Exam 2: Macroeconomics

1. Gross Domestic Production is a measure of

a. the price level of goods and services sold.

b. total spending by federal, state and local governments.

c. the market value of the nation’s output of final goods and services.

d. the net market value of the nation’s output minus the cost of production.

e. the total quantity of intermediate (or producer) goods and services produced domestically.

2. Durable, nondurable goods and services lumped together in the expenditure approach to measuring GDP are called

a. personal consumption.

b. gross private domestic investment.

c. government spending.

d. inventory.

e. employee compensation.

3. The education and training of workers is called investment in:

a. technological change.

b. research and development.

c. land.

d. human capital.

e. physical capital.

4. Which of the following best measures a nation’s standard of living?

a. Interest rates

b. The rate of inflation

c. The unemployment rate

d. Real income per capita

e. Money income per capita

5. Production and employment in which of the following industries would be the least affected by a major recession?

a. Furniture and refrigerators

b. Oil and steel

c. Bread and milk

d. Computers and copy machines

e. Housing and cars

6. Susan Greenberg, who works in a typewriter factory, becomes unemployed because people start buying personal computers instead of typewriters. Susan can best be described as

a. frictionally unemployed.

b. structurally unemployed.

c. cyclically unemployed.

d. not part of the labor force.

e. a discouraged worker.

7. Suppose an economy has an adult population of 100 million people, a labor force of 70 million people and 3.5 million people who are currently unemployed. What is the country’s unemployment rate?

a. 3.5 percent

b. 5 percent

c. 7 percent

d. 30 percent

e. 70 percent

8. An increase in the general price level is termed

a. a depression

b. inflation.

c. deflation.

d. stagflation.

e. nominal pricing.

9. When the inflation rate rises, the purchasing power of nominal or money income

a. remains unchanged.

b. decreases.

c. increases.

d. changes by the inflation rate minus one.

e. none of the above.

10. If federal government spending is less than tax revenues, then the nation is experiencing a

a. budget deficit.

b. growing national debt.

c. trade deficit.

d. a balanced budget.

e. a budget surplus.

11. For something to serve as money it must be

a. backed by the authority of the government.

b. generally accepted by buyers and sellers.

c. available in only paper or credit cards.

d. convertible to gold.

e. convertible to gold or silver.

12. If you go to the shopping mall and buy a new pair of boots, this is an example of money functioning as a

a. medium of exchange.

b. standard of deferred payment.

c. store of value.

d. measure of value.

e. symbol of status.

13. Commercial banks can create money by

a. printing money.

b. lending excess reserves to customers.

c. sending vault cash to the Federal Reserve.

d. buying Treasury bills from the Federal Reserve.

e. maintaining a 100% reserve requirement.

14. A tax is proportional if, as a person’s income rises, the

a. tax rate is constant.

b. tax rate falls.

c. tax rate rises.

d. amount of the tax paid rises.

e. amount of the tax paid falls.

15. Expansionary fiscal policy refers to

a. increasing government spending and decreasing taxes.

b. increasing government spending and increasing taxes.

c. decreasing government spending and decreasing taxes.

d. increasing government spending and decreasing the money supply.

e. increasing government spending and increasing the money supply.

Answers:

1-C
2-A
3-D
4-D
5-C
6-B
7-B
8-B
9-B
10-E
11-B
12-A
13-B
14-Yikes  Both A and D are correct.
15-A