Exam ECON 102 SPRING 2009 SECTION B
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
the question.
1) The country of Kemper is on its aggregate production function at point
W in the above figure. The government of Kemper passes a law that
makes 4 years of college mandatory for all citizens. After all citizens
have their education, the economy will
A) move to point such as Z.
B) move to point such as Y.
C) remain at point W.
D) move to point such as X.
1) _______
2) The country of Kemper is on its aggregate production function at point
W in the above figure. If the population increases with no change in
capital or technology, the economy will
A) move to point such as Z.
B) move to point such as Y.
C) move to point such as X.
D) remain at point W.
2) _______
2008
Item
Quantit
y
4
2009
Price
Price
Movie tickets
$5.00
$7.50
Bags of
2
$3.00
$3.00
popcorn
Drinks of soda
4
$1.00
$1.50
3) The information in the table above gives the 2008 reference base period
CPI basket and prices used to construct the CPI for a small nation. It also
has the 2009 prices. What is the value of the CPI for 2009?
A) 100
B) 140
C) 75
D) 133
4) Assume the inflation rate falls from 4 percent to 2 percent. This means
that
A) the economy is experiencing deflation.
3) _______
4) _______
B) real GDP is decreasing.
C) the price level has fallen.
D) the price level is increasing more slowly.
Real
wage
rate
(2000
dollars
per
hour)
15
20
25
30
35
Quantity of
labor
demanded
(billions of
hours per
year)
Quantity of
labor
supplied
(billions of
hours per
year)
70
60
50
40
30
10
20
30
40
50
Quantity of
labor
(billions of
hours per
year)
3
20
9
30
14
40
18
50
21
60
5) The tables above show the labor market and the production function
schedule for the country of Pickett. Potential GDP is ________.
A) $30 trillion
B) $18 trillion
C) $14 trillion
D) $9 trillion
Real GDP
(trillions of
2000 dollars
per year)
Real
Quantity of
Quantity of
wage
labor
labor
rate
demanded
supplied
(2000
(billions of
(billions of
dollars
hours per
hours per
per
year)
year)
hour)
15
70
10
20
60
20
25
50
30
30
40
40
35
30
50
6) The table above shows the labor market for the country of Pickett. When
the labor market is in equilibrium, the real wage rate is ________ and
________ of labor a year are employed.
A) $30 an hour; 40 billion hours
B) any value greater than or equal to $25 an hour; any value less than
40 billion hours
5) _______
6) _______
C) any value greater than $30 an hour; any value more than 40 billion
hours
D) any value less than $25 an hour; any value greater than 40 billion
hours
7) Which of the following is NOT a final good?
A) a hot dog sold to a spectator at a Chicago Bears football game
B) a new computer sold to an NYU student
C) a purse sold to a foreign visitor
D) a new car sold to Avis ( a rental car company) for use in their fleet
of rental cars
7) _______
8) In a small country the population equals 8,000. 5,000 people are in the
labor force and 3,000 people are employed. The unemployment rate
equals
A) 0.4.
B) 0.6.
C) 0.625.
D) an undetermined amount given the lack of information.
8) _______
9) In a small country, the population equals 5,000. There are 4,000 people
in the labor force and 3,000 people are employed. The labor force
participation rate equals
A) 0.25.
B) 0.8.
C) 0.75.
D) an undetermined amount given the lack of information.
9) _______
10) Bob's assembly line job has been replaced by robots, and Bob lacks
abilities and skills required to attain other jobs. He is considered
A) seasonally unemployed.
B) structurally unemployed.
C) frictionally unemployed.
D) a discouraged worker.
10) ______
11) An unemployment rate of zero cannot be expected since
A) aggregate demand can never create enough job vacancies.
B) some portion of the labor force will always be between jobs.
C) there are some people who do not want to work.
D) there will always be discouraged workers.
11) ______
12) The rate of inflation and the purchasing power of money are
A) inversely related.
B) positively related.
C) randomly related.
D) totally unrelated.
12) ______
13) According to the above table, in Year 3, the price index for widgets is
A) 213.3.
B) 46.9.
C) 100.
D) 180.
13) ______
14) According to the above table, in the base period (Year 1), the price index
is
A) 46.9.
B) 213.3.
C) 100.
D) 180.
