Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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If
the CPI is 150 in one year and 165 in the next year, how much did prices rise between the two
years? a. | 100.0
percent | b. | 10.0 percent | c. | 1.00
percent | d. | 0.10 percent | | |
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2.
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Suppose the market basket consists of 10X, 20Y, and 30Z. Current-year prices are $2.00
for each unit of X, $1.00 for each unit of Y, and $1.20 for each unit of Z. Base-year prices are
$1.00 for each unit of X, Y, and Z. What is the approximate CPI in the current year?
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3.
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Persons who are retired or engaged in own-home housework are considered to be in which
of the following categories? a. | in the civilian labor force | b. | employed | c. | not in the labor force | d. | unemployed | | |
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4.
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In
order to be classified as unemployed, a person must a. | not have worked
during the survey week, actively have looked for work within the past four weeks, and currently be
available for work. | b. | not have worked during the survey week, and currently be
available for work. | c. | actively have looked for work within the past six
weeks. | d. | not have a job. | | |
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5.
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The
unemployment due to the time it takes for unemployed people to locate a job utilizing their
transferable skills is called __________ unemployment. a. | structural | b. | cyclical | c. | natural | d. | frictional | | |
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6.
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"Full employment" is said to exist when the unemployment rate
equals a. | zero. | b. | the cyclical unemployment rate. | c. | the structural
unemployment rate. | d. | the natural unemployment rate. | | |
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7.
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A
movie star was paid $1 million in 1960 to do a movie. The CPI was 30.0 in 1960 and the CPI in 2000
was 165.0. Approximately how much did the movie star earn in 2000 dollars? a. | $6.5
million | b. | $6.0 million | c. | $5.5
million | d. | $5.0 million | e. | none of the
above | | |
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8.
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Gross
Domestic Product (GDP) is the total market value of all a. | final goods and
services produced annually within a country's borders. | b. | final and
intermediate goods and services produced annually within a country's
borders. | c. | intermediate goods and services produced annually within a
country's borders. | d. | final goods and services produced every two years within a
country's borders. | | |
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9.
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Gross
Domestic Product is computed by using a. | costs of production. | b. | wholesale
prices. | c. | previous-year prices. | d. | current-year
prices. | | |
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10.
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Macroeconomists define "consumption" as a. | purchases by the
business sector. | b. | wearing away and breakdown of capital
goods. | c. | purchases by the household sector. | d. | the difference
between imports and exports. | | |
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11.
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The
expenditure approach to measuring GDP sums a. | consumption, gross private domestic investment, government
purchases, and net exports. | b. | sales, revenues, income, and wages. | c. | profits,
compensation of employees, consumption, and investment. | d. | net exports,
consumption, wages, and salaries. | | |
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12.
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Leisure is a. | a good that is not counted in GDP. | b. | a good that is
counted in GDP. | c. | neither a good nor a bad, and it is not counted in
GDP. | d. | a bad as far as
economists are concerned, because it is not tangible. | | |
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13.
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To
derive net domestic product (NDP) from gross domestic product (GDP), we must
subtract a. | imports from
GDP. | b. | gross private
domestic investment from GDP. | c. | depreciation or capital consumption allowance from
GDP. | d. | inventory
investment from GDP. | e. | the statistical discrepancy from GDP. | | |
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Exhibit 6-1
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14.
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Refer
to Exhibit 6-1. Which of the following summations represents GDP using the expenditure
approach? a. | $1750 + $412 +
$200 + $299 | b. | $1750 + $412 + $200 - $331 + $299 | c. | $1750 + $412 +
$200 + $331 + $299 | d. | $1750 + $412 + $200 + $331 + $299 -
$355 | e. | $1750 + $412 +
$200 + $331 + $299 - $355 + $188 | | |
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15.
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A
"recession" is defined as a. | a period of a positive frictional unemployment
rate. | b. | two or more consecutive quarters of falling Real
GDP. | c. | the lowest point
in a business cycle. | d. | a period of negative inflation. | | |
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16.
