Assignment
Question 1
Inflation is defined as an increase in
the real wages of workers.
real GDP.
the average price level.
the prices of all consumer products.
the prices of basic necessities.
Question 2
During periods of high inflation,
people want to hold on to as much money as possible.
the purchasing power of money is decreasing.
nobody has any incentive to work and earn income.
nominal interest rates are likely to be low.
nobody wants to buy goods and services.
Question 3
Gross domestic product is officially measured by adding together the:
quantity of each good and service produced by U.S. residents.
market value of all final goods and services produced within the borders of a nation.
quantity of goods and services produced by companies owned by U.S. citizens.
the amount of money spent by every person in the entire country.
market value of all final goods and services produced by domestic companies.
Question 4
In double-entry GDP accounting,
the value of output produced must equal the value of resource payments generated in producing that output.
government is not counted because most of government spending is for transfer payments.
payments to resources must equal the value of goods sold to households.
inventories are counted twice, once as investment and once as output.
intermediate goods are counted twice, once as a type of output themselves and once as part of final outp
Question 5
Jamal lost his job as a shipbuilder during 2004. His shipyard never reopened, and so his very specialized skills are no longer in demand. Jamal's unemployment is best classified as
cyclical.
structural.
seasonal.
frictional.
voluntary.
Question 6
Real GDP means GDP
adjusted for the effects of inflation.
that does not change from year to year.
corrected for changes in the quality of goods and services over time.
valued at the prices at which goods are actually sold.
adjusted for negative effects like pollution.
Question 7
Which of the following is the best example of an investment as defined by economists?
A household's purchase of 100 shares of Apple computer stock.
A firm's purchase of 100 shares of General Electric stock.
A firm's purchase of a bond issued by General Mills.
An individual's purchase of a U.S. savings bond.
A firm buying personal computers for its secretarial staff.
Question 8
According to the expenditure approach, the largest component of GDP is:
government spending.
proprietor's income.
net interest.
personal consumption expenditures.
compensation of employees.
Question 9
Which of the following people would be officially counted as unemployed?
A person who works only 5 hours per week for pay.
A full-time college student who chooses not to have a paying job.
A family member who works 20 hours per week in the family business without pay.
A jobless high-school graduate who is actively looking for work.
A soldier who has left their job in the U.S. for an overseas deployment.
Question 10
Those hurt by unexpected inflation include:
labor unions with COLA clauses.
borrowers.
savers.
owners of real estate.
owners of precious metals, antiques, and works of art.
Question 11
Economic fluctuations (or business cycles)
are changes in the number of businesses started.
are fluctuations in the Dow Jones industrial average relative to a long-term growth trend.
look at the role of business in the hiring resources.
are fluctuations in the level of overall economic activity, relative to a long-term growth trend.
are changes in government spending that occur over a period of years.
Question 12
As a member of society, should you care when other people lose their jobs, or should you only be concerned if you lose your job? Should we have an explicit national goal of keeping the unemployment rate low? Fully explain your answer.
Question 13
In the resource (or factor) market of the Circular Flow model,
businesses borrow money to buy the capital resources they need.
businesses sell services to the households.
firms provide the resources to the households.
households sell the resources to firms in return for factor payments.
resources flow from the business sector to the household sector.
Question 14
Two politicians are debating the best ways to spur long-term growth in the nation's economy. Candidate X says we should lower income taxes so that households have more money to spend on goods and services. Candidate Y says we should lower taxes on interest income so that households have more incentive to save. Which candidate has the best idea? Why?
Question 15
Your boss is impressed with your performance over the past year and has decided to give you a 5% increase in your salary. Will this increase raise your standard of living over last year? Fully explain your reasoning.
Question 16
Sharon was being treated unfairly by her boss, so she quit her job and two months later found another position. For two months Sharon experienced
cyclical unemployment.
structural unemployment.
seasonal unemployment.
frictional unemployment.
being out of the labor force.
Question 17
Which of the following people would be counted in the labor force?
Chou, who lost his job and last looked for work three months ago.
Stephanie, who holds a Ph.D. in history, but can only find part-time employment at a fast-food restaurant.
Jordan, who used to work as a stockbroker but is now a stay-at-home dad.
Steffan, who thinks he could easily earn $100,000 per year, despite the opinion of the psychiatrist at the state hospital where he is a patient.
Monique, age 90, who is enjoying her retirement in Montan
Question 18
Income received minus personal taxes is called:
national income.
personal income.
disposable income.
transfer payments.
net national product.
Question 19
All of the following are government policies to promote economic growth EXCEPT:
building infrastructure and providing public goods.
implementing monetary policies that lead to higher rates of inflation.
subsidizing education.
providing an environment of general political stability.
protecting and enforcing private property rights.
Question 20
Which of the following would not increase labor productivity?
Technological change.
An increased amount of capital per unit of labor.
A lower unemployment rate.
Greater job experience for the work force.
A better educated work force.
Question 21
Suppose the economy is in the expansionary (or growth) phase of the business cycle. Thoroughly discuss how the primary measures of macroeconomic well-being (GDP; employment/unemployment; inflation) are likely to be changing. Are these changes good or bad? Explain.
Question 22
In the long run, improvements in technology have led to
lower employment and lower wage rates.
higher employment and lower wage rates.
lower employment with wage rates unchanged.
higher employment with wage rates unchanged.
higher incomes and more leisure time.
Question 23
The business cycle consists of four phases. In order, they are:
expansion, followed by peak, and then recession followed by an expansion.
expansion, followed by a trough, and then peak followed by recession.
peak, then an expansion, followed by a recession, and then a trough.
peak, then a recession followed by expansion, and then recession.
peak, then a recession followed by trough, and finally, expansion.
Question 24
Which of the following is not considered a cost of unemployment?
Loss of self-respect by those who are unemployed.
Waste of the economy's resources.
Negative psychological effects on those who have lost their jobs.
Higher inflation rates.
Loss of income by those who are unemployed.
Question 25
What kinds of transactions make up the underground economy? How does the existence of the underground economy affect the accuracy of GDP, our official measure of overall economic activity? Fully explain you answer.
Question 26
A recession leads to all of the following EXCEPT:
higher unemployment.
reduced output.
lower income levels and living standards.
higher employment.
lower rates of inflation
Question 27
Which of the following is reflected in GDP?
The value of leisure time.
The value of illegal goods and services.
Emotional and psychological well-being.
The costs of cleaning up pollution.
The value of house maintenance performed by homeowners.
Question 28
Cyclical unemployment results from
a mismatch of skills.
being in the wrong geographical location.
taking the time to find the best job.
seasonal decreases in demand for labor.
a recession in the economy.
Question 29
Productivity growth is important because
it is the only way an economy can increase GDP.
a small decrease in productivity growth causes a large decline in GDP.
a large increase in productivity growth causes a small decrease in GDP.
it causes an increase in the quantity of all resources available to an economy.
it ultimately increases a nation's standard of living.
Question 30
A discouraged worker is one who
is underqualified for his current job.
dislikes his current job but is afraid to quit.
drops out of the labor force because he cannot find a job.
quits his job because the possibility of advancement was very low.
is overqualified for his current job.