14) ______
15) Last year you purchased 20 CDs at $12 a piece, 10 shirts at $15 each, and
5 sweaters at $30 each (total spending equals $540). This year you buy 18
CDs at $15 each, 10 shirts at $16 each, and 6 sweaters at $36 each (total
spending equals $640). If last year's index was 100, this year's index
A) is 118.5.
B) is 30.
C) is 119.6.
D) is 83.6.
15) ______
16) Which of the following statements is NOT true about inflation?
A) Inflation is a sustained increase in the average prices of goods in
the economy.
B) When there is inflation, the purchasing power of a TL decreases.
C) During an inflationary period, the prices of some goods might
decrease while the price of some goods are increasing.
D) During an inflationary period, the prices of all goods will increase.
16) ______
17) Suppose medical care makes up 5 percent of the CPI index, and that
prices rise in the medical care area faster than in the rest of the economy.
An elderly couple spends 15 percent of their income on medical care.
For this couple, the CPI
A) understates the inflation rate because of the importance of medical
care for this family.
B) overstates the inflation rate because this family is not typical of the
country as a whole.
C) is a good measure of inflation since the bias inherent in the CPI is
offset by the increased emphasis on health care for this family.
D) understates the inflation rate because the CPI always understates
inflation.
17) ______
18) Which of the following is NOT a criticism of the CPI?
A) The CPI does not account for the way consumer substitute less
expensive items for higher priced items.
B) The CPI ignores the changes of prices of goods that firms produce
and sell to each other.
C) The CPI ignores successful new products until long after they have
been introduced.
D) The CPI ignores changes in consumption patterns that occur
between years in which it revises the index.
18) ______
19) A farmer buys seed for 20 cents that is used to grow wheat. The farmer
sells the wheat to the miller for 35 cents, and the miller makes flour,
which is then sold to the baker for 55 cents. The baker makes bread and
sells it to the grocer for 80 cents, and the grocer sells the bread to a
family for $1. What is the value added of the baker and what is the sum
of the value added at each stage of production?
A) 80 cents; $1
B) 25 cents; $2.90
C) 80 cents; $2.90
D) 25 cents; $1
19) ______
20) GDP does NOT include intermediate goods because
20) ______
A)
B)
C)
D)
that would understate the true size of GDP.
intermediate goods are not valuable.
intermediate goods are not useful to consumers.
that would count the value of intermediate goods twice.
21) Which of the following is a significant weakness of GDP as a measure of
the nation's economic performance?
A) GDP excludes the value of the buying and selling of securities.
B) GDP considers product and factor markets but not services.
C) GDP excludes nonmarket production, such as black market
activities.
D) GDP excludes the intermediate good market because it is
impossible to obtain an estimate of the amount sold.
21) ______
22) If nominal Gross Domestic Product (GDP) in 2001 was $500 billion with
a price index of 100, what would be the real Gross Domestic Product
(GDP) in 2006 if the 2006 nominal Gross Domestic Product (GDP) was
$900 billion and the 2006 price index was 140?
A) $900 billion
B) $643 billion
C) $540 billion
D) $800 billion
22) ______
23) If nominal Gross Domestic Product (GDP) in 1996 was $1 trillion,
nominal Gross Domestic Product (GDP) in 2006 was $2 trillion, and the
1996 and 2006 price indexes were 100 and 250 respectively,
A) real Gross Domestic Product (GDP) increased between 1996 and
2006.
B) real Gross Domestic Product (GDP) remained constant.
C) real Gross Domestic Product (GDP) decreased between 1996 and
2006.
D) we cannot draw any conclusions about changes in real Gross
Domestic Product (GDP).
23) ______
24) Improvements in labor productivity
A) affect the level of wages, but do not affect the rate of economic
growth.
B) affect the level of profit, but do not affect the rate of economic
growth.
C) contribute to economic growth.
D) hinder economic growth, because they cause unemployment.
24) ______
25) Between 1997 and 2007, if the economy's real GDP grew from $20 billion
to $40 billion, what must the average annual growth rate in the
economy have been?
A) 20%
B) 7%
C) 3%
D) 100%
25) ______
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
17)
18)
19)
20)
21)
22)
23)
24)
25)
A
C
B
D
C
A
D
A
Both B and D are acceptable
B
B
A
A
C
A
D
A
B
D
D
C
B
C
C
B