P.S: This is just a study guide. The questions may not appear exactly like this.
2. Inflation reduces the purchasing power of a person’s income and savings.
3. Demand shocks
a. refer to unexpected changes in the desires of households and businesses to buy goods and services.
b. refer to unexpected changes in the ability of firms to produce and sell goods and services.
c. always have a negative effect on the economy.
d. cause fewer short-run fluctuations than supply shocks.
4. (Consider This) What is the difference between financial investment and economic investment?
a. There is no difference between the two.
b. Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods.
c. Economic investment is adjusted for inflation; financial investment is not.
d. Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.
5. The term “recession” describes a situation where
a. inflation rates exceed normal levels.
b. output and living standards decline.
c. an economy’s ability to produce is destroyed.
d. government takes a less active role in economic matters.
6. The so-called Great Recession in the U.S.
a. is another name for the Great Depression.
b. was the worst economic downturn since the Great Depression.
c. was triggered by oil-supply shocks.
d. was caused by a sharp increase in the value of the U.S. dollar.
7. Situations in which firms expect one thing to happen but then something else happens are called
c. business cycles.
8. If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms. We refer to that adjustment as
a. inflating GDP.
b. deflating GDP.
c. compounding GDP.
d. indexing GDP.
9. A nation’s gross domestic product (GDP)
a. can be found by summing C + Ig + G + Xn.
b. is the dollar value of the total output produced by its citizens, regardless of where they are living.
c. can be found by summing C + S + G + Xn.
d. is always some amount less than its NDP
10. National income accountants can avoid multiple counting by
a. including transfer payments in their calculations.
b. only counting final goods.
c. counting both intermediate and final goods.
d. only counting intermediate goods.
12. The amount of new output produced per year for both consumption and additions to capital stock is measured by
b. net investment.
d. net exports.
Refer to the accompanying data (all figures in billions of dollars). From this information we can conclude that the net foreign factor income is
a. negative $5 billion.
c. positive $5 billion.
d. positive $15 billion.
14. If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately
a. $3,846 billion.
b. $3,925 billion.
c. $4,108 billion.
d. $4,379 billion.
15. GDP is the
a. national income minus all nonincome charges against output.
b. monetary value of all final goods and services produced within the borders of a nation in a particular year.
c. monetary value of all economic resources used in producing a year’s output.
d. monetary value of all goods and services, final and intermediate, produced in a specific year.
16. Many economists studying the productivity-growth patterns in the U.S. believe that in the period 1995–2010, the productivity of labor in the nation
a. benefited from a significant wave of technological advance, coupled with global competition.
b. suffered severely from global competition and outsourcing.
c. was not much affected by external and technological forces, continuing on at a steady rate as before.
d. weakened from the rising economic powers of other nations like China and India.
17. (Consider This) Over the past several decades, the percentage of women in the paid U.S. workforce has
a. increased in spite of declining wages for women.
b. decreased because relatively more women are staying home to raise their children.
c. increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.
d. increased for unmarried women but decreased for married women.
19. Human capital refers to the
a. tools and equipment available to workers.
b. amount of financing available to start-up firms.
c. number of workers available in the economy.
d. education, training, and skills of workers.
20. Which of the following is not a supply factor in economic growth?
a. the stock of capital
b. technological advance
c. the size and quality of the labor force
d. aggregate expenditures of households, businesses, and government