Economics Test #2

1.

2 points

Real GDP measures:

current output at current prices.

current output at base year prices.

base year output at current prices

base year output at current exchange rates.

2.

2 points

Real GDP and nominal GDP differ because the real GDP:

is adjusted for changes in the volume of intermediate transactions.

includes the economic effects of international trade.

excludes depreciation charges

has been adjusted for changes in the price level.

3.

2 points

Real GDP per capita

cannot grow more rapidly than real GDP.

cannot grow more slowly than real GDP.

necessarily grows more rapidly than real GDP

can grow either more slowly or more rapidly than real GDP.

4.

2 points

Critics of economic growth:

Contend that growth and industrialization reduce pollution.

argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

Point out that growth results in greater economic security for workers.

Say that its benefits accrue nearly exclusively to white males.

5.

2 points

Before the period of modern economic growth:

only civilizations such as the Roman Empire experienced economic growth.

output and population growth were stagnant

most economies realized high rates of growth in output person.

rates of population growth virtually matched rates of output growth.

6.

2 points

The business cycle depicts:

fluctuations in the general price level

the phases a business goes through from when it first opens to when it finally closes.

Which of the following statements is most accurate about advanced economies.

Economies experience little long-run growth in output, but can experience significant growth in the short run.

7.

2 points

Exhausting of the earths resources and adding to environmental hazard is a negative consequence of economic growth.

True

False

8.

2 points

Nominal interest rate is 5%, and the inflation rate is 9%.
What is the Real Interest rate ?

14%

4%

-4%

-45%

9.

2 points

MPC is calculated by change in consumption divided by change income.

True

False

10.

2 points

Increased lifespan is one of the benefits of economic growth, as well as wages, increased income.

True

False

11.

2 points

Economists who believe that the recent increase in the average productivity growth rate may be permanent claim that the above-normal economic growth in the United States between 1995 and 2009 was caused by

increases in the rate of personal savings

increased entrepreneurial activity, application of information technology, and global competition.

rising federal budget surpluses that reduced real interest rates

expansionary monetary policy.

12.

2 points

Which would be considered an investment according economists?

The purchase of newly-issued shares of stock in Microsoft

The construction of a new computer chip factory by Intel

The purchase of shares of stock by Fidelity, a mutual fund company.

The sale of government bonds by the nation's central bank

13.

2 points

The nominal interest rate is 7%, and the Real interest rate is 7%, what is the inflation rate ?

(Please add the % decimal)

14.

2 points

Growth is advantageous to a nation because it

promotes faster population growth.

lessens the burden of scarcity

eliminates the economizing problem

slows the growth of wants

15.

2 points

MPS is change in savings divided by change in consumption.

True

False

16.

2 points

Which is best considered a supply factor for long-run economic growth?

Government Spending

The stock of capital goods

full employment of resources

Personal consumption expenditures

17.

2 points

The GDP tends to:

overstate economic welfare because it does not include certain non market activities such as the productive work of housewives.

understate economic welfare because it includes expenditures undertaken to offset or correct pollution.

understate economic welfare because it does not take into account increases in leisure.

overstate economic welfare because it does not reflect improvements in product quality.

18.

2 points

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2,460) and government purchases ($470). What is the GDP of the economy ?

(Please add dollar sign and comma)