Econ 203 Test 2 (Make Sure to Put Your Name on Your Scantron)
Econ 203 Test 2 (Make sure to put your name on your scantron)
1. Currently, the unemployment rate in the U.S. is closest to which of the following figures?
a. 11.5%b. 9.5%
c. 7.5%d. 5.5%
2. Nominal or Current Dollar GDP for the U.S. is currently closest to which of the following figures?
a. $25 trillionb. $10 trillion
c. $15 trilliond. $5 trillion
3. The growth rate of real GDP is the most watched single number to gauge the direction of the economy. It is computed by
a. adding purchasing power parity to nominal GDP
b. subtracting national income from real GDP
c. dividing real GDP by national income
d. taking percentage changes in real GDP
4. A quarterly growth of rate of 0.5% for real GDP converted to annualized figures would be
a. 0.5%b. 1.0%
c. 2.0%d. 5.0%
5. The CPI
a. calculates how much a given group of goods or services costs in comparison to a base year
b. fully adjusts the index quality changes goods and services
c. has been about the same level for the past 10 years
d. None of the above
6. Constant dollar or “real” GDP
a. is a different method of measuring the average price level than the CPI
b. is always higher than nominal GDP
c. Measures expenditures while holding the purchasing power of the dollar constant
d. all of the above
7. For which good is PPP likely to be observed across countries
a. goldb. wheat
c. crude oild. all of the above
8. Based on the definition of GDP as well as our discussion concerning its measurement, which of the following would not be included in GDP even if the activity were reported to the Bureau of Economic Analysis?
a. the payment of $100 to Merry Maids for housecleaning services
b. the payment of $100 to a roofing company for storm repairs on a residence
c. the purchase of $10 worth of sugar by a household from a supermarket
d. the payment of $10 cash to a child for mowing his/her family’s lawn
9. What is a strength of the GDP Implicit Price Deflator over the CPI?
a. frequency of measurement
b. number of items included
c. ability to fully account for quality changes
d. technical ability of individuals involved in its computation
10. Which of the following makes up Net National Worth?
a. GDP per capita over a given year
b. consumption + investment + government spending + net exports
c. GDP converted to constant dollar values
d. none of the above
Use the following information for the questions below:
YearCPI
1939 14
1983 100
2000 172
2005 212
2010 217
11. Suppose that gasoline prices were $300 per gallon in 2010. In 2005 constant dollars, this would be
a. $2.93b. $2.50
c. $1.42d. $3.07
12. Star Wars Episode I (The PhantonMenace ) made about $1 billion in 2000. This amount converted to 2005 constant dollars would be about
a. $810millionb. $1.23billion
c. $1.02billion d. $2.12billion
13. The inflation rate is computed by
a. taking percentage changes in a price index like the CPI
b. multiplying price changes in the CPI by a base year
c. dividing GDP by the CPI
d. none of the above
14. Big Macs are perishable, but the underlying reason that Big Mac prices don’t tend to reflect PPP is that
a. some nations like them more than others
b. beef is not highly transportable
c. labor and land are not easily arbitraged
d. a dollar is not easily converted into some currencies
15. The Sears Catalogue data was presented to show an alternative means of assessing long run changes in buying value. The website using the data expressed items in terms of
a. the amount of labor hours at average wages needed to buy the item
b. the prices of the item in 1975 relative to their current prices
c. the price of the item multiplied by the ratio of the CPI now versus in 1975
d. none of the above
16. Which of the following is true about worldwide foreign currency markets?
a. about $300 billion per day is traded
b. about 85 percent of the trade is in and out of dollars
c. inflation concerns are the overriding motive for trades
d. all of the above
CURRENCY VALUE CHANGE % CHANGE
EUR-USD 1.300.0068 0.5212%
GBP-USD 1.500.0012 0.0788%
USD-JPY 85.00-0.3385 -0.3950%
AUD-USD 0.950.0009 0.0932%
USD-CAD 1.000.0026 0.2577%
USD-CHF 1.00-0.0014 -0.1388%
17. The table above in terms of US Dollars (USD) and Japanese Yen (JPY)
a. is expressed in terms of Dollars per Yen
b. means that 85 Yen can be purchased per Dollar
c. shows that the dollar has become stronger
d. all of the above
18. The former owner of the Texas Rangers recently went bankrupt (on that part of his holdings) and sold the team. He also owns the Liverpool Football Club in England. Suppose he sells Liverpool for ₤500 million (₤ = pounds). What would the dollar value of this transaction be given the exchange rates expressed in the table above?
a. $333mb. $500m
c. $750md. $1500m
19. Some economic measures are “stock” measures and some are “flow” measures. Pick the pair below that show a “stock” first and “flow” second:
a. wealth-incomeb. new jobs-unemployed
c. GDP-Net National wealthd. all of the above
20. Which of the following is an equivalent term for real GDP?
a. current dollar GDPb. Net National Wealth
c. per capital GDPd. constant dollar GDP
21. The Dallas Fed article on Big Mac Prices and PPP showed
a. that Big Mac prices varied more across Dallas than across the rest of Texas
b. that Big Mac prices varied more across the U.S. than across Texas
c. that Big Mac prices varied more across the U.S. than across the world
d. none of the above
Correct Answers: 1b, 2c, 3d, 4c, 5a, 6c, 7d, 8d, 9b, 10d, 11a, 12b, 13a, 14c, 15a, 16b, 17b, 18c, 19a, 20d, 21b