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Quizzes for test 2- principles of economics

Terms in this set (50)

Refer to Figure 23-1. Which of the following correctly identifies the flow of dollars?

a. W, X, Y and Z
b. K, M, L and N
c. C, K, M and D
d. A, L, N and B
d. A, L, N and B
For an economy as a whole,

a. consumption must equal saving.
b. wages must equal profit.
c. consumption must equal income.
d. income must equal expenditure.
d. income must equal expenditure.
GDP is not a perfect measure of well-being; for example,

a. GDP excludes the value of volunteer work.
b. GDP does not address the distribution of income.
c. GDP does not address environmental quality.
d. All of the above are correct.
d. All of the above are correct.
GDP is equal to

a. the market value of all final goods and services produced within a country in a given period of time.
b. Y.
c. C + I + G + NX.
d. All of the above are correct.
d. All of the above are correct.
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013 .

Refer to Table 23-6. In 2011, this country's nominal GDP was

a. $620.
b. $760.
c. $440.
d. $260.
c. $440.
A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 .


What was this country's real GDP in 2016?

a. $12,550
b. $10,950
c. $10,575
d. $11,250
b. $10,950
If nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is

a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.
b. 83.33, and this indicates that the price level has increased by 83.33 percent since the base year.
c. 120, and this indicates that the price level has increased by 20 percent since the base year.
d. 120, and this indicates that the price level has increased by 120 percent since the base year.
a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.
All of the following are examples of a nondurable good except

a. a pencil.
b. a pair of shoes.
c. one gallon of gasoline.
d. a queen-size bed.
d. a queen-size bed.
Countries with low GDP per person tend to have

a. lower rates of child malnutrition.
b. fewer infants with low birth weight.
c. higher rates of infant mortality.
d. more access to safe drinking water.
c. higher rates of infant mortality.
A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010.

a. real output and the price level both fell.
b. real output rose and the price level fell.
c. real output and the price level both rose.
d. real output fell and the price level rose.
d. real output fell and the price level rose.
Gasoline is considered a final good if it is sold by a

a. gasoline station to a bus company that operates a bus route between San Francisco and Los Angeles.
b. pipeline operator to a gasoline station in San Francisco.
c. gasoline station to a motorist in Los Angeles.
d. All of the above are correct.
c. gasoline station to a motorist in Los Angeles.
A form of government spending that is not made in exchange for a currently produced good or service is called

a. a transfer payment.
b. consumption.
c. investment.
d. None of the above is correct.
a. a transfer payment.
Suppose an economy produces only eggs and ham. In 2009, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2010, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2009,

a. nominal GDP is $500, real GDP is $400, and the GDP deflator is 80.
b. nominal GDP is $400, real GDP is $500, and the GDP deflator is 125.
c. nominal GDP is $400, real GDP is $500, and the GDP deflator is 80.
d. nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.
d. nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.
A dairy buys $50,000 worth of milk and spend $5,000 on cartons and utilities. It sells the cartons of milk to a grocery store for $60,000 that then sells all of the cartons to consumers for $65,000. How much do these actions add to GDP?

a. $55,000
b. $65,000
c. $120,000
d. None of the above are correct.
b. $65,000
Refer to Figure 23-1. Which of the following pairs correctly identify W and Y?

a. markets for factors of production and markets for goods and services
b. firms and households
c. expenditures and income
d. consumption and investment
b. firms and households
In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015?

a. $2000
b. $4400
c. $5600
d. $3200
d. $3200
Chapter 11
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which of the following statements is correct about the relationship between inflation and interest rates?

a. In order to fully understand inflation, we need to know how to correct for the effects of interest rates.
b. There is no relationship between inflation and interest rates.
c. The interest rate is determined by the rate of inflation.
d. In order to fully understand interest rates, we need to know how to correct for the effects of inflation.
d. In order to fully understand interest rates, we need to know how to correct for effects of inflation.
Which of the following is correct?
a. The GDP deflator is more commonly used as a gauge of inflation than the CPI is.
b. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.
c. The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers.
d. The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers.
b. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.
The following table shows some values of the Consumer Price Index and the corresponding inflation rates for 2012-2015.

