Principles of Macroeconomics: Self-Study Quiz and Exercises

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Chapter 5

1) Which of the following is NOT a topic studied in Macroeconomics? A) gross domestic product
B) the unemployment rate
C) the price of IBM computers
D) the inflation rate

2) In a business cycle, a peak represents the end of ________ and a trough represents the end of ________.
A) an expansion; a recession
B) a depression; an expansion
C) a trough; a peak
D) a recession; an expansion

3) The unemployment rate equals
A) labor force/population.
B) unemployed/employed.
C) (employed - unemployed)/labor force.
D) unemployed/labor force.

4) Government policies regarding taxes and expenditures are called A) fiscal policy.
B) income policies.
C) supply-side policy.
D) monetary policy.

5) The diagram that shows the income received and payments made by each sector of the economy is the
A) aggregate demand-aggregate supply diagram.
B) circular flow diagram.
C) income flow diagram.
D) income-production diagram.

6) In which basic market would DVDs be traded?
A) the goods and services market
B) the money market
C) the labor market
D) the factor market

Chapter 6

7) Which of the following is a good or service counted in GDP? A) tires Ford buys to put on a car
B) a used tire you buy for your personal car
C) a new tire you buy for your personal car
D) used tires bought by a used car dealer to put on a car on his lot ANSWER:____________

8) The GDP includes
A) the value of all intermediate goods and services.
B) the value of all final goods and services.
C) the value of both intermediate and final goods and services. D) the value of all transactions.

9) If the GDP deflator is greater than 100, then
A) nominal GDP is greater than real GDP.
B) nominal GDP is lower than real GDP.
C) nominal GDP equals real GDP.
D) prices decreased by more than half between the current and the base years. ANSWER:____________
10) Legalizing all forms of illegal activities would
A) reduce measured GDP.
B) reduce the size of the underground economy and increase measured GDP. C) reduce both the underground economy and measured GDP.
D) increase the size of the underground economy and reduce measured GDP. ANSWER:____________

Chapter 7

11) For you to be considered out of the labor force, you can be A) a full-time student.
B) a full-time retiree.
C) a full-time volunteer.
D) any of the above

12) Jake retired from the police force. He started working an hour or two a day at a paid job in cityʹs courthouse. Jake is
A) employed.
B) in the labor force.
C) unemployed.
D) not in the labor force.

13) During recessions, the number of discouraged workers ________ and this ________ the unemployment rate.
A) falls; reduces
B) decreases; increases
C) increases; reduces
D) increases; increases

14) An individual who cannot find a job because his or her job skills have become obsolete is an example of
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.

15) An increase in the overall price level is
A) inflation.
B) deflation.
C) a price index.
D) a recession.

16) A price index is
A) a measurement showing how the average price of a bundle of goods changes over time. B) a measurement showing the cost of a bundle of goods at a point in time. C) a sustained increase in the overall price level.

D) a decrease in the overall price level.

17) If the CPI in period 1 is 180 and the CPI in period 2 is 240, then the rate of inflation between period 1 and period 2 is
A) 25.0%.
B) 33.3%.
C) 50.0%.
D) 66.7%.

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