WorksheetsGDP and Economic Concepts Worksheet
Total questions: 99
Worksheet time: 50mins
A professional gambler moves from a state where gambling is legal to a state when gambling is illegal. 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 effect of an increase in the price level is represented by a:
Shift to the right of the aggregate demand curve
Shift to the left of the aggregate demand curve
Movement to the left along a given aggregate demand curve
Movement to the right along a given aggregate demand curve
Expenditures on a nation's domestic production:
Are less than its domestic production
Are equal to its domestic production
Are greater than its domestic production
Could be less than, equal to, or greater than its domestic production
GDP is equal to
The market value of all final goods and services produced within a country in a given period of time
Y
C + I + G + NX
All of the above are correct
Which of the following statements regarding GDP is correct?
GDP includes factory production, but not any harm that may be inflicted on the environment
GDP accounts for all activities taking place outside markets
GDP provides detailed information about the distribution of income
GDP is a good measure of economic well-being for all purposes
In computing GDP, market prices are used to value final goods and services because
Market prices do not change much over time so it is easy to make comparisons between years
Market prices reflect the values of goods and services
Market prices reflect the quantity sold
None of the above is correct, market prices are not used in computing GDP
James owns 2 houses. He rents one house to the Johnson family for 10,000peryear.Helivesintheotherhouse.Ifheweretorentthehouseinwhichhelives,hecouldearn 12,000 per year in rent. How much do the housing services provided by the 2 houses contribute to GDP if he also rents the house in which he lives?
$0
$10,000
$12,000
$22,000
Household spending on education is counted in which component or subcomponent of GDP?
Consumption of durable goods
Consumption of nondurable goods
Consumption of services
Investment
The CPI differs from the GDP deflator in that
The CPI is a price index while the GDP deflator is an inflation index
Substitution bias is not a problem with the CPI but it is a problem with the GDP deflator
Increases in the prices of foreign produced goods that are sold to US consumers show up in the CPI but not in the GDP deflator
Increases in the prices of domestically produced goods that are sold to US government show up in the CPI but not in the GDP deflator
Which of the following is a correct way to measure productivity?
Divide the number of hours worked by the quantity of output
Divide the quantity of output by the number of hours worked
Determine how much output is produced in a given time
Determine how much time it takes to produce a unit of output
If a state made an illegal activity such as gambling or prostitution legal then other things the same GDP
Necessarily increases
Necessarily decreases
Doesn't change because both legal and illegal production are included in GDP
Doesn't change because these activities are never included in GDP
What would happen in the market for loanable funds if the government were to increase the tax on interest income
Interest rates would rise
Interest rates would be unaffected
Interest rates would fall
The change in the interest rate would be ambiguous
The CPI is a measure of the overall cost of the goods and services bought by
A typical consumer and the CPI is computed and reported by the Department of the Treasury
Typical consumers and typical business firms and the CPI is computed and reported by the Department of the Treasury
A typical consumer and the CPI is computed and reported by the Bureau of Labor Statistics
Typical consumers and typical business firms and the CPI is computed and reported by the Bureau of Labor Statistics
In 1931 the price of a movie ticket was $0.25. The consumer price index was 15.2 in 1931 and 210 in 2008. Using 2008 prices the real price of a movie in 1931 was
$13.82
$52.50
$1.81
$3.45
The consumer price index is used to
Convert nominal GDP into real GDP
Turn dollar figures into meaningful measures of purchasing power
Babe Ruth, the famous baseball player, earned $80000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However prices have also risen since 1931. We can conclude that
The best baseball players today are about 400 times better off than Babe Ruth was in 1931
Because prices have also risen, the standard of living of baseball stars hasn't changed since 1931
One cannot make judgements about changes in the standard of living based on changes in prices and changes in incomes
One can not determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931
Which of the following are human capital and physical capital, respectively?
For an accounting firm: the accountant's knowledge of tax laws and computer software
For a grocery store: grocery carts and shelving
For a school: chalkboard and desks
For a library: the building and the reference librarian's knowledge of the Internet
For an economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?
Consumption
Taxes
Government purchases
Net exports
Suppose the economy is closed and consumption is 6500, taxes are 1500 and government purchases are 2000. If national saving amounts to 1000 then what is GDP?