Year CPI InflationRate

2012 229.6 2.1%
2013 233.0
2014 1.6%
2015 237.0 0.1%
a. ​236.7.
b. ​235.0.
c. ​234.6.
d. ​236.9.
a. 236.7
When the consumer price index falls, the typical family
a. can save less because they do not need to offset the effects of rising prices.
b. can spend fewer dollars to maintain the same standard of living.
c. has to spend more dollars to maintain the same standard of living
d. finds that its standard of living is not affected.
b. can spend fewer dollars to maintain the same standard of living.
Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was
a. 100 in 2012.
b. 105 in 2013.
c. 109.5 in 2014.
d. All of the above are correct.
d. all of the above are correct
During periods of deflation, the nominal interest rate will be​

​a. higher than the real interest rate.
b. ​lower than the real interest rate.
c. ​the same as the real interest rate.
d. ​possibly higher, lower, or the same as the real interest rate. The answer depends on how much deflation there is in the economy.
b. lower than the real interest rate
Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

a. $37,711.86.
b. $112,711.86.
c. $66,750.00.
d. $49,906.02.
b. $112,711.86
The economy's inflation rate is the

a. percentage change in the price level from the previous period
b. change in the gross domestic product from the previous period
c. price level in the current period
d. change in the price level from the previous period.
a. percentage change in the price level from the previous period.
The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs

Year Price of hamburgers
Price of hot dogs
2009
$5.00 $3.00
2010
5.50 3.30
2011
5.61 3.63

a. 14 percent.
b. 19 percent.
c. 17 percent.
d. 6 percent.
c. 17 percent
The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

a. 9.5 percent
b. - 0.75 percent
c. - 0.5 percent
d. 9.75 percent
a. 9.5 percent
The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats.
Year
2008
2009
2010
Price of aBaseball
$3.25
$3.75
$4.50
Price of a Baseball Bat
$75
$82
$96
a. 100.00 in 2008, 110.03 in 2009, and 117.43 in 2010.
b. 100.00 in 2008, 110.03 in 2009, and 129.20 in 2010.
c. 100.00 in 2008, 117.00 in 2009, and 132.50 in 2010.
d. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.
b. 100.00 in 2008, in 110.3 in 2009, and 129.20 in 2010
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
Year
2012
2013
Price ofPeaches
$11 per bushel
$9 per bushel
Price ofPecans
$6 per bushel
$10 per bushel
If 2012 is the base year, then the CPI for 2013 was
d. 104.4
The CPI is a measure of the overall cost of
a. the goods and services purchased by a typical consumer
b. the stocks on the New York Stock Exchange
c. the inputs purchased by a typical producer
d. the goods and services produced in the economy
a. the goods and services purchases by a typical consumer.
For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?

a. If the basket of goods that is used to calculate the CPI cost $40 in 2014, then that basket of goods cost $60 in 2015.
b. If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016.
c. The overall level of prices increased by 60 percent between 2014 and 2016.
d. All of the above are correct.
b. If the basket of goods that is used to calculate the Cpi cost $25 in 2015, then that basket of goods cost $35 in 2016
An important difference between the GDP deflator and the consumer price index is that

a. the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
b. the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
c. the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.
d. the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
a. the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.

The price of a 1975 golf ball in 2005 dollars is
a. $2.00.
b. $0.53.
c. $0.73.
d. $0.05.
c. $ 0.73
chapter 15
...
labor data for aridia
Year
2010
2011
2012
Adult population
2,000
3,000
3,200
Number of employed
1,400
1,300
1,600
Number of unemployed
200
600
200

the unemployment rate of aridia
a. decreased both from 2010 to 2011 and from 2011 to 2012.
b. increased from 2010 to 2011 but decreased from 2011 to 2012.
c. decreased from 2010 to 2011 but increased from 2011 to 2012.
d. increased both from 2010 to 2011 and from 2011 to 2012.
b. increased from 2010 to 2011 but decreased from 2011 to 2012.
Measuring unemployment
a. congressional budget office
b. department of commerce
c. bureau of labor statistics
d. council of economic advisers
c. bureau of labor statistics
If the government imposes a minimum wage of $4, how many workers will be unemployed?

