The nominal interest rate
Unit 5 Macro Quiz (Ch 10 & 11)
The nominal interest rate tells you
a. the purchasing power of your bank account today.
b. how fast the number of dollars in your bank account rises over time.
c. how fast the purchasing power of your bank account rises over time.
d. the number of dollars in your bank account today.
A recession has traditionally been defined as a period during which
a. nominal GDP declines for four consecutive quarters.
b. nominal GDP declines for two consecutive quarters.
c. real GDP declines for four consecutive quarters.
d. real GDP declines for two consecutive quarters.
Figure 23-1
Refer to Figure 23-1. Which of the following correctly identifies the flow of dollars?
a. K, M, L, and N
b. A, L, N, and B
c. C, K, M, and D
d. W, X, Y, and Z
Government purchases include spending on goods and services by
a. the federal government, but not by state or local governments.
b. federal, state, and local governments.
c. federal and state governments, but not by local governments.
d. federal, state, and local governments, as well as household spending by employees of those governments.
Net exports equal
a. exports plus imports.
b. Y − (C + I + G).
c. imports minus exports.
d. Y − (C − I − G).
Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is
a. included in U.S. GNP, but it is not included in U.S. GDP.
b. included in U.S. GDP, but it is not included in U.S. GNP.
c. included in both U.S. GDP and U.S. GNP.
d. included in neither U.S. GDP nor U.S. GNP.
The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland’s net factor payments from abroad are
a. positive, and its GNP is larger than its GDP.
b. positive, and its GDP is larger than its GNP.
c. negative, and its GNP is larger than its GDP.
d. negative, and its GDP is larger than its GNP.
Table 23-1
The following table contains data for Chereaux for the year 2019.
GDP $200
Income earned by citizens abroad $9
Income foreigners earn here $5
Losses from depreciation $6
Indirect business taxes $10
Statistical discrepancy $0
Retained earnings $8
Corporate income taxes $12
Social insurance contributions $30
Interest paid to households by government $8
Transfer payments to households from government $55
Personal taxes $60
Nontax payments to government $11
Refer to Table 23-1. Net national product for Chereaux in 2019 is
a. $198.
b. $196.
c. $194.
d. $204.
Table 23-2
The following table contains data for country A for the year 2019.
Household purchases of durable goods $1,293
Household purchases of nondurable goods $1,717
Household purchases of services $301
Household purchases of new housing $704
Purchases of capital equipment $310
Inventory changes $374
Purchases of new structures $611
Depreciation $117
Salaries of government workers $1,422
Government expenditures on public works $553
Transfer payments $777
Foreign purchases of domestically produced goods $88
Domestic purchases of foreign goods $120
Refer to Table 23-2. What were country A’s exports in 2019?
a. −$32
b. $120
c. $32
d. $88
National income differs from net national product because
a. it excludes depreciation.
b. of a statistical discrepancy.
c. it includes transfer payments.
d. it includes profits of corporations.
Two common measures of the overall level of prices are
a. the inflation rate and the GDP deflator.
b. the GDP deflator and the consumer price index.
c. the inflation rate and the consumer price index.
d. the cost of living index and nominal GDP.
Table 24-2
The following table pertains to Wrexington, an economy in which the typical consumer’s basket consists of 20 pounds of meat and 10 toys.
Year Price of Meat
(Dollars per pound) Price of a Toy
(Dollars per toy)
1 3 2
2 1 7
3 4 5
Refer to Table 24-2. The cost of the basket
a. decreased from Year 1 to Year 2 and increased from Year 2 to Year 3.
b. increased from Year 1 to Year 2 and increased from Year 2 to Year 3.
c. decreased from Year 1 to Year 2 and decreased from Year 2 to Year 3.
d. increased from Year 1 to Year 2 and decreased from Year 2 to Year 3.
Indexation refers to
a. using a price index to deflate dollar values.
b. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.
c. using a law or contract to automatically correct a dollar amount for the effects of inflation.
d. a process of adjusting the nominal interest rate so that it is equal to the real interest rate.
If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is
a. 0.4 percent.
b. −2 percent.
c. 12 percent.
d. 2 percent
In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the
a. GDP deflator and the consumer price index rise by about the same amount.
b. consumer price index rises much more than does the GDP deflator.
c. GDP deflator rises much more than does the consumer price index.
d. consumer price index rises slightly more than does the GDP deflator.
Table 24-1
The following table pertains to Pieway, an economy in which the typical consumer’s basket consists of 15 bushels of peaches and 10 bushels of pecans.
Year Price of Peaches
(Dollars per bushel) Price of Pecans
(Dollars per bushel)
Year 1 11 6
Year2 9 10
Refer to Table 24-1. If Year 1 is the base year, then the inflation rate in Year 2 was
a. 23.5 percent.
b. 4.4 percent.
c. 1.04 percent.
d. 10 percent.
Changes in the quality of a good
a. can lead to either an increase or a decrease in the value of a dollar.
b. are not accounted for, as a matter of policy, by the Bureau of Labor Statistics.
c. do not present a problem in the construction of the consumer price index.
d. present a problem in the construction of the consumer price index, and that problem is sometimes referred to as substitution bias.
Table 24-1
The following table pertains to Pieway, an economy in which the typical consumer’s basket consists of 15 bushels of peaches and 10 bushels of pecans.
