Download Miami Dade College ECO 2013 Principles of Macroeconomics

Miami Dade College
ECO 2013 Principles of Macroeconomics – Summer B 2014
Practice Test #2
1. What event was a major influence on the development of macroeconomics?
A) the Great Depression
B) the Employment Act of 1946
C) the establishment of the Federal Reserve System in the United States
D) the U.S. entry into World War II
2. An economy has historically grown at a rate of 2.25%. Currently, this economy is
growing at a rate of 3%, and the unemployment rate is low by historical standards. The
economy is expected to continue to grow in the near future, and the monetary authorities
are concerned that inflation may increase. This economy is probably in the
_____________ stage of the business cycle.
A) expansion
B) recovery
C) contraction
D) trough
3. A business cycle is:
A) the periodic fluctuation of economic activity.
B) the engine of economic growth.
C) a period lasting about 50 years.
D) identical to the consumption life cycle.
4. The National Bureau of Economic Research determines that a recession is over:
A) after one year of economic growth.
B) when the economy is in a trough.
C) when the unemployment rate declines below 5%.
D) when the stock market reaches its prerecession level.
5. The national income and product accounts provide:
A) the ability to track business cycles.
B) the ability to account for nonmarket activities, such as car maintenance.
C) a comprehensive measure of domestic unemployment.
D) a comprehensive measure of domestic inflation.
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6. A simple circular flow diagram shows that the factors of production are:
A) owned by the government.
B) purchased by households.
C) purchased by businesses.
D) traded in the market for goods and services.
7. GDP can be found either by adding up all of the __________ or all of the __________
in the economy.
A) spending; taxes
B) spending; income
C) investment; income
D) net interest payments; taxes
8. Which ONE of the following would be included in the GDP calculations?
A) a windshield purchased by General Motors
B) a hamburger purchased by a hungry restaurant patron
C) petroleum purchased by a refiner from the company that drilled it
D) nails purchased by a building contractor
9. If personal consumption is $100, investment is $25, government purchases total $25,
imports equal $20, and exports equal $10, then GDP equals:
A) $160.
B) $180.
C) $150.
D) $140.
10. A benefit of using GDP per capita instead of GDP is that it:
A) takes into account the differences in wealth between rich and poor within a
country.
B) measures the effects of outliers skewing the averages.
C) takes into account the size of the population when measuring the value of the
goods and services a country produces.
D) takes into account the environmental benefits or harm of economic activity.
11. When Mr. Wilson worked full time, he paid a cleaning service to have his house cleaned
twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the
effect on GDP?
A) GDP is unaffected by this change.
B) GDP falls as a result of this change.
C) GDP at first rises but then falls.
D) GDP rises as a result of this change.
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12. Which of the following activities is an example of a nonmarket transaction?
A) hiring a maid to clean your home
B) employing a lawn service worker to trim your bushes
C) hiring a nanny to take care of your kids
D) growing your own food in a vegetable garden
13. If in the past you have always painted your own house but now you hire a painting
contractor to do the work, what is the effect on GDP?
A) GDP is unaffected by this change.
B) GDP falls as a result of this change.
C) GDP at first rises but then falls.
D) GDP rises as a result of this change.
14. Which of the following terms describes a situation in which there is a reduction in the
rate of inflation from 4% to 3% per year?
A) hyperinflation
B) inflation
C) deflation
D) disinflation
15. Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:
A) rose by about 1%.
B) rose by about 2%.
C) fell by about 3%.
D) fell by about 1%.
16. What is real GDP in 2014 if nominal GDP in 2014 is $15,000 billion, the GDP deflator
in 2014 is 110, and the GDP deflator in 2010 was 100?
A) $9.1 billion
B) $13,636 billion
C) $14,010 billion
D) $16.500 billion
17. Jennifer just got news that she is getting a 5% raise. However, the Bureau of Labor
Statistics just reported that prices are rising by 7%.
A) Jennifer is ahead by 2%.
B) Jennifer is losing purchasing power by 2%.
C) Inflation has no impact on purchasing power.
D) Jennifer's purchasing power is rising by 7%.
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18. From 1999 to 2002, the Japanese inflation rates were, respectively, –0.3%, –0.6%, –
0.7%, and –0.7%. During this time, the Japanese economy underwent:
A) inflation.
B) hyperinflation.
C) a rise in its price level.
D) deflation.
19. Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a
local elementary school. She began looking for a full-time job last week and has already
scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is:
A) a discouraged worker.
B) unemployed.
C) employed.
D) not in the labor force.
