Q1

Q1. Suppose nominal GDP increased in a given year. Based on this information, we know with certainty that:

1. either real output or the price level (GDP deflator) have increased

2. the price level (GDP deflator) has increased

3. real output has increased and the price level has decreased

4. real output and the price level (GDP deflator) have both increased

5. real output has increased

Q2. GDP in current dollars is equivalent to which of the following?

1. GDP in 2000 dollars

2. GDP in constant dollars

3. real GDP

4. GDP in terms of goods

5. none of the above

Q3. Which of the following calculations will yield the correct measure of real GDP?

1. multiply nominal GDP by the consumer price index.

2. multiply nominal GDP by the GDP deflator.

3. divide the GDP deflator by the consumer price index.

4. divide nominal GDP by the consumer price index.

5. none of the above

Q4. Suppose we switch the base year from 2000 to 2008. This change in the base year will cause:

1. real GDP in every year to decrease.

2. both nominal and real GDP in every year to decrease.

3. nominal GDP in every year to decrease.

4. nominal GDP in every year to increase.

5. none of the above

Q5. Pure inflation occurs when:

1. nominal wages rise faster than all prices.

2. all prices rise faster than nominal wages.

3. the GDP deflator and Consumer Price Index rise by the same percentage

4. all prices and nominal wages rise by the same percentage.

5. none of the above.

Q6. Changes in GDP in the short run are caused primarily by:

1. demand factors.

2. capital accumulation.

3. supply factors.

4. technology

5. all of the above.

Q7. The rate of unemployment tends to rise during recessions and fall during expansions. During prolonged recessions, it is difficult for workers to find a job and many workers become discouraged. Which of the following is a correct statement?

1. Discouragedworkersarenotcountedinthelaborforceandcausetheparticipation rate to rise.

2. Discouragedworkersarenotcountedinthelaborforceandcausetheparticipation rate to fall.

3. Discouraged workers are counted in the labor force and cause the participation rate to rise.

4. Discouraged workers are counted in the labor force and cause the participation rate to fall.

5. none of the above.

Q8. The GDP deflator can be expressed as:

1. $????/???????? ????

2. ????/$???????? ????

3. ???? − ???????????? ????

4. $???????? × ????????

5. none of the above.

Q9. Suppose the consumption equation is represented by the following: C = 250 + .75YD. Given this information, the marginal propensity to save is

1. 0.7

2. 0.25

3. 4

4. 1

5. none of the above.