Question

1. Structural unemployment is the result of

A) short-term movement of workers between jobs.

B) job search for first-time job seekers.

C) technological change or permanent changes in industry demand.

D) business cycle fluctuations.

E) recurring changes in the hiring needs of certain industries.

2. The real interest rate equals

A) the nominal interest rate minus the rate of unexpected inflation.

B) the rate of expected inflation minus the nominal interest rate.

C) the nominal interest rate minus the rate of expected inflation.

D) the nominal interest rate divided by the rate of expected inflation.

E) the nominal interest rate plus the rate of expected inflation.

Use the following to answer questions 3-4:

Disposable Income (Yd)	Consumption (C)
$0 million	$10 million
$50 million	$55 million
$100 million	$100 million
$150 million	$145 million
$200 million	$190 million
$250 million	$235 million
$300 million	$280 million
$350 million	$325 million

3.	Refer to the table above. The savings function is equal to
	A)	S = 0.9Yd.
	B)	S = -10 + 0.1Yd.
	C)	S = 10 + 0.1Yd.
	D)	S = 325 + Yd.
	E)	S = 50 + 0.1Yd.

4.	Refer to the table above. The MPC is equal to
	A)	0.09.
	B)	0.01.
	C)	1.00.
	D)	0.90.
	E)	0.10.

5.	If the nominal interest rate is 12 percent and the real interest rate is 4 percent, then the expected inflation rate must equal
	A)	+8 percent.
	B)	-4 percent.
	C)	+12 percent.
	D)	+4 percent.
	E)	+20 percent.

6. Other things equal, a significant depreciation of the U.S. dollar against other foreign currencies, such as the Euro, (from approximately 1 Euro = $1.25 to 1 Euro = $1.50), would result in

A) an increase in foreign demand for U.S. goods.

B) an increase in foreign aggregate expenditures.

C) a decrease in domestic investment spending.

D) an increase in U.S. demand for foreign goods.

E) a decrease in U.S. aggregate expenditures.

Use the following to answer questions 7-10:

Production Data
	Prices per Unit		Output
Production	1995	2003	1995	2003
Vegetables Meat	$2 $8	$4 $12	250 500	300 550

7.	Refer to the table above. What is the real GDP growth from 1995 to 2003 using 2003 as the base year?
	A)	13.6 percent
	B)	11.0 percent
	C)	55.5 percent
	D)	11.4 percent
	E)	73.3 percent

8.	Refer to the table above. What is nominal GDP for 2003?
	A)	$16
	B)	$5,000
	C)	$7,800
	D)	$750
	E)	$4,500

9.	Refer to the table above. What is the real GDP growth from 1995 to 2003 using 1995 as the base year?
	A)	55.5 percent
	B)	11.1 percent
	C)	11.4 percent
	D)	13.6 percent
	E)	73.3 percent

10.	Refer to the table above. What is nominal GDP for 1995?
	A)	$4,500
	B)	$750
	C)	$500
	D)	$5,400
	E)	$10

11.	Since 1920, the NBER (National Bureau of Economic Research) has tracked the business cycles in the U.S. economy that occurred between 1854 and the present time. Approximately how many (complete) business cycles occurred in the U.S. during the period 1854-2014?
	A)	33
	B)	More than 50.
	C)	43
	D)	32
	E)	12

12.	Lower investment spending is the result of
	A)	an increase in interest rates.
	B)	an increase in the price of bonds.
	C)	a fall in prices that increases consumption expenditure.
	D)	a decrease in interest rates.
	E)	a greater demand for bonds.

13.	Gross domestic product constitutes
	A)	the total spending in an economy.
	B)	the current market value of all final goods and services produced in a given year within a country's borders.
	C)	the current market value of all goods and services produced in a given year.
	D)	the total quantitative output in an economy.
	E)	the total monetary transactions in an economy.

14.	The Great Depression, from 1929 through 1939, inclusive
	A)	caused real national output to fall by 50 percent.
	B)	was characterized by both low output and high prices.
	C)	consisted of one deep trough.
	D)	consisted of two deep troughs.
	E)	consisted of three deep troughs.

15.	The official unemployment rate is
	A)	the number of unemployed people divided by the size of the non-institutionalized population.
	B)	the number of unemployed people divided by the size of the non-institutionalized population, age 16 or older.
	C)	the number of unemployed people divided by the size of the labor force.
	D)	the number of unemployed people divided by the total size of the population.
	E)	the number of unemployed people divided by the number of employed people.

16.	Other things equal, the steeper the aggregate supply curve,
	A)	the smaller the recessionary effect of an increase in aggregate demand.
	B)	the greater the expansionary effect of a decrease in aggregate demand.
	C)	the greater the expansionary effect of an increase in aggregate demand.
	D)	the smaller the recessionary effect of a decrease in aggregate demand.
	E)	the smaller the inflationary effect of an increase in aggregate demand.

17.	Federal personal income taxes affect aggregate demand
	A)	indirectly by changing investment spending.
	B)	directly through government spending.
	C)	indirectly by changing consumption.
	D)	indirectly by changing net exports.
	E)	directly by changing disposable income.

For questions 18 through 23 below, assume the following annual values for each of the macroeconomic variable given. Numbers are $ billions.

