midterm #1 practice problems - with answers

midterm #1 practice problems - with answers - Economics 212...

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Economics 212: Macroeconomic Principles Midterm #1 Review Questions: Lectures 1 to 4 Dustin Chambers © 2015
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Question #1 – True/False National income and national expenditure must be equal. True
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Question #2 – True/False Gross Domestic Product (GDP) and Gross National Product (GNP) must be equal. False
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Question #3 – True/False GDP includes the market value of all final goods and services, including so-called “Black Market” products (e.g. drugs). False
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Question #4 – True/False GDP includes the imputed market value of owner-occupied housing. True
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Question #5 – True/False Intermediate goods produced in a given year that go unused and are placed in inventory are included in GDP in that year. True
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Question #6 – True/False Overall, aggregate investment (I) is the largest component (on a percentage basis) of GDP. False
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Question #7 – True/False Although money can’t buy happiness, nations with higher levels of GDP per capita generally have higher life expectancy rates and higher literacy rates. True
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Question #8 – True/False The largest component of the U.S. CPI basket is housing. True
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Question #9 – True/False Generally speaking, the behavior of the CPI and GDP deflator are very similar (i.e. these alternative measures of inflation are rarely in conflict). True
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Question #10 – True/False Most economists would agree that productivity is the key to economic growth. True
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Question #11 – True/False The NYSE and NASDAQ are famous examples of primary markets. False
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Question #12 – True/False Most lending takes place through financial intermediaries (loans) and not financial markets (bonds). True
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Question #13 – True/False If the real interest rate is negative, then the inflation rate is greater than the nominal interest rate. True
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Question #14 – True/False AAA-rated government bonds have more credit risk than junk bonds. False
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Question #15 – Definition Gross Domestic Product the market value of all final goods and services produced within a country in a given period of time
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Question #16 – Definition GDP Deflator a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
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Question #17 – Definition Indexation the automatic correction of a dollar amount for the effects of inflation by law or contract
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