Question 1

What is a sub-prime mortgage?

Accepted Answer

A)  It is a mortgage loan offered at an interest rate below the prime lending rate. 
B)  It is a mortgage loan made to a homeowner by an insolvent lender. 
C)  It is a mortgage loan made to a buyer whose credit or income would not ordinarily qualify for a mortgage loan. 
D)  It is a mortgage loan made to a buyer whose excellent credit score earns the buyer a preferential interest rate. 
A)  It is a mortgage loan offered at an interest rate below the prime lending rate. 
B)  It is a mortgage loan made to a homeowner by an insolvent lender. 
C)  It is a mortgage loan made to a buyer whose credit or income would not ordinarily qualify for a mortgage loan. 
D)  It is a mortgage loan made to a buyer whose excellent credit score earns the buyer a preferential interest rate.

Question 2

The market basket used for computing the implicit price deflator for a particular period includes:

Accepted Answer

A)  all final goods and services consumed in that period. 
B)  all final goods and services produced in that period. 
C)  all final and intermediate goods and services produced in that period. 
D)  all intermediate goods produced in that period. 
A)  all final goods and services consumed in that period. 
B)  all final goods and services produced in that period. 
C)  all final and intermediate goods and services produced in that period. 
D)  all intermediate goods produced in that period.

Question 3

The CPI in a year is computed based on the prices of all the final goods and services produced during that period.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions .
Exhibit: Price and Output Data for an Economy
  
-(Exhibit: Price and Output Data for an Economy) Assume that 1994 is the base period. In _____, nominal GDP increased over the previous year due to an increase in output and not due to a change in prices.

Accepted Answer

A)  1996 
B)  1999 
C)  1998 
D)  1995 and 1999 
A)  1996 
B)  1999 
C)  1998 
D)  1995 and 1999

Question 5

The implicit price deflator is given by the formula:

Accepted Answer

A)  nominal GDP in current period ÷ nominal GDP in base period. 
B)  nominal GDP in current period ÷ real GDP in base period. 
C)  nominal GDP ÷ real GDP. 
D)  real GDP ÷ nominal GDP. 
A)  nominal GDP in current period ÷ nominal GDP in base period. 
B)  nominal GDP in current period ÷ real GDP in base period. 
C)  nominal GDP ÷ real GDP. 
D)  real GDP ÷ nominal GDP.

Question 6

The economy in a particular country is booming. Real GDP is growing at a rate of 6% per year, well above the average growth rate. Under these circumstances, which of the following types of unemployment is most likely to be the lowest?

Accepted Answer

A)  Frictional unemployment 
B)  Cyclical unemployment 
C)  Structural unemployment 
D)  Involuntary unemployment 
A)  Frictional unemployment 
B)  Cyclical unemployment 
C)  Structural unemployment 
D)  Involuntary unemployment

Question 7

The nominal wage divided by a price index provides the value of real wage.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the price of petroleum in the international market is an example of global inflation.

Accepted Answer

A) True 
 B)False

Question 9

A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience _____ unemployment.

Accepted Answer

A)  transitional 
B)  technological 
C)  structural 
D)  frictional 
A)  transitional 
B)  technological 
C)  structural 
D)  frictional

Question 10

Use the following to answer questions.
Exhibit: Consumer Price Index for a City
  
-(Exhibit: Consumer Price Index for a City) The base year is 2002. What is the inflation rate in 2005?

Accepted Answer

A)  5% 
B)  20% 
C)  25% 
D)  50% 
A)  5% 
B)  20% 
C)  25% 
D)  50%

Question 11

A country's frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.4%. The structural unemployment rate is _____ and the unemployment rate is _____.

Accepted Answer

A)  3%; 7.9% 
B)  2.5%; 7.9% 
C)  2.5%; 5.4% 
D)  2.4%; 5.4% 
A)  3%; 7.9% 
B)  2.5%; 7.9% 
C)  2.5%; 5.4% 
D)  2.4%; 5.4%

Question 12

Deflation is defined as:

Accepted Answer

A)  a decrease in the inflation rate. 
B)  a fall in the average price level. 
C)  a period during which the average price level is low. 
D)  a low rate of change in average prices. 
A)  a decrease in the inflation rate. 
B)  a fall in the average price level. 
C)  a period during which the average price level is low. 
D)  a low rate of change in average prices.

Question 13

If the CPI is 120 in 2005 and 150 in 2006, what is the rate of inflation over this period?

Accepted Answer

A)  8% 
B)  20% 
C)  25% 
D)  30% 
A)  8% 
B)  20% 
C)  25% 
D)  30%

Question 14

The substitution bias in the construction of the CPI arises because:

Accepted Answer

A)  consumers alter their buying habits as new products come into being and lifestyles change. 
B)  technological changes have led to improvements in quality and lower production costs over time. 
C)  consumers alter the goods they buy, switching from relatively high priced goods toward lower-priced alternatives. 
D)  consumers shop at both high-priced department stores and lower-priced discount stores. 
A)  consumers alter their buying habits as new products come into being and lifestyles change. 
B)  technological changes have led to improvements in quality and lower production costs over time. 
C)  consumers alter the goods they buy, switching from relatively high priced goods toward lower-priced alternatives. 
D)  consumers shop at both high-priced department stores and lower-priced discount stores.

Question 15

Which of the following would be defined as inflation?

Accepted Answer

A)  An increase in medical care costs 
B)  A rise in the price of real estates 
C)  An increase in the market interest rate 
D)  An increase in the average level of prices 
A)  An increase in medical care costs 
B)  A rise in the price of real estates 
C)  An increase in the market interest rate 
D)  An increase in the average level of prices

Question 16

While calculating real GDP, market prices are held constant at some level.