a. 0
b. 3,000
c. 4,000
d. 7,000
a.0
Which of the following correctly identifies lines A and B?
a. Line A is the labor force participation rate, and line B is the adult population.
b. Line A is the unemployment rate, and line B is the natural rate of unemployment.
c. Line A is the labor force participation rate, and line B is the unemployment rate.
d. Line A is the employment rate, and line B is the adult population.
b.
Line A is the unemployment rate, and line B is the natural rate of unemployment.
Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills.

a. Jenna is structurally unemployed, and Mary is frictionally unemployed.
b. Jenna and Mary are both structurally unemployed.
c. Jenna and Mary are both frictionally unemployed.
d. Jenna is frictionally unemployed, and Mary is structurally unemployed.
c.
Jenna and Mary are both frictionally unemployed.
At the equilibrium wage, how many workers are employed?

a. 0
b. 1,000
c. 9,000
d. 5,000
d. 5,000
Jamarcus works part-time as a pizza delivery person in a college town. The Bureau of Labor Statistics counts Jamarcus as

a. unemployed and in the labor force.
b. employed and in the labor force.
c. unemployed and not in the labor force.
d. employed and not in the labor force.
b. employed and in the labor force.
A firm may pay efficiency wages in an attempt to
a. reduce incentives to shirk.
b. reduce turnover.
c. attract a well-qualified pool of applicants.
d. All of the above are correct.
d. all of the above are correct
In 2016 the Bureau of Labor Statistics reported that there were 71.9 million people over age 25 who had at least a bachelor's degree. Of these 52.1 million were employed and 1.3 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group?

a. 72.5% and 2.4%
b. 72.5% and 1.8%
c. 74.3% and 1.8%
d. 74.3% and 2.4%
d. 74.3% and 2.4 %
Cyclical unemployment refers to

a. the portion of unemployment created by wages set above the equilibrium level.
b. short-run fluctuations around the natural rate of unemployment.
c. the portion of unemployment created by job search.
d. changes in unemployment due to changes in the natural rate of unemployment.
b. short-run fluctuations around the natural rate of unemployment
If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is

a. structural unemployment amounting to 0.5 percent of the labor force.
b. search unemployment amounting to 0.5 percent of the labor force.
c. frictional unemployment amounting to 0.5 percent of the labor force.
d. cyclical unemployment amounting to 0.5 percent of the labor force.
d. cyclical unemployment amounting to 0.5 percent of the labor force.
Amy is working part-time. Tavaris is on temporary layoff. Who is included in the Bureau of Labor Statistics "employed" category?

a. neither Amy nor Tavaris
b. only Amy
c. only Tavaris
d. both Amy and Tavaris
b. only Amy
A person who is counted as "unemployed" by the Bureau of Labor Statistics

a. is also in the labor force.
b. must have recently looked for work or be on temporary layoff.
c. must be at least 16 years old.
d. All of the above are correct.
d. all of the above are correct
If the government imposes a minimum wage of $8, then how many workers will be employed?

a. 5,000
b. 3,000
c. 7,000
d. 4,000
b.3,000
Efficiency wages

a. increase productivity but increase unemployment.
b. increase productivity and reduce unemployment.
c. decrease productivity and increase unemployment.
d. decrease productivity but reduce unemployment.
a. increase productivity but increase unemployment.
An increase in the minimum wage

a. decreases the quantity of labor demanded but increases the quantity of labor supplied.
b. decreases both the quantity demanded and the quantity supplied of labor.
c. increases both the quantity demanded and the quantity supplied of labor.
d. increases the quantity of labor demanded but decreases the quantity of labor supplied.
a.
decreases the quantity of labor demanded but increases the quantity of labor supplied.
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