9,500
10,000
10,500
11,000
In a system of 100 percent reserve banking
A. Banks do not make loans
B. Currency is the only form of money
C. Deposits are banks only assets
D. All of the above are correct
A bank has a 10 percent reserve requirement, $5000 in deposits and has loaned out all it can given the reserve requirement.
It has 50inreservesand 4950 in loans
It has 500inreservesand 4500 in loans
It has 555inreservesand 4445 in loans
None of the above are correct
If a country legalized gambling and then reversed its decision and made gambling illegal, then other things the same GDP
Necessarily increases
Necessarily decreases
Doesn't change because both legal and illegal production are included in GDP
Doesn't change because gambling is never included in GDP
Which of the following equations is always correct in an open economy
I=Y-C
I=S
I=S-NCO
I=S+NX
The level of real GDP per person
Differs widely across countries but the growth rate of real GDP per person is similar across countries
Is very similar across countries but the growth rate of real GDP per person differs widely across countries
and the growth rate of real GDP per person are similar across countries
and the growth rate of real GDP per person vary widely across countries
Which of the following is a correct way to measure productivity?
Divide the number of hours worked by the quantity of output
Divide the quantity of output by the number of hours worked
Determine how much output is produced in a given time
Determine how much time it takes to produce a unit of output
Consider three imaginary countries. In Aire, saving amounts to 4000andconsumptionamountsto 12000. In Bovina, saving amounts to 3000andconsumptionamountsto 24000. In Cantar, saving amounts to 10000andconsumptionamountsto 50000. The saving rate is
Higher in Aire than in Cantar and it is higher in Cantar than in Bovina
Higher in Cantar than in Aire and it is higher in Aire than in Bovina
Higher in Cantar than in Bovina and it is the same in Bovina and Aire
Higher in Aire than in Bovina and it is the same in Aire and Cantar
The classical theory of inflation
Is also known as the quantity theory of money
Was developed by some of the earliest economic thinkers
Is used by most modern economists to explain the long-run determinant of the inflation rate
All of the above are correct
Money demand refers to
The total quantity of financial assets that people want to hold
How much income people want to earn per year
How much wealth people want to hold in liquid form
How much currency the Federal Reserve decides to print
The purchase of US government bonds by Egyptians is an example of
US imports
US exports
Foreign portfolio investment by Egyptians (FPI)
Foreign direct investment by Egyptians (FDI)
An Italian company builds and operates a pasta factory in US. This is an example of
Foreign direct investment that increases Italian net capital outflow
Foreign direct investment that decreases Italian net capital outflow
Foreign portfolio investment that increases Italian net capital outflow
Foreign portfolio investment that decreases Italian net capital outflow
Other things the same, the aggregate quantity of goods demanded (AD) decreases if
Real wealth falls
The interest rate rises
. The domestic currency appreciates
D. All of the above are correct
Economists differ in their views of the role of the government in promoting economic growth. A controversial idea is that government should
Lend support to the invisible hand by maintaining property rights and political stability
Lower barriers and impediments to free trade
Encourage capital formation
Target and subsidize specific industries important for technological progress
Curtis is a stock broker. He has had several job offers but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. John is an accountant. He has looked for work for some time but no accounting firms are hiring
John and Curtis are both frictionally unemployed
John and Curtis are both structurally unemployed
Curtis is frictionally unemployed and John is structurally unemployed
Curtis is structurally unemployed and John is frictionally unemployed
35. Anna, a US citizen, works only in Germany. The value added to production from her employment is included
Only in US GDP
Only in German GDP
In both German and US GDP
In neither German nor US GDP
Which of the following are residents of rich countries likely to have in greater quantities or better quality than residents of poor countries
Housing
Health care
Life expectancy
All of the above
According to liquidity preference theory, the money-supply curve would shift rightward
If the money demand curve shifted right
If the Federal Reserve chose to increase the money supply
If the interest rate increased
All of the above are correct
Net capital Outflow is defined as the purchase of
Foreign assets by domestic residents minus the purchase of domestic assets by foreign residents
Foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents
Domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents
Domestic assets by foreign residents minus the purchase of foreign assets by domestic residents
Other things the same, an increase in the price level makes dollars people hold worth
More, so they can buy more
Less, so they can buy less
Can directly be used to buy goods and services
Function as a unit of account
People hold money primarily because it
Has a guaranteed nominal return
Serves as a store of value
Can directly be used to buy goods and services
Functions as a unit of account
If National saving in a closed economy is greater than zero, which of the following must be true?