Ig = Gross Investment = 550

RE = Retained Earnings of Corporations = 45

G = Government Goods = 900

BusTr = Net Business Transfer Payments = 35

M = Imports = 975

RFRW = Receipts From the Rest of the World = 250

PayTax = Payroll Taxes = 90

SSI = Social Security Income = 65

CCA = Capital Consumption Allowance (Depreciation) = 205

C = Consumer Goods = 3,950

IBT = Indirect Business Taxes = 75

PTRW = Payments To the Rest of the World = 220

CIT = Corporate Income Taxes = 75

PIT = Personal Income Taxes = 500

X = Exports = 600

S.D. = Statistical Discrepancy = -345

18. How much is Gross Domestic Product (GDP) for the economy?

A)   5,400

B)   6,000

C)   5,100

D)   5,025

E)   6,100

19. How much is Gross National Product (GNP) for the economy?

A)   5,430

B)   5,130

C)   6,030

D)   6,250

E)   5,055

20. How much is Net National Product (NNP) for the economy?

A)   5,225

B)   5,825

C)   6,045

D)   4,850

E)   4,925

21. How much is National Income (NI) for the economy?

A)   5,275

B)   5,875

C)   4,975

D)   5,195

E)   4,875

22. For this question only, assume that National Income (NI) is 5,875. How much is Personal Income (PI) for the economy?

A)   5,010

B)   5,090

C)   5,690

D)   4,790

E)   4,690

23. For this question only, assume that National Income (NI) is 5,875. How much is Personal Saving (S) for the economy?

A)     640

B)     240

C)     340

D) 1,240

E)     560

Use the following table to answer questions 24 and 25.

  

                                                         PRICE INDEX

                                NOMINAL          FOR GDP

              YEAR           GDP               (2000 = 100)                 

               1970           $2,500 B                  25

               1977           $2,800 B                  40                          

24. What is real GDP in 1970 using 2000 as the base year?

A)    7,000

B)    7,500

C)    1,200

D)       350

E) 10,000

25. Using 2000 as the base year, by how much did real income change between 1970 and 1977?

A)   1,250

B)      300

C)   1,200

D)      500

E)   3,000

Answer 1

1. Structural unemployment is the result of

D) business cycle fluctuations.

2. The real interest rate equal

E) the nominal interest rate plus the rate of expected inflation.

3.	Refer to the table above. The savings function is equal to
	c)	S = 10 + 0.1Yd.

4.	Refer to the table above. The MPC is equal to
	E)	0.10.

5.	If the nominal interest rate is 12 percent and the real interest rate is 4 percent, then the expected inflation rate must equal
	A)	+8 percent.

6. Other things equal, a significant depreciation of the U.S. dollar against other foreign currencies, such as the Euro, (from approximately 1 Euro = $1.25 to 1 Euro = $1.50), would result in

A) an increase in foreign demand for U.S. goods.

7.	Refer to the table above. What is the real GDP growth from 1995 to 2003 using 2003 as the base year?
	B)	11.0 percent

8.	Refer to the table above. What is nominal GDP for 2003?
	A)	$16

9.	Refer to the table above. What is the real GDP growth from 1995 to 2003 using 1995 as the base year?
	C)	11.4 percent

10.	Refer to the table above. What is nominal GDP for 1995?
	A)	$4,500

11.	Since 1920, the NBER (National Bureau of Economic Research) has tracked the business cycles in the U.S. economy that occurred between 1854 and the present time. Approximately how many (complete) business cycles occurred in the U.S. during the period 1854-2014?
	B)	More than 50.

12.	Lower investment spending is the result of
	C) a fall in prices that increases consumption expenditure.

13.	Gross domestic product constitutes
	B)	the current market value of all final goods and services produced in a given year within a country's borders.

14.	The Great Depression, from 1929 through 1939, inclusive
	A)	caused real national output to fall by 50 percent.

15.	The official unemployment rate is
	C)	the number of unemployed people divided by the size of the labor force.

16.	Other things equal, the steeper the aggregate supply curve,
	B)	the greater the expansionary effect of a decrease in aggregate demand.

17.	Federal personal income taxes affect aggregate demand
	A)	indirectly by changing investment spending.

18. How much is Gross Domestic Product (GDP) for the economy?

E)   6,100

19. How much is Gross National Product (GNP) for the economy?

C)   6,030

20. How much is Net National Product (NNP) for the economy?

B)   5,825

21. How much is National Income (NI) for the economy?

A)   5,275

22. For this question only, assume that National Income (NI) is 5,875. How much is Personal Income (PI) for the economy?

A)   5,010

23. For this question only, assume that National Income (NI) is 5,875. How much is Personal Saving (S) for the economy?

C)     340

24. What is real GDP in 1970 using 2000 as the base year?

A)    7,000

25. Using 2000 as the base year, by how much did real income change between 1970 and 1977?

C)   1,200

Answer 2

1. C

2. C

3. B

4. D

5. A

6 A

7 D

8 C

9 B

10 A

11 A

12 A

13 B

14 D

15 C

16 D

17 E

18 D

19 E

20 D

21 E

22 C

23 B

24 E

25 E