Macro/Midterm I Name Practice Exam Choose the best answer.
Good Luck!

                                                         back
 
1. Given that resources are scarce:
A. A "free lunch" is possible but only for a limited number of people.
B. Poor countries must make choices but rich countries with abundant resources do not have to make choices.
C. Opportunity costs are experienced whenever choices are made.
D. Some choices involve opportunity costs while other choices do not.

 
2. The production-possibilities curve shifts outward in response to:
A. Better technology or fewer resources or both.
B. Better technology or more resources or both.
C. Worsening technology or fewer resources or both.
D. Worsening technology or more resources or both.

 
3. The Latin phrase ceteris paribus means: 
A. The production-possibilities curve never shifts.
B. Laissez faire.
C. Other things remain equal.
D. The invisible hand.

 
4.
Figure 1.3

R-1 Ref: 1-3

Using Figure 1.3, an increase in the capacity to produce can be represented by a movement from:
A. Point A to point B.
B. Point B to point C.
C. Point A to point C.
D. Point C to point D.


 
5.
Figure 1.3

R-1 Ref: 1-3

Using Figure 1.3, at point A:
A. There is inefficient use of available resources.
B. The available technology keeps production inside PP*B1 . 
C. All available resources are being used efficiently.
D. An increase in the production of tanks would definitely require a decrease in the production of automobiles.


 
6.
Figure 1.3

R-1 Ref: 1-3

A movement from point D to point F in Figure 1.3 results in:
A. Less efficient production.
B. Permanent unemployment of workers producing tanks.
C. A reallocation of resources from tank production to automobile production.
D. More efficient production.


 
7. Greater productivity refers to:
A. Lower labor cost per unit of output.
B. Higher labor cost per unit of output.
C. Lower output per worker.
D. Higher output per worker.

 
8. A public good is:
A. Any good produced by a unit of government.
B. Priced in the market like a private good.
C. Characterized by joint consumption.
D. Characterized by exclusive consumption.

 
9. The free-rider problem:
A. Arises because an individual can reap direct benefits from someone else's purchases.
B. Is a government failure resulting from the consumption of private goods.
C. Arises because costs of a market activity are borne by a third party.
D. Means that the market mechanism allocates the optimal level of resources to public goods.

 
10. Externalities:
A. Occur because of government failure.
B. Are the costs or benefits of market activities that "spill over" onto third parties.
C. Occur because of greedy business people.
D. All of the above

 
11. Government antitrust activity against Microsoft in the late 1990s was the result of which type of market failure?
A. Inequity.
B. Public goods.
C. Externalities.
D. Market power.

 
12. Transfer payments include:
A. Unemployment benefits.
B. Social security benefits.
C. Welfare.
D. All of the above.

 
13. The largest single source of revenue for the federal government is:
A. Borrowing (selling government bonds).
B. Social security taxes.
C. The corporate profits tax.
D. The personal income tax.

 
14. Which of the following is an example of a progressive tax?
A. The excise tax on alcohol.
B. The federal tax on gasoline.
C. The federal income tax.
D. All of the above.

 
15. A tax is regressive if it takes a:
A. Larger number of dollars as income falls.
B. Larger number of dollars as income rises.
C. Smaller fraction of dollars as income falls.
D. Smaller fraction of dollars as income rises.

 
16. The GDP is:
A. C + I + G + (X - IM ). 
B. The sum of value added at every stage of the production process.
C. The total market value of final goods and services.
D. All of the above.

 
17. A commonly used measure of a country's standard of living is:
A. Nominal GDP.
B. Real GDP.
C. GDP per capita.
D. NDP.

 
18. If the real U.S. GDP was $6,786.2 billion in 1995 and the U.S. population was 263 million, the per capita real GDP would have been approximately:
A. $4,821 per person.
B. $25,803 per person.
C. $456,800 per person.
D. $38,755 per person.

 
19. To avoid counting the same output more than once the calculation of GDP includes:
A. Intermediate goods plus final goods.
B. Only the value of final goods.
C. The value added at each stage of production plus intermediate goods.
D. Only the output produced by U.S. factors of production.

