The questions provided below are representative of the multiple choice style questions which will be used for exams. Although these questions will not directly appear on any of the exams, they can be used to help prepare for the exams. Please use them as such.
INFLATION
1. This price index is based upon a basket of goods
purchased by the typical household:
a. PPI
b. CPI
c. GDP Deflator
d. Inflation Adjustor
2. Which of the following statements is true about
the CPI and PPI?
a. The PPI is more widely used to measure overall inflation.
b. The CPI consists of a constant basket of goods, while
the PPI consists of a basket of goods which is always changing.
c. The CPI is calculated based upon a basket of household
goods, while the PPI is calculated based upon a basket of producer or intermediate
goods.
d. All of the above are correct.
Use the table below to answer the following questions.
| Year | Basket Value |
| 1990* | $500 |
| 1992 | $450 |
| 1994 | $550 |
| 1996 | $800 |
| 1998 | $1000 |
*1990 = Base Year
3. The CPI in 1990 is:
a. 0
b. 1
c. 50
d. 100
4. The CPI in 1992 is:
a. 80
b. 90
c. 100
d. 110
5. The CPI in 1994 is:
a. 80
b. 90
c. 100
d. 110
6. The percentage change in prices between 1990 and
1996 is:
a. 20%
b. 30%
c. 60%
d. 120%
7. From the information above, we can conclude that
between 1990 and 1992, the U.S. experienced:
a. Inflation
b. Deflation
c. Expansion
d. Unemployment
8. From the information above, we can conclude that
between 1996 and 1998, the U.S. experienced:
a. Inflation
b. Deflation
c. Recession
d. Unemployment
9. The price index calculated using a basket of producer
goods or services is:
a. PPI
b. CPI
c. GDP Deflator
d. Inflation Adjustor
10. The total market value of goods and services produced
within a country in a given year expressed in current dollar values is:
a. Deflated GDP
b. Real GDP
c. Nominal GDP
d. GNP
11. If Nominal GDP for 1995 = $3700, and the GDP deflator
for 1995= 110 (base year = 1990), Real GDP for 1995 was:
a. $4070
b. $3700
c. $3364
d. $3330
12. If Real GDP for 1990 = $2400 and the GDP deflator
for 1990 = 95 (base year = 1992), Nominal GDP for 1990 was:
a. $2520
b. $2400
c. $2280
d. $2600
13. If Nominal GDP for 1994 = $3600, Real GDP for
1994= $3000, the GDP deflator for 1994 is:
a. 80
b. 100
c. 110
d. 120
14. If Real GDP in 1988 was $2500 and Real GDP in
1992 was $2750, what is the percentage change in Real GDP?
a. 10%
b. 15%
c. 20%
d. 25%
UNEMPLOYMENT
Use the table below to answer the following questions:
| Total Population | 36,000 |
| Unemployable (under 16, etc.) | 8,000 |
| Not wanting to work | 10,000 |
| Employed | 15,000 |
15. Calculate the unemployment rate for this country:
a. 83%
b. 33%
c. 17%
d. 11%
16. Calculate the employment rate for this country:
a. 83%
b. 54%
c. 42%
d. 17%
17. Calculate the labor force participation rate for
this country:
a. 50%
b. 64%
c. 33%
d. 28%
18. If the unemployment rate is 10%, we can conclude:
a. The employment rate is 90%
b. The economy is in a recession
c. Inflation is high
d. The natural rate of unemployment is less than 10%
19. The condition where the unemployment rate equals
the natural rate of unemployment is called:
a. Structural unemployment
b. Frictional unemployment
c. Cyclical unemployment
d. Full employment
20. In general, when unemployment is falling:
a. The economy is experiencing slow growth
b. The economy is in a recession
c. The economy is in a depression
d. The economy is expanding
21. Steel mill workers who are laid off (prior to
becoming male strippers a la the Full Monty), would be classified as this
type of unemployment:
a. Structural
b. Frictional
c. Cyclical
d. Seasonal
22. Workers for Kelloggs who are laid off in light
of decreasing corporate profits, would be classified as this type of unemployment:
a. Structural
b. Frictional
c. Cyclical
d. Seasonal
23. Which of the following people would not be included
in the labor force:
a. Military personnel stationed overseas
b. Houseworkers
c. Retired Persons
d. All of the above.
