Unit 2 Vocab
Multiple Choice Questions
1.GDP is the market value of:
A.Resources (land, labor, capita, and entrepreneurship) in an economy in a given year
B.All final goods and services produced in an economy in a given year
C.Consumption and investment spending in an economy in a given year
D.All output produced and accumulated over the years
2.The following are examples of final goods in national income accounting, except:
A.Lumber and steel beams purchased by a construction company
B.Tractor purchased by a construction company
C.Laptop computer purchased by an executive for personal use
D.Desktop computer purchased by an executive for business use
3.The total volume of business sales in our economy is several times larger than GDP because:
A.The GDP does not take taxes into account
B.The GDP excludes intermediate transactions
C.The GDP grossly understates the value of our annual output
D.Total sales are in money terms and GDP is always stated in real terms
4.Which of the following is not a component of GDP in the expenditures approach?
A.Government purchases
B.Workers' wages and other compensation
C.Gross private domestic investment
D.The difference between exports and imports
5.Gross private domestic investment is the value of capital goods bought by firms plus:
A.The consumption of fixed capital and changes in business inventories
B.All construction and changes in business inventories
C.All business inventories and all construction
D.Plus the consumption of fixed capital and all construction
6.When gross private domestic investment exceeds depreciation, it can be concluded that:
A.Net investment is positive
B.Net investment is negative
C.The economy is exporting more than it imports
D.The economy is importing more than it exports
7.The consumption of fixed capital in each year's production is called:
A.Indirect business taxes
B.Inventory reduction
C.Depreciation
D.Net investment
8.Net exports is a positive number when:
A.A nation's exports of goods and services are increasing
B.A nation exports goods and services to other nations
C.A nation's exports of goods and services exceed its imports
D.A nation's exports of goods and services fall short of its imports
9.National income is the sum of employee compensation, profits, and the following items, except:
A.Rent
B.Interest
C.Depreciation or consumption of fixed capital
D.Taxes on production and imports
10.Personal income will equal disposable income when:
A.Corporate profits are zero
B.Personal taxes are zero
C.Transfer payments are zero
D.Social Security contributions are zero
11.Nominal GDP differs from real GDP because:
A.Nominal GDP is based on constant prices
B.Real GDP is based on current prices
C.Real GDP results from adjusting for changes in the price level
D.Nominal GDP results from adjusting for changes in the price level
12.If real GDP declines in a given year, nominal GDP:
A.Must also be declining
B.Must also be increasing
C.May either rise or fall
D.Is likely to remain constant
13.Refer to the above diagram. The phases of the business cycle from points A to D are, respectively:
A.Peak, recession, expansion, trough
B.Trough, recovery, expansion, peak
C.Expansion, recession, trough, peak
D.Peak, recession, trough, expansion
14.The unemployment rate is interpreted as the percentage of the:
A.Adult population who are unemployed
B.Labor force that are not employed
C.Able-bodied population who are not working
D.Work force that have been laid off
15.The best example of a "frictionally unemployed" worker is one who:
A.Reduces productivity by causing frictions in a business
B.Is laid off during a recessionary period in the economy
C.Is in the process of voluntarily switching jobs
D.Is discouraged and not actively seeking work
16.A worker who loses a job at a call center because business firms switch the call center to another country is an example of:
A.Frictional unemployment
B.Structural unemployment
C.Cyclical unemployment
D.Disguised unemployment
17.The full-employment rate of unemployment is also called the:
A.Potential rate of unemployment
B.Cyclical rate of unemployment
C.Frictional rate of unemployment
D.Natural rate of unemployment
18.The natural rate of unemployment:
A.Means that the economy will always operate at that rate
B.Means that the economy will always realize its potential output
C.Is equal to the total of frictional and structural unemployment
D.Is a fixed unemployment rate that does not change over time
19.Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?
A.The GDP price index
B.The Consumer Price Index
C.The Retail Trade survey
D.The Survey of Manufactures
20.Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:
A.Anticipated inflation
B.Demand-pull inflation
C.Cost-push inflation
D.Unanticipated inflation
21.When oil and energy prices rise, the economy tends to experience:
A.Natural inflation
B.Demand-pull inflation
C.Cost-push inflation
D.Unanticipated inflation
22.For a given amount of nominal income, the real income will:
A.Fall if the price level rises
B.Fall if the price level falls
C.Be unaffected if the price level falls
D.Rise as the price level rises