 
20. Which of the following statements about real GDP and nominal GDP is correct?
A. Nominal GDP is the value of output measured in constant prices.
B. Real GDP is the value of output measured in constant prices.
C. Real GDP is the value of output measured in current prices.
D. Real GDP can give a distorted view of economic activity because of price level changes.

 
21. The market value of final output produced in a given period measured in the prices of that period is:
A. Real GDP.
B. GDP per capita.
C. Nominal GDP.
D. Potential GDP.

 
22. If the GDP deflator is 100 for 1992 and the GDP deflator is 109.2 in 1996, a nominal GDP in 1996 of $7,566.9 billion would mean that the real GDP in 1996 would be closest to:
A. $6,734 billion.
B. $8,263.1 billion.
C. $6,929.4 billion.
D. $523,210 billion.

 
23. Depreciation represents:
A. The consumption of capital in the production process.
B. A loss of productive capability as a result of the inefficient use of resources.
C. Wasted capital.
D. Gross investment plus net investment.

 
24. "Income received by households before payment of personal taxes" is known as:
A. Disposable personal income.
B. Net domestic product.
C. National income.
D. Personal income.

 
25. Personal income minus personal taxes is the definition of:
A. National income.
B. Personal income.
C. Consumption.
D. Disposable income.

 
26. People are not part of the labor force when they:
A. Go on vacation.
B. Are old enough to work but choose not to work.
C. Suffer from a temporary illness which keeps them away from their job.
D. Go on strike.

 
27. The labor-force participation rate is:
A. The number of unemployed divided by the number of employed.
B. The number of employed divided by the number in the labor force.
C. The number of employed divided by the total population.
D. The number in the labor force divided by the total population.

 
28. To be officially counted as unemployed, one must be:
A. Fired from previous employment.
B. A participant in a state employment-compensation program.
C. Actively seeking employment and currently not working.
D. Available for only full-time employment.

 
29. If the population of a country is 160,000 people, its labor force consists of 80,000 people, and 20,000 people are unemployed, the unemployment rate is:
A. 12.5 percent.
B. 25.0 percent.
C. 50.0 percent.
D. 20.0 percent.

 
30. Discouraged workers:
A. Do not actively seek employment, although they desire to be employed.
B. Are part of the labor force.
C. Are workers who are unhappy in their jobs.
D. Are counted as part of total unemployment.

 
31. Suppose a student graduates from college and is employed to grade papers, answer the phone, and make copies—tasks which are below the graduate's capabilities. The graduate can best be classified as:
A. A discouraged worker.
B. Structurally unemployed.
C. Phantom unemployed.
D. Underemployed.

 
32. The type of unemployment that economists generally associate with normal growth of the labor force and expanding job opportunities in a dynamic economy is:
A. Frictional unemployment.
B. Seasonal unemployment.
C. Cyclical unemployment.
D. Structural unemployment.

 
33. An inner-city teenager without a high school diploma is unable to find work because all of the available jobs require a certain minimum reading skill level. Which of the following best characterizes the teenager's circumstances?
A. A discouraged worker.
B. Structurally unemployed.
C. Phantom unemployed.
D. Underemployed.

 
34. Inflation means:
A. Prices of all goods stay the same or are rising.
B. All prices are rising.
C. The average price level is rising.
D. All of the above.

 
35. If the price of computers falls 5 percent during a period when the level of average prices falls 10 percent, the relative price of computers compared with other goods:
A. Stays the same.
B. Increases.
C. Decreases.
D. More information is required.

 
36. Which of the following is correctly identified by the term "nominal income"?
A. Money income adjusted for any change in the price level.
B. Real purchasing power.
C. Real purchasing power deflated for rising prices.
D. Money income measured in current dollars.

 
37. Your real income is:
A. The amount of money you receive during a given time period.
B. Measured in current dollars.
C. The purchasing power of the money you receive.
D. All of the above.

 
38. During a period of unanticipated inflation:
A. Debtors are better off and creditors are worse off.
B. Debtors and creditors are both better off because of lower real interest rates.
C. Individuals on fixed incomes are better off.
D. All individuals are worse off because of the level of uncertainty.

 
39. When people make their decisions on the basis of the face value of currency rather than the real value, their decisions reflect:
A. The price effect of inflation.
B. The income effect of inflation.
C. The wealth effect of inflation.
D. Money illusion.

