These multiple choice questions are from the exam bank. If you believe one or more answers are not correct, then speak with the instructor. He is human and makes mistakes.
Lesson 15 - Gross Domestic Product(GDP)
1. National income accountants can avoid multiple counting by:
A. including transfer payments in their calculations.
2. Gross domestic product (GDP) measures and reports output:
A. as an index number.
3. Tom Atoe grows tomatoes for home consumption. This activity is:
A. excluded from GDP in order to avoid double counting.
4. Net exports are:
A. that portion of consumption and investment goods sent to other countries.
5. Nominal GDP was $130 and $150 in years 1 and 2 respectively. Real DDP was $100 and $110 in years 1 and 2 respectively. On the basis of this information we can conclude that:
A. the price level increased between years 1 and 2.
6. What is depreciation of capital?
A. adjusting nominal GDP for inflation.
7. Real GDP measures:
A. current output at current prices.
8. If nominal GDP rises:
A. real GDP may either rise or fall.
9. A large underground economy results in an:
A. understated GDP.
10. The growth of GDP may understate changes in the economy's economic well-being over time if the:
A. distribution of income becomes increasingly unequal.
11. As defined in national income accounting, investment includes:
A. business expenditures on machinery and equipment.
12. Sometimes economists have two different methodologies to calculate a statistic. What do economists call it when these two statistics should equal each other, but they do not?
13. The amount of after-tax income received by households is measured by:
A. discretionary income.
14. What is a problem with the GDP measure?
A. GDP accounts for environmental pollution but the estimate is not accurate.
15. Approximately how large (by economists' best guess) is the hidden economy in the United States?
Lesson 16 - Economic Growth
1. Growth is advantageous to a nation because it:
A. promotes faster population growth.
2. Given the annual rate of economic growth, the "rule of 70" allows one to:
A. determine the accompanying rate of inflation.
3. If the economy's real GDP doubles in 18 years, we can:
A. not say anything about the average annual rate of growth.
4. Recurring upswings and downswings in an economy's real GDP over time are called:
A. the failure of a market economy.
5. During a severe recession, we would expect output to fall the most in:
A. the health-care industry.
6. The phase of the business cycle in which real GDP is at a minimum is called:
A. the peak.
7. Market economies have been characterized by:
A. occasional instability of employment and price levels.
8. Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kara presently is:
A. cyclically unemployed.
9. The unemployment rate of:
A. women greatly exceeds that of men.
10. The natural rate of unemployment:
A. is fixed over time.
11. Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is:
A. 3 percent.
12. Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:
A. 4 percent.
13. Cost-push inflation:
A. is caused by excessive total spending.
14. Who is least likely to be hurt by unanticipated inflation?
A. a disabled laborer who is living off accumulated savings
15. A burst stock market bubble might adversely affect the economy by:
A. causing rapid inflation.
Lesson 17 - Macroeconomic Relationships
1. With an MPS of .4, the MPC will be:
A. 1.0 minus .4.
2. The consumption schedule shows:
A. that the MPC increases in proportion to GDP.
3. A decline in disposable income:
A. increases consumption by moving upward along a specific consumption schedule.
4. Which of the following is correct?
A. APC + APS = 1.
5. The investment demand curve portrays an inverse (negative) relationship between:
A. investment and real GDP.
6. A high rate of inflation is likely to cause a:
A. high nominal interest rate.
7. Investment spending in the United States tends to be unstable because:
A. expected profits are highly variable.
8. The multiplier is:
9. If the MPC is .70 and gross investment increases by $3 billion, the equilibrium GDP will:
A. increase by $10 billion.
10. The practical significance of the multiplier is that it:
A. equates the real interest rate and the expected rate of return on investment.
11. The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:
A. the real-world MPS is larger than the MPS in the examples.
12. The multiplier is useful in determining the:
A. full-employment unemployment rate.
13. In annual percentage terms, investment spending in the United States is:
A. less variable than real GDP.
14. When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift:
A. both the consumption and saving schedules downward.
15. The greater is the marginal propensity to consume, the:
A. smaller is the marginal propensity to save.