1.Economic growth can be defined as an increase in: A.either real GDP or real GDP per capita. B.nominal GDP. C.total consumption expenditures. D.total export expenditures

2.Real GDP per capita is found by: A.adding real GDP and population. B.subtracting population from real GDP. C.dividing real GDP by the population. D.dividing population by real GDP.

3.Which of the following best measures improvements in the standard of living of a nation? A.growth of nominal GDP B.growth of real GDP C.growth of real GDP per capita D.growth of nominal GDP per capita

Alta Zorn Alta Zorn

Year (RGDP) (RGDP) (Population) (Population)

1 $2,000,000,000 $150,000,000,000 200,000 5,000,000

2 $2,100,000,000 $152,000,000,000 202,000 5,050,000

3 $2,200,000,000 $154,000,000,000 210,000 5,058,000

4.Refer to the above table. Between years 1 and 2, real GDP grew by __________ percent in Alta: A. 5.0 B. 1.3 C. 52.0 D. 10.0

5.Refer to the above table. Per capita real GDP was about: A.$5,000 in year 2 in Alta. B.$10,396 in year 2 in Alta. C.$15,223 in year 3 in Zorn. D.$735,000 in year 1 in Zorn.

6.

The above diagram (Y axis = RGDP) is best described as an idealized: A.Business cycle B.Unemployment fluctuations C.Inflation cycles D.Economic growth patterns

7.Most economists agree that the immediate cause of the majority of cyclical changes in the level of real GDP is changes in the: A.Level of total spending (demand) B.Rate of unemployment C.Rate of inflation D.Stock market price indexes

8.The phase of the business cycle in which real GDP declines is called: A.the peak. B.an expansion

C.a recession. D.the trough.

9.The phase of the business cycle in which real GDP increases is called: A.the recovery (expansion) B.a recession. C.the pits

D.the trough

10.In which phase of the business cycle will the economy most likely experience decreasing unemployment rates? A.expansion B.recession C.peak D.trough

Answer the next four questions on the basis of the following information about the hypothetical national economy of Lubrec. All figures are in millions.

-Total Population 330

-Persons under 16 years old 50

-Institutional population

(Prisons, hospitals, etc.) 5

-Discouraged Workers 7

-Full-Time Students > 16 8

-Retired Persons 60

-Persons over age 16 actively

seeking work and available for

employment but not employed 20

11.Refer to the above information. The labor force in Lubrec is: A. 350 million. B. 220 million. C. 480 million. D. 200 million.

12. The labor force of Lubrec is smaller than its total population.

A. True

B. False

13.Refer to the above information. The unemployment rate in Lubrec is ______percent. A.8.3

B.4.5 C.10.0 D.9.1

14. Refer to the above information. If the natural rate of unemployment in Lubrec is 4.7 percent, then: A. structural unemployment is 4.0 percent. B. frictional unemployment is 3.0 percent. C. cyclical unemployment is 4.4 percent. D. cyclical unemployment is 5.3percent.

15. 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. B. frictionally unemployed. C. structurally unemployed. D. not a member of the labor force.

16. The natural rate of unemployment is: A. higher than the full-employment rate of unemployment. B. lower than the full-employment rate of unemployment. C. that rate of unemployment occurring when the economy is producing at its potential output (potential RGDP). D. found by dividing total unemployment by the size of the labor force.

17. The economy of nation X produced three products in 2011: oranges, computers, and houses. How much was nominal GDP in 2011 based on the following information?

Product Units Produced Price/Unit

Oranges (bushels) 2,000,000 $50

Computers 8,000 $1,000

Houses 1,000 $150,000

A. $258,000,000 B. $151,050 C. $63,000,000 D. $25,800,000

18.To be officially unemployed a person must: A.be 15 years of age or older. B.be 21 years of age or older. C.not be employed.

D.be in the labor force (and be looking for a job).

19.If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the: A.structural unemployment rate is 5 percent. B.cyclical unemployment rate is 4 percent. C.cyclical unemployment rate is 5 percent. D.natural rate of unemployment will eventually increase to the unemployment rate.

20.Susie has lost her job in a Massachusetts textile plant because of import competition. She intends to take a short course in electronics and move to California where she anticipates that a new job will be available. We can say that Susie is faced with: A.secular unemployment. B.cyclical unemployment. C.frictional unemployment. D.structural unemployment.

21.Which of the following constitute the unemployment occurring at the natural rate of unemployment? A.frictional and cyclical unemployment. B.structural and frictional unemployment. C.cyclical and structural unemployment. D.frictional, structural, and cyclical unemployment.

