous period.
The “basket” on which the CPI is based is composed of
raw materials purchased by firms.
total current production.
products purchased by the typical consumer.
consumer production.
none of the above.
The CPI of Vietnam will be most influenced by a 10% increase in the price of which of the following consumption categories?
housing
transportation
medical care
food and beverages
all of the above would produce the same impact
Which of the following would likely cause the CPI to rise more than the GDP deflator in Vietnam?
an increase in the price of Thong Nhat bicycle
an increase in the price of tanks purchased by the military
an increase in the price of Piaggio LX produced in Italy and sold in Vietnam
an increase in price of the industrial tractors produced domestically
The CPI is a measure of the overall cost of
inputs purchased by a typical producer.
goods and services bought by a typical consumer.
goods and services produced in the economy.
stocks on the New York Stock Exchange.
When the consumer price index rises, the typical family
has to spend more money to maintain the same standard of living.
can spend fewer money to maintain the same standard of living.
finds that its standard of living is not affected.
can offset the effects of rising prices by saving more.
If this year the CPI is 125 and last year it was 120, then we know that
all goods have become more expensive.
the price level has increased.
the inflation rate has increased.
All of the above are correct.
The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?
11 percent between the first and second year, 11 percent between the second and third year
11 percent between the first and second year, 12 percent between the second and third year
10 percent between the first and second year, 11 percent between the second and third year
10 percent between the first and second year, 12 percent between the second and third year
The consumer price index is
not very useful as a measure of the cost of living.
a perfect measure of the cost of living.
not used as a measure of the cost of living.
not a perfect measure of the cost of living.
Laura buys word processing software in 2011 for $50. Laura’s twin brother Laurence buys an upgrade of the same software in 2013 for $50. What problem in the construction of the CPI does this situation best represent?
substitution bias
unmeasured quality change
introduction of new goods
income bias
A nation's standard of living is measured by its
real GDP.
real GDP per person.
nominal GDP.
nominal GDP per person.
Over the past century in the United States, average income as measured by real GDP per person has grown about
3 percent per year, which implies a doubling about every 20 years.
2 percent per year, which implies a doubling about every 35 years.
4 percent per year, which implies a doubling about every 30 years.
none of the above are correct.
Which of the following is true?
Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries.
Productivity is not closely linked to government policies.
The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.
Productivity may be measured by the growth rate of real GDP per person.
A nation's standard of living is determined by
its productivity.
its gross domestic product.
its national income.
how much it has relative to others.
Which of the following is a correct way to measure productivity?
divide the number of hours worked by output
divide output by the number of hours worked
compute output growth
divide the change in output by the change in number of hours worked
Which of the following is considered human capital?
knowledge acquired from early childhood education programs
knowledge acquired from grade school
knowledge acquired from on-the-job training
All are correct
Which of the following is considered human capital?
the comfortable chair in your dorm room where you read economics texts
the amount you get paid each week to work at the library
the things you have learned this semester
any capital goods that require a human to be present to operate
Technological knowledge refers to
human capital.
available information on how to produce things.
resources expended transmitting society's understanding to the labor force.
All of the above are technological knowledge.
If there are constant returns to scale, the production function can be written as
xY = 2xAF(L, K, H, N)
Y/L = A F( , xK, xH, xN).
Y/L = A F(1, K/L, H/L, N/L).
L = AF(Y, K, H, N).
If there are diminishing returns to capital,
capital produces fewer goods as it ages.
new ideas are not as useful as old ideas.
increases in the capital stock eventually decrease output.
increases in the capital stock increase output by ever smaller amounts.
The logic behind the catch-up effect is that
workers in countries with low incomes will work more hours than workers in countries with high incomes.
the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital.
new capital adds more to production in a country that doesn’t have much capital than in a country that already has much capital.
None of the above are correct.
Suppose Japanese-based Sony Corporation builds and operates a new chip factory in the United States. Future production from such an investment would
increase U.S. GNP more than it would increase U.S. GDP.
increase U.S. GDP more than it would increase U.S. GNP.
not affect U.S. GNP, but would increase U.S. GDP.
have no affect on U.S. GNP or GDP.
Investment from abroad
is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries.
is viewed by economists as a way to increase growth.
often requires removing restrictions that governments have imposed on foreign ownership of domestic capital.
All of the above are correct.
The source of most technological progress is
private research by firms.
individual inventors.
government research.
Both a and b are correct.
Real GDP per person
minus real GDP per person from the previous period equals the growth rate of real GDP per person.
provides more meaningful comparisons across time and countries than real GDP.
is population divided by GDP.
All of the above are correct.
To increase growth, governments should do all of the following except
promote free trade.
encourage saving and investment.
control population growth.
encourage research and development.
nationalize major industry.
The opportunity cost of growth is
a reduction in current investment.
a reduction in current saving.
a reduction in current consumption.
a reduction in taxes.
Which of the following describes an increase in technological knowledge?
a farmer discovers that it is better to plant in the spring rather than in the fall.
a farmer buys another tractor.
a farmer hires another day laborer.
a farmer sends his child to agricultural college and the child returns to work on the farm.
Our standard of living is most closely related to
how hard we work
our supply of capital, because everything of value is produced by machinery.
our supply of natural resources, because they limit production.
our productivity, because our income is equal to what we produce.
