1) The unemployment rate is
A) the percentage of the U.S. population
that is unemployed.
B) the percentage of the private sector
labor force that is unemployed.
C) the percentage of the U.S. labor force
that is unemployed.
D) the percentage of the U.S. population
that is looking for a job.
2) Inflation is
A) a rise in the price of every good and
service.
B) a rise of exactly a specified percentage
in the price of every good or service.
C) a rise in the average price level.
D) a rise in average prices of at least 10
percent a year.
3) If the number of unemployed is greater than the
number of employed, the unemployment rate is
A) over 100 percent.
B) more than 50 percent.
C) less than 50 percent.
D) None of these is true.
4) The labor force includes only
A) people who are employed.
B) the employed and the unemployed.
C) the employed, the unemployed, and
discouraged workers.
D) the unemployed and discouraged
workers.
5) When we are at full employment
A) the unemployment rate is zero.
B) the cyclical unemployment rate is zero.
C) the structural unemployment rate is
zero.
D) the frictional unemployment rate is zero.
6) Which statement is true?
A) All people who are unemployed collect
unemployment insurance benefits.
B) All people who collect unemployment
insurance benefits are officially
unemployed.
C) No one who is officially unemployed
collects unemployment insurance
benefits.
D) No one who collects unemployment
insurance benefits is officially
unemployed.
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7) Deflation is
A) a constant rate of inflation.
B) a slow-down in the rate of inflation.
C) zero inflation.
D) a decline in the average price level.
8) If the consumer price index were 233.8 last year
and 261.3 today, a level of _____ next year
would represent disinflation.
A) 261.3
B) 661.3
C) 283.1
D) 260.0
9) The unemployment rate is calculated as
A) the number of unemployed divided by
the number in the labor force.
B) the number of unemployed divided by
the number of employed.
C) the number of unemployed divided by
the civilian, noninstitutionalized
population.
D) the number of unemployed plus the
number of discouraged workers.
10) Disinflation is
A) a constant price level.
B) negative inflation.
C) a drop in the average level of prices.
D) a reduction in the annual rate of
inflation.
11) Hyperinflation
A) is typically considered to be when prices
rise more than 50 percent per month.
B) is typically caused by the government
printing too much money.
C) can cause people to stop accepting
money and demand goods or services
in payment.
D) All of these are true.
12) Structural unemployment results from
A) changes in business inventories.
B) changes in interest rates.
C) changes in both technology and the
changing demand for products.
D) All of these are true.
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13) The unemployment that occurs as jobs are
eliminated because of changing technology is
known as
A) frictional.
B) voluntary.
C) structural.
D) fundamental.
E) cyclical.
14) Frictional unemployment is
A) the lowest rate of unemployment that
can be maintained without accelerating
the rate of inflation.
B) caused by a mismatch between the
skills of unemployed workers and the
skills required in jobs that have
openings.
C) associated with downturns in the pace
of economic activity.
D) caused because time is needed to enter
the labor force to find a job or to move
from one job to another.
15) The term recession refers to
A) a period of decline in real GDP for two
business quarters.
B) a fall in the general level of real wages.
C) a fall in the CPI.
D) a fall in the rate of increase of real per
capita GDP.
16) The GDP is the value of all final goods and
services produced
A) within a nation's boundaries.
B) by domestically owned companies.
C) by citizens of the country.
D) by domestically controlled companies.
17) Net domestic product is usually preferred to GDP
by economists because net domestic product
A) includes depreciation.
B) excludes depreciation.
C) includes indirect business taxes.
D) excludes indirect business taxes.
18) If GDP rose from $4 trillion to $6 trillion, and
prices rose by 50 percent, over this period
A) real GDP fell by 100 percent.
B) real GDP fell by 50 percent.
C) real GDP stayed the same.
D) real GDP rose by 50 percent.
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19) If GDP increases faster than the GDP deflator,
A) real GDP will rise.
B) real GDP will fall.
C) real GDP will stay the same.
D) There is not enough information to
determine what happens to real GDP.
20) In the equation C + I + G + Xn, the I is defined as
A) total new investments less a wear out
allowance.
B) total investments in new plant and
equipment, business inventory changes,
and new residential housing.
C) domestic consumer income.
D) total investments in new plant and
equipment.
21) Net exports is a negative figure when
A) a nation's exports of goods and services
exceed its imports.
B) depreciation exceeds gross private
domestic investment.
C) the economy's stock of capital is
declining.
D) a nation's imports of goods and services
exceed its exports.
22) Net exports is a negative number whenever
A) a nation's exports of goods and services
exceed its imports.
B) a nation's imports of goods and services
