Unit II Test

Gross domestic product is equal to which of the following?

• Total consumer spending on final goods

• The total value of production of all firms

• The sum of income paid to all the factors of production

• The total value of production of domestic firms

• The sum of values added of all foreign firms located domestically

The circular flow model illustrates the equality of which of the following?

• Total expenditure and total income

• Savings and consumption

• Total income and government spending

• Total expenditure and wages

• Exports and imports

GDP does NOT account for which of the following?

• The value added by all firms in the economy

• The depletion of natural resources

• Wages, rent, profit, and interest payments

• The value of final goods and services produced domestically

• Imports from foreign countries

Which of the following transactions will be included in the calculation of Country X's Gross Domestic Product (GDP) in 2002?

• The sale of corporate stocks

• The exchange of a used automobile for a used boat

• The purchase of new construction equipment

• Social Security checks received by retirees

• Carrots grown in a household's backyard and consumed by the family

Which of the following unemployed individuals represents frictional unemployment?

• Marissa, a full-time student who plays on the school's soccer team.

• Janet, an accounting graduate who is interviewing with a number of accounting firms.

• Samer, a retired faculty member who volunteers at the local hospital.

• Jeremy, a customer service representative who was laid-off after his job was automated.

• Elizabeth, a financial analyst who was laid off because of the recession.

Based on the above table which of the following is most likely correct?

• The natural rate of unemployment is 5 percent.

• The labor force participation rate is 91 percent.

• Discouraged workers are 4 percent of the labor force.

• There are 9 million discouraged workers in the nation.

• There are 95 million people in the labor force

In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in 2018 was 2%. How did Sabrina's nominal income and real income change in 2018 compared to 2017?

• Nominal income decreased and real income decreased.

• Nominal income decreased and real income did not change.

• Nominal income increased and real income decreased.

• Nominal income increased and real income did not change.

• Nominal income increased and real income increased.

If 2012 is the base year, which of the following is true?

• The cost of a given basket of goods in 2012 was $10,000 and in 2013 was $12,000.

• The average weekly nominal wage rate in 2012 and 2013 was $1,000.

The inflation rate from 2012 to 2013 is 10%.

• The CPI in year 2013 is 110.

• The CPI in year 2013 is 120.

• Based on the CPI, the average real weekly wage rate increased by 10% from 2012 to 2013.

• Based on the CPI, the average real weekly wage rate decreased by 20% from 2012 to 2013.

Which of the following will happen if the actual inflation rate is greater than the expected inflation rate?

• Lenders of fixed interest rate loans will be better off.

• Lenders of variable interest rate loans will be worse off.

• Borrowers of fixed interest rate loans will be worse off.

• Borrowers of fixed interest rate loans will be better off.

• Borrowers of variable interest rate loans will be better off.