 
40. The Consumer Price Index is a measure of the:
A. Index used to compute real GDP from nominal GDP.
B. Change in the average price of shipments of goods and services in the United States.
C. Average price of consumer goods and services in the current period relative to their price in some base period.
D. Annual inflation rate in the producers' goods market.

 
41. Which of the following usually increases before the CPI increases?
A. GDP deflator.
B. Consumer price index.
C. Producer price index.
D. COLAs.

 
42. Which of the following automatically adjusts some nominal wages to changing price indexes?
A. The CPI.
B. The PPI.
C. The GDP deflator.
D. The COLA.

 
43. The business cycle is defined as:
A. Changing wages and prices.
B. An effort to reach full employment.
C. The growth of real GDP.
D. Alternating periods of economic growth and contraction.

 
44. Business cycles in the United States:
A. Are remarkably similar in length but vary greatly in intensity.
B. Vary greatly in length, frequency, and intensity.
C. Are similar in frequency and intensity.
D. Are similar in length, frequency, and intensity.

 
45. The downswing in the business cycle is characterized by:
A. Lower unemployment rates.
B. Lower real output.
C. Higher prices.
D. Higher interest rates.

 
46. When real GDP declines for two consecutive quarters, this is known as:
A. Inflation.
B. A recession.
C. A growth recession.
D. All of the above.

 
47. Changes in real GDP provide a way to measure:
A. Inflation.
B. Unemployment.
C. Business cycles.
D. All of the above.

 
48. If the CPI doesn't measure product quality improvements, then the CPI tends to:
A. Understate the inflation rate.
B. Overstate the inflation rate.
C. Understate economic growth.
D. Be artificially low.

 
49. The best price index to use in calculating the real GDP would be:
A. Any of the indexes since they all reflect price level changes.
B. The CPI.
C. The PPI.
D. The GDP deflator.

 
50. Capital, as economists use the term, refers to:
A. The money needed to start a new business.
B. The costs of operating a business.
C. Shares of stock issued by businesses.
D. Final goods that are produced then used to produce other goods and services.

                                              back

This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test.

mac1af99
Macro/Midterm I Name Practice Exam Choose the best answer.
Good Luck!

                                                         back
 
1. Given that resources are scarce:
A. A "free lunch" is possible but only for a limited number of people.
B. Poor countries must make choices but rich countries with abundant resources do not have to make choices.
C. Opportunity costs are experienced whenever choices are made.
D. Some choices involve opportunity costs while other choices do not.

 
2. The production-possibilities curve shifts outward in response to:
A. Better technology or fewer resources or both.
B. Better technology or more resources or both.
C. Worsening technology or fewer resources or both.
D. Worsening technology or more resources or both.

 
3. The Latin phrase ceteris paribus means: 
A. The production-possibilities curve never shifts.
B. Laissez faire.
C. Other things remain equal.
D. The invisible hand.

 
4.
Figure 1.3

R-1 Ref: 1-3

Using Figure 1.3, an increase in the capacity to produce can be represented by a movement from:
A. Point A to point B.
B. Point B to point C.
C. Point A to point C.
D. Point C to point D.


 
5.
Figure 1.3

R-1 Ref: 1-3

Using Figure 1.3, at point A:
A. There is inefficient use of available resources.
B. The available technology keeps production inside PP*B1 . 
C. All available resources are being used efficiently.
D. An increase in the production of tanks would definitely require a decrease in the production of automobiles.


 
6.
Figure 1.3

R-1 Ref: 1-3

A movement from point D to point F in Figure 1.3 results in:
A. Less efficient production.
B. Permanent unemployment of workers producing tanks.
C. A reallocation of resources from tank production to automobile production.
D. More efficient production.


 
7. Greater productivity refers to:
A. Lower labor cost per unit of output.
B. Higher labor cost per unit of output.
C. Lower output per worker.
D. Higher output per worker.

 
8. A public good is:
A. Any good produced by a unit of government.
B. Priced in the market like a private good.
C. Characterized by joint consumption.
D. Characterized by exclusive consumption.

 
9. The free-rider problem:
A. Arises because an individual can reap direct benefits from someone else's purchases.
B. Is a government failure resulting from the consumption of private goods.
C. Arises because costs of a market activity are borne by a third party.
D. Means that the market mechanism allocates the optimal level of resources to public goods.