exceed its exports.
C) the nation's gross investment is on the
decline.
D) the nation's gross savings rate is on the
decline.
23) Net exports are
A) the smallest component of GDP.
B) income after taxes.
C) the largest component of GDP.
D) included in government spending.
24) Investment will tend to be low when the
A) capacity utilization rate is high and the
interest rate is high.
B) capacity utilization rate is high and the
interest rate is low.
C) capacity utilization rate is low and the
interest rate is low.
D) capacity utilization rate is low and the
interest rate is high.
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25) Which one is NOT an investment?
A) A new home purchase
B) 500 shares of stock
C) An addition to a factory
D) Purchase of 100 new machines
(equipment)
26) At the point where C line crosses the 45-degree
line, saving is
A) positive.
B) negative.
C) zero.
D) There is not enough information to
answer this.
27) The consumption function is associated with
A) John Maynard Keynes.
B) Karl Marx.
C) Milton Friedman.
D) Adam Smith.
28) The MPC is equal to ______ divided by ______.
A) consumption; income
B) the change in consumption; the change
in income
C) the APC; the APS
D) savings; consumption
29) As disposable income grows,
A) both autonomous C and induced C rise.
B) both autonomous C and induced C fall.
C) autonomous C falls and induced C rises.
D) autonomous C stays the same and
induced C rises.
30) The two axes on the Lorenz curve graph of
income distribution are
A) the percent of households and the
percent of income.
B) the percent of households and the
percent of poverty.
C) the number of households and the
percent of income below median.
D) the number of households and the
number of households below poverty.
31) Productivity means
A) output per unit of input.
B) output per business cycle.
C) output per fiscal year.
D) marginal increases to output over time.
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32) The _____ our productivity grows, the _____ our
real GDP grows.
A) slower; faster
B) faster; slower
C) faster; faster
33) In general, real GDP and productivity growth
A) move in the same direction, but at
different rates.
B) move in the same direction at the exact
same rate.
C) move in opposite directions but at
different rates.
D) move in opposite directions at the exact
same rate.
34) Which is one of the three jobs (or functions) of
money?
A) A medium of exchange
B) A standard of value
C) A store of value
D) All of these are true
35) At equilibrium GDP,
A) savings = investment, but aggregate
demand does not equal aggregate
supply.
B) savings = investment and aggregate
demand = aggregate supply.
C) savings does not equal investment and
aggregate demand does not equal
aggregate supply.
D) savings does not equal investment, but
aggregate demand = aggregate supply.
36) The recovery phase of the business cycle ends
when
A) we reattain the level of the previous
peak.
B) we reattain the level of the previous
trough.
C) we go into the next recession.
D) we are back at full employment.
37) If the number of unemployed stays the same and
the number of people in the labor force declines
A) the unemployment rate will rise.
B) the unemployment rate will fall.
C) the unemployment rate will stay the
same.
D) There is not enough information to
answer this.
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38) We have had some degree of inflation since the
A) 1900s.
B) 1920s.
C) 1940s.
D) 1960s.
39) The most important and most commonly used
measure of inflation is
A) the GDP deflator.
B) the consumer price index.
C) demand-pull inflation.
D) the wage-price spiral.
40) The difference between GDP and NDP is
A) who has control of the company.
B) who receives the profit from the sale.
C) where the money is spent.
D) depreciation.
41) In the equation C + I + G + Xn, the I is defined as
A) total new investments less a wear out
allowance.
B) total investments in new plant and
equipment, business inventory changes,
and new residential housing.
C) domestic consumer income.
D) total investments in new plant and
equipment.
45) If GDP rises,
A) real GDP may either rise or fall or stay
the same.
B) we can be certain that the price level
has risen.
C) real GDP must fall.
D) real GDP must also rise.
46) If GDP declined by 6 percent in real terms during
one year, and population declined by 3 percent,
then
A) real GDP per capita decreased.
B) real GDP per capita increased.
C) real GDP increased while nominal GDP
decreased.
D) nominal GDP did not change at all.
47) Gross domestic product is the total market value
of all
A) commodities sold in a year.
B) final goods and services produced in a
year within a country.
C) foods and services produced by
domestic companies in a year.
D) consumer goods sold in a year.

42) Which one of the following is counted in GDP?

A) Government spending
B) Transfer payments
C) Intermediate goods
D) Leisure time

43) Which statement is true?

A) GDP can never be greater than NDP.
B) NDP can never be greater than GDP.
C) GDP and NDP are always equal.
D) None of these is true.

44) Today our per capita real GDP is _____ what it

was since World War II.
A) half
B) equal to
C) twice
D) over three times

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