GDP
24. This component of the macroeconomy constitutes
almost two-thirds of GDP?
a. Households
b. Businesses
c. Government
d. Rest of the World
25. Household expenditures, as measured in GDP, are
called:
a. Investment
b. Exports
c. Consumption
d. Imports
26. Business expenditures on final goods and services
are called:
a. Investment
b. Exports
c. Consumption
d. Imports
27. Given the following expenditures, calculate GDP:
Consumption = 50,000
Investment = 10,000
Government = 15,000
Exports = 12,000
Imports = 10,000
a.
97,000
b. 87,000
c. 77,000
d. 75,000
28. This period in the business cycle occurs after
a recovery:
a. Peak
b. Recession
c. Trough
d. Expansion
29. This period in the business cycle is characterized
by two consecutive quarters of falling GDP:
a. Peak
b. Trough
c. Recession
d. Depression
30. Which of the following is included when calculating
GDP?
a. Purchase of a used car
b. Purchase of stocks
c. Paying to have your house cleaned
d. Purchase of scalped tickets
1. An increase in quantity demanded of real GDP is brought about by
a(n):
a. An
increase in exports
b. An
increase in imports
c. An
increase in investment
d. A decrease
in the price level
2. The Aggregate Demand (AD) Curve is downward sloping for all of the
following reasons, except:
a. Real
Balance Effect
b. International
Trade Effect
c. Depreciation
Effect
d. Interest
Rate Effect
3. According to the international trade effect, if the price level in
the US rises,
a. US
exports fall and imports rise
b. US
imports fall and exports rise
c. Both
US imports & exports rise
d. Both
US imports & exports fall
4. If businesses become optimistic about future sales,
a. AD
curve shifts rightward (increase in AD)
b. AD
curve shifts leftward (decrease in AD)
c. AS
curve shifts rightward (increase in AS)
d. AS
curve shifts leftward (decrease in AS)
5. If our trading partners are doing well, economically speaking, leading
to increases in foreign real national incomes, what impact will this have
on the price level and real GDP (output) of the US?
a. Decreases
in both price level and output
b. Increases
in both price level and output
c. Increase
in price level, decrease in output
d. Decrease
in price level, increase in output
6. A decrease in the price level can be caused by all of the following
except:
a. An
increase in imports
b. A decrease
in government expenditures
c. A beneficial
supply shock
d. An
increase in wage rates
7. When faced with a horizontal AS curve, increases in government
expenditures leads to:
a. Inflation
b. Decreased
Output
c. Increased
Output
d. Both
A & B
8. Suppose we observe an increase in the price level coupled with decreasing
real output (GDP). Which of the following could explain this change
in economic conditions?
a. An
increase in non-labor inputs
b. A decrease
in the interest rate
c. An
increase in government purchases of goods and services
d. An
increase in productivity
9. An increase in Aggregate Demand can be caused by all of the following,
except:
a. An
increase in consumption
b. An
increase in exports
c. A decrease
in the price level
d. A decrease
in the interest rate
10. If the Aggregate Supply (AS) Curve is perfectly vertical and firms
are increasing their investment expenditures, what will happen to equilibrium
output and price level?
a. Price
level falls, output rises
b. Price
level rises, output falls
c. Both
price level and output rise
d. Both
price level and output fall
Section 1
1. b
2. c
3. d
4. b
5. d
6. c
7. b
8. a
9. a
10. c
11. c
12. c
13. d
14. a
15. c
16. b
17. b
18. b & d
19. d
20. d
21. a
22. b
23. d
24. a
25. c
26. a
27. c
28. d
29. c
30. c
Section 2
1. d
2. c
3. a
4. a
5. b
6. d
7. c
8. a
9. c
10. none of the above: should be – price level rises, output
unchanged.
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Last Updated March 20, 1999 by Kelley L. Altese