ECON 2101 - test 2 practice-1 - Copy (2)

# ECON 2101 - test 2 practice-1 - Copy (2) - 1. If the annual...

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1. If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double? a) 10 years b) 16 years c) 14 years d) 12 years 2. If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is: a) 7 percent. b) 3 percent. c) 8 percent. d) 5 percent. 3. Transfer payments such as Social Security or unemployment compensation are counted in the calculation of GDP. a) True b) False 4. If real GDP falls from one period to another, we can conclude that: a) deflation occurred. b) inflation occurred. c) nominal GDP fell. d) None of these necessarily occurred. 5. Which is included in the expenditures approach to GDP? a) Spending on meals by consumers at restaurants b) Spending on used clothing by consumers at garage sales c) The monetary value of used trucks purchased by construction companies d) The monetary value of stocks and bonds owned by investors 6. 7. Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. The type of unemployment Kevin is faced with is: a) Structural b) Cyclical c) Frictional d) Natural 8. For a nation's real GDP per capita to rise during a year: a) investment spending must increase. b) real GDP must increase more rapidly than population. c) consumption spending must increase. d) population must increase more rapidly than real GDP. 1

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9. A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate? a) 27 percent b) 4 percent c) 6 percent d) 9 percent 10. A GDP price index one year was 110, and the next year it was 115. What is the approximate percentage change in the price level from one year to the next as measured by that index? a) 6.2% b) 5.0% c) 3.1% d) 4.5% Answer the question(s) based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. 11. Refer to the above data. If year 2 is the base year, the price index for year 3 is: a) 120 b) 125 c) 150 d) 133 12. Refer to the above data. If year 2 is the base year, then the percentage increase in real GDP from year 2 to year 4 is: a) 80 percent b) 40 percent c) 60 percent d) 100 percent 13. GDP tends to underestimate the productive activity in the economy because it excludes: a) The work done by construction companies to build manufacturing plants. b) Spending by the government on military goods
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## This note was uploaded on 10/23/2011 for the course ECON 201 taught by Professor Staff during the Spring '08 term at Northern Virginia Community College.

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ECON 2101 - test 2 practice-1 - Copy (2) - 1. If the annual...

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