Practice Questions

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return on the project is:

a. 4.8%.
b. 5%.
c. $5,000.
d. $105,000.
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If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return on the project is:

a. 4.8%.
b. 5%.
c. $5,000.
d. $105,000.
b. 5%.
You are a university student and NOT working or looking for work. You are:

a. unemployed.
b. in the labour force but unemployed.
c. not part of the labour force.
d. counted in the labour force as underemployed
c. not part of the labour force.
If real GDP grows at an average rate of 3% per year, it will double in _____ years.

a. less than 10
b. approximately 17
c. approximately 23
d. approximately 36
c. approximately 23
The rule of 70 is MOST useful in:

a. identifying the causes of economic growth.
b. identifying the sources of economic growth.
c. estimating the productivity of labour.
d. estimating the doubling time of real GDP for a given growth rate.
d. estimating the doubling time of real GDP for a given growth rate.
The four main types of financial assets do NOT include:

a. real estate.
b. bonds.
c. bank deposits.
d. loans.
a. real estate.
Assume a closed economy with no government and a fixed aggregate price level and constant interest rate.
Furthermore, assume that the country's consumption function is C = 200 + 0.75YD, where YD is disposable income, and C is consumption, and that planned investment is $75.
If real GDP is $900:

a. planned investment equals $900.
b. unplanned inventory investment is negative.
c. autonomous consumption equals $900.
d. the economy is in income-expenditure equilibrium.
b. unplanned inventory investment is negative.
GDP is $12 trillion in a closed economy. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion.

What is the government budget balance?

a. a surplus of $1.5 trillion
b. a deficit of $1.5 trillion
c. a surplus of $0.5 trillion
d. a deficit of $0.5 trillion
b. a deficit of $1.5 trillion
If there are 100 million people in the total population, a labour force of 50 million, and 47 million employed workers, the unemployment rate is:
a. 3%.
b. 6%.
c. 8%.
d. 10%.
b. 6%.
Discouraged workers are:

a. not working and want to work, but are not actively seeking a job.
b. people working part-time who would like to work full-time.
c. people working for less money than they would like to.
d. people working at a job that requires less education than they have.
a. not working and want to work, but are not actively seeking a job.
(Figure: Aggregate Expenditures Curve II) Use Figure: Aggregate Expenditures Curve II.
Aggregate Expenditures per year = $800
Real GDP per year= $2000
Suppose that the consumption function rises by $100. The equilibrium level of real GDP would rise by:

a. $100.
b. $200.
c. $250.
d. $50.
c. $250.
(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, if the interest rate rises above 6%, _____ quantity of loanable funds will be demanded. (r* =6% Q*=500) a. the same b. a larger c. a smaller d. at first a smaller and then a largerc. a smaller