Either public saving or private saving must be greater than zero
Investment is positive
Y - C - G > 0
All of the above are correct
Which of the following is correct?
In the national income accounts, investment and private saving refer to the same thing
In a closed economy if national saving is greater than zero, then everyone must be saving
The financial system channels funds from savers to borrowers
People whose consumption exceeds their income are savers
The following table presents information about a closed economy whose market for loan funds is in equilibrium • GDP: 8.7trillion•ConsumptionSpending: 6.1 trillion • Taxes Net of Transfers: 1.0trillion•GovernmentPurchases: 0.8 trillion. Determine the quantity of private saving
$0.2 trillion
$1.6 trillion
$1.8 trillion
$2.6 trillion
Use the balance sheet for the following question • First Bank of Mason City • Assets: • Required Reserves $20.00 • Loans $80.00 • Liabilities: • Deposits $100.00 If $400 is deposited into the First Bank of Mason City
The bank will be able to make additional loans totaling $320
Excess reserves initially increase by $320
Required reserves initially increase by $80
All of the above are true
Ryan lives in an apartment where he pays 7000ayearinrent.Alexislivesinahousethatcouldberentedfor 14000 a year. How much do these housing services contribute to GDP?
$21000
$14000
$7000
$0
Spots, Inc produces ink and sells it to Write on Target which makes pens. The ink produced by Spots, Ink is called
An inventor good
a transitory good
a final good
an intermediate good
Changes in the producer price index are often thought to be useful in predicting changes in
Stock prices
The consumer price index
The unemployment rate
The rate of output of goods and services
A Korean steel company produces steel in the US with some of its steel being exported to other nations and some of it being sold within the US. IF the prices of this steel increase then
The GDP deflator and the CPI will both increase
The GDP deflator will increase and the CPI will be unchanged
The GDP deflator will be unchanged and the CPI will increase
The GDP deflator and the CPI will both be unchanged
Suppose over the last year that the price of iron ore increased from 1200atonto 1300 a ton. Over the same time a measure of the overall price level increased from 168 to 187. The price of iron ore increased by
Less than inflation and this means it became relatively less scarce
Less than inflation and this means it became scarcer
More than inflation and this means it became scarcer
More than inflation but this doesn't necessarily mean that it became scarcer
Which of the following equations is correct?
Y = C + I + G + NCO
NX = NCO
NCO = S - I
All of the above are correct
If the minimum wage is $7, the number of people unemployed is
20 and if the minimum wage is $6 it is 20
40 and if the minimum wage is $6 it is 0
40 and if the minimum wage is $6 it is 20
0 and if the minimum wage is $6 it is 0
Use the balance sheet for the following question First Bank of Mason City Assets: • Required reserves 20.00•Loans 80.00 Liabilities: • Deposits 100.00IF 1000 is deposited into the First Bank of Mason City
Total reserves will initially increase by $200
Liabilities will decrease by $1000
Assets will increase by $1000
Required reserves will increase by $800
Which of the following shifts aggregate demand curve (AD) left
An increase in Government expenditures
A decrease in consumption
an decrease in the expected price level
an increase in net export
Which of the following are human capital and physical capital, respectively?
For a brick layer: her bricks and her tools
For a gas station: the pumps and the cash register
For a restaurant: the chef's knowledge about preparing food and the equipment in the kitchen
For a medical officer: the building and the doctor's knowledge of medicine
Which of the following is a certificate of indebtedness?
Both stocks and bonds
Stocks but not bonds
Bonds but not stocks
Neither stocks nor bonds
When opening a print shop you need to buy printers, computers, furniture and similar items. Economists call these expenditures
Capital Investment
Investment in human capital
Business consumption expenditures
Personal Saving
Sinclair has just finished high school and started looking for his first job but has not yet found one. Other things the same, the unemployment rate
and the labor-force participation rate both increase
increases and the labor-force participation rate is unaffected
is unaffected and the labor-force participation rate increases
and the labor-force participation rate are both unaffected
People who are unemployed because of job search are best classified as
Cyclically unemployed
Structurally unemployed
Frictionally unemployed
Discourage workers
Leslie is offered a job in Seattle that pays 80,000.SheisalsoofferedajobinBostonthatpays 75,000. Which set of CPI's below would make the two salaries have almost the same purchasing power?
