EC 102 Second Exam Practice Questions Fall 2024 PDF

EC 102 Second Exam Practice Questions 1. What event was a major influence on the development of macroeconomics? a. Great Depression b. Em...

EC 102 Second Exam Practice Questions 1. What event was a major influence on the development of macroeconomics? a. Great Depression b. Employment Act of 1946 c. establishment of the Federal Reserve System in the United States d. U.S. entry into World War II 2. GDP can be found by adding up either all of the _____ or all of the _____ in the economy. a. spending; taxes b. spending; income c. investment; income d. net interest payments; taxes 3. Gross domestic product is a measure of a. an economy's total output. b. household production. c. the total weight of all goods produced. d. production by owners of labor and capital only. 4. Gross domestic product is the total market value of all a. final goods and services produced in the United States by labor and property. b. final and intermediate goods and services produced in the United States by labor and property. c. intermediate goods produced in the United States by labor and property. d. final goods and services sold in the United States. 5. Total spending in an economy is the sum of a. durable goods plus nondurable goods plus services. b. imports minus exports. c. personal consumption plus gross private investment plus government spending plus net exports. d. food consumption plus housing expenditures plus business expenditures plus government spending. 6. The three types of consumption are a. compulsive, impulsive, and deliberate. b. durables, nondurables, and services. c. investments, nondurables, and services. d. investments, durables, and services. Page 1 7. Which of these is a nondurable good? a. Toyota sedan b. movie ticket c. six-pack of beer d. hour with a massage therapist 8. Which of these is an example of gross private domestic investment? a. the sale of an existing home b. highway construction by a government contractor c. a change in business inventories d. a household purchase of shares of Google stock 9. The principal measure of inflation in the United States is a. the consumer price index. b. gross domestic product. c. the producer price index. d. the leading economic Index. 10. _____ is a reduction in the rate of inflation. a. Disinflation b. Deflation c. Hyperinflation d. The price level 11. _____ is a measure of the change in the average prices paid by urban consumers for a typical market basket of goods and services. a. The consumer price index b. The producer price index c. Personal consumption expenditure d. The GDP deflator 12. What is real GDP in 2010 dollars if nominal GDP in 2014 is $15,000 billion; the GDP deflator in 2014 is 110; and the GDP deflator in 2010 was 100? a. $9,100 billion b. $13,636 billion c. $14,010 billion d. $16,500 billion 13. Last year, the consumer price index was 115 while the consumer price index for this year is 125. The rate of inflation is a. 8%. b. 8.7%. c. 9.2%. Page 2  d. 10.8%. 14. If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing a. inflation. b. disinflation. c. deflation. d. hyperinflation. 15. Nominal GDP in 2006 was $13,458.2 billion. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006 if the GDP deflator uses 2000 as the base year? a. $11,512.6 billion b. $11,522.5 billion c. $15,732.6 billion d. $15,746.1 billion 16. Janet is receiving a 5% pay raise. If the rate of inflation is 2%, then Janet's purchasing power is a. falling. b. rising. c. unaffected by either inflation or the pay raise because they are expressed in nominal and not in real terms. d. impossible to determine without further information. 17. John expects to get a raise equal to the increase in the consumer price index (CPI). The CPI has gone from 160 to 164. If John's salary last year was $50,000, what salary does he expect to earn this year? a. $48,750 b. $51,250 c. $52,220 d. $52,250 18. Which group benefits from an unanticipated rise in the inflation rate? a. homeowners with fixed-rate mortgages b. senior citizens living on a fixed income c. creditors or lenders d. workers on contracts without escalator clauses 19. Zach has been laid off from his job as an aircraft worker. He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is a. employed. b. unemployed. c. a discouraged worker. d. not in the labor force. 20. In the United States, people are considered unemployed if and when they Page 3  a. have become discouraged and are no longer actively seeking work. b. do not have a job but are available for work and have been actively seeking work. c. are working at a job that does not fully utilize their skills. d. are on family leave. 21. The labor force is defined as the a. total number of those employed. b. total number of the employed and unemployed. c. total population less the number unemployed. d. number of workers seeking a paid job. 22. Robert lost his job and now takes care of his children while his wife works. He would take a job similar to the one he lost if it were offered, but he is not actively seeking work. How is Robert categorized in the unemployment figures? a. Robert is unemployed. b. Robert is employed because he is providing a useful service. c. Robert is not part of the labor force. d. Robert is underemployed. 23. Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as a. the invisible unemployed. b. temporary workers. c. discouraged workers. d. the disgruntled unemployed. 