3. Investment in human capital shifts the aggregate production function: A) leftward. B) upward. C) rightward. D) downward.

Transcription

1 Econ 102 Exam 1 Name ID Section Number 1. Which of the following equations describes the calculation of the natural unemployment rate? A) Natural unemployment = frictional unemployment + cyclical unemployment. B) Natural unemployment = frictional unemployment + structural unemployment. C) Natural unemployment = frictional unemployment + structural unemployment + cyclical unemployment. D) Natural unemployment = cyclical unemployment + structural unemployment. 2. Diminishing returns to physical capital means that as more and more physical capital is combined with a fixed amount of human capital and a fixed technology, eventually: A) additions to aggregate output or real GDP increase. B) aggregate output or real GDP declines. C) aggregate output or real GDP grows. D) additions to aggregate output or real GDP decline. 3. Investment in human capital shifts the aggregate production function: A) leftward. B) upward. C) rightward. D) downward. 4. Which of the following transactions would be included in the nation's gross domestic product? A) A college student has a pizza delivered to her dorm room. B) A college student buys a used textbook from his roommate. C) A group of college students volunteer to rake leaves at an assisted living facility for senior citizens. D) A construction company purchases lumber to use in building a new house. Version 1 Page 1

2 5. If a country has a working-age population of 200 million, 135 million people with jobs, 10 million people who were looking for a job but have given up, and 5 million people unemployed and seeking employment, then the number of discouraged workers is: A) 10 million. B) 5 million. C) 15 million. D) 25 million. 6. The labor force participation has recently fallen to the lowest level since the 1970's because of which of the following? A) A significant rise in involuntary part-time work. B) A rise in regulations. C) A rising number of retirees. D) A severe shortage of construction workers. 7. In the 25 years following the development of the first microprocessor in 1971, the rate of growth of productivity was low because: A) labor morale was low because machines replaced many workers. B) computers were too expensive for most people to buy. C) it took some time for people to change their way of doing business to take advantage of the new technology. D) there were many flaws in the method of measuring GDP. 8. Which of the following is false? GDP can be calculated by summing: A) all factor payments within a country's borders in a given year. B) the value added for all goods and services. C) government spending and tax revenues. D) total market value of all final goods and services within a country's borders in a given year. Version 1 Page 2

3 9. Suppose that roughly 8 million people in the United States were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the unemployment rate this month, all other things unchanged? A) It will fall, because 2 million people are not in the labor force this month and are not counted as unemployed. B) Not enough information is provided to determine what happens to the unemployment rate. C) It will rise, because 2 million people are not in the labor force this month and are not counted as unemployed. D) It will be unaffected, because the same number of people is unemployed. 10. The value of all the following goods is included in the calculation of GDP EXCEPT: A) the value of Goodyear tires purchased by the United States Secret Service. B) the value of Firestone tires sold at your local garage. C) the value of Michelin tires purchased by Canadian car collectors. D) the value of Bridgestone tires purchased by Ford Motor Co. 11. Economies with higher growth rates tend to be those that increase their: A) consumption. B) government regulation. C) resources. D) human capital. 12. If the actual inflation rate is less than the expected inflation rate, then: A) everyone is worse off from unexpected inflation. B) the lenders gain and the borrowers lose. C) the borrowers gain and the lenders lose. D) everyone benefits from the inflation. 13. An economic recovery encompasses all of the following except: A) a short-run increase in aggregate production in an economy. B) a time of increasing employment. C) the end of the business cycle. D) sustained economic growth. Version 1 Page 3

