Question 1(Multiple Choice Worth 2 points)

Assume that a country has a high GDP and also one of the worst life expectancy rates in the world. Which limitation of the GDP is highlighted in this scenario?

The GDP does not measure household contributions.

The GDP does not include sale of illegal contraband.

The GDP does not include government aid.

The GDP does not include net receipts from abroad.

The GDP does not measure standard of living.

Question 2(Multiple Choice Worth 2 points)

From the following data given by the Bureau of Labor Statistics, calculate the total number of persons who are counted in a labor force of a country.

Institutionalized population

5 million

Stay-at-home parents

12 million

Employed individuals

22 million

Unemployed individuals

9 million

Military workers

7 million

Under age 16 population

13 million

Retired individuals

11 million

31 million

22 million

36 million

42 million

68 million

Question 3(Multiple Choice Worth 2 points)

An economy's natural unemployment rate is 9 percent, its structural unemployment rate is 2 percent, and its cyclical unemployment rate is 3 percent. Based on this data, its frictional unemployment rate is ________, and its actual unemployment rate is ________.

6 percent; 9 percent

7 percent; 9 percent

12 percent; 7 percent

9 percent; 12 percent

7 percent; 12 percent

Question 4(Multiple Choice Worth 2 points)

What can you conclude regarding the the economy if it is producing below the full employment level?

There is a negative output gap.

There is a positive output gap.

There is zero output gap.

There is an inflationary gap.

There is insufficient information to determine whether there is an output gap.

Question 5(Multiple Choice Worth 2 points)

Which of the following is true about the consumer price index (CPI) as an economic indicator?

The CPI is useful in understanding the level of inflation in an economy.

The CPI is based on the prices of all consumer goods in the market.

The CPI always shows an increase in the price level in an economy.

The CPI shows changes in the cost of living based on changes in income.

The CPI represents the economic growth rate.

Question 6(Multiple Choice Worth 2 points)

Use the data table to answer the question that follows.

Year

Real GDP

GDP Deflator

1

$5 billion

120

2

$5.3 billion

100

3

$5.7 billion

140

4

$6 billion

150

Based on the table, by what percent has the nominal GDP changed from Year 1 to Year 4?

The nominal GDP has increased by 14%.

The nominal GDP has increased by 33%.

The nominal GDP has increased by 50%.

The nominal GDP has increased by 25%.

The nominal GDP has increased by 20%.

Question 7(Multiple Choice Worth 2 points)

Which of the following is true about the limitations of the unemployment rate?

The unemployment rate is often overestimated because it includes part-time workers.

The unemployment rate is often overestimated because it includes discouraged workers.

The unemployment rate is often underestimated because it excludes retired workers.

The unemployment rate is often underestimated because it excludes inefficient workers.

The unemployment rate is often underestimated because it excludes part-time workers.

Question 8(Multiple Choice Worth 2 points)

Assume that an economy produces only two goods, A and B. In the base year, it produces 2 units of A at a price of $2 and 4 units of B at a price of $4. If the next year it produces the same quantity of each good with a $1 price increase for both, what is the consumer price index for that year?

30

76.9

125

130

175

Question 9(Multiple Choice Worth 2 points)

Michaela was recently fired from her factory job because her company's inventories have sharply increased for six consecutive months. Michaela is most likely

a marginally attached worker

a discouraged worker

frictionally unemployed

structurally unemployed

cyclically unemployed

Question 10(Multiple Choice Worth 2 points)

Use the graph to answer the question that follows.

Which point on the business cycle represents a negative output gap in the economy?

A

B

C

Both A and C

Both B and C

Question 11(Multiple Choice Worth 2 points)

If the price of a basket of goods in the given year is $56 and the price of the basket of goods in the base year is $70, then what is the consumer price index (CPI) for the given year?

100

180

80

125

20

Question 12(Multiple Choice Worth 2 points)

If a bank offers a home loan with a fixed interest rate of 8 percent with an expected inflation rate of 4 percent. If the inflation rate ends up being 5 percent, which accurately describes the impact on the bank?

It benefited because the real interest rate increased by 1 percent.

It benefited because the real interest rate increased by 4 percent.

It lost financially because the real rate of interest decreased by 1 percent.

Its expected gains increased because the real rate of interest increased to 9 percent.

The bank's real interest rate was not impacted by the difference in the inflation rate.

