Question #1, #2

Q #1. MULTIPLE CHOICE

1). Cost-push inflation is a result of

A) lower wages

B) higher wages

C) sticky wages

D) inflexible wages

E) none of the above

2). Economists define investment to include:

A) any increase in business inventories

B) the addition of cash to a savings account

C) the purchase of common or preferred stock

D) the purchase of any durable good

E) the purchase of any non-durable good

3).The actual GDP was $885 billion, the unemployment rate is 5% and the natural rate of

unemployment is 2%. What is the GDP gap?

A) 17.7 billion

B) 44.25 billion

C) 61.95 billion

D) 26.55 billion

E) none of the above

4)..According to the AD/AS model, lower taxes lead to

A) higher price level and lower real GDP

B) higher price level and higher real GDP

C) lower price level and higher real GDP

D) lower price level and lower real GDP

E) none of the above

Q #2. Is it True or false?

a) GDP can be calculated using two different approaches

b) If the annual inflation rate is 3%, that means that all goods and services have prices that are 3% higher than they were one year ago.

c) If GDP increases, the standard of living for all of the citizens of that country also increases.

d) The government is a "winner" from the underground economy

e) GDP can be calculated using two different approaches