Question 1

A newspaper article recently stated that there are 45.06 million people over the age of 16 who have completed college education. Of this number, 36.21 million are in the labor force and 35.44 million are employed. What is the unemployment rate for this group of people above the age of 16?

Select one:

a. 2.44%

b. 2.17%

c. 2.13%

d. 1.71%

Question 2

Your grandfather tells you that his Social Security payments are indexed. What does this mean?

Select one:

a. It means that the dollar value of his Social Security payment is adjusted for changes in the price level so that his purchasing power is constant.

b. It means that the dollar value of his Social Security payments is adjusted for changes in the price level so that his purchasing power increases at the same rate as inflation.

c. It means that the value of his Social Security payments is not adjusted for changes in the price level so his purchasing power may fall.

d. It means that the real value of his Social Security payment is adjusted for changes in the price level so that its nominal value is constant.

Question 3

The inability of the government to stabilize the economy in the 1970s when real GDP has fallen, but inflation has remained high, led Robert Lucas to challenge the Keynesian macroeconomic policy prescriptions. Which of the following is the main tenet of his argument?

Select one:

a. Active stabilization policies tend to be destabilizing because of the long policy lags and consequently, slow down the economy's self correction.

b. There is no role for active stabilization policies because they do not take into account rational choices by individuals; failure to do so generally cancels the impact of fiscal and monetary policies.

c. Individuals respond in predictable ways to their changing economic environment; active stabilization interferes with people's ability to respond to changing economic conditions.

d. The economy is inherently stable and any role for stabilization policy should be limited to those that affect long-run aggregate supply to promote economic growth and not aggregate demand.

Question 4

In the Case in Point titled "Take Me Out to the Ball Game . . .", the fan price index used to track the costs of going to baseball games uses:

Select one:

a. a fixed market basket of goods and services, like the consumer price index.

b. a varying market basket of goods and services, like the consumer price index.

c. a varying market basket of goods and services, like the implicit price deflator.

d. a fixed market basket of goods and services, like the implicit price deflator.

Question 5

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

Select one:

a. net national product.

b. gross foreign factor output.

c. gross personal product.

d. gross domestic product.

Question 6

Which of the following are reasons why monetarists oppose activist stabilization policies?

I. Monetary policy lags are so long and variable that trying to stabilize the economy using monetary policy can be destabilizing.

II. Monetary policy affects a nation's currency exchange rate and affects the nation's competitiveness in the global market.

III. Because of crowding-out effects, fiscal policy has no effect on GDP.

IV. Fiscal policies must be financed by government borrowing or tax increases, both of which affect aggregate demand negatively.

Select one:

a. I only

b. I and II only

c. I and III only

d. I, II, III, and IV

Question 7

David Ricardo focused on the economy in the _______ and on the forces that determined an Economy's _______.

Select one:

a. short run; full employment level of output

b. long run; potential output

c. short run; market gluts

d. short run; money supply

Question 8

What is the difference between a nominal value and a real value?

Select one:

a. A nominal value is measured in monetary units adjusted for inflation, unlike a real value.

b. A nominal value is measured in market rates while a real value is measured in terms of exchange rates.

c. A nominal value is measured in units of constant purchasing power while a real value is measured in units of current purchasing power.

d. A nominal value is measured in current market prices while a real value is measured in base year prices.

Question 9

An indexed payment is a payment for which:

Select one:

a. the nominal value does not change with the rate of change in the price level.

b. the nominal value is constant.

c. the nominal value changes with the rate of change in the price level.

d. the nominal value is equal to the real value, when inflation is positive.