Assigned Seat. MULTIPLE CHOICE. Put all answers in the space provided at the end of the quiz.

Transcription

1 Eco202, Spring 2008, Quiz 2 Name Prof. Bill Even Assigned Seat MULTIPLE CHOICE. Put all answers in the space provided at the end of the quiz. 1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final goods and services B) market value of all final and intermediate goods and services C) market value of all goods and services D) amount of final and intermediate goods and services 2) The governmentʹs budget deficit is the excess of government A) purchases of goods and services over its interest payments on the government debt. B) interest payments on the government debt over its net taxes. C) net taxes over its purchases of goods and services. D) purchases of goods and services over its net taxes. 3) If national saving (S) is $100,000, net taxes (T) equal $100,000 and government purchases of goods and services (G) are $25,000, how much are households and businesses saving? A) -$25,000. B) $25,000. C) $225,000. D) none of the above 4) If our exports are $2.2 billion and our imports are $2.7 billion, A) U.S. investment must decrease. B) the United States is borrowing from the rest of the world. C) the United States is lending to the rest of the world. D) U.S. national saving is too high. 5) Which of the following is a stock variable? A) income B) wealth C) investment D) saving 6) The term capital, as used in macroeconomics, refers to A) investment. B) the sum of investment and government purchases of goods. C) the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. D) financial wealth. 7) If the economyʹs capital stock increases over time, A) depreciation is less than zero. B) depreciation exceeds gross investment. C) net investment is positive. D) gross investment equals depreciation. 8) The Acme Stereo Company had a capital stock of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Thus its A) gross investment was zero. B) net investment was some amount but we need more information to determine the amount. C) net investment was -$4 million for the year. D) net investment was $4 million for the year. 1

2 9) If the government budget is balanced and investment is equal to saving, then. A) net exports are positive B) the country does not trade internationally C) exports equal imports D) net exports are negative Item Millions of dollars Personal consumption expenditure 80 Government purchases of goods and services 30 Net taxes 35 Gross private domestic investment 20 Imports of goods and services 10 Exports of goods and services 20 10) Use the information in the table above to calculate the value of private saving. A) $25 million B) $20 million C) $40 million D) -$15 million 11) If the government has a budget surplus and saving is equal to investment, then. A) imports equal exports B) imports are less than exports C) aggregate expenditure does not equal aggregate income D) imports exceed exports 12) GDP using the expenditure approach equals the sum of personal consumption expenditures plus A) gross private investment plus government expenditure on goods and services. B) gross private investment plus government expenditure on goods and services minus imports of goods and services. C) gross private investment plus government expenditure on goods and services plus net exports of goods and services. D) gross private investment. 13) In the computation of GDP, social security payments count as A) transfer payments and are included in GDP. B) government expenditure on goods and services and are not included in GDP. C) government expenditure on goods and services and are included in GDP. D) transfer payments and are not included in GDP. 14) Which of the following items is not a component of the income approach to measuring U.S. GDP? A) profits made by businesses B) income earned by businesses that export goods C) interest earned on savings deposits D) investment 15) Which of the following relationships is correct? A) GDP Deflator = (Nominal GDP/Real GDP) 100 B) Real GDP = Nominal GDP 100 C) Real GDP = (Nominal GDP GDP Deflator)/100 D) Nominal GDP = (GDP Deflator/Real GDP) 100 2

3 16) In years with inflation, nominal GDP increases real GDP. A) slower than B) at the same rate as C) faster than D) sometimes faster, sometimes slower, and sometimes at the same rate as 17) Real GDP in 2006 is $100. Between 2006 and 2007, using 2006 prices GDP grew 8 percent and using 2007 prices real GDP grew 4 percent. Using the chain-weighted mehtod, what does real GDP in 2007 equal? A) $104 B) $108 C) $106 D) None of the above answers is correct. Year Nominal GDP (billions of dollars) Real GDP (billions of dollars) GDP deflator ) Using the data in the above table, what is nominal GDP in 2005? A) $2400 billion B) $2381 billion C) $2520 billion D) $2808 billion 19) Which of the following is NOT included in real GDP? A) production in the home B) production of goods that last more than one year, such as television sets C) production of goods that do not last more than one year, such as gasoline D) production of services, such as the services of doctors 20) Which of the following is NOT a reason that real GDP is a poor measure of a nationʹs economic welfare? A) Real GDP does not include the underground economy. B) Real GDP does not take into account the value of peopleʹs leisure time. C) Real GDP omits measures of political freedom. D) Real GDP overvalues household production. 21) Which of the following statements about the comparison between GDP in China and in the United States is correct? A) Chinaʹs GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing Chinaʹs GDP in dollars. B) Using the exchange rate to value Chinaʹs GDP in dollars shows that Chinaʹs GDP per person exceeds the GDP per person in the United States. C) Using purchasing power parity prices to value Chinaʹs GDP in dollars shows that Chinaʹs GDP per person exceeds the GDP per person in the United States. D) None of the above answers are correct because they are all false statements. 22) Over the past two weeks, the Federal Reserve has (increased, decreased) the federal funds rate by over 1 percentage point and this has contributed to (higher, lower) gold prices. A) increased; higher. B) increased; lower C) decreased; higher. D) decreased; lower 3

4 23) According to the article titled ʺBernankeʹs rate cut, growth outlook align Fed with investors, the Fedʹs recent actions could A) lead to increased inflation and a stronger dollar B) lead to increased inflation and a weaker dollar C) lead to increased unemployment and a stronger dollar D) lead to increased unemployment and a weaker dollar Answer Sheet 24)

5 Answer Key Testname: Q2F1F08 1) A 2) D 3) B 4) B 5) B 6) C 7) C 8) C 9) C 10) A 11) B 12) C 13) D 14) D 15) A 16) C 17) C 18) D 19) A 20) D 21) A 22) C 23) B 24) 5