Reference no: EM133199855
Assignment:
1. An increase in nominal U.S. GDP necessarily implies that the USA is producing a larger output of goods and services. T F
2. When an American doctor opens a practice in Bermuda, his production there is part of U.S. GDP. T F
3. The CPI is calculated by finding the price of a market basket of goods whose contents vary each year. T F
4. The producer price index (PPI) is an inadequate indicator of the consumer price index (CPI). T F
5. Food and Beverages plus medical care account for more than 50 percent of the goods and services in the CPI basket of goods. T F
6. If the number of buyers of video tapes increases, ceteris paribus, there will be an increase in the equilibrium price of video tapes and a decrease in the equilibrium quantity sold. T F
7. If the price index is 110 in 2018 and 115 in 2019, the rate of inflation between 2018 and 2019 is 5 percent. T F
8. Substitution bias in computing the CPI tends to make the CPI overstate the true increase in the cost of living. T F
9. A shortage will occur at any price below the equilibrium price and a surplus will occur at any price above the equilibrium price T F
10. An apple orchard is an example of perfect competition. T F
11. If Belgium exports chocolate to the rest of the world, Belgian chocolate sellers benefit from higher producer surplus, Belgian chocolate buyers are worse off because of lower consumer surplus, but total surplus in Belgium increases because of trade. T F
12. During 2018, the ACME washing machine company produces $10 million worth of washing machines, but sells only $9 million of them. The remaining $1 million worth of washing machines will be included in GDP when they are sold. T F
MULTIPLE-CHOICE QUESTIONS
(Circle the Right Answer)
13. If suppliers expect the price of their product to fall in the future they will
a. decrease supply now.
b. increase supply now.
c. increase supply in the future but not now.
d. do nothing, since there is nothing they can do to affect the price in the future.
14. An increase in the price of oranges would lead to
a. an increased supply of oranges.
b. a reduction in the prices of inputs used in orange production.
c. an upward movement along the supply curve for oranges.
d. an increased demand for oranges.
15. When a country allows free trade,
a. the domestic price will be greater than the world price.
b. the domestic price will be lower than the world price.
c. the domestic price will equal the world price.
d. it does not matter what the world price is; the domestic price is the prevailing price.
16. Benefits from free trade include each of the following EXCEPT
a. increased variety of goods.
b. lower costs because of economies of scale.
c. enhanced flow of ideas.
d. reduced competition.
17. The price index is 270 in one year and 300 in the next. What was the inflation rate?
a. 9.3 percent
b. 10 percent
c. 11.1 percent
d. none of the above are correct.
18. For questions 18 and 19 consider the table below.
|
|
2015
|
2016
|
|
Food and beverages
|
168.4
|
173.6
|
|
Housing
|
169.6
|
176.2
|
|
Transportation
|
153.3
|
154.3
|
Among these categories, what was the highest rate of inflation?
a. 6.6 percent
b. 5.2 percent
c. 3.9 percent
d. 3.1 percent
19. Of these categories, which one had the highest increase and which one had the lowest rate of inflation?
a. Food and Beverages, Housing
b. Food and Beverages, Transportation
c. Housing, Food and Beverages
d. Housing, Transportation
20. In the CPI, goods and services are weighted according to
a. how much consumers buy of each item.
b. whether the goods are necessities or luxuries.
c. the levels of production of the goods and services in the domestic economy.
d. by the expenditures on them in the GDP national income accounts.
21. Which of the following agencies calculates the CPI?
a. The National Price Board.
b. The Department of Weight and Measurements
c. The Bureau of Labor Statistics
d. the Congressional Budget Office
22. When the price of Chiquita bananas changes from $0.44 to $0.62 per pound,
a. supply shifts in the opposite direction.
b. there is a movement along the supply curve
c. there is a movement along the demand curve
d. demand shifts in the same direction.
23. When the overall level of prices in the economy is increasing, we say that the economy is experiencing
a. economic growth.
b. inflation.
c. unemployment
d. deflation.
24. Mrs. Harris spends the morning cleaning her house and cooking lunch. This is not included in GDP because it is:
a. already included in the value of her husband's output.
b. a nonmarket transaction.
c. valued at cost.
d. unproductive of any economic output.
e. none of the above.
25. Which of the following transactions would be included in GDP?
a. Bill White buys a secondhand bicycle for $50.
b. Bill Green gives his bicycle to his cousin.
c. John Black buys a new bicycle for $100.
d. Jerry Brown buys 2 shares of stock in a bicycle firm.
e. Mort Gray steals John Black's new bicycle.
26. Refer to the graph shown. With free trade, this country would
a. import 70 baskets.
b. export 65 baskets.
c. export 35 baskets.
d. import 40 baskets.
27. According to the graph, if this country chooses to trade, the price of baskets in this country would be
a. $10 and 40 would be sold domestically.
b. $10 and 105 would be sold domestically.
c. $7 and 705 would be sold domestically.
d. $7 and 40 would be sold domestically.
28. If a small country has current nominal GDP of $20 billion and a GDP deflator of 50, what is its real GDP?
a. $100 billion
b. $40 billion
c. $10 billion
d. $4 billion
29. Recessions are associated with which of the following?
a. increased bankruptcies.
b. falling profits
c. falling output
d. all of the above are correct.
