Anser Key Study Questions(1)
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Anser Key Study Questions(1)

Course Number: ECON 252, Spring 2011

College/University: USC

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Econ 252x Marshall School of Business Akbulut Spring 2011 Answer Key - Study Questions 1. What is a business cycle? a. The long-run growth trend of the economy. b. The short-run movements (expansions and recessions) of economic activity. c. The short-run movements (inflations and deflations) of prices. d. The relationship between political activity and economic activity. 2. A period of rising prices and high...

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252x Marshall Econ School of Business Akbulut Spring 2011 Answer Key - Study Questions 1. What is a business cycle? a. The long-run growth trend of the economy. b. The short-run movements (expansions and recessions) of economic activity. c. The short-run movements (inflations and deflations) of prices. d. The relationship between political activity and economic activity. 2. A period of rising prices and high unemployment is known as a. stagflation b. recession. c. inflation. d. deflation. 3. If a country employs many foreign workers a. GDP is likely to be higher than GNP. b. GDP is likely to be lower than GNP. c. GDP and GNP will most likely be equal. d. the gap between GDP and GNP will not be effected by this fact. 4. Classical economists believe that the best way to solve the problem of high unemployment is a. increases in the money supply to increase investment. b. increase in government spending to stimulate demand. c. increase in taxes to reduce consumption. d. to do nothing; the economy will rapidly adjust its own. 5. Economists could agree about the effects of a particular economic policy but disagree about the desirability of implementing the policy. This would occur if they _______ about the positive analysis of the policy and _______ about the normative analysis of the policy. a. disagree; agree b. agree; agree c. agree; disagree d. disagree; disagree 6. Average labor productivity is the a. amount of workers per machine. b. amount of machines per worker. c. ratio of employed to unemployed workers. d. amount of output per worker. 7. A farmer grows wheat, which he sells to a miller for $100. The miller turns the wheat into flour which he sells to a baker for $150. The baker turns the wheat into bread, which he sells to consumers for $180. Consumers eat bread. What is GDP in this economy? a. b. c. d. $80 $180 $250 $430 8. Which of the following is the best example of an intermediate good? a. a tire purchased by an auto company b. a new house purchased by a newly married couple c. grain sold to foreign farmers d. All off the above are intermediate goods. 9. The GDP-deflator and the CPI differ from each other since a. the GDP-deflator does not include services but the CPI does. b. the GDP-deflator includes imported goods but the CPI doesnt. c. the CPI measures a fixed market basket but the GDP-deflator doesnt. d. the CPI includes more goods than the GDP-deflator does. 10. A country has a trade surplus when a. imports exceed exports. b. imports equal exports. c. exports exceed imports. d. imports equal zero. 11. Saving and Wealth are: a. b. c. d. Stock and flow variables, respectively Flow and stock variables, respectively Flow variables Stock variables 12. The table below contains data for the country of Dachsland, which produces only pretzels and books. The base year is 2005. Year 2005 2006 2007 2008 Price of Pretzels $4.00 $4.00 $5.00 $6.00 Quantity of Pretzels 90 100 120 150 Price of Books $1.50 $2.00 $2.50 $3.50 Quantity of Books 150 180 200 200 In 2006, Dachslands a. b. c. d. nominal GDP was $585, real GDP was $660, and the GDP deflator was 88.6. nominal GDP was $585, real GDP was $670, and the GDP deflator was 87.3. nominal GDP was $760, real GDP was $660, and the GDP deflator was 115.2. nominal GDP was $760, real GDP was $670, and the GDP deflator was 113.4. 13. The following table shows U.S. data for 2006. Civilian working-age population Civilian labor force Civilian employment 228.7 million 151.4 million 144.4 million What was the unemployment rate in 2006? a. 3.4% b. 3.7% c. 4.6% d. 4.8%. 14. If the government succeeds in turning a budget deficit into a budget surplus, which of the following can happen? a. private domestic saving can decrease b. private domestic investment can increase c. net exports can increase d. all of the above 15. Dissatisfaction with public school education has led many parents to try home schooling for their children. If parents cut back on their jobs outside the home in order to spend time teaching their children at home, how will this affect GDP? a. GDP will increase. b. Real GDP will increase and nominal GDP will decrease. c. Both real and nominal GDP will increase. d. GDP will decrease. 