Section 3 MCQ

1. Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:

$630

2. In 2008, consumption spending was $7,000, government purchases were $2,000 and investment spending was $1,500. If GDP for 2008 is $10,300, then:

Export is $600 and import is $800

3. What two markets are represented in the circular-flow diagram?

a. The market for goods and services and the market for factors

4. Which one of the following is an example of consumption spending that would be counted toward GDP this year?

Stephanie bought a laptop for her

5. An example of a government transfer is a?

Social security payment

6. An intermediate good would be?

Lumber used in building a house

7. GDP is the:

a. total market value of all final goods and services produced in one year

8. Donna was laid off by her employer at the beginning of 2008. She looked for a job for three months, but could not find anything suitable. She then decided to volunteer for a soup kitchen. Donna is considered to be:

a. A discouraged worker

9. Which of the following statistics is used to measure changes in the prices that firms pay for goods and services?

Producer Price Index

10. Which of the following would be classified as consumption?

A new car purchased by an employee of a company for personal use

11. Unanticipated Inflation:

a. reduces the value of money

12. Which of the following represents the best scenario for a bank lending its money to a customer?

Fixed interest rate of 8% with 1%

13. A worker classified as frictionally unemployed is one who is:

Voluntarily looking for work, somewhere a job exists that demands his or her skills

14. A nation's export minus its imports?

Net exports

15. Deflation is a:

decrease in the average level of prices

16. Which of the following is true concerning interest rates?

The real interest rate is equal to the sum of the nominal interest

17. Construction of new homes is considered part of:

Investment Spending

18. Jim has a part-time job and would prefer to have a full-time job, but has been unable to find full-time work. Jim's labor market status is classified as:

An underemployed worker

19. Shoe-Leather costs refer to the:

a. Increased cost of transactions due to inflation

20. The costs arising from the way inflation makes money a less reliable unit of measurement are known as:

Unit of Account costs

21. The labor force is equal to the:

Sum of the employed and the Unemployed

22. Unit-of-account costs of inflation are the:

Costs associated with money being a less reliable unit of measurement

23. In general, for the U.S. economy, the relationship between unemployment and real economic growth is:

Negative

24. The circular-flow diagram illustrates how firms and goods and services factors of production.

Sell; Buy

25. Use Table 11-2. The value of Year 4's output in nominal dollars is:

$36

26. If the cost of a market basket is $200 in Year 1 and $230 in Year 2, the price index for Year 2 with a Year 1 base is:

$115

27. In the simplest circular flow model, households supply demand and

a. Factors of Production; Goods and Services

28. If during 2009, the country of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and the rent of $7 bil wages during 2009 in Sildavia w

$36 Billion

29. Use Table 11-2. The value of Year 3's output in real dollars is:

$20

30. An example of investment spending would be:

a. Purchase of a new productive machine

31. Structural Unemployment is:

a. Unemployment that results when there are more people seeking jobs than there are jobs available at the current wage rate

32. The official unemployment rate re by the government may tend to understate the amount of unemploy by:

a. Excluding discouraged workers who are not actively seeking employment

33. Suppose the real interest rate is 2.1% and the nominal interest rate 5.4%. Then the expected inflation rate is:

3.3%

34. When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing:

Shoe Leather Costs

35. Sam, who is 55 years old and has been a steelworker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico, Sam is experiencing:

Structural Unemployment

36. Use Table 10-3. What is the value-added at all stages of the production process of the furniture as described in the accomnying table?

$1200

37. The nominal interest rate equals:

the real interest rate plus the expected rate of inflation

38. Goods that are produced in a particular year but not sold in that year?

. Are included in investment in this year

39. When the economy is in full employment,

No cyclical employment

40. To be classified as unemployed, a person must be:

Not working and actively look for a job in the last 4 weeks

People who are in the process of

Frictional employment