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Quiz 1
Macroeconomics (Econ 5000)
(1) Recessions are periods when real GDP:
a.
b.
c.
d.
increases slowly
increases rapidly
decreases mildly
decreases severely
(2) A measure of how fast prices are rising is called the:
a.
b.
c.
d.
growth rate of real GDP
inflation rate
unemployment rate
interest rate
(3) Deflation occurs when
a.
b.
c.
d.
nominal GDP increases
unemployment rate decreases
prices increases at a slower rate
prices fall
(4) It is a national income accounting rule that all expenditure on purchases of
products is necessarily equal to:
a.
b.
c.
d.
profits of firms
wages of employees
income of the producers of the products
income of employees
(5) The market value of all final goods and services produced within an economy in a
given period of time is called:
a.
b.
c.
d.
industrial production
the GDP deflator
gross domestic product
general durable purchases
(6) When a firm sells a product out of inventory, GDP:
a.
b.
c.
d.
increases
decreases
increases or decreases, depending on the year the product was produced
is not changed
(7) The value added on an item produced means:
a.
b.
c.
d.
a firm’s profit on the item sold
the value of the labor inputs in the production of an item
the value of firm’s output less the value of its costs
the value of firm’s output less the value of the intermediate goods that the firm
purchases
(8) The GDP deflator is equal to:
a.
b.
c.
d.
the ratio of nominal GDP to real GDP
the ratio of real GDP to nominal GDP
real GDP minus nominal GDP
nominal GDP minus real GDP
(9) If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657,
investment is $741, and the government purchases are $1,098, then net exports
are:
a.
b.
c.
d.
$131
-$131
$31
-$31
(10) The CPI is determined by computing:
a. an average price of all goods and services
b. nominal GDP relative to real GDP
c. the price of a basket of goods that changes every year, relative to the same basket
in a base year
d. the price of fixed basket of goods and services, relative to the price of the same
basket in a base year
(11) Other things equal, an increase in the interest rate leads to:
a.
b.
c.
d.
a decrease in the quantity of investment goods demanded
no change in the quantity of investment goods demanded
an increase in the quantity of investment goods demanded
sometimes an increase and sometimes a decrease in the quantity of investment
goods demanded
(12) The real interest rate is the:
a. rate of interest actually paid by the consumers
b. rate of interest actually paid by the banks
c. rate of inflation minus the nominal interest rate
d. nominal interest rate minus the rate of inflation
(13) In the classical model with fixed income, if the demand for goods and services
is less than the supply, the interest rate will:
a.
b.
c.
d.
increase
decrease
remain unchanged
either increase or decrease, depending on whether consumption is greater than or
less than investment
(14) In a closed economy with fixed output, when government spending increases:
a.
b.
c.
d.
private saving decreases
private saving increases
public saving decreases
public saving increases
(15) The reduction in investment brought about by the increase in the interest rate
caused by increased government spending is called:
a.
b.
c.
d.
Answers:
(1) c
(2) b
(3) d
(4) c
(5) c
(6) d
(7) d
(8) a
(9) d
(10) d
(11) a
(12) d
(13) b
(14) c
(15) d
a budget deficit
monetary policy
the identification problem
crowding out