Question 1 of 70Which of the following describes the accuracy of the Consumer Price Index?

• A.Changes in the CPI accurately reflect the true rate of inflation.
• B.Changes in the CPI understate the true rate of inflation.
• C.Changes in the CPI overstate the true rate of inflation.
• D.Changes in the CPI are unrelated to the true rate of inflation.

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Question 2 of 70In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

• A.product; financial
• B.resource; product
• C.product; resource
• D.capital; product

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Question 3 of 70GDP deflator is an example of price index. GDP deflator reflects the prices of all goods bought and consumed domestically.

• A.Both statements are true, and 2nd statement is the correct explanation of 1st statement
• B.Both statements are true but 2nd statement is not the correct explanation of 1st statement
• C.1st statement is true but 2nd statement is false
• D.1st statement is false but 2nd statement is true

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Question 4 of 70If firms pay what are called "efficiency wages," they pay wages that

• A.motivate workers to increase their productivity.
• B.are lower than average to ensure maximum profit.
• C.will eventually lower the unemployment rate.
• D.are mandated by the government.

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Question 5 of 70Physical capital is a produced factor of production. Physical capital is not tangible.

• A.Both statements are true, and 2nd statement is the correct explanation of 1st statement
• B.Both statements are true but 2nd statement is not the correct explanation of 1st statement
• C.1st statement is true but 2nd statement is false
• D.1st statement is false but 2nd statement is true

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Question 6 of 70In Germany, workers get up to 4 weeks of paid vacation time while in the U.S., workers get only 2 weeks. In addition, in Germany there are many more public holidays than in the U.S. However, Germany's GDP per capita is about 2/3 of that of the U.S. Which of the following statements is a valid conclusion from the information given?

• A.Germany's technology is inferior to U.S. technology.
• B.Germans are better off than Americans, because they work a lot less.
• C.Americans are better off than Germans, because their income is much higher.
• D.It is not clear which nation is better off.

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Question 7 of 70Akosua grows corn in her backyard garden to feed her family. The corn she grows is not counted in GDP because

• A.it was not produced for the marketplace
• B.it is an intermediate good that Susie will process further before feeding her family
• C.goods produced using land are not included in GDP
• D.the corn has no value
• E.it reduces the amount of corn she will buy at the store

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Question 8 of 70Which of the following is true regarding the national income accounts?

• A.GDP > GNP
• B.NNP > GNP
• C.Personal income > national income
• D.National income > NNP
• E.Personal income > disposable personal income

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Question 9 of 70Which of the following would be classified as consumption spending?

• A.a family's purchase of a new home
• B.a family's purchase of a used car
• C.a family's payment for a child's hospitalization
• D.a family's purchase of Microsoft stock
• E.a family's purchase of a swing set for their home day-care business

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Question 10 of 70Suppose a nation's 2003 nominal GDP was $972 billion and the general price index was 90. To make the 2003 GDP comparable with the base year GDP, the 2003 GDP must be:

• A.adjusted downward to $678 billion.
• B.inflated to $1080 billion.
• C.deflated to $896 billion.
• D.deflated to $1080 billion.

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Question 11 of 70Real GDP is a good gauge of economic progress. With real GDP, the value of output is measured in constant prices.

• A.Both statements are true, and 2nd statement is the correct explanation of 1st statement
• B.Both statements are true but 2nd statement is not the correct explanation of 1st statement
• C.1st statement is true but 2nd statement is false
• D.1st statement is false but 2nd statement is true

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Question 12 of 70In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

• A.product; financial
• B.resource; product
• C.product; resource
• D.capital; product

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Question 13 of 70Economic growth always brings about negative externalities.

• A.TRUE
• B.FALSE

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Question 14 of 70Suppose GDP for 2003 was $1500, wages and salaries were $800, rent payments were $200, consumption was $1000, and interest payments were $200. What was the value of profits for 2003?

• A.$200
• B.$500
• C.$100
• D.$300

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Question 15 of 70Potential GDP is the maximum output a firm is capable of producing. Potential GDP is always greater than real GDP in an economy

• A.Both statements are true
• B.Both statements are false
• C.1st statement is true but 2nd statement is false
• D.1st statement is false but 2nd statement is true

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Question 16 of 70The GDP price index:

• A.includes fewer goods and services than the consumer price index.
• B.is identical to the consumer price index.
• C.is another term for the producer price index.
• D.includes all goods comprising the nation's domestic output.

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• Question 17 of 70A.S. GDP in 20X2 is 400,000. Jacob, a U.S. citizen, works in Paris and earns 30,000; Jacques, a French citizen, works in Boston and earns 40,000; Rachel, a U.S. citizen, owns a condominium in Berlin which she rents to a German family for 20,000; Angela, a German citizen, owns a warehouse in California which she rents to a U.S. firm for 70,000. What is U.S. GNP in 20X2?
• B.340,000
• C.350,000
• D.390,000
• E.410,000
• F.460,000

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Question 18 of 70The inflation rate measures the percentage increase in the price level from one year to the next. The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.

• A.Both statements are true
• B.Both statements are false
• C.1st statement is true but 2nd statement is false
• D.1st statement is false but 2nd statement is true

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Question 19 of 70Full employment is not considered to be zero unemployment, because

• A.some cyclical unemployment always exists.
• B.some people do not want a job.
• C.there are not enough jobs for everyone who wants one.
• D.people do not find jobs instantaneously.

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Question 20 of 70Gross domestic product (GDP) is

• A.the total value of all goods and services produced for the marketplace during a given period, within a nation's borders
• B.the total value of all final goods and services produced for the marketplace during a given period, by a nation's citizens and businesses
• C.the total value of all final goods and services produced for the marketplace during a given period, within a nation's borders
• D.the total value of all goods and services produced for the marketplace during a given period, by a nation's citizens and businesses
• E.the total value of all goods, services and inputs produced for the marketplace during a given period, within a nation's borders

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