1. Countries that have experienced modern economic growth have also tended to
|A. have less leisure time for sport and artistic activities.|
|B. restrict women and minorities from holding certain economic and political positions.|
|C. adopt feudalistic institutions.|
|D. move toward more democratic forms of government.|
2. The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by
|A. national income.|
|B. personal income.|
|C. disposable income.|
|D. gross domestic product.|
3. Which one of the following statements about GDP is correct?
|A. GDP is the monetary value of all goods and services, final and intermediate, produced in a specific year.|
|B. GDP is the monetary value of all final goods and services produced within the borders of a nation in a particular year.|
|C. GDP is the monetary value of all economic resources used in producing a year’s output.|
|D. GDP is the national income minus all nonincome charges against output|
4. Which one of the following is used to measure directly the average standard of living across countries?
|A. Purchasing power parity|
|B. GDP per person|
|C. Real GDP|
|D. Nominal GDP|
5. Most economists agree that the immediate cause of most business cycle variation is
|A. the invention of new products.|
|B. an unexpected change in the productivity of workers.|
|C. the growth and subsequent bursting of financial bubbles.|
|D. an unexpected change in the level of total spending.|
|Mark for review (Will be highlighted on the review page)|
|6. Which one of the following statements about free trade is correct?|
|A. Free trade encourages growth by effectively eliminating all patent and copyright barriers to growth. |
B. Free trade discourages growth compared to circumstances where the government strongly controls foreign trade.
C. Free trade discourages growth by increasing competitive pressures on domestic firms.
D. Free trade encourages growth by promoting the rapid spread of new inventions and innovations
7. Innovations such as the microchip and the Internet lead to business cycle variations because
|A. significant innovations occur irregularly and unexpectedly.|
|B. they cause prices to be flexible.|
|C. the central bank will often change the money supply in response.|
|D. they cause prices to be sticky.|
8. The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are
|A. services and nondurable consumer goods.|
|B. capital goods and durable consumer goods.|
|C. clothing and education.|
|D. military goods and capital goods.|
9. The business cycle depicts
|A. short-run fluctuations in output and employment.|
|B. the phases a business goes through from when it first opens to when it finally closes.|
|C. the evolution of technology over time.|
|D. fluctuations in the general price level.|
10. In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
11. Which one of the following statements correctly describes real GDP?
|A. Real GDP measures the total dollar value of all goods and services produced within the borders of a country using current prices.|
|B. Real GDP measures the value of all goods and services produced in the world, using current prices.|
|C. Real GDP measures the total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes.|
|D. Real GDP measures the value of final goods and services produced within the borders of a country, corrected for price changes.|
12. Melissa voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand, she’s now searching for a position in management. At the present time, Melissa is considered to be
|A. frictionally unemployed.|
|B. not a member of the labor force.|
|C. structurally unemployed.|
|D. cyclically unemployed.|
13. Which one of the following is an example of a supply shock?
|A. A surge in consumer optimism prompts increased buying of goods and services.|
|B. A dramatic increase in energy prices increases production costs for firms in the economy.|
|C. Government increases spending on education.|
|D. A surprise tax rebate from the government gives people more money to spend.|
14. Which one of the following statements about Okun’s law is correct?.
|A. Okun’s law shows the relationship between the unemployment rate and the size of the negative GDP gap.|
|B. Okun’s law measures the tradeoff between the rate of inflation and the rate of unemployment.|
|C. Okun’s law indicates the number of years it will take for a constant rate of inflation to double the price level.|
|D. Okun’s law quantifies the relationship between nominal and real incomes.|
15. Which one of the following statements about competitive market systems is correct?
|A. A competitive market system encourages growth by ensuring that everyone in society will receive a decent standard of living.|
|B. A competitive market system discourages growth because firms busy competing have no time to innovate or invest.|
|C. A competitive market system encourages growth by allowing producers to make profitable investment decisions based on market signals.|
|D. A competitive market system discourages growth unless government protects domestic firms from foreign competition.|
16. Modern economic growth refers to countries that have experienced an increase in
|A. real output per person.|
|B. nominal GDP over time.|
|C. real output spread evenly across all sectors of the economy.|
|D. real GDP over time.|
17. Which one of the following is the correct definition of inflation?
|A. Inflation is the growth phase of the business cycle.|
|B. Inflation is a situation in which all prices in the economy rise simultaneously.|
|C. Inflation is an increase in the overall level of prices.|
|D. Inflation is the rate of growth in nominal GDP.|
18. Suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that
|A. GDP in 2008 is $500 billion.|
|B. GDP in 2008 is $450 billion.|
|C. inventories in 2008 fell by $50 billion.|
|D. NDP in 2008 is $450 billion.|
19. The production of durable goods varies more than the production of nondurable goods because
|A. the producers of nondurables have monopoly power.|
|B. durables purchases are postponable.|
|C. durables purchases are nonpostponable.|
|D. producers of durables are highly competitive.|
20. Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called _______ unemployment.
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