Question Final Exam ECON 201 OL1-US1 Spring 2014 I. MULTIPLE CHOICE (40 questions 2 points each). Cho

Final Exam ECON 201 OL1-US1 Spring 2014

I. MULTIPLE CHOICE (40 questions 2 points each). Choose the one alternative that best completes the statement or answers the question.

1) All of the following are considered natural resources EXCEPT 1) _______

A) labor. B) a redwood forest. C) gold. D) a coral reef.

2) Which of the following is NOT a macroeconomic statement? 2) _______

A) The U.S. inflation rate was two percent in 2012.

B) The price of cell phones decreased by 18 percent last year.

C) Gross domestic product in Peru increased 4 percent from 2011 to 2012.

D) Aggregate worker productivity decreased by three percent in 2012.

3) GDP understates the value of output produced by an economy because it 3) _______

A) excludes value added from the underground economy, such as tips taken “under the table.”

B) includes environmental degradation caused by increased output production.

C) excludes the value of the wages and benefits of government employees.

D) includes transactions that do not take place in organized markets, such as home-cooked meals.

4) Transfer payments are excluded from government purchases in GDP accounting because 4) _______

A) they are a reward to individuals who have been productive their entire lives.

B) they are already included as part of investment.

C) they are difficult to measure.

D) nothing is being produced in return for the payment.

Use the following information to answer the next several questions:

Scenario 1: Imagine that an economy produces two goods, flashlights and fishing lures. In 2011, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and $12, respectively. In 2012, the economy produced 85 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $7 and $15, respectively.

5) Based on the information in Scenario 1, real GDP in 2012 (in 2011 dollars) in this economy was 5) _______
A) $830. B) $1,025. C) $1,090. D) $1,345.
6) The real-nominal principle can be stated as 6) _______

A) what matters to people is the purchasing power of money or income.

B) production generates income.

C) only the manufacture of real goods is production.

D) only final goods and services should be counted in GDP.

7) What does the Consumer Price Index (CPI) measure? 7) _______
A) the cost of living over time B) prices of durable goods
C) the cost of replacing lost items D) prices of non durable goods
8) Which one of the following statements is true of the Consumer Price Index? 8) _______

A) It does not take into account the price of used goods.

B) It understates the true rate of inflation.

C) It does not take account of the price of imported goods and services.

D) It measures changes in prices of a fixed basket of goods.

9) Unemployment that naturally occurs during the normal workings of an economy as people change jobs and move

across the country is called 9) _______

A) cyclical unemployment. B) structural unemployment.

C) frictional unemployment. D) natural unemployment.

10) The economy needs some unemployment to operate efficiently, because without it 10) ______

A) firms will find it difficult to recruit workers, leading to reduced wages and prices.

B) workers will find it difficult to find a job, leading to reduced wages and prices.

C) workers will find it difficult to find a job, leading to increased wages and prices.

D) firms will find it difficult to recruit workers, leading to increased wages and prices.

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