Which of the following is the BEST way to define "Say's

Law?" (a) supply creates its own demand; (b) continue to add capital until the marginal product of capital is zero; (c) equilibrium takes place at the intersection of a supply curve and a demand curve; (d) the act of producing output in a closed economy generates enough income to buy back all of the output produced.

(2) One important attribute of a "circular flow" diagram is its ability to show: (a) the various components of GDP; (b) the relationship between productivity increases and wage increases; (c) the interconnectedness of the economy's various sectors; (d) how increases in the money supply result directly in higher rates of inflation.

(3) A production function expresses a relationship between output and the factors of production. Which of the following

is the best example of a production function? (a) a list of tasks; (b) a menu; (c) an essay question on an in-class exam; (d) the lyrics of a song.

(4) Workers whose job loss is attributable mainly to unfavorable business or economic conditions are typically called: (a) U-6 unemployed; (b) frictionally unemployed; (c) part of the marginally attached labor force; (d) cyclically unemployed.

(5) Suppose the Federal Reserve's Index of Industrial Production increases from 200.0 to 202.0 between August and September. On an annualized basis, the Federal Reserve will report that: (a) industrial production increased by 24%; (b) industrial production increased by 12%; (c) industrial production increased by fractionally more than 12%; (d) industrial production increased by fractionally more than 24%.

(6) The Solow model implies all of the following, except: (a) supply creates its own demand;

(b) countries that devote a relatively larger share of output to investment will be wealthier; (c) growth will be faster the farther away a country's capital stock is from its steady-state; (d) new ideas are the driving force behind long-run economic growth.

(7) The U-3 unemployment rates measures the share of the labor force: (a) that is out of work; (b) that is out of working and seeking employment actively; (c) that is out of work, but may be employed part-time; (d) that is too discouraged to seek employment.

(8) Which of the following would NOT likely be considered a reason for the long-term slowdown in U.S. productivity gains? (a) aging of the fixed capital stock; (b) record-low interest rates that curtail capital investment; (c) technological advances that reduce the demand for resources and for various outputs; (d) the high inflation rates since 2008 that caused the Fed to tighten monetary policy.

(9) In order to go from data on nominal GDP to constant dollar GDP, the Bureau of Economic Analysis: (a) multiplies

nominal GDP by the consumer price index; (b) takes out the impact of rising interest rates from the nominal GDP data; (c) deflates current dollar GDP by the implicit GDP price deflator; (d) assumes a constant inflation rate of 2%.

(10) The sustainable growth rate of an economy can be measured broadly as: (a) growth in real GDP plus growth in net exports; (b) growth in total factor productivity; (c) growth in total factor productivity plus growth in the labor force; (d) growth in the capital stock plus growth in the labor force.

(11) Suppose the constant dollar GDP is $20.0 trillion and the implicit GDP deflator during the same quarter is 120.0. Current dollar GDP in that quarter would be: (a) $24 trillion; (b) $2,400 trillion; (c) $16.667 trillion; (d) indeterminant from the data provided.

(12) Which of the following is a standard assumption of most growth models? (a) there is a diminishing marginal return to capital investment; (b) investment funding is best spent on industries with the weakest productivity growth in order to bring them up to speed; (c) all investment should go strictly toward replacing depreciated capital goods: (d) capital investment is the only truly important source of real economic growth.

(13) Which of the following is NOT generally considered a determinant of the U.S. labor force participation rate? (a) cultural shifts, such as the increased presence of women in the work force; (b) rising frictional unemployment of labor; (c) persistent structural unemployment; (c) demographics, such as the aging of the labor force.

(14) Which of the following best represents the one constant and two variables in the Solow Growth Model? (a) inflation, plus capital and labor; (b) productivity, plus the rental rate of capital and wages; (c) autonomous consumption, plus capital spending and the stock of capital; (d) productivity, plus labor and capital inputs.

(15) Perhaps the best single explanation for the relative strength of productivity in one country compared with other countries

is: (a) the relative quality of the labor forces; (b) the relative quantity of capital; (c) the relative amount of capital per worker; (d) the demographic make-up of the labor force, by age, gender and political preference.

(16) Which of the following best explains why the United States has negative net exports persistently? (a) the U.S. dollar is too weak in foreign exchange markets; (b) strong U.S. imports reflect the relative strength of the U.S. economy versus U.S. trading partners; (c) the U.S. simply does not produce exportable outputs anymore; (d) all of the above.

(17) There is a strong correlation between net private domestic investment (GPDI minus spending on replacement items) and: (a) the long-term growth of real GDP; (b) government spending on national defense; (c) the U.S. inflation rate since the 1970s; (d) growth in the money supply.

(18) All of the following are reasons why some countries are more efficient than others at using capital and labor, except: (a) efficient countries have higher quality and quantity of work force education; (b) efficient countries have higher quality management styles; (c) mergers and acquisitions eliminate some of the most productive companies; (d) dissemination and adoption of capital is easier in the most efficient countries.

(19) Which of the following is generally NOT considered a benefit of real economic growth? (a) growth results indirectly in generally better health among the country's residents; (b) it guarantees a better distribution of income across income classes; (c) incomes tend to increase; (d) more goods and services become available to the country's residents.

(20) Why aren't transfer payments included in calculations of GDP? (a) transfer payments are not income to recipients derived from the production of new goods and services; (b) transfer payments are not included in the federal budget, so they cannot be included; (c) transfer payments require recipients to provide services to the federal government; (d) only states make transfer payments.

(21) China and India tend to have higher sustained growth in real GDP than most developed market countries, because: (a) China and India have relatively more rapid population growth; (b) China's and India's growth rates are measured off a smaller base than those of developed economies; (c) China and India have made rapid real economic growth a top national priority; (d) all of the above.

(22) Structurally unemployed persons typically cannot find work because: (a) they lack the skill set required by potential employers; (b) they have a solid skill set but cannot go to where open jobs exist; (c) they may have physical, emotional or educational handicaps that undermine their hiring prospects; (d) all of the above.

(23) Over time, the share of national income accruing to labor and away from capital has: (a) remained broadly constant; (b) decreased; (c) increased; (d) increased at an increasing rate.

(24) Roughly what percentage of GDP is comprised of personal consumption expenditures? (a) 68%; (b) 37%: (c) 52%; (d) 20%.

(25) Components of GDP that disproportionately affect, and are disproportionately affected by, changes in real economic activity are called: (a) industrials; (b) elastic with respect to personal income; (c) cyclically sensitive; (d) heteroskedastic.