Question 13(Multiple Choice Worth 2 points)

Use the data table for country B to answer the question that follows.

Year

Real GDP

GDP Deflator

2019

$50,000

400

2020

$40,000

200

What is the change in the nominal GDP from 2019 to 2020?

The nominal GDP has increased by $120,000.

The nominal GDP has increased by $100,000.

The nominal GDP has decreased by $120,000.

The nominal GDP has remained constant.

The nominal GDP has decreased by $100,000.

Question 14(Multiple Choice Worth 2 points)

The circular flow model of the economy divides economic activity into two broad categories, which are

capital production and government spending

value-added and expenditures

factor markets and product markets

businesses and banking institutions

private and public enterprise

Question 15(Multiple Choice Worth 2 points)

In 2020, the real gross domestic product was $20 trillion and the GDP deflator was 110. Based on this, nominal GDP must have been

$18 trillion

$20 trillion

$22 trillion

$31 trillion

$42 trillion

Question 16(Multiple Choice Worth 2 points)

If the government of a country instituted a policy that led to an unexpected decrease in consumer prices, which of the following groups would inherently benefit?

People whose incomes are automatically adjusted with inflation

People on fixed incomes

Borrowers of fixed interest rates

Borrowers of variable interest rates

Businesses that had taken out large capital loans

Question 17(Multiple Choice Worth 2 points)

Which of the following best describes the turning points of the business cycle?

Expansion and contraction

Peak and trough

Peak and contraction

Recession and expansion

Trough and recession

Question 18(Multiple Choice Worth 2 points)

Which of the following statements accurately describes the different types of unemployment?

There will always be cyclical unemployment.

Structural unemployment must always be greater than frictional unemployment.

The natural rate of unemployment will always equal five percent and never change.

The actual unemployment rate is the sum of the natural and cyclical unemployment rates.

Full employment is achieved when the actual unemployment rate is zero.

Question 19(Multiple Choice Worth 2 points)

The consumer price index tends to ________ the substitution of lower-priced goods, which has the effect of ________ inflation.

underrepresent; overstating

underrepresent; understating

overrepresent; overstating

overrepresent; understating

ignore; understating

Question 20(Multiple Choice Worth 2 points)

In an economy, if the real GDP is $50 billion and the GDP deflator is 150, what would be the value of the total output in the economy at the current market prices?

$50 billion

$75 billion

$3 billion

$7,500 billion

$100 billion

Question 21(Multiple Choice Worth 2 points)

Use the table to answer the question that follows.

Private spending

$16 trillion

Government spending

$20 trillion

Change in inventories

$10 trillion

Money spent on stocks

$5 trillion

Net exports

$14 trillion

Wages to employees

$6 trillion

What is the GDP of the country, according to the expenditures approach?

$71 trillion

$57 trillion

$65 trillion

$60 trillion

$56 trillion

Question 22(Multiple Choice Worth 2 points)

Nominal GDP fails to take account of ________, and real GDP still does not measure ________.

changes in business inventories; household consumption

inflation; non-market transactions

exports; imports

imports; government spending on infrastructure

capital investments; goods produced in the country and sold overseas

Question 23(Multiple Choice Worth 2 points)

The Bureau of Labor Statistics takes a survey and reports the following unemployment data:

Number of Workers Classified as Employed

178 million

Number of Workers Cyclically Unemployed

12 million

Number of Workers Frictionally Unemployed

3 million

Number of Workers Structurally Unemployed

7 million

Working-age Population

300 million

Based on this data, what is the natural unemployment rate in the economy?

3.3 percent

5 percent

6 percent

12 percent

33 percent

Question 24(Multiple Choice Worth 2 points)

Which of the following statements explains the difference between final goods and intermediate goods with regards to the GDP?

Final goods are semi-finished goods used in the production of intermediate goods, while intermediate goods are used for consumption purposes, and both are included in the GDP.

Intermediate goods are semi-finished goods used to produce final goods, while final goods are used for consumption purposes, but only final goods are included in the GDP.

Intermediate goods are semi-finished goods used to produce final goods, while final goods are used for consumption purposes, and both are included in the GDP.

Final goods are semi-finished goods used to produce intermediate goods, while intermediate goods are used for consumption purposes, but only intermediate goods are included in the GDP.

Intermediate goods are semi-finished goods used to produce final goods, while final goods are used for consumption purposes, but only intermediate goods are included in the GDP.