Accumulating capital
requires that society sacrifice consumption goods in the present.
allows society to consume more in the present.
decreases saving rates.
has no tradeoffs.
Which of the following is correct?
Some bonds have terms as short as a few months.
Because they are so risky, junk bonds pay a low rate of interest.
Corporations buy bonds to raise funds.
All of the above are correct.
Long-term bonds are generally
less risky than short-term bonds and so pay higher interest.
less risky than short-term bonds and so pay lower interest.
more risky than short-term bonds and so pay higher interest.
more risky than short-term bonds and so pay lower interest.
The sale of stocks
and bonds to raise money is called debt finance.
and bonds to raise money is called equity finance.
to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.
to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.
People who buy stock in a corporation such as General Electric become
creditors of General Electric, so the benefits of holding the stock depend on General Electric’s profits.
creditors of General Electric, but the benefits of holding the stock do not depend on General Electric’s profits.
part owners of General Electric, so the benefits of holding the stock depend on General Electric’s profits.
part owners of General Electric, but the benefits of holding the stock do not depend on General Electric’s profits.
Which of the following equations will always represent GDP in an open economy?
S = I – G
I = Y – C + G
Y = C + I + G
Y = C + I + G + NX
In a closed economy, national saving equals
investment.
income minus the sum of consumption and government expenditures.
private saving plus public saving.
All of the above are correct.
In a closed economy, what remains after paying for consumption and government purchases is
national disposable income.
national saving.
public saving.
private saving.
In a closed economy, what does (T – G) represent?
national saving
investment
private saving
public saving
A higher interest rate induces people to
save more, so the supply of loanable funds slopes upward.
save less, so the supply of loanable funds slopes downward.
invest more, so the supply of loanable funds slopes upward.
invest less, so the supply of loanable funds slopes downward.
If the current market interest rate for loanable funds is above the equilibrium level, then
the quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise.
the quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise.
the quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall.
the quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.
If the supply of loanable funds is very inelastic (steep), which policy would likely increase saving and investment the most?
an investment tax credit.
a reduction in the budget deficit.
an increase in the budget deficit.
None of the above
Which of the following sets of government policies is the most growth oriented?
lower taxes on the returns of saving, provide investment tax credits, and lower the deficit.
lower taxes on the returns of saving, provide investment tax credits, and increase the deficit.
increase taxes on the returns of saving, provide investment tax credits, and increase the deficit
increase taxes on the returns of saving, provide investment tax credits, and lower the deficit.
If the government increases investment tax credits and reduces taxes on the return to saving at the same time,
the real interest rate should rise.
the real interest rate should fall.
the real interest rate should not change.
the impact on the real interest rate is indeterminate.
Investment is
the purchase of stocks and bonds.
the purchase of capital equipment and structures.
when we place our saving in the bank.
the purchase of goods and services.
Suppose the interest rate is 8%. Which would you prefer to receive: $100 today or $116 two years from today?
$100 today.
$116 two year from today.
You should be indifferent between the two values.
None of the above.
Who would be included in the labor force?
Derrick, who is waiting for his new job to start
Brett, who has become discouraged looking for a job and has quit looking for awhile
Homer, an unpaid homemaker
None of the above would be included in the labor force.
Which of the following definitions is correct?
Labor force = number of employed.
Labor force = population – number of unemployed.
Unemployment Rate = (number of unemployed ÷ [number of employed + number of unemployed]) × 100.
Unemployment Rate = (number of unemployed ÷ adult population) × 100.
Rick loses his job and immediately begins looking for another. Ceteris paribus, the unemployment rate
increases, and the labor-force participation rate decreases.
increases, and the labor-force participation rate is unaffected.
is unaffected, and the labor-force participation rate increases.
decreases, and the labor-force participation rate is unaffected.
The natural unemployment rate includes
both frictional and structural unemployment.
neither frictional nor structural unemployment.
structural, but not frictional unemployment.
frictional, but not structural unemployment.
There will be structural unemployment if
some wages are kept above the equilibrium level.
some people choose not to work at the equilibrium wage.
some wages are below the equilibrium level.
All of the above could be correct.
The natural unemployment rate includes
both frictional and structural unemployment.
neither frictional nor structural unemployment.
structural, but not frictional unemployment.
frictional, but not structural unemployment.
Which of the following is a cause of frictional unemployment?
the minimum wage
a worker leaving a job to find one with better benefits
labor unions
All of the above are correct.
Economists have found evidence that receiving unemployment-insurance benefits
decreases the job-search effort of the unemployed.
has no effect on the job-search effort of the unemployed.
increases the job-search effort of the unemployed.
has an uncertain effect on the job-search effort of the unemployed.
Consumers decide to buy more computers and fewer typewriters. As a result, computer companies expand production while typewriter companies lay-off workers. This is an example of
structural unemployment created by efficiency wages.
cyclical unemployment created by a recession.
frictional unemployment created by a sectoral shift in demand.
None of the above are correct.
If the minimum wage was currently above the equilibrium wage, than a decrease in the minimum wage would
increase both the quantity demanded and the quantity supplied of labor.
decrease both the quantity demanded and the quantity supplied of labor.
increase the quantity of labor demanded and decrease the quantity supplied.
decrease the quantity of labor demanded and increase the quantity supplied.