4 14. Within the circular-flow diagram, the value of household income, the sum of wages, dividends, interest, and rent plus transfer payments equals the sum of: A) transfer payments and household tax payments. B) the value of household tax payments. C) consumer spending, private saving, and the value of household tax payments. D) the money supply. 15. Which one of the following is an example of consumption expenditure? A) Jim purchased 200 shares of Google stock. B) Mr. Smith spent $1,500 to buy a used car for his son. C) Stephanie bought a laptop for her brother. D) Samantha bought an oven for her cooking show on Food Network. 16. Efficiency wages are usually set by employers to: A) increase employment and provide better incentives for performance. B) provide an incentive for better performance. C) reduce unemployment. D) increase employment. 17. Structural unemployment occurs when: A) there is an expansion in the economy. B) there is cyclical unemployment. C) there is a surplus of labor at the current wage rate. D) new workers enter the work force. 18. Which of the following affects GDP growth? A) The change in the change of inventories. B) The inflow of new inventories. C) A change in inventories. D) The level of inventories. 19. Real GDP tends to understate our economic well-being because it: A) excludes the value of leisure. B) includes expenditures on crime prevention equipment. C) includes health care costs related to the consumption of cigarettes. D) includes the value of services produced in the home. Version 1 Page 4

5 20. Consider an economy that produces only two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is: A) $900. B) $100. C) $700. D) $1, Analysts believe that generous unemployment benefits in Europe are associated with: A) weak labor unions in Europe. B) relatively constant levels of unemployment in Europe. C) high unemployment rates in Europe. D) low unemployment rates in Europe. 22. Government spending is like investment in each of the following cases except when: A) it is used for a personal income tax rebate. B) it is used for public health measures. C) it goes to help pay for education. D) it helps provide infrastructure for the economy. 23. Total retail sales rose 0.6% in July due to all the following except: A) rising inflation expectations. B) increased credit availability. C) rising home prices. D) rising household formation. 24. If a country runs a trade deficit, its investment spending is probably: A) equal to zero. B) greater than its level of saving. C) less than its level of saving. D) equal to its level of saving. 25. Structural unemployment can be caused by all of the following EXCEPT: A) efficiency wages. B) fluctuations in the business cycle. C) labor unions. D) minimum wages. Version 1 Page 5

6 26. Initial unemployment insurance claims are down 9% over the last year. All of the following are risks to the labor market except: A) struggling global economy. B) rising inflation expectations. C) rising value of the dollar. D) falling oil prices. 27. You are a college student and not working or looking for work. You are: A) not described by any of the above. B) unemployed. C) in the labor force but not employed. D) not part of the labor force. 28. From the standpoint of economic growth, banks are important to: A) channel savings into investment. B) fight inflation. C) channel investment into savings. D) keep interest rates low. 29. Which of the following statements regarding price level or inflation is correct? A) Prices of most goods and services remained stable during the Great Depression. B) In general, when the economy is in recession and jobs are hard to find, inflation tends to fall. C) Inflation affects only the more advanced countries, whereas less advanced countries face deflation. D) Supply and demand cannot explain why a particular good or service becomes more expensive relative to other goods and services. 30. The rule of 70 indicates that a 6% annual increase in the potential level of real GDP would lead to the potential output doubling in years. A) 12 B) 24 C) 30 D) 6 Version 1 Page 6

7 31. Government economists have adopted a new method of calculating the change in real GDP known as the, which uses the average between the GDP growth rate calculated using an early base year and the GDP growth rate calculated using a late base year. A) fixed base year method. B) cost indexation method C) straight-line depreciation method D) chain-linking method. 32. If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is: A) 7.5%. B) 67.5%. C) 4%. D) 10%. 33. If the CPI changes from 120 to 125 between December 2009 and December 2010, the: A) inflation rate for 2010 is 5%. B) deflation rate for 2010 is 5%. C) deflation rate for 2010 is 4.2% D) inflation rate for 2010 is 4.2%. 34. To be classified as unemployed, a worker must: A) not have a job and must be actively looking for work. B) not be looking for a job and must not have a job. C) be a discouraged worker. D) be working less than full time (40 hours a week). 35. Between which of the following pairings of economies would you expect to see convergence? A) Mexico and Ghana or Brazil and the United Kingdom B) Brazil and the United Kingdom C) Mexico and Ghana D) France and Germany Version 1 Page 7

