Download Econ 203 Test 1 (Make sure to put your name on the test and on

Econ 203 Test 1 (Make sure to put your name on the test and on your scantron; 2 pts off if not)
1. Currently, nominal GDP in the U.S. is closest to which of the following ranges?
a. $19-20 trillion
b. $14-15 trillion
c. $8-9 trillion
d. none of the above
2. GDP is made up of what major components?
a. consumption, investment, government transfers, exports
b. consumption, investment, government purchases, exports minus imports
c. consumption, investment, exports minus imports
d. none of the above
3. The CPI
a. It calculates how much a given group of goods or services costs in comparison to a base year
b. Fully adjusts the index quality changes goods and services
c. Has been about the same level for the past 10 years
d. None of the above
c. It takes into account every good purchased by every consumer in a given time frame
4. Which of the following is not included in GDP computations?
a. payments to a plumbing company for repairs
b. the value of the labor a homeowner puts in fixing a leaky faucet
c. the purchase in Nashville of strawberries grown in Mexico
d. all of the above are included in GDP computations
5. The Washington apple, Florida orange example illustrated the principle that
a. What one group gains in a trade, the other party to the trade loses
b. Volutntary trade is based on who can produce more of a good than someone else
c. That people like apples better than oranges but orange juice better than apple juice
d. none of the above
6. Although “money can’t buy happiness” one reason to think that happiness measures and GDP might be related is
that (this questions was messed up – put A for answer)
a. happiness and GDP are not closely correlated, possibly because of rising expectations
b. GDP is closely correlated only with more goods, not with other outcomes that people care about such as life
expectancy
c. GDP and happiness measures tend to be very closely correlated
d. GDP is intended as a measure of happiness
7. Constant dollar or “real” GDP
a. is a different method of measuring the average price level than the CPI
b. is always higher than nominal GDP
c. Measures expenditures while holding the purchasing power of the dollar constant
d. all of the above
8. GDP is very nearly equivalent to
a. national saving b. national income
c. total wealth
d. none of the above
9. The recovery spending from a natural disaster does not increase overall economic activity and welfare because
a. the disaster involves the destruction of wealth
b. wealth is not adjusted for purchasing power
c. wealth includes the value of
d. all of the above
10. What is a source of comparative advantage?
a. Land-location b. Human Capital (knowledge; skills)
c. Labor
d. All of the Above
11. The 1977 film, Star Wars (Episode IV: A New Hope), earned about $800 million in worldwide box office
revenues. If the CPI in 1977 were 60 and the CPI in 2000 were 180, compute the 2000 constant dollar amount the
film earned:
a. $266 million b. $2.4 billion
c. $1.9 billion d. none of the above
12. In 2000 constant dollar terms, gasoline prices in January of 2009 were
a. much higher than they were in the early 1980s
b. much higher than they were in 2000
c. much higher than they were in 2008
d. none of the above
13. The website using the Sears Catalogue data indicates that
a. the prices of clothes today in constant dollar terms are less than in the 1980s
b. the quality of most household products has diminished since the 1970s
c. most goods listed a lot fewer hours of labor to purchase today than in the 1970s
d. none of the above
14. Two years ago The owner of the Texas Rangers and Dallas Stars recently purchased Liverpool Football Club in
England for about $1.2 Billion or ₤600 million. Since then, the British pound fell in value versus the dollar. Now
the exchange rate is about $1.5 per pound and ₤0.65 per dollar? What would the dollar value of the be now if it is
still worth ₤600 million?
a. $390 million
b. $400 million
c. $1.2 billion
d. none of the above
15. Pucharsing power parity refers to
a. buying a good at a lower price and reselling at a higher price
b. when the same dollar amount of money is able to purchase equal amounts of goods/services in two different
countries
c. when exchange rates are equal in two countries
d. none of the above
16. Economists generally support relatively unrestricted trade agreements between nations because
a. such agreements increase consumption possibilities by providing lower cost goods
b. producers are almost always in favor of such agreements
c. such trade rarely involves shifts in employment
d. none of the above
17. Comparative advantage
a. is based on who can produce more of a good or service
b. tends to shift over time as the sources of it change
c. is important for trade between states but not between nations
d. all of the above
18. If overnight, the supply of a good is drastically effected (much less of it), and the demand remains the same, we
would expect
a. prices to increase substantially
b. prices to decrease substantially
c. prices to stay about the same
19. One key economic principle concerning markets and prices is that
a. holding prices artificially lower will ultimately lead to higher economic growth
b. prices send key signals to consumers and producers
c. changes in demand influence prices more than changes in supply
d. none of the above
20. Big Mac don’t tend to reflect purchasing power parity because
a. land values at McDonalds stores differ
b. some resources (labor and others) that produce Big Macs cannot be easily transported
c. there are influences on exchange rates other than for purposes of trade
d. all of the above
21. Put “A” for your answer
Correct Answers:
1b, 2b, 3a, 4b, 5b, 6a, 7c, 8b, 9a, 10d, 11b, 12d, 13c, 14d, 15b, 16a, 17b, 18a, 19b, 20d
12 (about same as 2000)
14 (600m pounds x 1.5 $/pound = $900m)