MT1Practice ECO 3203 - Practice Questions 1 GDP is the...

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Unformatted text preview: Practice Questions 1. GDP is the total value of _____ produced during a given year within the nation’s borders. a. all final goods and services c. all final goods b. all goods and services d. all goods 2. a. b. c. d. Which of the following is not considered part of government purchases (G)? Cars purchased by the Orlando police department Airplanes purchased by the military Social security payments to your grandfather The salary of the mayor of Orlando 3. a. b. c. d. If firms sell more output during a given quarter than they produce then private investment is negative. inventory investment is negative. the stock of inventory will rise. this is not possible. 4. Ben is a dairy farmer. In the current year Ben produces milk valued at $200,000, half of which he sells directly to consumers, and half of which he sells to Breyers to make ice cream. Breyers produces ice cream using all of the milk it buys from Ben and sells it to consumers for $225,000. What is the value of GDP in this simple economy? a. $425,000 b. $325,000 c. $225,000 d. $200,000 5. The investment spending category of GDP includes spending on a. consumer durable goods. c. services purchased by the firm. b. new capital goods. d. stocks and bonds. 6. If your nominal wage rises from $5 to $7.50 and the price level rises from 150 to 225 then your real wage a. rises by 50%. c. rises by 20%. b. rises by 25%. d. does not change. 7. You have $1,000 that you do not need until next year and you decide to buy a one-year certificate of deposit that pays 8% interest. The inflation rate for the year ends up being 5%. At the end of the year your nominal rate of return is __ and your real rate of return is __. a. 8% : 3% b. 8% : 8% c. 3% : 8% d. 13% : 8% 8. There are 100 million people in the working age population who can be divided as follows: 50 million full time employed, 10 million part time employed, 4 million no job but looking, 1 million no job but not looking, 10 million full time students, 5 million retired people, and 20 million stay home spouses. The unemployment rate is a. 6.25% b. 8.0% c. 7.69% d. 10.0% 9. The labor force participation rate measures a. the size of the adult population relative to the total population. b. the number of unemployed people relative to the size of the labor force. c. the size of the labor force relative to the adult population. d. the number of employed people relative to the size of the labor force. 10. When nominal GDP rises we know that a. output of goods and services has increased. b. the price level has increased. c. output and prices have increased. d. output or prices have increased. 11. If the inflation rate ends up higher than expected this year, who benefits? a. people who live on fixed incomes b. those who lent money last year c. those who borrowed money last year d. no one benefits when inflation is higher than expected 12. The exchange rate value of the dollar rises. This causes exports to ____ and imports to ____. a. increase : increase c. increase : decrease b. decrease : decrease d. decrease : increase 13. A firm is deciding how many machines to buy for the factory. They determine that the marginal product of capital is given by MPK = 100-5K, where K is the number of machines. Each machine costs $1,000. The value of the extra output produced by each machine is $2 per unit. The interest rate is 5% and the rate of depreciation is 5%. How many machines should the firm purchase? a. 8 b. 9 c. 10 d. 11 14. Suppose government spending rises in a small open economy. This will cause national saving to _____, investment to _____, and net exports to _______. a. decrease : stay the same : decrease b. decrease : decrease : decrease c. stay the same : decrease : decrease d. stay the same : increase : increase 15. Consider a country where the quantity of labor supplied is positively related to the real wage. In this same country, the production function exhibits diminishing returns to labor. Suppose a technological advance leads to a 20% increase in the marginal product of labor. This will cause the real wage to _____ and the level of employment to _____. a. increase : increase c. increase : decrease b. decrease : decrease d. decrease : increase 16. A country is running a trade surplus. This means that a. imports exceed exports. b. taxes exceed government spending. c. domestic spending exceeds domestic income. d. there is net capital outflow. ...
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This note was uploaded on 11/08/2011 for the course ECO 3203 taught by Professor Yang during the Fall '10 term at University of Central Florida.

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