 
10. Externalities:
A. Occur because of government failure.
B. Are the costs or benefits of market activities that "spill over" onto third parties.
C. Occur because of greedy business people.
D. All of the above

 
11. Government antitrust activity against Microsoft in the late 1990s was the result of which type of market failure?
A. Inequity.
B. Public goods.
C. Externalities.
D. Market power.

 
12. Transfer payments include:
A. Unemployment benefits.
B. Social security benefits.
C. Welfare.
D. All of the above.

 
13. The largest single source of revenue for the federal government is:
A. Borrowing (selling government bonds).
B. Social security taxes.
C. The corporate profits tax.
D. The personal income tax.

 
14. Which of the following is an example of a progressive tax?
A. The excise tax on alcohol.
B. The federal tax on gasoline.
C. The federal income tax.
D. All of the above.

 
15. A tax is regressive if it takes a:
A. Larger number of dollars as income falls.
B. Larger number of dollars as income rises.
C. Smaller fraction of dollars as income falls.
D. Smaller fraction of dollars as income rises.

 
16. The GDP is:
A. C + I + G + (X - IM ). 
B. The sum of value added at every stage of the production process.
C. The total market value of final goods and services.
D. All of the above.

 
17. A commonly used measure of a country's standard of living is:
A. Nominal GDP.
B. Real GDP.
C. GDP per capita.
D. NDP.

 
18. If the real U.S. GDP was $6,786.2 billion in 1995 and the U.S. population was 263 million, the per capita real GDP would have been approximately:
A. $4,821 per person.
B. $25,803 per person.
C. $456,800 per person.
D. $38,755 per person.

 
19. To avoid counting the same output more than once the calculation of GDP includes:
A. Intermediate goods plus final goods.
B. Only the value of final goods.
C. The value added at each stage of production plus intermediate goods.
D. Only the output produced by U.S. factors of production.

 
20. Which of the following statements about real GDP and nominal GDP is correct?
A. Nominal GDP is the value of output measured in constant prices.
B. Real GDP is the value of output measured in constant prices.
C. Real GDP is the value of output measured in current prices.
D. Real GDP can give a distorted view of economic activity because of price level changes.

 
21. The market value of final output produced in a given period measured in the prices of that period is:
A. Real GDP.
B. GDP per capita.
C. Nominal GDP.
D. Potential GDP.

 
22. If the GDP deflator is 100 for 1992 and the GDP deflator is 109.2 in 1996, a nominal GDP in 1996 of $7,566.9 billion would mean that the real GDP in 1996 would be closest to:
A. $6,734 billion.
B. $8,263.1 billion.
C. $6,929.4 billion.
D. $523,210 billion.

 
23. Depreciation represents:
A. The consumption of capital in the production process.
B. A loss of productive capability as a result of the inefficient use of resources.
C. Wasted capital.
D. Gross investment plus net investment.

 
24. "Income received by households before payment of personal taxes" is known as:
A. Disposable personal income.
B. Net domestic product.
C. National income.
D. Personal income.

 
25. Personal income minus personal taxes is the definition of:
A. National income.
B. Personal income.
C. Consumption.
D. Disposable income.

 
26. People are not part of the labor force when they:
A. Go on vacation.
B. Are old enough to work but choose not to work.
C. Suffer from a temporary illness which keeps them away from their job.
D. Go on strike.

 
27. The labor-force participation rate is:
A. The number of unemployed divided by the number of employed.
B. The number of employed divided by the number in the labor force.
C. The number of employed divided by the total population.
D. The number in the labor force divided by the total population.

 
28. To be officially counted as unemployed, one must be:
A. Fired from previous employment.
B. A participant in a state employment-compensation program.
C. Actively seeking employment and currently not working.
D. Available for only full-time employment.

 
29. If the population of a country is 160,000 people, its labor force consists of 80,000 people, and 20,000 people are unemployed, the unemployment rate is:
A. 12.5 percent.
B. 25.0 percent.
C. 50.0 percent.
D. 20.0 percent.