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Why
do economists prefer to compare Real GDP figures for various years instead of GDP
figures? a. | Because when GDP
in one year is higher than in another year, there is no way to tell why it is higher. Is it because
output is higher, prices are higher, etc.? This is not the case with Real GDP. If Real GDP is higher
in one year than in another year, it is because output is higher. | b. | Because when GDP
in one year is higher than in another year, there is no way of knowing if the quality of goods
produced is higher in one year than the other. This is not the case with Real GDP. If Real GDP is
higher in one year than in another year, it is because the quality of the goods produced is
higher. | c. | Actually the question is incorrect. Economists prefer to
compare GDP figures instead of Real GDP figures. | d. | Because Real GDP
is easier to compute than GDP. | e. | Because when GDP in one year is higher than in another year,
there is no way to tell if the quality of life is higher in one year than the other. This is not the
case with Real GDP. If Real GDP is higher in one year than in another year, it is because the quality
of life is higher. | | |
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17.
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A
business cycle refers to the a. | continued expansion in Real GDP. | b. | continued
decline in Real GDP. | c. | recurrent swings (up and down) in Real
GDP. | d. | period when Real
GDP grows at unusually high rates. | e. | none of the above | | |
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18.
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One
of the reasons why the AD curve slopes downward is that as the a. | price level
rises, purchasing power rises. | b. | price level falls, purchasing power
rises. | c. | nation's income level rises, purchasing power
rises. | d. | nation's income level rises, purchasing power
falls. | e. | This is a trick question, because the curve is upward
sloping. | | |
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19.
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Suppose a drop in stock prices makes people feel less wealthy. This would cause
__________ the economy's AD curve. a. | movement down along | b. | movement up
along | c. | a rightward shift of | d. | a leftward shift
of | | |
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20.
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Changes in which of the following will not cause the AS curve to
shift? a. | the wage
rate | b. | prices of
nonlabor inputs | c. | the price level | d. | productivity | e. | All of the above will cause the AS curve to
shift. | | |
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21.
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A
decrease in the price level a. | shifts the AD curve to the right. | b. | shifts the AD
curve to the left. | c. | causes an upward movement along the existing AD
curve. | d. | causes a downward movement along the existing AD
curve. | e. | none of the above | | |
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22.
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The
short-run aggregate supply curve shows the various amounts of real output that producers are willing
to a. | sell at
different profit levels. | b. | sell at different price levels. | c. | buy at different
income levels. | d. | buy at different price levels. | | |
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23.
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Generally, an increase in aggregate supply is a. | the result of an
increase in the price level. | b. | represented by a movement along the AS
curve. | c. | represented by a rightward shift in the AS
curve. | d. | both a and b | e. | both a and
C | | |
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Exhibit 8-3
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24.
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Refer
to Exhibit 8-3. The economy is in short-run equilibrium and has an inflationary gap at
point
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25.
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Refer
to Exhibit 8-3. The economy is in short-run equilibrium and has a recessionary gap at
point
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26.
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In a
self-regulating economy, inflationary and recessionary gaps produce shifts of the a. | AD curve that
maintain the short-run equilibrium point. | b. | AD curve that move the economy to a long-run equilibrium
point. | c. | SRAS curve that maintain the short-run equilibrium
point. | d. | SRAS curve that move the economy to a long-run equilibrium
point. | | |
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27.
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The
classical economists believed __________ determined savings, while Keynes said it was
__________. a. | interest rates;
consumption habits and income | b. | income; investment | c. | investment;
interest rates | d. | interest rates; investment | | |
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28.
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Keynesian macroeconomists believe that the time it takes for falling wages and prices
to eliminate a recessionary gap is __________ enough to say that the economy is
__________. a. | long; not
self-regulating | b. | long; self-regulating | c. | short; not
self-regulating | d. | short; self-regulating | | |
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29.
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Keynesian economics was developed during the a. | late
1800s. | b. | late 1700s. | c. | Great
Depression. | d. | Panic of 1907. | | |
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30.
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Keynes argued that a. | monopolistic elements in the economy will prevent an immediate
sharp fall in prices as a result of decreasing demand. | b. | wages and prices
are not flexible in a downward direction. | c. | a and b | d. | none of the
above | | |
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