24. If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, they are experiencing _____ unemployment. a. frictional b. cyclical c. full d. structural 25. Jennifer did not work during college. She just obtained a bachelor's degree in marketing, and is now looking for a marketing job in the retail industry. Jennifer is considered a. structurally unemployed. b. frictionally unemployed. c. cyclically unemployed. d. not in the labor force. 26. The natural rate of unemployment a. occurs when the unemployment rate is zero and everyone who is willing to work has a job. b. fluctuates with the business cycle. c. is associated with the economy's maximum output rate consistent with low inflation. Page 4  d. never changes. 27. Frictional unemployment occurs when job openings a. exist and people are willing to take them, but the applicants do not have the necessary skill set. b. exist, and people are willing to take them, but it takes some time to bring the two together. c. exist, but people are not willing to take them, so it makes no sense to bring the two together. d. do not exist, although people are willing to work, so it makes no sense to try to bring the two together. 28. U.S. steelworkers who have lost their jobs to workers receiving lower wages overseas are part of _____ unemployment. a. frictional b. cyclical c. seasonal d. structural 29. When the economy is operating at full employment _____ unemployment is zero. a. cyclical b. the sum of cyclical unemployment and structural c. the sum of frictional unemployment and structural d. the sum of frictional unemployment and cyclical 30. Economic growth is most commonly measured by a. GDP. b. GDP per capita. c. Genuine Progress Indicator per capita. d. real GDP per capita. 31. If the growth rate in an economy is 3.5%, then its GDP will double in about a. 3.5 years. b. 20 years. c. 70 years. d. 245 years. 32. If a country's population increases at a higher rate than the growth rate of its real GDP a. GDP per capita has increased. b. the standard of living in the country has decreased. c. average output per person remains constant. d. the country's rate of inflation has increased. Page 5 33. Refer to the production possibilities frontiers below. Panel A illustrates _____ economic growth and panel B illustrates _____ economic growth. a. short-run; short-run b. short-run; long-run c. long-run; long-run d. long-run; short-run 34. Physical capital includes a. the physical talents of people. b. the ability to take physical resources and use them in creative ways to produce goods and services. c. manufactured products that are used to produce other goods and services. d. land and raw resources that come from the earth. 35. Human capital includes a. physical capital. b. labor. c. the improvements to labor capabilities from training, education, and apprenticeship programs. d. pension plans that enable early retirement. 36. A production function shows the a. output that is produced using different combinations of inputs combined with existing technology. b. output that is produced using different combinations of technology combined with existing inputs. c. output that is most highly valued by consumers. d. most desired production method for a given level of output. 37. If technology is held constant, an increase in capital concurrent with a decrease in labor input causes output to a. rise. b. fall. c. stay the same. d. rise, fall, or stay the same. 38. The capital-to-labor ratio measures the Page 6  a. average number of hours worked. b. financial resources of a company divided by the number of employees. c. rate of technological improvement. d. amount of economic capital per worker. 39. Improvements in technology a. explain most of the economic growth in recent decades. b. caused the last recession. c. are relatively unimportant for today's standard of living. d. have slowed in the past 100 years. 40. To have long-term economic growth, the production function suggests a. keeping interest rates high to encourage saving. b. increasing the availability of technology, capital, and labor. c. increasing government oversight of business decisions. d. redistributing income from the wealthy to the poor. 41. According to the production function, which of these changes will NOT result in economic growth? a. improvements in the productivity of labor b. increases in consumption spending c. increases in capital d. improvements in technology 42. Increases in _____ often lead to economic growth. a. technology b. population c. the money supply d. government regulations 43. As a general rule, the more capital employed with workers, the _____ their productivity and the _____ their earnings. a. lower; higher b. lower; lower c. higher; lower d. higher; higher 44. Infrastructure is a. not important in a market-based economy. b. a country's public capital. c. typically better when provided by private companies. d. unimportant for economic growth because the government provides it. Page 7 45. Generally, countries with the _____ economic freedom also have the _____ per capita GDP. a. most; highest b. least; highest c. most; lowest d. least; average Page 8 Answer Key 1. a 2. b 3. a 4. a 5. c 6. b 7. c 8. c 9. a 10. a 11. a 12. b 13. b 14. c 15. a 16. b 17. b 18. a 19. b 20. b 21. b 22. c 23. c 24. d 25. b Page 9 26. c 27. b 28. d 29. a 30. d 31. b 32. b 33. b 34. c 35. c 36. a 37. d 38. d 39. a 40. b 41. b 42. a 43. d 44. b 45. a Page 10