A. 83.3 in Seattle and 100 in Boston
B. 89.3 in Seattle and 100 in Boston
C. 100 in Seattle and 124.5 in Boston
D. 100 in Seattle and 140 in Boston
Which list contains only actions that decrease the money supply?
Make open market purchases, raise the reserve requirement ratio
Make open market purchases, lower the reserve requirement ratio
Make open market sales, raise the reserve requirement ratio
Make open market sales, lower the reserve requirement ratio
An American company owns a fast food restaurant in Romania. The value of goods and services it produces is included
In both Romania and US GDP
Partly in Romania GDP and partly in US GDP
In Romania GDP but not US GDP
In US GDP but not Romania GDP
which of the following is included in gdp
the sale of intermediate goods
the sale of user goods
The sale of services such as visits to a doctor
All of the above are correct
Saving deposits are included in
M1 but not M2
M2 but not M1
M1 and M2
Neither M1 or M2
When in France you notice that prices are posted in euros, this best illustrates money's function as
A. A store of value
B. A medium of exchange
C. A unit of account
D. A method of barter
When conducting an open-market sale, the Fed
Buys government bonds, and in so doing increases the money supply
Buys government bonds, and in so doing decreases the money supply
Sells government bonds, and in so doing increases the money supply
Sells government bonds, and in so doing decreases the money supply
As the price level decreases, the value of money
Increases, so people want to hold more of it
Increases, so people want to hold less of it
Decreases, so people want to hold more of it
Decreases, so people want to hold less of it
Velocity is computed as
(P x Y) / M
(P x M) / Y
(Y x M) / P
(Y x M) / V
If you are vacationing in France and the dollar depreciates relative to the euro, then
The dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros
The dollar buys more euros. It will take more dollars to buy a good that costs 50 euros
The dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros
The dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros
If the inflation rate is 2 percent and the real interest rate is 3 percent then the nominal interest rate is
5 percent
1 percent
1.5 percent
2/3 percent
Who would be included in the labor force?
Karen, who works most of the week in a steel factory
Beth, who is waiting for her new job at the bank to start
Dave, who does not have a job but is looking for work
All of the above are included in the labor force
A Brazilian company produces soccer balls in the US and exports all of them. If the price of the soccer balls increases, the GDP deflator:
remains unchanged
increases
decreases
fluctuates unpredictably
If the nominal interest rate increases and the expected inflation rate is unchanged, what happens to the real interest rate and the CPI?
A. and the CPI both increase
B. is unchanged and the CPI increases
C. increases and the CPI is unchanged
D. and the CPI is unchanged
Which of the following bond buyers did NOT buy the bond that best met their objective?
Mia wanted a bond with a high interest rate regardless of the risk. She purchased a junk bond
Anna wanted a bond that would let her best avoid taxes. She purchased a municipal bond
Bill wanted to purchase a bond that was unlikely to have default. He purchased a bond that Standards and Poor's rated a low credit risk
To reduce risk, Toby purchased a long term bond rather than a short term one
Andrew is offered a job in Des Moines where the CPI is 80 and a job in New York where the CPI is 125. Andrew's job offer in Des Moines is $42,000. How much does the New York job need to pay in order to make the two salaries have almost the same purchasing power?
$74,667
$65,625
$60,900
$52,500
The nominal exchange rate is 30 Thai baht for 1 US dollar. A sub sandwich combo deal in the US costs $6 dollars in the US and 120 baht in Thailand. The real exchange rate is
3/8
2/3
3/2
8/3
IF the price level falls, the real value of a dollar
Rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve
Rises, so people will want to buy more. This response shifts aggregate demand to the right
Falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve
Falls, so people will want to buy less. This response aggregate demand to the left
Other things the same, an increase in the price level makes the dollars people hold worth
More, so they can buy more
Less, so they can buy less
Less, so they can buy more
Less, so they can buy less
According to liquidity preference theory, the money-supply curve would shift if the Fed
Engaged in open-market transactions
Changed the discount rate
Changed the reserve requirement
Did any of the above
A nation's standard of living is best measured by its
Real GDP
Real GDP per person
Nominal GDP
Nominal GDP per person
Which of the following equations is correct?