 
30. Discouraged workers:
A. Do not actively seek employment, although they desire to be employed.
B. Are part of the labor force.
C. Are workers who are unhappy in their jobs.
D. Are counted as part of total unemployment.

 
31. Suppose a student graduates from college and is employed to grade papers, answer the phone, and make copies—tasks which are below the graduate's capabilities. The graduate can best be classified as:
A. A discouraged worker.
B. Structurally unemployed.
C. Phantom unemployed.
D. Underemployed.

 
32. The type of unemployment that economists generally associate with normal growth of the labor force and expanding job opportunities in a dynamic economy is:
A. Frictional unemployment.
B. Seasonal unemployment.
C. Cyclical unemployment.
D. Structural unemployment.

 
33. An inner-city teenager without a high school diploma is unable to find work because all of the available jobs require a certain minimum reading skill level. Which of the following best characterizes the teenager's circumstances?
A. A discouraged worker.
B. Structurally unemployed.
C. Phantom unemployed.
D. Underemployed.

 
34. Inflation means:
A. Prices of all goods stay the same or are rising.
B. All prices are rising.
C. The average price level is rising.
D. All of the above.

 
35. If the price of computers falls 5 percent during a period when the level of average prices falls 10 percent, the relative price of computers compared with other goods:
A. Stays the same.
B. Increases.
C. Decreases.
D. More information is required.

 
36. Which of the following is correctly identified by the term "nominal income"?
A. Money income adjusted for any change in the price level.
B. Real purchasing power.
C. Real purchasing power deflated for rising prices.
D. Money income measured in current dollars.

 
37. Your real income is:
A. The amount of money you receive during a given time period.
B. Measured in current dollars.
C. The purchasing power of the money you receive.
D. All of the above.

 
38. During a period of unanticipated inflation:
A. Debtors are better off and creditors are worse off.
B. Debtors and creditors are both better off because of lower real interest rates.
C. Individuals on fixed incomes are better off.
D. All individuals are worse off because of the level of uncertainty.

 
39. When people make their decisions on the basis of the face value of currency rather than the real value, their decisions reflect:
A. The price effect of inflation.
B. The income effect of inflation.
C. The wealth effect of inflation.
D. Money illusion.

 
40. The Consumer Price Index is a measure of the:
A. Index used to compute real GDP from nominal GDP.
B. Change in the average price of shipments of goods and services in the United States.
C. Average price of consumer goods and services in the current period relative to their price in some base period.
D. Annual inflation rate in the producers' goods market.

 
41. Which of the following usually increases before the CPI increases?
A. GDP deflator.
B. Consumer price index.
C. Producer price index.
D. COLAs.

 
42. Which of the following automatically adjusts some nominal wages to changing price indexes?
A. The CPI.
B. The PPI.
C. The GDP deflator.
D. The COLA.

 
43. The business cycle is defined as:
A. Changing wages and prices.
B. An effort to reach full employment.
C. The growth of real GDP.
D. Alternating periods of economic growth and contraction.

 
44. Business cycles in the United States:
A. Are remarkably similar in length but vary greatly in intensity.
B. Vary greatly in length, frequency, and intensity.
C. Are similar in frequency and intensity.
D. Are similar in length, frequency, and intensity.

 
45. The downswing in the business cycle is characterized by:
A. Lower unemployment rates.
B. Lower real output.
C. Higher prices.
D. Higher interest rates.

 
46. When real GDP declines for two consecutive quarters, this is known as:
A. Inflation.
B. A recession.
C. A growth recession.
D. All of the above.

 
47. Changes in real GDP provide a way to measure:
A. Inflation.
B. Unemployment.
C. Business cycles.
D. All of the above.

 
48. If the CPI doesn't measure product quality improvements, then the CPI tends to:
A. Understate the inflation rate.
B. Overstate the inflation rate.
C. Understate economic growth.
D. Be artificially low.

 
49. The best price index to use in calculating the real GDP would be:
A. Any of the indexes since they all reflect price level changes.
B. The CPI.
C. The PPI.
D. The GDP deflator.

 
50. Capital, as economists use the term, refers to:
A. The money needed to start a new business.
B. The costs of operating a business.
C. Shares of stock issued by businesses.
D. Final goods that are produced then used to produce other goods and services.

                                              back

This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test.