22.The GDP gap measures the difference between: A.NDP and GDP. B.NI and PI. C.actual GDP and potential GDP. D.nominal GDP and real GDP.

23.If actual GDP is less than potential GDP: A.potential GDP will fall. B.the price level will rise. C.investment spending will rise. D.the actual unemployment rate will be higher than the natural unemployment rate.

24.Inflation means that: A.all prices are falling, but at different rates. B.all prices are rising and at the same rate. C.most prices are rising. That is, the price level is rising. D.real incomes are rising.

25.If the consumer price index increases from 200 to 210 between year 1 and year 2, the economy has experienced: A.inflation of 10.0 percent. B.inflation of 5.0 percent. C.deflation of 10.0 percent. D.deflation of 5.0 percent.

26.The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about: A.6.7 percent. B.3.4 percent. C.4.1 percent. D.1.6 percent.

27.Suppose that a person's annual nominal income rises from $40,000.00 to $44,000.00 between 2006 and 2007 and that the consumer price index rises from 100 to 105. The purchasing power of this person's nominal income increased by about _______ between 2006 and 2007. A.$1,905

B.$4,000 C.$44,000 D. $5.00

28.Which of the following is correct? A.Real and nominal incomes always move in the same direction. B.Inflation increases the purchasing power of the dollar and necessarily reduces one's nominal income. C.Inflation reduces the purchasing power of the dollar and necessarily reduces one's real income. D.Inflation reduces the purchasing power of the dollar, but does not necessarily reduce one's real income.

29.Cost-of-living adjustment clauses (COLAs): A.reduce the purchasing power of nominal income. B.apply only to demand-pull inflation. C.increase the gap between nominal and real income. D.tie wage increases to changes in the price level.

30.Suppose the nominal annual interest rate on a one-year loan is 5 percent and lenders expect inflation to be 2 percent. The annual real rate of interest is: A.1 percent. B.2 percent. C.3 percent. D.5 percent.

31.Recently a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining. Is the critic correct? A.Yes, because when you have a large nominal income your standard of living automatically increases. B.No, because real income may fall if price increases are more, proportionately, than the increase in nominal income. C.No, because real income may fall if price increases are less, proportionately, than the increases in nominal income. D.Yes, because real income may fall if price increases are less, proportionately, than the increases in nominal income.

32.Significant inflation does not hurt people who regularly save money out of their paycheck.

A. True

B.False

33.Who is least likely to be hurt by significant inflation? A.a disabled laborer who is living off accumulated savings B.an owner of a small business who can raise product prices C.creditors who have made fixed interest rate loans D.a pensioned steelworker

Assume an economy that is producing only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the next two questions on the basis of these data.

34.Refer to the above data. The price index for year 3 is: A.140. B.40. C.100. D.160.

35. Refer to the above data. The price index for year 4 is:

A.140. B.40. C.100. D.160.

36. Which of the following economic regions has experienced the least and mostgrowth in real GDP per capita since 1820, respectively? A.Japan, Latin America B.Africa, United States C.Latin America, Japan D.United States, Africa

37. Economic growth rates in follower countries: A.tend to be lower than in leader countries because labor forces in follower countries are too small. B.tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs. C.will never bring real GDP per capita up to the same levels as in leader countries, even if follower growth rates are greater than those in leader countries. D.typically average about 2 percent per year.

38. Strong property rights are important for modern economic growth because: A.they allow governments to extract the gains from private citizens' investments. B. they ensure an equitable distribution of income. C.people are less likely to invest if they are fearful that others can take their returns on investment without compensation.

D.business cycle fluctuations will be smaller and less likely to disrupt investment patterns.

39. Which of the following is not considered to be a growth-promoting institutional structure? A.Literacy and widespread education B.Strong government restrictions on international trade. C.Financial institutions that effectively link savers to investors. D.A competitive market system.

40. A competitive market system: A.discourages growth unless government protects domestic firms from foreign competition. B.encourages growth by ensuring that everyone in society will receive a decent standard of living. C.discourages growth because firms busy competing have no time to innovate or invest. D.encourages growth by allowing producers to make profitable investment decisions based on market signals.

41. Countries that have experienced modern economic growth have also tended to: A.adopt feudalistic institutions. B.restrict women and minorities from holding certain economic and political positions. C.move toward more democratic forms of government. D.have less leisure time for sport and artistic activities.