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TITLE: 20 Questions

CLASS / COURSE: Macroeconomics

QUESTION DESCRIPTION:

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.  
1) 
 
The CPI in 1980 was 82, and the CPI in 2006 was 202. If you earned a salary of $30,000 in 1980, what would be a salary with equivalent purchasing power in 2006? 
 
1) 
 
_____  
A) 
 
$49,268 
 
B) 
 
$32,180 
 
C) 
 
$73,902 
 
D) 
 
$43,360  
  
2) 
 
Which factors explain labor productivity? 
 
2) 
 
_____  
A) 
 
diminishing returns; the quantity of capital per hour  
B) 
 
diminishing returns; the quantity of labor per hour  
C) 
 
technological change; the quantity of capital per hour  
D) 
 
technological change; the quantity of labor per hour  
  
3) 
 
Georg, a German citizen, just purchased 10 shares of stock in Microsoft, a U.S. company. This purchase is an example of 
 
3) 
 
_____  
A) 
 
foreign portfolio investment. 
 
B) 
 
contractual globalization.  
C) 
 
foreign direct investment. 
 
D) 
 
foreign public investment.  
  
Figure 8-1
   
4) 
 
Refer to Figure 8-1. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur? 
 
4) 
 
_____  
A) 
 
The unemployment rate will fall.  
B) 
 
The unemployment rate will rise.  
C) 
 
The level of unemployment will rise, but the percentage of the labor force unemployed will not change.  
D) 
 
None of the above will occur.  
  
5) 
 
Not enforcing property rights in an economy will  
 
5) 
 
_____  
A) 
 
cause the market system to work efficiently.  
B) 
 
lower the level of investment.   
C) 
 
not change the level of investment.  
D) 
 
raise the level of investment.  
  
6) 
 
Recessions cause the unemployment rate to ________ and the inflation rate to ________. 
 
6) 
 
_____  
A) 
 
rise; fall 
 
B) 
 
rise; rise 
 
C) 
 
fall; rise 
 
D) 
 
fall; fall  
  
7) 
 
If a country's real GDP is rising by 3% per year, while its population is rising at 5% per year, which of the following is true? 
 
7) 
 
_____  
A) 
 
Growth in nominal GDP is less than the growth in the population.  
B) 
 
The country's standard of living is falling.  
C) 
 
Growth in nominal GDP outweighs growth in the population.  
D) 
 
The country's standard of living is rising.  
  
8) 
 
Discouraged workers are 
 
8) 
 
_____  
A) 
 
workers who find their current jobs unfulfilling and are considering a job change.  
B) 
 
workers who have stopped looking for work because they believe there are no jobs for them.  
C) 
 
workers who have consistently been looking for work for more than 4 weeks.  
D) 
 
workers who have a part time job but want a full time job.  
  
9) 
 
In periods when prices are falling, on average, 
 
9) 
 
____  
A) 
 
real GDP will grow slower than nominal GDP.  
B) 
 
real GDP will grow as fast as nominal GDP.  
C) 
 
real GDP will grow faster than nominal GDP.  
D) 
 
one cannot calculate real GDP.  
  
10) 
 
Foreign investment can give a low-income country 
 
10) 
 
_____  
A) 
 
no hope to break the vicious cycle of poverty.  
B) 
 
a path to dependency and low growth.  
C) 
 
access to funds for investment and access to technology.  
D) 
 
the means to slow down growth.  
  
11) 
 
We say that the economy is at full employment if the unemployment rate is equal to 
 
11) 
 
_____  
A) 
 
the natural rate of unemployment.  
B) 
 
the sum of structural and cyclical unemployment.  
C) 
 
zero.  
D) 
 
the amount of cyclical unemployment.  
E) 
 
the sum of frictional and cyclical unemployment.  
  
12) 
 
The best measure of the standard of living is  
 
12) 
 
_____  
A) 
 
nominal GDP per capita. 
 
B) 
 
real GDP per capita.  
C) 
 
nominal GDP. 
 
D) 
 
real GDP.  
  
13) 
 
Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP? 
 
13) 
 
_____  
A) 
 
the sale of a new door to TapKon construction for installation into a new home  
B) 
 
the sale of a used door to TapKon construction for installation into a new home  
C) 
 
the sale of a used door to a homeowner  
D) 
 
the sale of a new door to homeowner  
  
14) 
 
What are menu costs? 
 
14) 
 
_____  
A) 
 
the costs to a firm of changing prices   
B) 
 
the opportunity cost of using food in a restaurant instead of at home  
C) 
 
the cost to a household of borrowing money when there is deflation  
D) 
 
the full list of a firm's costs of production  
  
15) 
 
Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no longer charges Chuck for her work. As a result, GDP ________ because ________. 
 
15) 
 
_____  
A) 
 
falls; Marla's work becomes less valuable once she's married  
B) 
 
rises; Marla becomes more productive once she's married  
C) 
 
falls; Marla's work takes place in the underground economy once she's married  
D) 
 
falls; Marla's architectural design services are no longer bought by Chuck once they're married  
  
Table 8-3
 
Year CPI
(1982-1984 =100)
2004 100
2005 113
 
16) 
 
Refer to Table 8-3. Suppose that the data in the table above reflects the prices in the economy. Given that data, we can say that the cost of living rose by ________ between 2004 and 2005?  
 
16) 
 
____  
A) 
 
2% 
 
B) 
 
13% 
 
C) 
 
5% 
 
D) 
 
8% 
 
E) 
 
11%  
  
17) 
 
A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds.  
 
17) 
 
_____  
A) 
 
borrower; savers 
 
B) 
 
savers; borrower  
C) 
 
firms; insurance companies 
 
D) 
 
governments; households  
  
18) 
 
Which of the following accurately describes the impact of the rule of law on a country's economic growth rate? 
 
18) 
 
____  
A) 
 
Countries that enforce property rights through lawsuits have slower economic growth.  
B) 
 
Countries where favoritism and bribery are common have stronger rates of growth.   
C) 
 
Countries with a weak rule of law have faster economic growth.  
D) 
 
Countries with a strong rule of law have faster economic growth.  
  
19) 
 
Which of the following would increase GNP in the U.S.? 
 
19) 
 
___  
A) 
 
an increase in the production of Mexican-owned Grupo Minsa corn in the U.S.  
B) 
 
an increase in the production of Japanese-owned Toyota cars in Mexico  
C) 
 
an increase in the production of U.S.-owned General Motors cars made in Mexico  
D) 
 
an increase in the production of Japanese-owned Toyota cars in the U.S.  
  
20) 
 
You lend $5,000 to a friend for one year at a nominal interest rate of 10%. Inflation during that year is 5%. As a result, you will receive ________ at the end of the year, but that money has a purchasing power of ________. 
 
20) 
 
____  
A) 
 
$5,500; $5,250 
 
B) 
 
$5,100; $5,050 
 
C) 
 
$5,050; $5,025 
 
D) 
 
$6,000; $5,500
 
 
 

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SUBJECTS / CATEGORIES:
1. Business Economics
2. Economics
3. Macroeconomics

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