1. Which of the following statements is correct?
a. Real GDP is the total market value of the final goods and
services produced in America for sale in a year valued in the prices of 1992.
b. Your buying stock in the stock market is an example of investment spending
c. Potential Real GDP is always greater than Equilibrium Real GDP
d. Social security and welfare are examples of spending on infrastructure.
e. All of the above
2. The period of the business cycle in which real GDP is increasing is called the:
a. expansion b. peak c. recession d. trough e. stagflation
3. Assume that, in the population, 95 million people worked for pay last week, 5 million people did not work for pay but had been seeking a job, 5 million people did not work for pay and had not been seeking a job for the past several months, and 45 million were under age 16. The unemployment rate, given these numbers, is:
a. 5% b. 8% c. 10% d. 20% e. 45%
4. A type of unemployment in which workers are in-between jobs or are searching for new and better jobs is called _______ unemployment:
a. frictional b. cyclical c. structural d. turnover
5. Consider three consumer goods: 100 of Good A, 100 of Good B, and 100 of Good C. In the base year, Good A sold at a price of $1, Good B sold at a price of $1, and Good C sold at a price of $1. In the current year, Good A sold at a price of $3, Good B sold at a price of $5, and Good C sold at a price of $10. The Consumer Price Index (CPI) for the current year is:
a. 100 b. 300 c. 500 d. 600 e. 1000
6. Which of the following is a "loser" from unexpected inflation?
a. workers with COLAs c. people who own Treasury Bills
b. the middle class d. people who own homes and have fixed-rate mortgages
7. If the nominal interest rate on a checking account is 2% and the inflation rate is 3% this year, the real interest rate is:
a. 5% b. 2% c. 2/3% d. -1% e. 3%
8. Which of the following would cause the demand curve for automobiles to shift to the left?
a. an increase in the price of the automobiles
b. an increase in the interest rate paid to borrow money to pay for the automobile
c. an increase in buyers' incomes
d. an increase in the cost of production of automobiles
9. Suppose it is announced that industry analysts are predicting that decreased oil supplies from Iraq will cause gasoline prices to rise, beginning next month. In the current week, the announcement would:
a. shift the supply of gasoline right c. shift the demand for gasoline left
b. shift the demand for gasoline right d. have no effect on the demand or supply of gasoline
10. "At the price of $500, tickets for the Super Bowl are expensive. Yet, the are long lines of people who wish to buy them. Many people who desire tickets will not be able to find them."
From this quote, we know that the price of Super Bowl tickets must be:
a. below equilibrium b. above equilibrium c. equal to equilibrium
11. Assume that the market for computers begins in equilibrium. Then, there is a decrease in a price of Pentium processors used in the production of computers. When the new equilibrium is reached,
a. the price and quantity of computers will both have risen
b. the price and quantity of computers will both have fallen
c. the price of computers will have risen and the quantity will have fallen
d. the price of computers will have fallen and the quantity will have risen
12. Assume that the market for the stock of Microsoft begins in equilibrium. Then, both buyers and sellers expect that the new Linux (a competitor of Microsoft Windows) will be a large success, reduing Microsoft sales. When the new equilibrium is reached,
a. the price and quantity of the stock will both have risen
b. the price and quantity of the stock will both have fallen
c. the quantity of the stock will fall and the price will rise
d. the quantity of the stock will fall but the effect on price cannot be determined
e. the price of the stock will fall but the effect on quantity cannot be determined
13. Assume that the market for Mexican pesos begin in equilibrium. Then, the Mexican economy experiences a severe recession. Because of the recession, the Mexican companies lower their prices. As a result of the recession and lower prices in Mexico:
a. the dollar depreciates and the peso appreciates c. the dollar and the peso both appreciate
b. the dollar appreciates and the peso depreciates d. the dollar and the peso both depreciate
14. Which of the following is an example of "portfolio investment"?
a. An American places funds in a savings account in Canada
b. Tokyo Bank of Japan buys Union Bank of the United States
c. Saturn Corp. (owned by General Motors) builds a new factory in Tennessee
d. An American puts $10,000 into a money market fund
e. All of the above