30. Which of the following is included in the investment component of GDP?
a. purchases of stocks and bonds.
b. purchases of capital equipment that were manufactured in a foreign country by a foreign firm.
c. the estimated rental value of owner-occupied housing.
d. none of the above are correct.
31. Government purchases include spending on goods and services by
a. the federal government only.
b. state and federal governments only.
c. local, state, and federal governments.
d. local and state governments , but not the federal government.
32. U.S. GNP is calculated from U.S. GDP by
a. including income earned by foreigners in the United States and excluding income earned by U.S. citizens abroad.
b. including income earned by U.S. citizens abroad and excluding income earned by foreigners in the United States.
c. including income earned by foreigners in the United States.
d. excluding income earned by U.S. citizens abroad.
33. Anna, a U.S. citizen, works only in Germany. The value added to production from her employment is included
a. only in U.S. GDP.
b. only in German GDP.
c. in both German and U.S. GDP.
d. in neither German nor U.S. GDP.
34. Nominal GDP can grow
a. only when there is real growth.
b. only when there is inflation.
c. only when there are both real growth and inflation.
d. either because there is real growth or because there is inflation.
35. Ralph pays someone to mow his lawn. Norton mows his own lawn.
a. Only what Ralph pays to have his lawn mowed is included in GDP.
b. What Ralph pays to have his lawn mowed and the estimated value to Norton of mowing his own lawn are both included in GDP.
c. Neither what Ralph pays nor the estimated value of Norton's mowing is included in GDP.
d. The answer depends on what Norton reports to survey takers.
36. Which of the following is CORRECT?
a. The value of all intermediate goods and final goods are included in GDP.
b. The value of intermediate goods are included in GDP only if they were produced in the previous year.
c. The value of intermediate goods are included in GDP only if they were purchased by firms rather than households.
d. The value of intermediate goods are not included in GDP.
37. Sony produces a hi-fi receiver in 2019 which is sold to a retailer in December 2019. It is sold to a consumer in 2020. This receiver in included in:
a. consumption expenditure in 2020.
b. investment in 2019.
c. disinvestment in 2020.
d. all of the above.
e. none of the above.
38. Economists have found evidence that receiving unemployment-insurance benefits
a. has no effect on the job-search effort of the unemployed.
b. decreases the job-search effort of the unemployed.
c. increases the job-search effort of the unemployed.
d. has an uncertain effect on the job-search effort of the unemployed.
39. Curtis is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. John is an accountant. He has looked for work for some time, but no accounting firms are hiring.
a. John and Curtis are both frictionally unemployed.
b. John and Curtis are both structurally unemployed.
c. Curtis is frictionally unemployed, and John is structurally unemployed.
d. Curtis is structurally unemployed, and John is frictionally unemployed.
40. Which of the following is a cause of frictional unemployment?
a. the minimum wage.
b. a worker leaving a job to find one with better benefits.
c. labor unions.
d. All of the above are correct.
41. There will be structural unemployment if
a. some wages are kept above the equilibrium level.
b. some people choose not to work at the equilibrium level.
c. some wages are below the equilibrium level.
d. All of the above could be correct.
42. The position of the supply curve is not directly affected by the
a. state of technology.
b. prices of resources used.
c. income level of consumers.
d. all of the above.
e. none of the above.
43. The price system
a. sets up incentives for firms to produce what consumers want.
b. determines each person's income through the price of his or her resources.
c. may result in unequal distribution of society's output.
d. all of the above.
e. none of the above.
44. The amount of capital goods produced, the amount that that society invests in education and training, and the rate of technological change are all influenced in the USA by
a. the price system.
b. government action.
c. neither a nor b.
d. both a and b.
45. Senator Blowhard represents a state that has some textile firms in it. He wants to impose tariffs on all imported textiles. Which of the following is the least likely consequence of such tariffs?
a. Domestic textile buyers will lose consumer surplus, have less variety, and will pay higher prices.
b. Domestic textile sellers will gain producer surplus.
c. Domestic textile sellers will have a higher rate of technological advance.
d. Domestic textile sellers will have more market power.
46. Economists and the public
a. often disagree about free trade.
b. always agree about free trade.
c. always disagree about free trade.
d. seldom disagree about free trade.
47. Ruth collected Social Security payment of $220 a month in 1985. If the price index rose from 90 to 105 during 1985, her Social Security payment for 1986 have been about
a. $252.43
b. $253.00
c. $256.67
c. None of the above.
48. In 1980, the average per capita income in New York State was $10,179. Holding other factors constant, what would be the level of this income in 2016? (The annual CPI average for 1980 was 82.4; the annual CPI average for 2016 was 240.007)
a. $36,000.
b. $29,648.43
c. $29,279.07
d. The calculations cannot be completed with the given information.
49. Ingrid takes a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she has been promoted to full professor with a salary of $50,000. If the price index in 1974 was 50, and the price index in 2003 is 180, what is Ingrid's 2003 salary in 1974 dollars?
a. $13,889
b. $18,000
c. $26,000
d. $36,000
50. Henry Ford paid his workers $5 a day in 1914 when the CPI was 10. Today with the price index of 177, the $5 a day is worth $88.50 T F