ECON 201 Principles of Macroeconomics Quiz 1 Answers (2017)

ECON 201 Principles of Macroeconomics Quiz 1 Answers (2017)

1. The circular flow diagram of economic activity is a model of the: 

a. interaction among taxes, prices, and profits.

b. flow of goods, services, and payments between households and firms.

c. role of unions and government in the economy.

d. influence of government on business behaviour.

2. In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: 

a. all consumers.

b. buyers and sellers.

c. producers and input suppliers.

d. producers and government planning committees. 

3. In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. 

a. market-oriented economy

b. macroeconomy

c. microeconomy

d. command economy 

4. Which of the following best denotes the reason for the existence of substantial black markets? 

a. a market-oriented economy

b. a command economy

c. government laws and rules

d. the microeconomy 

5. ___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time. 

a. Government

b. Investment

c. ervices

d. Consumption

6. If imports exceed exports, as in recent years, then __________ exists. 

a. a trade imbalance

b. a trade surplus

c. trade disequilibrium

d. a trade deficit

7. _______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country.

a. Education

b. Economic growth

c. Inflation

d. Trade balance

8. A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: 

a. trough, expansion, recession, peak

b.contraction, recession, expansion, boom

c. expansion, trough, recession, peak

d. expansion, peak, recession, trough

9. Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country. 

a. Ethiopia = $14.50 Costa Rica = $2250.00

b. Ethiopia = $14.50 Costa Rica = $225.00

c. Ethiopia = $145.00 Costa Rica = $2250.00

d. Ethiopia = $1450.00 Costa Rica = $22,500.00

10. A country will roughly double its GDP in twenty years if its annual growth rate is: 

a. 12 percent.

b. 7.5 percent.

c. 3.5 percent.

d. 2.5 percent

11. A nation's prosperity is sometimes measured in terms of ___________. 

a. GDP per capita

b. GNP

c. GDP

d. economic output

12. Some recent economic research has suggested that African countries' economic growth may have been limited by __________________ . 

a. Population

b. geography and climate

c. government interventionism

d. technological challenges

13. A nation can achieve higher economic growth if: 

a. it devotes more resources to research and development.

b. the productivity of labor declines

c. taxes are imposed on investment in capital.

d. more resources are allocated to consumption goods. 

14. The unemployment rate may underestimate the true extent of unemployment if: 

a. many part-time employees would like to work full-time, but are unable to get the additional work.

b. employees increase the number of hours they work overtime.

c. there are a large number of people working in the underground economy.

d. any of the above occur

15. A university student who is enrolled in school fulltime and not seeking employment is considered: 

a. out of the labor force.

b. unemployable, and not counted in official statistics.

c. employed in leisure.

d. underemployed. 

16. A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as: 

a. cyclically unemployed.

b. underemployed.

c. frictionally unemployed.

d. naturally unemployed. 

17. The GDP deflator is a price index that includes the following components of GDP: 

a. Consumption, Investment plus Exports minus Imports

b. Consumption

c. Consumption plus Investment but not Exports

d. Consumption, Investment, Government plus Exports minus Imports

18. The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer’s true cost of living, because it doesn’t take into account that the person can substitute between goods according to changes in their relative prices. 

a. stabilize

b. understate

c. overstate

d. reduce 

19. Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be? 

a. $430 billion

b. $835 billion

c. $2,063 billion

d. $2,449 billion 

20. The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals: 

a. 20.2 %.

b. 16.8%.

c. 14.4%.

d. 11%.