08 Jun Question Economics 1: TEST 3 (40 Questions) Multiple Choice
Question
Economics 1: TEST 3 (40 Questions)
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. The base year is the year
a. in which prices are unstable.
b. in which prices are lowest.
c. in which prices are highest.
d. that serves as a reference point or benchmark.
e. in which nominal output is largest. ____ 2. A person in the civilian labor force falls into one of two categories:
a. a person who works in a service industry or a person who works in a manufacturing
industry.
b. unemployed or employed.
c. disemployed or unemployed.
d. a self-employed worker or a non-self-employed worker. ____ 3. If a person did at least one hour of work as a paid employee during the survey week, how is she classified?
a. as an employed person
b. as not in the labor force
c. as an unemployed person
d. none of the above ____ 4. If a person worked at least 15 hours per week as an "unpaid" worker on a family farm, how is she classified?
a. as not in the labor force
b. as an unemployed person
c. as an employed person
d. none of the above ____ 5. The cyclical unemployment rate is defined as the __________ unemployment rates.
a. sum of the structural and the frictional
b. difference between the structural and the frictional
c. difference between the existing (actual) and the natural
d. sum of the natural and the frictional ____ 6. "Full employment" is said to exist when the unemployment rate equals
a. zero.
b. the cyclical unemployment rate.
c. the structural unemployment rate.
d. the natural unemployment rate. ____ 7. In many large retail stores, price markdowns are now determined by computer. The "middle managers" who
used to make these decisions personally became __________ unemployed.
a. frictionally
b. structurally
c. naturally
d. cyclically ____ 8. Look at the following data: The frictional unemployment rate is 3 percent, the natural unemployment rate is
6.5 percent, and the cyclical unemployment rate is 2.4 percent. The structural unemployment rate is
__________ percent and the actual unemployment rate (in this economy) is __________ percent.
a. 3; 8.9
b. 3.5; 8.9
c. 3.5; 9.5
d. 5.4; 2.4
e. none of the above ____ 9. If the cyclical unemployment rate is negative, then the __________.
a. natural unemployment rate is less than the actual unemployment rate in the economy.
b. natural unemployment rate is greater than the actual unemployment rate in the economy.
c. structural unemployment rate is greater than the frictional unemployment rate.
d. structural unemployment rate is less than the frictional unemployment rate.
e. a and d ____ 10. Is it possible for the economy to be at full employment and still have some people who are unemployed?
a. No, full employment means that no one is unemployed.
b. Yes, since full employment exists if the economy is operating at the natural unemployment
rate and there is always some natural unemployment.
c. Yes, since full employment exists if the economy is operating at the frictional
unemployment rate and there is always some frictional unemployment.
d. Yes, since full employment equals the sum of the cyclical unemployment rate and the
natural unemployment rate, and there is always some cyclical unemployment.
e. none of the above
____ 11. Jones lost his job in industry A, but he has skills that can be transferred to industry B (which is currently
hiring). Smith lost a job in industry C, but his skills cannot be transferred to industry B or to any other
industry. Jones is __________ unemployed and Smith is __________ unemployed.
a. structurally; frictionally
b. structurally; structurally
c. frictionally; frictionally
d. frictionally; structurally
____ 12. A __________ is a person who was employed in the civilian labor force and was either fired or laid off.
a. new entrant
b. reentrant
c. job leaver
d. job fixer
e. none of the above
____ 13. The answer is "a person employed in the civilian labor force who quits his or her job." The question is:
a. Who is a job loser?
b. Who is an entrant?
c. Who is a reentrant?
d. Who is a job leaver?
e. Who is a discouraged worker? ____ 14. A(n) __________ is a person who was previously employed, hasn’t worked for some time, and is currently
reentering the labor force.
a. discouraged worker
b. entrant
c. reentrant
d. job loser
e. job leaver
____ 15. A plumber who quits his job in San Diego and moves to Orlando where additional plumbers are needed is
said to be __________ unemployed
a. frictionally
c. cyclically
b. structurally
d. underemployed
____ 16. Which of the following illustrates double counting?
a. The total market value of the steel used to produce a car and the total market value of the
car itself are summed.
b. The total market value of tennis rackets and the total market value of tennis balls are
summed.
c. The total market value of picture frames and the total market value of camera film are
summed.
d. The total market value of eyeglasses and the total market value of carpet are summed.
e. b and c
____ 17. Underground activities are not counted in GDP because
a. some underground activities are illegal and the government doesn’t want to place, for
instance, drug dealers on an equal footing with small businesses.
b. there are no written records of underground activities.
c. of a decision made in the 1930s and no one has gotten around to changing it yet.
d. although it is possible to accurately measure underground activities, it is harder than
measuring above-ground activities because with the latter, one doesn’t have to dig as deep.
