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Multiple-choice questions to accompany

MACROECONOMIC ESSENTIALS
FOR MEDIA INTERPRETATION
(MIT Press, second edition, 2000)

Copyright 2000 by Peter E. Kennedy

This set of multiple-choice questions has been prepared for instructors wishing a bank of such questions for examination purposes, and for students who find studying from such questions to be an efficient way of learning. There are three generic types of questions.

First in each chapter category below, and most numerous, are questions based on short news clips, reflecting the unique flavor of Macroeconomic Essentials for Media Interpretation. It is because this text's focus on the interpretation of news commentary is so different from traditional texts that it was felt necessary to provide this set of multiple-choice questions. These questions are based almost exclusively on clips found in the text as examples or as end-of-chapter questions, and so students who have worked through the text should be familiar with them.

Second are questions providing numerical examples to be worked out. These questions are unlike traditional economics numerical multiple-choice questions, and so also reflect a unique character of the text. Again, almost all of these questions are similar to numerical questions found as end-of-chapter exercises in the text and so students who have worked through the text should be familiar with them.

Third are much smaller numbers of traditional multiple-choice questions, included for completeness.

As with all multiple-choice questions, the intent is that the best of the possible answers should be chosen. An asterisk beside a question indicates that that question introduces new terminology or is more difficult.

This document is about 112 pages in length, and contains over 770 multiple-choice questions, an average of 45 questions per chapter. Although I have tried hard to remove ambiguities and errors, some such may remain, for which I apologize and accept full responsibility. Suggested corrections, sent to kennedy@sfu.ca, would be appreciated.

Chapter 2: Measuring GDP and the Price Level

1. "Almost all of the fourth quarter increase in GDP wound up as unsold inventory sitting on shelves." If it doesn't get sold, how could it get counted into GDP? a) it is added when measuring GDP, as an element of investment demand b) it is added when measuring GDP, as an element of consumption demand c) it is subtracted when measuring GDP, as an element of investment demand d) it is subtracted when measuring GDP, as an element of consumption demand

2. "The oil crisis caused U.S. oil companies' overseas profits to shoot up, producing a jump in ______ that could mislead policy-makers." The blank should be a) GDP b) GNP c) investment d) interest rates

*3. "Suppose a new computer is invented that costs one-quarter of existing computers and performs as well. Now when GDP is calculated production of the same number of computers creates only one-quarter as much dollar output - GDP falls!" a) true, both nominal and real GDP fall

b) false, real GDP should rise because of adjustments for quality c) false, real GDP should rise because of price index adjustments d) false, real GDP should be unchanged because of price index adjustments

4. "Homemakers often feel their work is taken for granted, and advocates in the women's movement argue that the statistical invisibility of homemakers' work has substantive policy implications." What is meant by "statistical invisibility" here? a) homemakers' output is not counted in GDP

b) homemakers' output is double-counted in GDP
c) homemakers' output is added into GDP at an artificially-low price d) homemakers' output is only counted into GDP if there exists a market counterpart

5. "Experts keen on the concept of Green GDP have offered a variety of suggestions to make economic statistics more environmentally friendly." An example of such a suggestion is
a) add the cost of...
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