S = I + C
S = I - NX
S = I + NCO
S = NX - NCO
An Italian company opens a pasta company in the US. The profits from this pasta company are included in
Both US and Italian GNP
Both US and Italian GDP
US GDP and Italian GNP
US GNP and Italian GDP
When the dollar appreciates, the US
Exports decrease while imports increase
Exports and Imports decrease
Exports and Imports increase
Exports increase while imports decrease
Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures
Increase US net capital outflow and have no effect on Greek net capital outflow
Increase US net capital outflow and increase Greek net capital outflow
Increase US net capital outflow but decrease Greek net capital outflow
Decrease US net capital outflow but increase Greek net capital outflow
Which of the following bond buyers did NOT buy the bond that best met their objective?
A. Mia wanted a bond with a high interest rate regardless of the risk. She purchased a junk bond
. Anna wanted a bond that would let her best avoid taxes. She purchased a municipal bond
C. Bill wanted to purchase a bond that was unlikely to have default. He purchased a bond that Standards and Poor's rated a low credit risk
D. To reduce risk, Toby purchased a long term bond rather than a short term one
When the money market is drawn with the value of money on the vertical axis, an increase in the money supply
Increases the price level and the value of money
the price level and Decreases the value of money
Decreases the price level and Increases the value of money
Decreases the price level and the value of money
Net exports equal
Exports plus imports
Exports minus imports
Imports minus exports
GDP minus imports
The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included in
In government expenditures and exports
Government expenditures and imports
Exports but not government expenditures
Imports but not government expenditures
If the CPI was 90 in 1975 and is 225 today then $100 today purchases the same amount of goods and services as
$25.00 purchased in 1975
$33.33 purchased in 1975
$40.00 purchased in 1975
$135.55 purchased in 1975
Natural resources
Are inputs provided by nature
Include land, rivers and mineral deposits
Take 2 forms: renewable and nonrenewable
All of the above are correct
Phoenix furniture uses 10 workers each working 8 hours to produce 80 rocking chairs. What is Phoenix's productivity?
80 rocking chairs
10 rocking chairs per hour
1 rocking chair per hour
1 hour per rocking chair
Merideth is looking for work as a computer programmer. Although her prospects are good she hasn't yet taken a job. Julie is looking for work in a steel mill but there aren't many job ads for steel workers and every time she shows up for an interview there are many more people than openings
Merideth and Julie are both frictionally unemployed
Merideth and Julie are both structurally unemployed
Merideth is frictionally unemployed and Julie is structurally unemployed
Merideth is structurally unemployed and Julie is frictionally unemployed
If the exchange rate changes from 30 Kuwaiti dinar per dollar to 35 Kuwaiti dinar per dollar, the dollar has
. Appreciated and so buys more Kuwaiti goods
Appreciated and so buys fewer Kuwaiti
C. Depreciated and so buys more Kuwaiti goods
D. Depreciated and so buys fewer Kuwaiti goods
Currency are included in
M1 but not M2
M2 but not M1
M1 and M2
Neither M1 nor M2
Which list contains only actions that increase the money supply?
Raise the discount rate, Make open market purchases
Raise the discount rate, Make open market sales
Lower the discount rate, Make open market purchases
Lower the discount rate, Make open market sales
IF the exchange rate changes from 150 yen per dollar to 100 yen per dollar, the dollar has
Appreciated and so buys more Japanese goods
Appreciated and so buys fewer Japanese goods
Depreciated and so buys more Japanese goods
Depreciated and so buys fewer Japanese goods
When the money market is drawn with the value of money on the vertical axis, the value of money increases if
Either money demand or money supply shifts right
Either money demand or money supply shifts left
Money demand shifts right or money supply shifts left
Money demand shifts left or money supply shifts right
According to the quantity equation, if P= 12, Y= 6, M= 8 then V=
A. 16
B. 9
C. 4
D. None of the above is correct
Suppose that the government were to increase tax on building new houses and factories. This would make the interest rate
And investment increase
And investment decrease
Increase and investment decrease
Decrease and investment increase
Which of the following is a way to compute GDP?
A
A. Total income earned
B. Total expenditures on final goods
C. Add up the market values of all final goods and services
D. All of the above are correct
. A mutual fund is
. Is a financial institution that stands between savers and borrowers
. is a financial intermediary
C. allows people with small amounts of money to diversify their holdings
D. All of the above are correct