8 36. The sum of frictional and structural unemployment make up the: A) cyclical amount of unemployment. B) natural rate of unemployment. C) amount of unemployment in an economy during a recession. D) actual unemployment level. 37. In 2011, consumption spending is $7,000, government purchasing is $2,000, and investment spending is $1,500. If GDP for 2011 is $10,300, then: A) exports are $500 and imports are $300. B) exports are $400 and imports are $200. C) exports are $100 and imports are $200. D) exports are $600 and imports are $ If the rate of unemployment is 10% and the labor force is 130 million, the number of unemployed workers is: A) impossible to determine with the above information. B) 10%. C) 13 million. D) 10 million. 39. Which sector is responsible for most of the growth that took place in the United States during the 1990s? A) the retail sector B) the mining sector C) the service sector D) the manufacturing sector 40. Workers today are more productive than workers in the past because: A) they are paid more. B) there are more workers now working with the same number of machines than in the past. C) workers now are physically stronger on average. D) workers now have more physical capital embodying better technology to work with. 41. The savings rate is low today because of all the following except: A) rising labor income. B) rising health insurance coverage. C) wealth effect. D) an improving economy. Version 1 Page 8

9 42. An example of a factor that causes the natural rate of unemployment to rise is: A) the use of new technology in the workplace that increases labor productivity. B) because of the loss of retirement funds, more people in the baby boom generation continue to work past the typical retirement age. C) a population boom that increases the number or young workers joining the labor force. D) the loss of labor union membership across industries. 43. The Boeing Company buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model of aircraft at $10 million. The value added by Boeing is equal to: A) $15.5 million. B) $3.5 million. C) $16.5 million. D) $13 million. 44. There are two countries on a peninsula. The first has a real GDP per capita annual growth rate of 2% and its neighbor to the south has an annual growth rate of 5%. How much sooner will the country in the south double its GDP per capita than its neighbor in the north? A) 10 years B) 15 years C) 21 years D) 5 years 45. Which of the following is a measure of labor income? A) average hourly earnings X number of employees B) weekly hours per employed X hours worked C) average hourly earnings X hours worked D) weekly hours per employed X number of employees 46. Setting government spending and taxes in an effort to change overall spending in an economy is called: A) monetary policy. B) the stock market. C) fiscal policy. D) investment. Version 1 Page 9

10 47. Jim has a part-time job and would prefer to have a full-time job but has been unable to find full-time work. Jim is classified as: A) an unemployed worker. B) a discouraged worker. C) out of the labor force. D) an underemployed worker. 48. A survey reveals that on a small island initially 1,000 people have jobs, 200 people are looking for jobs, and 200 people are neither working nor looking for work. Suppose that 100 of the 200 people who weren't looking for work now begin looking for work and that half of the new entrants successfully find a job. What happens to the unemployment rate? A) Nothing happens to the unemployment rate. B) It rises to 19.2%. C) It rises to 21.4%. D) It rises to 28.6%. 49. Suppose that a country has a progressive income tax code, where taxable income is calculated in nominal terms but the schedule of income tax rates is NOT indexed to inflation. An individual whose income keeps up with inflation will find that over time he or she she will pay: A) a higher percentage of income in taxes over time. B) the same percentage of income in taxes over time. C) the alternative minimum tax. D) a lower percentage of income in taxes over time. 50. Existing home sales in July were 5.59 million annualized units. Economists believe a pace of is normal and sustainable. A) 5 million B) 6.5 million C) 7.3 million D) 6 million Version 1 Page 10

11 Answer Key 1. B 2. D 3. B 4. A 5. A 6. C 7. C 8. C 9. A 10. D 11. D 12. B 13. C 14. C 15. C 16. B 17. C 18. A 19. A 20. C 21. C 22. A 23. B 24. B 25. B 26. B 27. D 28. A 29. B 30. A 31. D 32. D 33. D 34. A 35. D 36. B 37. D 38. C 39. A 40. D 41. A 42. C 43. B 44. C Version 1 Page 11

12 45. C 46. C 47. D 48. B 49. A 50. A Version 1 Page 12