2 Real GDP is a more accurate measure of macroeconomic performance than nominal GDP because real GDP

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1 Name: ate: 1 Which of the following is included in GP? the price of intermediate goods the cost of producing goods the cash value of durable goods merican goods produced overseas 2 Real GP is a more accurate measure of macroeconomic performance than nominal GP because real GP takes inflation into account. is derived from gross national product. gives a better picture of a country s quality of life. includes nonmarket activities. 3 How is GP related to price level? drop in the price level leads to a rise in GP. rise in GP causes the price level to drop. drop in GP causes the price level to drop. rise in the price level leads to a rise in GP. opyright by Pearson Education Page 1 of 6

2 4 irections: Use the diagram to answer the following question. Suppose the economy is at the point labeled a. Which of the following is most likely to have caused it to reach that point? falling interest rates declining business investment high consumer confidence a positive external shock opyright by Pearson Education Page 2 of 6

3 5 irections: Use the diagram to answer the following question. t points b and c, an economy would likely experience decreasing business investment and recession. stagflation and low unemployment. high consumer confidence and increasing GP. contractions and troughs. 6 How do rising interest rates affect the business cycle? s interest rates rise, lenders make more money, leading to expansion. s interest rates rise, consumer confidence rises, leading to expansion. s interest rates rise, the nation is more subject to external shocks, leading to contraction. s interest rates rise, businesses borrow less, leading to contraction. 7 Which of the following actions would contribute most to capital deepening? withdrawing $400 from your savings account volunteering to help clean up a city park buying a meal at a locally owned restaurant learning to use a new computer program at work opyright by Pearson Education Page 3 of 6

4 8 You deposit your paycheck in a savings account. How does this action contribute directly to economic growth? It promotes capital deepening. It improves your quality of life. It enhances aggregate demand. It increases real GP. 9 What is the likely result of a country having a high population and low capital stocks? a sharp increase in foreign trade an unpredictable business cycle a prolonged period of stagflation a low GP per capita 10 You quit your part-time job to concentrate on school work. fter your grades improve, you plan to start looking for another job. You are cyclically unemployed. frictionally unemployed. structurally unemployed. seasonably unemployed. 11 You are searching for a job, but discover that you are not qualified for any of the available jobs. You are suffering from frictional unemployment. structural unemployment. seasonal unemployment. cyclical unemployment. 12 Imagine that you are an economist advising the President. The national unemployment rate is at 5 percent. What action would you recommend in response? a national training program to end structural unemployment a large increase in unemployment benefits an emergency program to create more government jobs no action, because the nation is at full employment opyright by Pearson Education Page 4 of 6

5 13 Imagine the following: In 1989, the average price of a movie ticket was $4. In 2009, as a result of inflation, you could buy four movie tickets for $32. If prices continue to increase at the same rate, how many tickets will you be able to buy for $32 in 2019? two four six eight 14 Economists announce that the PI jumped 1 percent in June. This means the price of all products in the United States increased by 12 percent in a year. the core inflation rate is jumping into hyperinflation. the cost of a selection of common products increased by 1 percent. the purchasing power of a dollar increased by 1 percent. 15 ccording to the quantity theory, what is a major cause of inflation? excess demand for existing goods and services increased costs of doing business a rapid rise in the unemployment rate an excess of money in the economy 16 Which two factors must you know in order to determine whether a family is living below the poverty threshold? education level and income employment and family structure income and family size residence and age 17 Which statement best describes the distribution of income in the United States in the first decade of the twenty-first century? The income gap between rich and poor was widening. The Lorenz urve was beginning to flatten. The income gap between men and women was growing. The income gap among racial groups no longer existed. opyright by Pearson Education Page 5 of 6

6 18 What is the immediate goal of national income accounting? to encourage savings to obtain information used to form policy to deepen capital to eliminate unemployment 19 The Earned Income Tax redit and the establishment of enterprise zones are government programs intended to control inflation. reduce unemployment. raise aggregate demand. reduce the poverty rate. 20 How does the ureau of Labor Statistics determine how items in the market basket should change over time? by evaluating the census by conducting a consumer survey by calculating the inflation rate by computing the PI opyright by Pearson Education Page 6 of 6