____ 18. Which of the following is counted in GDP?
a. the purchase of 100 shares of Microsoft stock
b. the services of a real estate broker
c. government transfer payments
d. the sale of a used car
e. none of the above
____ 19. Net exports equals
a. exports divided by imports.
b. the sum of exports and imports.
c. exports minus imports.
d. exports during the year.
e. none of the above
____ 20. Macroeconomists define consumption as
a. purchases by the business sector.
b. wearing away and breakdown of capital goods.
c. the difference between imports and exports.
d. purchases by the household sector. ____ 21. To macroeconomists, investment is mainly the purchases of goods and services
a. by businesses.
b. to hold as wealth, such as gold coins or art.
c. to hold as wealth, such as stocks and bonds.
d. in the period previous to the period being studied.
____ 22. Business firms make which of the following two types of investment?
a. foreign investment and domestic investment
b. fixed investment and capital investment
c. investment in stocks and investment in bonds
d. investment in new capital goods and investment in used capital goods to replace "wornout" capital goods
e. fixed investment and inventory investment
____ 23. "Economic growth" has occurred if the
a. inflation rate between this year and last year is zero or less.
b. GDP this year exceeds the Real GDP this year.
c. unemployment rate this year is above the natural rate of unemployment.
d. Real GDP this year exceeds the Real GDP of last year.
____ 24. Which of the following would be included in this year’s GDP?
a. the value of a used car, at its sale price
b. the value of a new domestic automobile, at its sale price
c. a sale of Microsoft stock from one individual to another
d. the face value of a life insurance policy paid to a woman at the death of her husband
____ 25. When the expenditure approach is used to measure GDP, the major components of GDP are
a. consumption, investment, indirect business taxes, and depreciation.
b. employee compensation, rents, interest, self-employment income, and corporate profits.
c. employee compensation, corporate profits, depreciation, and indirect business taxes.
d. consumption, investment, government consumption and gross investment, and net exports.
____ 26. Gross domestic product is
a. the market value of all goods and services exchanged within a country during a time
period.
b. the market value of all domestic assets, regardless of whether they are owned by citizens
or foreigners.
c. the compensation received during a period for labor services plus interest, rents, and
corporate profits.
d. the market value of final goods and services produced within a country during a time
period.
____ 27. U.S. imports are
a. not added to U.S. GDP because they are produced abroad
b. added to U.S. GDP because they are consumed domestically
c. added to U.S. GDP because they represent an increase in inventories
d. added to U.S. GDP as government purchases because the government decides what goods
may be imported
e. not added to U.S. GDP because they are intermediate goods ____ 28. If U.S. net exports are negative,
a. U.S. consumers are spending less on foreign goods than foreign consumers are spending
on U.S. goods
b. U.S. consumers are spending more on foreign goods than foreign consumers are spending
on U.S. goods
c. the government must promote imports to balance international trade
d. U.S. consumers are spending more on foreign goods than they are spending on U.S. goods
e. U.S. disposable income is low
____ 29. Which of the following transactions would be included in this year’s GDP for the United States?
a. Jennifer buys a rug imported from Mexico.
b. Melissa buys stock in an American textile company.
c. Jennifer purchases a table over the Internet from a North Carolina furniture manufacturer.
d. Melissa purchases a table over the Internet from a Mexican manufacturer.
____ 30. Which of the following transactions would be included in this year’s GDP for the United States?
a. Deion sends $100 to a hotel in Costa Rica as a deposit for his vacation.
b. Deion buys a travel guide written by a Costa Rican woman living in the United States.
c. Deion buys a shirt while on vacation in Costa Rica.
d. Deion spends money in an American-owned restaurant in Costa Rica.
____ 31. Which of the following is true of inflation?
a. It is an increase in the general price level of goods and services.
b. The purchasing power of money increases as the result of inflation.
c. Inflation is similar to interest payments on future money income, such as pensions and
receipts from outstanding loans.
d. Inflation has no effect on real resources.
____ 32. The type of unemployment caused by changes in the business cycle is
a. cyclical unemployment.
b. natural unemployment.
c. frictional unemployment.
d. structural unemployment.
____ 33. Economists usually use the term "recession" to refer to
a. any slowdown in the growth of real GDP.
b. zero real GDP growth.
c. two or more consecutive quarters of declining real GDP.
d. a reduction in nominal GDP lasting more than six months.
____ 34. The civilian labor force includes those individuals who are
a. unemployed and looking for work.
b. staying home to care for other family members.
c. attending school and not working at a job.
d. retired.
____ 35. How would the Bureau of Labor Statistics classify a person who is not working and refuses an offer of
employment in order to keep looking for a better job?
a. not in the labor force
b. unemployed
c. employed
d. a discouraged worker ____ 36. Unemployment caused by people voluntarily quitting work in order to seek more attractive employment is
called
a. the natural rate of unemployment.
b. full employment.
c. cyclical unemployment.
d. frictional unemployment.
e. structural unemployment.
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