Macroeconomics Midterm Exam Practice

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11.

Using the expenditure approach, which of the following would be included in U.S. GDP? a. The value of the groceries you buy at the store. b. The value of an automobile purchased by Hertz to be rented out later to customers. c. The value of steel that was produced but not sold during the year. d. All of the above. e. None of the above.

12.

Which of the following would be considered "government purchases" when measuring GDP? a. The salary of a city police officer. b. U.S. government social security payments to retired workers. c. The groceries that a U.S. postal worker buys at the store. d. All of the above. e. None of the above.

13.

Suppose that, in a given year, consumption spending is $5 trillion, exports are $3.2 trillion, imports are $4 trillion, government transfer payments to households are $2 trillion, business spending on plant and equipment is $1 trillion, new housing construction is $0.5 trillion, government purchases of goods and services are $3 trillion, taxes are $3.5 trillion, and inventories of unsold goods during the year decline from $4 trillion to $3.3 trillion. Then using the expenditure approach, GDP during the year is a. $6 trillion. b. $8 trillion. c. $10 trillion. d. $11.2 trillion. e. $12 trillion

14.

Suppose that, in a given year, a country's GDP using the expenditure approach is $5 trillion. Then, during that year, the total income earned by the owners of the country's resources (or factors of production) will be a. $5 trillion. b. $5 trillion minus total payments made for intermediate goods. c. $5 trillion minus total taxes paid by households and businesses. d. $5 trillion minus both payments for intermediate goods and taxes paid by households and businesses. e. $5 trillion minus the sum of total rent, total profit and total interest.

15.

In order to build each of its DVD players, a firm buys $100 of components, pays out $200 in salaries, and sells each player to the public for $600, earning $300 in profit. The total contribution of each DVD player to GDP is a. $100. b. $300. c. $500. d. $600. e. $1,200.

16.

Suppose that, during the year, nominal GDP grows by 6 percent, real GDP grows by 2 percent, and the population grows by 2 percent. Then, during the year, the average standard of living (using the typical definition of that term) a. rises by 10 percent. b. rises by 8 percent. c. rises by 6 percent. d. rises by 4 percent. e. doesn't rise at all.

17.

Which of the following problems probably causes GDP to underestimate total production? a. GDP's treatment of non-market activity. b. GDP's treatment of most quality improvements. c. GDP's treatment of the underground economy. d. All of the above. e. None of the above.

18.

Suppose the price of the typical consumer's market basket rises from $150 to $160 during a year. Then, according to the CPI, the inflation rate for the year would be a. 6.25 percent. b. 6.66 percent. c. 7.00 percent. d. 10 percent. e. none of the above.

19.

The prices of which of the following are tracked by the CPI? a. fresh milk bought in the store. b. computers purchased by businesses. c. building materials purchased by the government. d. all of the above. e. none of the above.

20.

Over some period of time, which of the following combinations is not possible? a. a rising price level and an increasing inflation rate. b. a rising price level and a decreasing inflation rate. c. a rising price level and a stable inflation rate. d. an unchanging price level and a rising inflation rate. e. an unchanging price level and a zero inflation rate.

21.

Suppose the wage rate is $10 per hour at the beginning of the year, and $15 per hour at the beginning of the next year. Suppose, too, that during this period, the price level rises from 2.0 to 2.2. Then, over the year, the real wage rises by a. b. c. d. e. o percent. 20 percent. 30 percent. 36 percent. 50 percent.

22.

Suppose a worker's nominal wage rises by 3 percent per...
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