You lend $5,000 to a friend for one year at a nominal interest rate of 10%. The CPI over that year rises from 180 to 190. What is the real rate of interest you will earn?

• A.0%
• B.4.4%
• C.5.5%
• D.5.8%

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Question 27 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 28 of 70If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

• A.4%.
• B.5.2%.
• C.60%.
• D.76%.
• E.80%.

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Question 29 of 70In 2008, Lisa bought a used Cadillac from her local automobile dealer. The Cadillac was originally produced in the year 2000 and sold for $50,000 to the first owner who bought the car in 2000. The used car dealer bought the car in 2008 for $5000 from the original owner. Then, the dealer washed and waxed the car right before selling it to Lisa. Which of the following is counted towards GDP in 2008?

• A.The total price paid by Lisa for the car.
• B.The original market price of the car.
• C.The amount the dealer paid the previous owner for the car.
• D.The value of the wash and wax right before selling the car.

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Question 30 of 70Macroeconomics approaches the study of economics from the viewpoint of:

• A.the entire economy.
• B.governmental units.
• C.the operation of specific product and resource markets.
• D.individual firms.

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Question 31 of 70Long-run economic growth requires all of the following except

• A.technological change.
• B.increases in capital per hour worked.
• C.government provision of secure property rights.
• D.political instability.

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Question 32 of 70The natural rate of unemployment consists of frictional unemployment plus structural unemployment. When an economy is at its natural rate of unemployment, the unemployment rate will be greater than 0%.

• 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 33 of 70You lend $5,000 to a friend for one year at a nominal interest rate of 10%. Inflation during that year is 5%. As a result, you will receive ________ at the end of the year, but that money has a purchasing power of ________.

• A.$5,050; $5,025
• B.$5,100; $5,050
• C.$5,500; $5,250
• D.$6,000; $5,500

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Question 34 of 70In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

• A.of changes in trade deficits and surpluses.
• B.the length of the workweek has declined historically.
• C.the price level may change over time.
• D.depreciation may be greater or smaller than gross investment.

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Question 35 of 70When an economy is at its natural rate of unemployment, which of the following will be true?

• A.The unemployment rate will be 0%.
• B.The labor force participation rate will be 100%.
• C.The unemployment rate will be greater than 0%.
• D.Only structural unemployment as a result of technological change will exist in the economy.

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Question 36 of 70If nominal GDP rises:

• A.real GDP may either rise or fall.
• B.real GDP must fall.
• C.we can be certain that the price level has risen.
• D.real GDP must also rise.

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Question 37 of 70The problems of aggregate inflation and unemployment are:

• A.major topics of macroeconomics.
• B.major topics of microeconomics.
• C.not relevant to the U.S. economy.
• D.peculiar to command economies.

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Question 38 of 70You have been asked to measure Gross Domestic Product. You are informed that the sum of consumption, domestic investment, government purchases, and exports is $24 trillion. You then learn that imports are $2 trillion. To get GDP, you should

• A.add $2 trillion to $24 trillion because imports are purchased by consumers, firms, and the government.
• B.add $2 trillion to $24 trillion because imports are used as inputs in the production of other goods.
• C.subtract $2 trillion from $24 trillion because imports are purchased by consumers, firms, and the government.
• D.subtract $2 trillion from $24 trillion because imports cost domestic jobs.

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Question 39 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 40 of 70Nominal GDP is:

• A.the sum of all monetary transactions that occur in the economy in a year.2 Principles of Macroeconomics- Chapter 1
• B.the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
• C.the amount of production that occurs when the economy is operating at full employment.
• D.money GDP adjusted for inflation.

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Question 41 of 70Real GDP and nominal GDP differ because the real GDP:

• A.is adjusted for changes in the volume of intermediate transactions.
• B.includes the economic effects of international trade.
• C.has been adjusted for changes in the price level.
• D.excludes depreciation charges.

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Question 42 of 70Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would

• A.increase the measured unemployment rate.
• B.increase the measured labor force participation rate.
• C.decrease the number of persons in the labor force.
• D.decrease the number of persons in the working-age population.

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Question 43 of 70Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

• A.employed.
• B.unemployed.
• C.not in the labor force.
• D.not in the working-age population.

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Question 44 of 70Which of the following transactions would be included in GDP for 2011?

• A.On January 5, 2011, Maya sold 100 shares of stock in IBM Corporation.
• B.Bonita purchases a brand new 2011 Honda Civic car on March 10, 2011.
• C.Daniel buys a used desk from Craigslist.com on May 9, 2011.
• D.Levi purchases a 75-year-old penthouse on Lake Shore Drive in Chicago, Illinois, on June 23, 2011.

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Question 45 of 70We measure GDP in different ways because

• A.we can then check for errors and gain different insights into how the economy performs
• B.certain economists do not like the expenditure equation for GDP
• C.the expenditure equation ignores certain aspects of the economy
• D.it is too difficult to determine accurate values of consumption and investment
• E.economists use different tools to measure economic activity

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Question 46 of 70Which of the following statements pertains to macroeconomics?

• A.Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force.
• B.A decline in the price of soybeans caused farmer Wanek to plant more land in wheat.
• C.The national productivity rate grew by 2.7 percent last year.
• D.The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point.

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Question 47 of 70If the minimum wage is set above the market wage

• A.the quantity of labor supplied will be below the quantity of labor demanded.
• B.unemployment will rise.
• C.highly-skilled workers will have a harder time finding jobs.
• D.All of the above are correct.

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Question 48 of 70If cyclical unemployment is eliminated in the economy, then

• A.the economy is considered to be at full employment.
• B.the unemployment rate is below the natural rate of unemployment.
• C.the unemployment rate is above the natural rate of unemployment.
• D.the economy is at less than full employment.

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Question 49 of 70When an economy is at its natural rate of unemployment, the unemployment rate will be greater than 0%. The natural rate of unemployment consists of frictional unemployment plus cyclical unemployment.

• 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 50 of 70Real GDP measures:

• A.current output at current prices.
• B.base year output at current prices.
• C.current output at base year prices.
• D.base year output at current exchange rates.