20. An economy has a population of 226,500. Of them, 12,500 are unemployed and actively
seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work
part-time, and 151,000 people work full-time. This economy's unemployment rate is
_______. (Round the percentage to one decimal place; for example, 0.0436 is 4.4%.)
A) 6.5%
B) 21.0%
C) 5.5%
D) 21.1%
21. Zach has been laid off from his job as an aircraft worker and is afraid that he will not be
recalled. He has been actively looking for a job but has had no luck for the past six
weeks. According to the Bureau of Labor Statistics, Zach is:
A) employed.
B) unemployed.
C) a discouraged worker.
D) not in the labor force.
22. In the United States, people are considered UNEMPLOYED if and when they:
A) have become discouraged and are no longer actively seeking work.
B) do not have a job but are available for work and have been actively seeking work.
C) are working at a job that does not fully utilize their skills.
D) are on family leave.
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23. Jennifer did not work during college. She just obtained a bachelor's degree in marketing,
and she is now looking for a marketing job in the retail industry. Jennifer is considered:
A) structurally unemployed.
B) frictionally unemployed.
C) cyclically unemployed.
D) not in the labor force.
24. The mortgage crisis caused a lot of consumers to stop spending money. The decrease in
spending led to a decrease in production. Which type of unemployment resulted?
A) structural
B) frictional
C) cyclical
D) statistical
25. _____ unemployment is caused by changes in consumer demands or technology.
A) Structural
B) Frictional
C) Seasonal
D) Cyclical
26. Most economists agree that ______ unemployment is the area in which public
policymakers can have their greatest impact.
A) structural
B) frictional
C) seasonal
D) cyclical
27. If the growth rate in an economy is 3.5%, then its GDP will double in about:
A) 3.5 years.
B) 20 years.
C) 70 years.
D) 245 years.
28. If a country's population increases at a higher rate than the growth in its real GDP:
A) GDP per capita has increased.
B) the standard of living in the country has declined.
C) average output per person remains constant.
D) the country's rate of inflation has increased.
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29. If an economy's GDP will double in 15 years, then its growth rate must be about:
A) 7%.
B) 4.7%.
C) 10%.
D) 15%.
30. Refer to the production possibilities frontiers below. Panel A illustrates _______
economic growth and Panel B illustrates _______ economic growth.
A)
B)
C)
D)
short-run; short-run.
short-run; long-run.
long-run; long-run.
long-run; short-run.
31. Improvements in production capacity will:
A) rotate the production possibility frontier (PPF) clockwise.
B) move the economy up to the PPF.
C) move the economy along the PPF.
D) shift the PPF outward.
32. Human capital includes:
A) physical capital.
B) labor.
C) the improvements to labor capabilities from training, education, and
apprenticeship programs.
D) pension plans that enable early retirement.
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33. Rocky Gap Furniture employs 10 workers working eight hours each to produce 100
rocking chairs. What is the productivity of these workers?
A) 2.5 chairs per hour
B) 1.25 chairs per hour
C) 100 chairs
D) 50 chairs
34. To have long-term economic growth, the production function suggests:
A) keeping interest rates high to encourage saving.
B) increasing the availability of technology, capital, and labor.
C) increasing government oversight of business decisions.
D) redistributing income from the wealthy to the poor.
35. Decreasing the accessibility to college in order to funnel workers into the workforce
faster will:
A) decrease productivity of the economy.
B) increase productivity of the economy.
C) increase real wages.
D) have no impact on the economy.
36. The following table shows data for four countries.
Country Workers Capital Stock
A
100
$4,000
B
50
$500
C
200
$1,000
D
150
$150
The table shows that the country with the most productive workers is:
A) A.
B) B.
C) C.
D) D.
37. Developing countries can achieve higher productivity per unit of capital because they
can use technologies developed by other countries. This is known as the:
A) increasing returns to capital effect.
B) copycat effect.
C) catch-up effect.
D) productivity effect.
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38. The single largest consumer of goods and services in the United States is:
A) personal consumption.
B) businesses.
C) the government.
D) industry.
39. The government decides to give tax-exempt status to a new organization whose mission
is to award college scholarships to members of the armed forces. In doing so, the
government is acting in its role to promote economic growth by:
A) ensuring a stable legal system.
B) enhancing physical and human capital.
C) ensuring a stable and secure financial system.
D) promoting free and competitive markets.
40. When the government enforces contracts between two parties, it is acting in its role to
promote economic growth by:
A) ensuring a stable legal system.
B) providing physical and human capital.
C) ensuring a stable and secure financial system.
D) promoting free and competitive markets.
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