Year Price of Peaches
(Dollars per bushel) Price of Pecans
(Dollars per bushel)
Year 1 11 6
Year2 9 10
Refer to Table 24-1. The cost of the basket in Year 1 was
a. $212.50.
b. $200.
c. $225.
d. $235.
Table 24-4.
Will’s expenditures on food for three consecutive years, along with other values, are presented in the following table.
Year
1 2 3
Expenditures on food $5,000 $5,800 $6,600
Consumer price index 160.0 168.0 x
Refer to Table 24-4. Suppose Will’s Year 2 food expenditures in Year 3 dollars amount to $6,235. Then x, the consumer price index for Year 3, has a value of
a. 175.0.
b. 177.5.
c. 180.6.
d. 171.2.
For any given year, the CPI is the price of the basket of goods and services in the
a. given year divided by the price of the basket in the base year, then multiplied by 100.
b. previous year divided by the price of the basket in the given year, then multiplied by 100.
c. base year divided by the price of the basket in the given year, then multiplied by 100.
d. given year divided by the price of the basket in the previous year, then multiplied by 100.
Unit 6 Macro Quiz (Ch 12, 13, 15)
Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods.
a. Country A has higher productivity and higher real GDP per person than country B.
b. Country A has lower productivity but higher real GDP per person than country B.
c. Country A has lower productivity and lower real GDP per person than country B.
d. Country A has higher productivity but lower real GDP per person than country B.
The behavior of market prices over time indicates that natural resources are
a. a limit to economic growth.
b. unrelated to economic growth.
c. not a limit to economic growth.
d. the major determinant of productivity.
A policy that increases saving will
a. improve economic growth but worsen health outcomes.
b. improve economic growth and health outcomes.
c. worsen economic growth, but improve health outcomes.
d. worsen economic growth and health outcomes.
Out of the following economic statistics, which is the best measure of economic prosperity ?
a. The level of nominal GDP
b. The price level
c. The level of real GDP
d. The growth rate of real GDP
Japan’s status as a rich nation is attributable to
a. the fact that the Japanese have downplayed the role of human capital in economic growth.
b. the fact that Japanese productivity has remained nearly constant for more than 100 years.
c. international trade, but not to Japan’s domestic quantities of natural resources.
d. Japan’s quantities of natural resources, but not to international trade.
Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0.
a. Country A had the higher level of real GDP and real GDP per person.
b. Country B had the higher level of real GDP and Country A had the higher level of real GDP per person.
c. Country A had the higher level of real GDP and Country B had the higher level of real GDP per person.
d. Country B had the higher level of real GDP and real GDP per person.
Proprietary technology is knowledge that is known
a. mostly by only those in a certain profession.
b. but no longer used much.
c. but only recently discovered.
d. only by the company that discovered it.
n which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?
a. The government’s tax revenue is equal to its expenditures.
b. Private saving is equal to government expenditures.
c. After paying their taxes and paying for their consumption, households have nothing left.
d. Public saving is equal to investment.
A bond that never matures is known as
a. an intermediary bond.
b. an indexed bond.
c. a perpetuity.
d. a junk bond.
By definition, equity finance
a. involves “fair” interest rates or dividend yields.
b. is accomplished when firms sell shares of stock.
c. is accomplished when units of government sell bonds.
d. is accomplished when firms sell bonds.
Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?
a. Corporate bond, municipal bond, U.S. government bond
b. Corporate bond, U.S. government bond, municipal bond
c. U.S. government bond, municipal bond, corporate bond
d. Municipal bond, U.S. government bond, corporate bond
Other things being constant, when a firm sells new shares of stock, the
a. demand for the stock decreases and the price decreases.
b. supply of the stock decreases and the price increases.
c. supply of the stock increases and the price decreases.
d. demand for the stock increases and the price increases.
Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?
a. The supply of loanable funds shifted right.
b. The supply of loanable funds shifted left.
c. The demand for loanable funds shifted left.
d. The demand for loanable funds shifted right.
Figure 26-3
The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
Refer to Figure 26-3. Which of the following movements shows the effects of households’ decision to save more?
a. A movement from Point C to Point B
b. A movement from Point A to Point B
c. A movement from Point F to Point A
d. A movement from Point C to Point F
Icon Key
Who of the following is not included in the Bureau of Labor Statistics’ “employed” category?
a. Those who were temporarily absent from work because of vacation
b. Those waiting to be recalled to a job from which they had been laid off
c. Those who worked in their own business
d. Those who worked as unpaid workers in a family member’s business
Which of the following is not a cause of the decline in the U.S. men’s labor-force participation rate over the past several decades?
a. With more women employed, there are fewer jobs now available to men.
b. More fathers now stay at home to raise their children.
c. Older men now retire earlier and live longer.
d. Young men now stay in school longer than their fathers and grandfathers did.
Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives, and he doesn’t think it likely that he will find work. Bev is not currently looking for work, but she would like a job, and she has looked for work in the past. The Bureau of Labor Statistics considers
a. only Bev to be a marginally attached worker.
b. neither Tim nor Bev to be marginally attached workers.
c. both Tim and Bev to be marginally attached workers.
d. only Tim to be a marginally attached worker.
The natural rate of unemployment
a. cannot be changed by government policy.
b. is set by the Federal Reserve.
c. varies less than the measured unemployment rate.
Efficiency wages
a. decrease productivity but reduce unemployment.
b. increase productivity and reduce unemployment.
c. decrease productivity and increase unemployment.
d. increase productivity but increase unemployment.
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