QUESTION 1

A contraction in the business cycle is likely to result in which form of unemployment increasing?

	a.	seasonal
	b.	frictional
	c.	cyclical
	d.	structural

4 points

QUESTION 2

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:

	a.	underemployed.
	b.	structurally unemployed.
	c.	frictionally unemployed.
	d.	cyclically unemployed.

4 points

QUESTION 3

Calculate the unemployment rate based on the following data for a country: Population: 200, Employed workers: 140, Labor Force: 160, Discouraged workers: 10.

	a.	18.75%
	b.	12.5%
	c.	10%
	d.	7.15%

4 points

QUESTION 4

Final goods or services used to compute GDP refer to:

	a.	goods and services purchased by the ultimate users.
	b.	the factors of production used to produce output.
	c.	the sum of all wages paid to laborers.
	d.	the value of outstanding shares of stock of manufacturing firms.

4 points

QUESTION 5

GDP is a controversial measure of national output because of what it includes and what it does not include. Test your understanding of GDP's limitations by identifying what GDP takes into account:

	a.	income for those engaged only in the underground economy.
	b.	negative returns to factors of production.
	c.	spending on used goods.
	d.	spending on public goods.

4 points

QUESTION 6

In calculating GDP, which component of spending must be subtracted from total spending to account for the fact that not all private or public spending by U.S. households is directed to U.S. businesses?

	a.	import
	b.	export
	c.	domestic
	d.	depreciation

4 points

QUESTION 7

Of the spending listed, one of the two sources most sensitive to business cycles is ________

	a.	exports
	b.	imports
	c.	business investment spending
	d.	non-durables

4 points

QUESTION 8

Which of the following is NOT part of GDP?

	a.	The purchase of a snow plough by the city of Minneapolis.
	b.	The purchase of a new car by a consumer
	c.	The unsold additions to inventory at an appliances store.
	d.	The purchase of your next door neighbor's house.

4 points

QUESTION 9

When a pair of jeans is sold to the end user, it:

	a.	represents investment.
	b.	increases business inventories.
	c.	adds to consumer spending.

4 points

QUESTION 10

What is investment used for?

	a.	The production of non-durable goods.
	b.	Immediate satisfaction of wants.
	c.	Depleting inventories.
	d.	Improving productivity.

4 points

QUESTION 11

The economic indicators used to determine how the economy is doing are:

	a.	measures of employment and unemployment
	b.	measures of aggregate production
	c.	all of the above
	d.	measures of inflation

4 points

QUESTION 12

One of the leading economic indicators, that is known to foretell an expansion is:

	a.	Inflation.
	b.	rising price for precious metals.
	c.	falling property values.
	d.	falling number new federal unemployment claims.

4 points

QUESTION 13

A business cycle reflects changes in real GDP. The stages of a business cycle are:

	a.	expansion, trough, recession, peak
	b.	expansion, peak, recession, trough
	c.	trough, expansion, recession, peak
	d.	trough, recession, expansion, peak

4 points

QUESTION 14

A fall in foreign prices relative to the price level in the U.S. will cause:

	a.	U.S. aggregate demand to fall.
	b.	U.S. net exports to fall.
	c.	U.S. net exports to rise.

4 points

QUESTION 15

A nation might achieve higher economic growth if it:

	a.	limits immigration.
	b.	taxes investment in capital.
	c.	devotes more resources to technology research and development.
	d.	produces more non-durable consumer goods.

QUESTION 16

An economy is considered to be in a recession if:

	a.	real GDP grows by less than 1% p.a.
	b.	real GDP has declined for two consecutive quarters.
	c.	it is moving from the trough to the peak of the business cycle.
	d.	all of the above

4 points

QUESTION 17

As interest rates rise, the effect on aggregate demand is to:

	a.	increase firm borrowing and investment spending.
	b.	reduce consumer borrowing and consumption spending.
	c.	increase consumer borrowing and saving.

4 points

QUESTION 18

During the winter of 2014 / 2015 oil prices dropped by a large percentage compared to the summer of 2014. By March 2015, what changed?

	a.	A change in the slope of the aggregate supply curve.
	b.	A shift to the right in the aggregate demand curve.
	c.	A shift to the left in the aggregate demand curve.

4 points

QUESTION 19

If the economy is in a recession, appropriate policies to pursue may include:

	a.	investment in technology that shifts the AS curve to the right.
	b.	an income tax cut that shifts the AD curve to the right.
	c.	an increase in government spending that shifts the AD curve to the left.

4 points

QUESTION 20

If a country's real GDP is growing at 4.2 percent annually and its per capita GDP is growing at a rate of 0.4 percent, then population is growing at a rate of ________ annually.

	a.	4.6 percent
	b.	3.8 percent
	c.	3.2 percent

4 points

QUESTION 21

Fluctuations in real GDP are called ________?

	a.	depressions.
	b.	recessions.
	c.	business cycles.

4 points

QUESTION 22

Economic growth is:

	a.	the annual percentage change of real GDP.
	b.	the quantity of goods produced within four months period.
	c.	a long-run process that occurs as a country's growth potential increases.

4 points

QUESTION 23

The point at which an economy transitions from an expansion to a recession is called a ________.

	a.	peak
	b.	expansion
	c.	trough

4

QUESTION 24

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:

	a.	aggregate demand.
	b.	aggregate supply.
	c.	potential GDP.
	d.	real GDP.

4 points

QUESTION 25

Over the course of human history:

	a.	economic growth follows a steady, long-term upward path.
	b.	economic growth has brought about substantial gains in incomes and standards of living in most countries.
	c.	all countries have achieved substantial gains in per capita GDP since the 19th century.

26. Many economists think the GDP is not a true measure of the quality of life. Many years ago, the Quality of Life Index was created.

a. what is the definition of Quality of Life Index and where the United States ranks on it?

b. thoughts on whether you think this is a good measure?