True / False - Indicate whether the statement is true or false.
1. For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are equal.
a. True
b. False
2. When the price of Italian wine rises, this change is reflected in the U.S. CPI but not in the U.S. GDP deflator.
a. True
b. False
3. Both the standard of living and the growth of real GDP per person vary widely across countries.
a. True
b. False
4. While GDP includes tangible goods such as books and bug spray, it excludes intangible services such as the services provided by teachers and exterminators.
a. True
b. False
5. Two countries with the same saving rates must have the same growth rate of real GDP per person.
a. True
b. False
6. The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.
a. True
b. False
7. Microeconomics and macroeconomics are closely linked.
a. True
b. False
8. By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.
a. True
b. False
9. Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.
a. True
b. False
10. Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.
a. True
b. False
11. An economy's income is the same as its expenditure because every transaction has a buyer and a seller.
a. True
b. False
12. Petroleum is an example of a nonrenewable resource.
a. True
b. False
13. An increase in a country's saving rate permanently raises its productivity.
a. True
b. False
14. Economists use the term inflation to describe a situation in which the economy's overall production level is rising.
a. True
b. False
15. The CPI is a measure of the overall cost of the goods and services bought by a typical consumer.
a. True
b. False
16. Assuming constant returns to scale, if two countries are otherwise the same, the one that is poorer grows faster.
a. True
b. False
17. U.S. GDP excludes the production of most illegal goods.
a. True
b. False
18. Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience.
a. True
b. False
19. An increase in capital increases productivity only if it is purchased and operated by domestic residents.
a. True
b. False
20. Like physical capital, human capital is a produced factor of production.
a. True
b. False
Multiple Choice - Indicate the answer choice that best completes the statement or answers the question.
21. Inward-oriented policies
a. include imposing tariffs and other trade restrictions.
b. promote the production of goods and services that the country produces most efficiently.
c. have generally increased productivity and growth in the countries that pursued them.
d. All of the above are correct.
22. Which of the following examples of household spending is categorized as investment rather than consumption?
a. expenditures on intangibles items such as medical care
b. expenditures on durable goods such as automobiles and refrigerators
c. expenditures on new housing
d. All of the above are correct.
23. Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at
a. Q = 270.
b. Q = 322.
c. Q = 515.
d. All of the above are correct.
24. Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S. The end result of these two transactions is
a. U.S. consumption purchases increase by $10,000 and U.S. GDP increases by $10,200.
b. U.S. consumption purchases increase by $200 and U.S. GDP increases by $10,000.
c. U.S. consumption purchases increase by $10,200 and U.S. GDP increases by $10,200.
d. U.S. consumption purchases increase by $200 and U.S. GDP increases by $200.
Table 24-1
The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.
|
Year
|
Consumer Price Index
|
Inflation Rate
|
|
2005
|
100
|
|
|
2006
|
115
|
B
|
|
2007
|
125
|
C
|
|
2008
|
140
|
D
|
|
2009
|
A
|
10%
|
|
2010
|
160
|
E
|
25. Refer to Table 24-1. What belongs in space D?
a. 40%
b. 154
c. 15%
d. 12%
Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
|
|
2011
|
2012
|
2013
|
|
Salary
|
$65,000
|
$72,000
|
$76,000
|
|
Consumer Price Index
|
226
|
230
|
235
|
|
Real Interest Rate
|
2.5 percent
|
2.7 percent
|
1.8 percent
|
26. Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,
a. 235.5.
b. 250.9.
c. 242.7.
d. 239.1.
27. Human capital
a. is more tangible than physical capital.
b. can be thought of, metaphorically, as the quality of society's textbooks, whereas technological knowledge can be thought of as the time that the population has devoted to reading textbooks.
c. is an input in the production of goods and services.
d. is the same as the quantity of labor.
28. The equipment and structures available to produce goods and services are called
a. technology.
b. physical capital.
c. human capital.
d. the production function.
29. The GDP deflator reflects the
a. current level of real output relative to the level of real output in the base year.
b. current level of prices relative to the level of prices in the base year.
c. level of real output in the base year relative to the current level of real output.
d. level of prices in the base year relative to the current level of prices.
30. Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about
a. $17,152,000
b. $1,128,421
c. $1,208,421
d. $5,296.
31. The one variable that stands out as the most significant explanation of large variations in living standards around the world is
a. preferences.
b. productivity.
c. prices.
d. population.
32. Which of the following is an example of a renewable natural resource?
a. fish
b. wood
c. soybeans
d. All of the above are correct.
33. Rapid population growth
a. is the main reason that less developed nations are poor.
b. may depress economic prosperity by reducing the amount of capital which each worker has to work with.
c. tends to lead to higher levels of educational attainment.
d. was hailed by Thomas Robert Malthus as the key to future economic growth.
34. In the base year, the GDP deflator is always
a. 100.
b. 0.
c. 1.
d. -1.
35. Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
a. U.S. GDP, but it is not included in Mexican GDP.
b. Mexican GDP, but it is not included in U.S. GDP.
c. both Mexican GDP and U.S. GDP.
d. neither Mexican GDP nor U.S. GDP.
36. GDP does not reflect
a. the value of goods and services produced at home.
b. the value of leisure.
c. the quality of the environment.
d. All of the above are correct.
37. Human capital is the
a. total number of hours worked in an economy.
b. knowledge and skills that workers acquire through education, training, and experience.
c. same thing as technological knowledge.
d. stock of equipment and structures that is used to produce goods and services.
38. If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is
a. -2 percent.
b. 0.4 percent.
c. 12 percent.
d. 2 percent.
39. Net exports equal
a. exports plus imports.
b. imports minus exports.
c. Y - (C + I + G).
d. Y - (C - I - G).
40. At the profit-maximizing level of output,
a. marginal revenue equals marginal cost.
b. marginal revenue equals average variable cost.
c. average revenue equals average total cost.
d. marginal revenue equals average total cost.
Subjective Short Answer:
41. Refer to Figure 23-2. Identify the location of firms and households.
42. List and explain the three major problems in using the CPI as a measure of the cost of living.