Inflation and Answer

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Name: mun
Score: 0 / 30 (0%)     [8 subjective questions not graded] Final Exam Review Questions

Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question. | |  1. | The total sales of all firms in the economy for a year a.| equals GDP for the year.| b.| is larger than GDP for the year.|

c.| is smaller than GDP for the year.|
d.| equals GNP for the year.|
| |
ANSWER: | B|
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|  2. | The local Chevrolet dealership has an increase in inventory of 25 cars in 2006. In 2007 it sells all 25 cars. Which of the following statements is correct? a.| The full value of the increased inventory will be counted as part of GDP in 2006, and the value of the cars sold in 2007 will not cause 2007 GDP to increase.| b.| The value of the increased inventory will not affect 2006 GDP; instead, the full value of the inventory will be counted as part of 2007 GDP.| c.| The value of the increased inventory will be counted as part of 2006 GDP and the value of the cars sold in 2007 will increase 2007 GDP.| d.| One-half of the value of the increased inventory will be counted as part of 2006 GDP and the other one-half of the value will be counted as part of 2007 GDP.| | |

ANSWER: | A|
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|  3. | Suppose that dairy products have risen in price relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this “low” rate of price increase most relevant? a.| substitution bias| b.| introduction of new goods|

c.| unmeasured quality change|
d.| income bias|
| |
ANSWER: | A|
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|  4. | In the small closed economy of San Lucretia, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 70 billion denars, government purchases of goods and services were 80 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What were consumption and investment in San Lucretia? a.| 270 billion denars, 50 billion denars| b.| 260 billion denars, 60 billion denars|

c.| 250 billion denars, 70 billion denars|
d.| None of the above is correct.|
| |
ANSWER: | A|
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|  5. | Suppose that a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer’s interest income was tax free. This would shift the a.| supply for loanable funds right making interest rates fall.| b.| supply of loanable funds left making interest rates rise.| c.| demand for loanable funds right making the interest rate rise.| d.| demand for loanable funds left making the interest rate fall.| | |

ANSWER: | A|
 |
|  6. | Which of the following is correct concerning a risk-averse person? a.| She would not play games where the probability of winning and losing a dollar are the same.| b.| She might not buy health insurance if she thinks her risks are low.| c.| Her marginal utility of wealth decreases as her income increases.| d.| All of the above are correct.|

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ANSWER: | D|
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|  7. | Which of the following is a source of market risk? a.| Holding stocks in many companies carries the risk of a reduced average return.| b.| Real GDP varies over time and sales and profits move with real GDP.| c.| When a paper producer has declining sales, it is likely that so will other paper producers.| d.| If stockholders become aggravated with the way a CEO runs a company, the price of that company’s stock might fall in the stock market..| | |

ANSWER: | B|
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|  8. | Suppose the United States exports cars to France and imports cheese from Switzerland. This situation suggests that a.| the United States has a comparative advantage relative to Switzerland in producing...
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