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UNIT FIVE SAMPLE TEST Q'S
Multiple Choice
Identify the choice that best completes the statement or answers the question.
Directions: Write the letter of the correct answer in the blank provided.
____
1. Which of the following is included in GDP?
a. the price of intermediate goods
b. the cost of producing goods
c. the cash value of durable goods
d. American goods produced overseas
____
2. Real GDP is a more accurate measure of macroeconomic performance than nominal GDP because real GDP
a. takes inflation into account.
b. is derived from gross national product.
c. gives a better picture of a country’s quality of life.
d. includes nonmarket activities.
____
3. You quit your part-time job to concentrate on school work. After your grades improve, you plan to start looking for
another job. You are
a. cyclically unemployed.
b. frictionally unemployed.
c. structurally unemployed.
d. seasonably unemployed.
____
4. Imagine that you are an economist advising the President. The national unemployment rate is at 5 percent. What action
would you recommend in response?
a. a national training program to end structural unemployment
b. a large increase in unemployment benefits
c. an emergency program to create more government jobs
d. no action, because the nation is at full employment
____
5. Which statement best describes the distribution of income in the United States in the first decade of the twenty-first
century?
a. The income gap between rich and poor was widening.
b. The Lorenz Curve was beginning to flatten.
c. The income gap between men and women was growing.
d. The income gap among racial groups no longer existed.
____
6. Real GDP is considered more accurate than nominal GDP. Why?
a. Real GDP is adjusted for changes in price.
b. Real GDP is based on the gross national product.
c. Real GDP gives a better picture of actual quality of life
d. Real GDP includes nonmarket activity.
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____ 7.
Real GDP falls for at least six straight months. The country is experiencing a long economic contraction
in the business cycle. What is occurring?
a. a peak
b. an external shock
c. an expansion
d. a recession
8. Which is an example of what economists call “technological progress”?
a. a new type of machine
b. more complicated technology
c. more use of natural resources
d. increased efficiency or productivity
____
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9. According to the quantity theory, what is a major cause of inflation?
a. excess demand for existing goods and services
b. increased costs of doing business
c. rapid rise in the unemployment rate
d. excess of money in the economy
10. What is the purpose of national income accounting?
a. to encourage savings
b. to obtain information used to form policy
c. to deepen capital
d. to eliminate unemployment
11. Which list contains only actions that increase the money supply?
a. Lower the discount rate, raise the reserve requirement ratio
b. Lower the discount rate, lower the reserve requirement ratio
c. Raise the discount rate, raise the reserve requirement ratio
d. Raise the discount rate, lower the reserve requirement ratio
12. Open market operations refer to which of the following activities?
a.
b.
c.
d.
e.
The buying and selling of stocks in the New York stock market
The loans made by the Federal Reserve to member commercial banks
The buying and selling of government securities by the Federal Reserve
The government’s purchase and sales of municipal bonds
The government’s contribution to net exports
13. Which of the following would most likely result if the federal government increased its spending without increasing
Its tax revenues during a period of full employment?
A. a recession
B. high er inflation
C. lower interest rates
D. a smaller foreign trade deficit
14. If the government wishes to increase the level of real GDP, it might reduce
A.
B.
C.
D.
taxes
its purchases of goods and services
transfer payments
the size of the budget deficit
15. The money supply curve is:
A.
B.
C.
D.
upward sloping, because people wish to lend more at higher interest rates.
upward sloping, because people want to hold less money at higher interest rates.
vertical, because the Fed controls and determines the amount of money in the economy.
downward sloping, because people want to hold less money at higher interest rates.