16. Friedrich von Hayek argued that a. the less governments intervene in the economy, the better. b. only active government policy could prevent recessions or inflation. c. the ultimate breakdown of the capitalist system is inevitable. d. unemployment is evil and that it requires intervention. 17. government The natural rate of unemployment is: a. the average rate of unemployment around which the economy fluctuates. b. about 10 percent of the labor force. c. a rate that never changes. d. the transition of individuals between employment and unemployment. 18. Richard loses his job at the railroad due to a downturn in general business conditions. He is experiencing a. structural unemployment. b. cyclical unemployment. c. seasonal unemployment d. fictional unemployment 19. Given the following data, what is the labor force participation rate? Population 300 million Non-institutionalized population, age 16 and over 250 million Persons employed or seeking employment 200 million Unemployed persons 10 million a. 10% b. 75% c. 80% d. 84% 20. Many economists attribute part of the recent increase in European unemployment to: a. high birth rates. b. slow rates of technological change. c. generous benefits for unemployed workers. d. increased demand for unskilled workers. 21. If the CPI was 132.5 at the end of 2003 and 140.2 at the end of 2004, the inflation rate over these two years was? a. 7.7% b. 5.8% c. 5.4% d. 4.4% 22. Hakan is a freshman at the University of Illinois. His parents had set up an education fund for him. But the fund has lost 30 percent of its value due to the stock market downturn. He is looking for summer jobs now. Hakan decides to supply more labor because of a. income effect. b. substitution effect. c. both income effect and substitution effect and income effect dominates. d. both income effect and substitution effect and substitution effect dominates. 23. An increase in total factor productivity a. shifts the production function upward and decreases the marginal product of labor. b. shifts firms labor demand curve to the left, so that at the same wage rate, firms are willing to hire less labor. c. will increase the equilibrium wage rate for sure, but the effect on the equilibrium labor input is uncertain. d. will increase the equilibrium wage rate and labor input for sure. 24. Suppose the economy's production function is Y = AK0.3N0.7. Suppose K = 200, N = 2000, and A = 1. Calculate the marginal product of capital. a. 1.0 b. 1.5 c. 2.0 d. 2.5 25. Which of the following equations represents the relation between real and nominal interest rates? a. Real interest rate = Nominal interest rate * Inflation b. Nominal interest rate = Real interest rate * Inflation c. Nominal interest rate = Real interest rate - Inflation d. Nominal interest rate = Real interest rate + Inflation 26. Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is NS = 300 + 8w where w is the real wage. What is the equilibrium quantity of employment? a. 12 b. 190 c. 380 d. 760 27. A law firm has discovered the following relationship between the number of junior associates and its total revenue. Worker s 1 2 3 4 5 Revenu e $2000 3800 5400 6800 8000 Refer to the data. If the market pay for a junior associate is $1500, the law firm should hire: a. 2 associates b. 3 associates c. 4 associates d. 5 associates 28. The city of Hope has a labor force of 1000. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year, 50 people lose their jobs for a period of four months before finding new jobs. What is the unemployment rate in any given month? a. 2% b. 3% c. 5% d. 7% 29. You are given the following information about an economy: Gross private domestic investment = 50 Government purchases of goods and services = 25 Gross national product (GNP) = 220 Net exports = -30 Taxes = 50 Government transfer payments to the domestic private sector = 25 Interest payments on the government to the domestic private sector = 10 Factor payment received from rest of world = 7 Factor payment made to rest of world = 7 What is national saving? a. -10 b. 20 c. 30 d. 40 30. You are given the following information about an economy: Private consumption of goods and services = 150 Gross private domestic investment = 30 Government purchases of goods and services = 30 Current account balance = 20 Taxes = 40 Government transfer payments to the domestic private sector = 25 Interest payments on the government to the domestic private sector = 10 Factor payment received from rest of world = 7 Factor payment made to rest of world = 10 What is GNP? a. 225 b. 228 c. 230 d. 233
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