Download Exam I from Summer 2006

Exam I
Name: ________MIM________________
1)
Modern Economics is best defined
a)
as a social science
b)
as a philosophy
c)
as a humanitarian discipline
d)
as a natural science
2)
The main focus of economics is on
a)
financial decision making
b)
efficiency
c)
historical behavior of individuals
d)
none of the above
3)
Assume the following statistics about two countries:
Country
GDP
Population
A
100 billion $
40 million
B
50 billion $
10 million
Given the information above we can conclude that:
a)
Country A has a higher average standard of living than country B
b)
Country B has a higher average standard of living than country B
c)
Not enough information is provided to make a conclusive comparison about the
standards of living
4) The GDP per capita in Japan is greater than in the US, but when adjusted for the
purchasing price parity the inequality sign reverses. From this we can conclude
that
a) The prices in the US tend to be higher than in Japan
b) The prices in Japan tend to be higher than in the US
c) The prices in these two countries tend to be the same
d) None of the above
5)
Appreciation of the USD would lead to
a) an increase in the rate of inflation
b) a decrease in the rate of inflation
c) inflation being unchanged
d) inflation and currency exchange value are not related
6)
If a nation has been a net recipient of foreign investment in the past then it is more likely
to have
a) a GDP that exceeds its GNP
b) a GNP that exceeds its GDP
c) a GNP that is equal to its GDP
d) none of the above
7)
If the rate of inflation is 4%, and your savings account pays a 5% nominal interest then
the real return on your account is:
a)
5%
b)
c)
d)
e)
8)
1%
-1%
4%
9%
Which of the following facts is wrong?
a)
In the US economy the largest component of the GDP is the spending by
households
b)
The US economy constitutes nearly (approximately) a quarter of the world
economy
c)
Most of the world’s population lives in high income countries
d)
Currently the US economy experiences a trade deficit
e)
None of the above
9) If the US experiences higher inflation than the Euro zone, then, all else held constant, we
should expect
a) the USD to appreciate against the Euro
b) the USD to depreciate against the Euro
c) the value of the USD in terms of the Euro to remain the same
d) inflation and currency exchange value are not related
10) Depreciation of the USD will lead to
a) an increase in the rate of inflation
b) a decrease in the rate of inflation
c) inflation being unchanged
d) inflation and currency exchange value are not related
11) In order to be counted as unemployed in the US one must meet the following:
a) be registered with a state labor department
b) collect unemployment compensation
c) simply have no job and be actively looking for work
d) none of the above
12) In the second half of the 1990’s the US economy experienced very low inflation rates.
This was in part due to
a) a depreciating US dollar
b) increasing property values
c) stock market boom
d) influx of foreign investment and dollar appreciation
For questions 13-17 identify if the value of the transaction is included in the US GDP
13) GM corporation purchases tires made by GoodYear Corporation
14) Your purchase of a hamburger at a local restaurant
15) A yard work performed by a worker paid in cash who does not report his income for tax
purposes
16) A dividend payment paid by a Russian telecommunication company to a US shareholder
17) Purchase of a previously occupied house
18) Inflationary tax refers to
a) the government raising the interest rate so that consumers and firms are forced to
borrow funds at higher cost
b) the government printing new money and injecting it into circulation,
typically by paying for goods and services
c) the depreciation of the domestic currency
d) none of the above as there is no such concept as inflationary tax
19) Unexpected inflation is capable of
a) redistributing wealth from lenders to borrowers
b) redistributing wealth from borrowers to lenders
c) none of the above
20) Which of the following is not an example of structural unemployment?
a) with changing technology the job of a college professor may become obsolete if
online teaching emerges as a popular tool, thus leading to unemployment
amongst college professors
b) trade liberalization has lead to a large transfer of manufacturing jobs overseas,
recently, both, Ford and GM made announcements that they will be closing their
plants in Atlanta leading to unemployment amongst their workers
c) In 2002 the tourism industry suffered a decline and many hotel/restaurant
workers lost their jobs. In less than two years the recession in the industry
ended and employment levels fully recovered.
d) None of the above
21) Which of the following statements is false?
a) a purchase of a foreign-made good results in a sale of the USD for the currency
of the country of origin of the good
b) a purchase of a US made good by a resident of a foreign country will result in a
purchase of the USD
c) a purchase of a foreign-made good results in a purchase of the USD
d) none of the above
22) Which of the following will not lead to acceleration in the rate of inflation?
a) competition by firms for workers which results in wage growth exceeding
productivity growth
b) depreciation of the domestic currency
c) an increase in input costs such as basic commodities: oil, natural gas, steel
d) printing of money by the government
e) none of the above
GDP per capita,
PPP (constant
2000
international $)
GDP per capita
(constant 2000
US$)
Moldova
1426.0
370.0
Russian Federation
8750.0
2138.0
Ukraine
5200.0
812.0
23) Based on the information above, which country has the lowest cost of living?
a) Moldova
b) The Russian Federation
c) Ukraine
d) Not enough information is provided
TRUE/FALSE
24) The retail price of a product can simply be viewed as the sum of all value added
amounts across all stages of the production of the good.
25) The GDP can be viewed as the sum of all domestically generated value added
amounts across all domestic production
26) Inflation can be defined as the rate of gain in the purchasing power of money
27) Inflation can be experienced differently by different individuals due to their
consumption behavior
28) Presence of the shadow sector in the economy may lead to understatement of the
GDP statistics
29) Real GDP is measured at contemporary prices and hence the growth in the real GDP is
affected by the growth in output and the rate of inflation
30) An increase in imports will reduce the level of GDP