Multiple Choice Questions

1. Depreciation (in the national output and income accounting process) is: a. the decrease in the overall price level b. the amount of decline in business inventories C. the amount of used up machinery, plants and equipment d. the addition to capital stock in a year 2. Legalizing all forms of illegal activities in the economy would a. reduce measured GDP b. reduce the size of the underground economy and increase measured GDP C. reduce both the underground economy and measured GDP d. increase the size of the underground economy and reduce measured GDP 3. The number of people unemployed in an economy equals a. the number of people employed minus the labor force b . the labor force plus the number of people employed C. the number of people employed divided by the labor force d the labor force minus the number of people employed If the number of people classified as unemployed is 46,000 and the number of people classified as employed is 600,000, what is the unemployment rate? a. 4.6% b. 9.2% C . 16% d. 7.1%5 . When 10,500 people who were previously looking for jobs stop looking for jobs, the a. unemployment rate increases b. size of the labor force decreases C . labor-force participation rate remains unchanged d. unemployment rate remains unchanged 6. If the labor-force participation rate is 82% and the total population 16 years of age or older is 1 million people, the labor force is a. 910,000 people b. 740,000 people C . 180,000 people d. 820,000 people 7. If a worker's nominal earning rises from $700 to $825 per week, while prices of goods and services have fallen, the worker's real earning has: a. increased by more than $125 per week b. increased by exactly $125 per week C. increased by less than $125 per week d. not changed at all 8. Which of the following most accurately reflects the amount of income actually received by households after taxes? a. personal income b. gross domestic product c. personal disposable income d. net national product15. According to the Keynesian consumption function, if aggregate income (Y) is zero, economy's aggregate consumption expenditure (C) will be: a. negative b. positive C . zero d. unknown - it depends on the slope of the consumption function 16. My income (salary) was $20,000 last year. My salary increased to $24,000 and my MPC is 0.75. Therefore, my consumption expenditure will increase by a. $4,000 b. $6,000 C . $1,500 d. $3,000 17. Suppose Yf= $4,900, equilibrium Y = $4,000, and MPS = 0.2. Which of the following actions is most likely to bring the economy to a full-employment level of aggregate income (Yf)? a. decrease government expenditure by $180 b. increase government expenditure by $225 C . increase taxes by $180 d. increase both government expenditure and taxes by $450 e . decrease taxes by $225 18. If government expenditure (G) is increased by $700 and simultaneously taxes are increased by $700, the equilibrium level of aggregate income (Y) will: a. increase by $1,400 b. decrease by $700 C. increase by $700 d. not change