1.

(02.01 MC) Which of the following is true for the gross domestic product? (2 points)

	It includes the value of both final and intermediate domestic goods.
	It is the market value of goods produced in a foreign country.
	It includes net exports of the domestic country.
	It is only measured by adding up the total expenditures in an economy.
	It includes the value of intermediate goods.

2.

(02.01 LC) The circular flow model of the economy divides economic activity into two broad categories, which are (2 points)

	capital production and government spending
	value-added and expenditures
	factor markets and product markets
	businesses and banking institutions
	private and public enterprise

3.

(02.01 HC) Use the table to answer the question that follows.

Wages received by employees	$15 trillion
Bonuses received by employees	$6 trillion
Rent on land	$12 trillion
Dividends earned by stockholders	$8 trillion
Profits earned by firms	$19 trillion
Interest received on capital	$7 trillion
Net income from abroad	$13 trillion

Calculate the GDP of the country according to the income approach. (2 points)

	The GDP of the country is $80 trillion.
	The GDP of the country is $67 trillion.
	The GDP of the country is $65 trillion.
	The GDP of the country is $61 trillion.
	The GDP of the country is $59 trillion.

4.

(02.02 MC) Which of the following represents a limitation in the measurement of the GDP? (2 points)

	Inventories of businesses are measured in the GDP.
	Products from household production are not included in the GDP.
	Household expenditure is calculated while measuring the GDP.
	A net export of the domestic country is not included in the GDP.
	Private investment expenditure is not included in the GDP.

5.

(02.02 MC) The GDP does not include ________ because they are considered to be ________. (2 points)

	illegal sales; non-market transactions
	net exports; non-domestic goods
	private investment; remittance from abroad
	transfer payments; economic transactions
	household production; intermediate goods

6.

(02.03 HC) The following table shows the demographic of a country, as given by the Bureau of Labor Statistics.

Individuals under the age of 16	16 million
Retired individuals over the age 65	9 million
Discouraged workers of age 16 and above	5 million
Employed persons of age 16 and above	18 million
Unemployed persons of age 16 and above	8 million

Based on the above data, what is the labor force participation rate (LFPR) for this country? (2 points)

	78%
	65%
	60%
	45%
	32%

7.

(02.03 HC) The Bureau of Labor Statistics takes a survey and reports the following unemployment data:

Number of Workers Classified as Employed	178 million
Number of Workers Cyclically Unemployed	12 million
Number of Workers Frictionally Unemployed	3 million
Number of Workers Structurally Unemployed	7 million
Working-age Population	300 million

Based on this data, what is the natural unemployment rate in the economy? (2 points)

	3.3 percent
	5 percent
	6 percent
	12 percent
	33 percent

8.

(02.03 MC) Which of the following explains why the unemployment rate could be misleading? (2 points)

	It does not consider discouraged workers, and hence it is understated.
	It considers discouraged workers, and hence it is overstated.
	It considers part-timers as employed, and hence it is understated.
	It does not consider those who were laid off due to recession, and hence it is understated.
	It considers part-timers as unemployed, and hence it is understated.

9.

(02.03 LC) Michaela was recently fired from her factory job because her company's inventories have sharply increased for six consecutive months. Michaela is most likely (2 points)

	a marginally attached worker
	a discouraged worker
	frictionally unemployed
	structurally unemployed
	cyclically unemployed

10.

(02.03 MC) An economy's natural unemployment rate is 9 percent, its structural unemployment rate is 2 percent, and its cyclical unemployment rate is 3 percent. Based on this data, its frictional unemployment rate is ________, and its actual unemployment rate is ________. (2 points)

	6 percent; 9 percent
	7 percent; 9 percent
	12 percent; 7 percent
	9 percent; 12 percent
	7 percent; 12 percent

11.

(02.03 MC) Which of the following would explain an increase in the natural rate of unemployment? (2 points)

	Increasing education level of the population
	Decreasing technical skills of employees
	Increase in wages
	Decreasing restrictions on production
	Decrease in a recessionary gap

12.

(02.04 MC) A consumer price index going from 140 in year 1 to 130 in year 2 means the economy is experiencing (2 points)

	depression
	deflation
	inflation
	recession
	stagflation

13.

(02.04 MC) If the consumer price index for a given year is 120 and the price of the fixed basket of goods for that year is $60, what must the price of the basket have been in the base year? (2 points)

	$30
	$50
	$72
	$120
	Indeterminate

14.

(02.04 HC) Assume that only two goods, A and B, are produced in an economy. In the base year, 5 units of A are produced for a price of $4, and 5 units of B are produced for a price of $6. And in a given year, 5 units of A are produced for a price of $5, and 5 units of B are produced for a price of $9. What is the CPI for the given year? (2 points)

	71.42
	140
	50.5
	198
	125

15.

(02.04 LC) The consumer price index tends to ________ the substitution of lower-priced goods, which has the effect of ________ inflation. (2 points)

	underrepresent; overstating
	underrepresent; understating
	overrepresent; overstating
	overrepresent; understating
	ignore; understating

16.

(02.05 LC) If the government of a country instituted a policy that led to an unexpected decrease in consumer prices, which of the following groups would inherently benefit? (2 points)

	People whose incomes are automatically adjusted with inflation
	People on fixed incomes
	Borrowers of fixed interest rates
	Borrowers of variable interest rates
	Businesses that had taken out large capital loans

17.

(02.05 MC) If a bank offers a home loan with a fixed interest rate of 8 percent with an expected inflation rate of 4 percent. If the inflation rate ends up being 5 percent, which accurately describes the impact on the bank? (2 points)

	It benefited because the real interest rate increased by 1 percent.
	It benefited because the real interest rate increased by 4 percent.
	It lost financially because the real rate of interest decreased by 1 percent.
	Its expected gains increased because the real rate of interest increased to 9 percent.
	The bank's real interest rate was not impacted by the difference in the inflation rate.

18.

(02.06 MC) Use the data table to answer the question that follows.

Year	Nominal GDP	GDP Deflator
1	$640 billion	160
2	$1050 billion	175

By how much did the value of output, adjusted for inflation, change from Year 1 to Year 2? (2 points)

	$200 billion
	$410 billion
	$179 billion
	$400 billion
	$600 billion

19.

(02.06 MC) In an economy, if the real GDP is $50 billion and the GDP deflator is 150, what would be the value of the total output in the economy at the current market prices? (2 points)

	$50 billion
	$75 billion
	$3 billion
	$7,500 billion
	$100 billion

20.

(02.06 MC) Use the data table to answer the question that follows.

Year	Price ($)	Quantity (units)
2015	120	200
2016	150	150

Using 2015 as the base year, calculate real GDP for the years 2015 and 2016. (2 points)

	The real GDP for 2015 and 2016 are $22,500 and $18,500, respectively.
	The real GDP for 2015 and 2016 are $24,000 and $18,000, respectively.
	The real GDP for 2015 and 2016 are $20,000 and $18,000, respectively.
	The real GDP for 2015 and 2016 are $30,000 and $20,500, respectively.
	The real GDP for 2015 and 2016 are $21,500 and $30,500, respectively.

21.

(02.06 MC) If the real GDP and nominal GDP are $200 billion and $620 billion respectively, what is the value of the GDP deflator? (2 points)

	322
	320
	312
	330
	310

22.

(02.07 LC) What can you conclude regarding the the economy if it is producing below the full employment level? (2 points)

	There is a negative output gap.
	There is a positive output gap.
	There is zero output gap.
	There is an inflationary gap.
	There is insufficient information to determine whether there is an output gap.

23.