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Question 1

1.5 pts

Consider a bakery that buys flour to bake cakes. Which of the following statements is true?

Group of answer choices

Only the value of the flour used to make the cake is counted in GDP.

Only the value of the cake is counted in GDP.

Only the difference between the value of the cake and the value of the flour is counted in GDP.

The value of the cake and the flour used to make the cake are counted as part of GDP.

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Question 2

1.5 pts

The national debt:

Group of answer choices

grows when the government runs a deficit.

is the sum of all past federal deficits plus any surpluses.

is a major problem facing the U.S. government.

grows when government spending increases.

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Question 3

1.5 pts

According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is:

Group of answer choices

considered underemployed.

considered unemployed.

not a member of the labor force.

not considered a part of the working-age population.

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Question 4

1.5 pts

Which of the following is counted as consumption expenditure?

Group of answer choices

A person buying a government bond

A person buying a toaster from your neighbor in a garage sale

A firm renting a two-storied building

A person buying a new car

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Question 5

1.5 pts

In the federal penitentiary at Lompoc, California, inmates used packages of mackerel to buyitems such as haircuts at the prison barber shop and laundry services. What function dothese packages of mackerel serve?

Group of answer choices

They enabled prison officers to monitor illegal money flows.

They forced prisoners to engage in barter.

They served as a corruption deterrent.

They functioned as money.

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Question 6

1.5 pts

The inflation rate in the year 2007 is defined as:

Group of answer choices

the ratio of the 2007 price index and 2006 price index.

the ratio of the nominal GDP in 2007 and the nominal GDP in 2006.

the percentage of change between the price index in 2007 and the price index in 2006.

the difference between the value of the price index in 2007 and the value of the price index in 2006.

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Question 7

1.5 pts

Assuming a constant level of nominal income, the real income of an individual rises:

Group of answer choices

if hyperinflation takes place.

when deflation occurs in the economy.

with a rise in natural rate of unemployment.

during an inflationary phase in the economy.

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Question 8

1.5 pts

Suppose the Fed conducts an open market sale.We can expect this transaction to

Group of answer choices

reduce the money supply, reduce bond prices, and increase interest rates.

reduce the money supply, increase bond prices, and lower interest rates.

increase the money supply, lower bond prices, and lower interest rates.

increase the money supply, raise bond prices, and lower interest rates.

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Question 9

1.5 pts

All of the following are examples of transfer payments except

Group of answer choices

Social Security payments to the elderly.

welfare benefits to the poor.

unemployment compensation to the unemployed.

dividend payments to the wealthy.

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Question 10

1.5 pts

The value, at current market prices, of the final goods and services produced during a particular period is:

Group of answer choices

net national product.

gross domestic product.

gross foreign factor output.

gross personal product.

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Question 11

1.5 pts

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

Group of answer choices

The value of the increased inventory will not affect GDP in 2007, but the sale of the umbrellas will cause GDP in 2008 to increase.

The value of the increased inventory will be counted as part of GDP in 2007 and the value of the 170 umbrellas sold in 2008 will cause GDP in 2008 to increase.

Since the umbrellas were not sold in 2007, they will not be included as part of GDP in 2007, and since they were not produced in 2008, they will not be included as part of GDP in 2008. This is a shortcoming of GDP computations.

The value of the increased inventory will be counted as part of GDP in 2007, and the value of the 170 umbrellas sold in 2008 will not cause GDP in 2008 to increase.

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Question 12

1.5 pts

If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is _____.

Group of answer choices

7.69%

8.37%

53.84%

3.85%

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Question 13

1.5 pts

The functions of money are:

Group of answer choices

a store of value, a unit of account, and a medium of exchange.

a store of value, a medium of exchange, and a determinant of investment.

a medium of exchange, a store of value, and a factor of production.

a conductor of economic activity, a medium of exchange, and a store of value.

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Question 14

1.5 pts

To best determine whether an economy's output is growing or shrinking, one must keep track of changes in:

Group of answer choices

the general price level.

nominal GDP.

the growth rate of nominal GDP.

real GDP.

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Question 15

1.5 pts

The price index for 2007 is 1.28. What does this mean?

Group of answer choices

It means that the average price level has increased by 1.28 percent over the base year.

It means that the average price level of the base year was 128 percent less than that in 2007.

It means that the average price level has increased by 128 percent over 2006.

It means that the average price level has increased by 28 percent over the base year.

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Question 16

1.5 pts

The quantity of reserves that banks must hold against deposits is called:

Group of answer choices

the reserve ratio.

total reserves.

excess reserves.

required reserves.

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Question 17

1.5 pts

The total labor force comprises:

Group of answer choices

those who are employed plus those who are unemployed.

all individuals who are working and those who are not working.

the population of a nation, aged 16 years and above.

all individuals who are employed.

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Question 18

1.5 pts

When a bank receives new deposits, it can make new loans up to the amount of

Group of answer choices

the deposits received.

the required reserves generated by the deposits.

the excess reserves generated by the deposits.

the reserves generated by the deposits.

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Question 19

1.5 pts

What is a business cycle?

Group of answer choices

It is the seasonal pattern of fluctuations in consumer spending: increased spending during the holiday season and decreased spending at other times of the year.

It refers to the peaks and troughs in the demand for luxury goods in a country.

It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.

It is a firm's pattern of sales during a given year.

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Question 20

1.5 pts

If the Fed acts to increase the money supply,

Group of answer choices

it will buy bonds, drive bond prices down, and drive interest rates down.

it will sell bonds, drive bond prices up, and drive interest rates down.

it will sell bonds, drive bond prices up, and drive interest rates up.

it will buy bonds, drive bond prices up, and drive interest rates down.