Accepted Answer

A) True 
 B)False

Question 17

The point on a business cycle when real GDP stops falling and begins rising is called a(n):

Accepted Answer

A)  trough. 
B)  recession. 
C)  peak. 
D)  expansion. 
A)  trough. 
B)  recession. 
C)  peak. 
D)  expansion.

Question 18

Price indexes that employ fixed market baskets:

Accepted Answer

A)  incorporate responses to changing relative prices. 
B)  do not incorporate responses to changing relative prices. 
C)  are the only way to measure inflation. 
D)  cannot be used to measure inflation. 
A)  incorporate responses to changing relative prices. 
B)  do not incorporate responses to changing relative prices. 
C)  are the only way to measure inflation. 
D)  cannot be used to measure inflation.

Question 19

Your grandfather tells you that his Social Security payments are indexed. What does this mean?

Accepted Answer

A)  It means that the dollar value of his Social Security payment is adjusted for changes in the price level so that his purchasing power is constant. 
B)  It means that the dollar value of his Social Security payments is adjusted for changes in the price level so that his purchasing power increases at the same rate as inflation. 
C)  It means that the value of his Social Security payments is not adjusted for changes in the price level so his purchasing power may fall. 
D)  It means that the real value of his Social Security payment is adjusted for changes in the price level so that its nominal value is constant. 
A)  It means that the dollar value of his Social Security payment is adjusted for changes in the price level so that his purchasing power is constant. 
B)  It means that the dollar value of his Social Security payments is adjusted for changes in the price level so that his purchasing power increases at the same rate as inflation. 
C)  It means that the value of his Social Security payments is not adjusted for changes in the price level so his purchasing power may fall. 
D)  It means that the real value of his Social Security payment is adjusted for changes in the price level so that its nominal value is constant.

Question 20

Which of the following is an example of cyclical unemployment?

Accepted Answer

A)  An autoworker is temporarily laid off from an automobile company due to a decline in sales 
B)  A geologist is permanently laid off from an oil company due to a new technological advancement 
C)  A worker at a fast-food restaurant quits work to attend college 
D)  A real estate agent leaves a job in Texas and searches for a similar, higher paying job in California 
A)  An autoworker is temporarily laid off from an automobile company due to a decline in sales 
B)  A geologist is permanently laid off from an oil company due to a new technological advancement 
C)  A worker at a fast-food restaurant quits work to attend college 
D)  A real estate agent leaves a job in Texas and searches for a similar, higher paying job in California

What is a sub-prime mortgage?

The market basket used for computing the implicit price deflator for a particular period includes:

The CPI in a year is computed based on the prices of all the final goods and services produced during that period.

Use the following to answer questions . Exhibit: Price and Output Data for an Economy -(Exhibit: Price and Output Data for an Economy) Assume that 1994 is the base period. In _____, nominal GDP increased over the previous year due to an increase in output and not due to a change in prices.

The implicit price deflator is given by the formula:

The economy in a particular country is booming. Real GDP is growing at a rate of 6% per year, well above the average growth rate. Under these circumstances, which of the following types of unemployment is most likely to be the lowest?

The nominal wage divided by a price index provides the value of real wage.

An increase in the price of petroleum in the international market is an example of global inflation.

A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience _____ unemployment.

Use the following to answer questions. Exhibit: Consumer Price Index for a City -(Exhibit: Consumer Price Index for a City) The base year is 2002. What is the inflation rate in 2005?

A country's frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.4%. The structural unemployment rate is _ and the unemployment rate is _.

Deflation is defined as:

If the CPI is 120 in 2005 and 150 in 2006, what is the rate of inflation over this period?

The substitution bias in the construction of the CPI arises because:

Which of the following would be defined as inflation?

While calculating real GDP, market prices are held constant at some level.

The point on a business cycle when real GDP stops falling and begins rising is called a(n):

Price indexes that employ fixed market baskets:

Your grandfather tells you that his Social Security payments are indexed. What does this mean?

Which of the following is an example of cyclical unemployment?

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 5: Macroeconomics: the Big Picture

What is a sub-prime mortgage?

The market basket used for computing the implicit price deflator for a particular period includes:

The CPI in a year is computed based on the prices of all the final goods and services produced during that period.

Use the following to answer questions . Exhibit: Price and Output Data for an Economy -(Exhibit: Price and Output Data for an Economy) Assume that 1994 is the base period. In _____, nominal GDP increased over the previous year due to an increase in output and not due to a change in prices.

The implicit price deflator is given by the formula:

The economy in a particular country is booming. Real GDP is growing at a rate of 6% per year, well above the average growth rate. Under these circumstances, which of the following types of unemployment is most likely to be the lowest?

The nominal wage divided by a price index provides the value of real wage.

An increase in the price of petroleum in the international market is an example of global inflation.

A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience _____ unemployment.

Use the following to answer questions. Exhibit: Consumer Price Index for a City -(Exhibit: Consumer Price Index for a City) The base year is 2002. What is the inflation rate in 2005?

A country's frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.4%. The structural unemployment rate is _____ and the unemployment rate is _____.

Deflation is defined as:

If the CPI is 120 in 2005 and 150 in 2006, what is the rate of inflation over this period?

The substitution bias in the construction of the CPI arises because:

Which of the following would be defined as inflation?

While calculating real GDP, market prices are held constant at some level.

The point on a business cycle when real GDP stops falling and begins rising is called a(n):

Price indexes that employ fixed market baskets:

Your grandfather tells you that his Social Security payments are indexed. What does this mean?

Which of the following is an example of cyclical unemployment?

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

A country's frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.4%. The structural unemployment rate is _ and the unemployment rate is _.