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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital at the end of year was A) 3 machines . B) 8 machines. C) 6 machines. D) 1 machine. E) 2 machines. 2) When government saving is negative, A) the real interest rate falls if crowding-out occurs. B) the real interest rate falls. C) the supply of loanable funds increases. D) investment increases. E) the real interest rate rises and crowding out occurs 3) A decrease in the real interest rate leads to a ________ the demand for loanable funds curve, and a decrease in expected profit leads to a ________ the demand for loanable funds curve. A) rightward shift of; movement up along B) movement down along; movement up along C) movement down along; leftward shift of D) rightward shift of; leftward shift of E) movement down along; rightward shift of 4) If households' disposable income decreases, then A) households' saving will decrease. B) a movement occurs down along the supply of loanable funds curve. C) the supply of loanable funds decreases. D) households' saving will increase. E) Both A and C are correct . 5) Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add? A) $75 B) $1,425 C) $1,500 D) $4,425 6) GDP is not a perfect measure of well-being because A) the value of leisure is included in GDP. B) GDP is not adjusted for pollution . C) GDP is adjusted for changes in crime rates. D) GDP is adjusted for increases in drug addiction 7) In calculating GDP, economists use the value of final goods and services because A) by using final goods and services, they avoid double counting . B) final goods can be exported to other countries.

C) GDP is underestimated if intermediate goods are used instead. D) final goods and services do not depreciate. E) intermediate goods are imported from other countries. 8) Which one of the following is an expenditure flow from households to firms? A) goods and services B) factor services C) payments for goods and services D) payments for factor services E) loans 9) Suppose the economy of Econoworld produces only two goods, kayaks and birdseed. In one year 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each. The value of nominal GDP for this year is A) $20,300 . B) $300. C) $23,000. D) $20,000. E) 20 kayaks plus 10 bags of birdseed. Use the table below to answer the following questions. Table 20.2.5 Data from Southton 10) Refer to Table 20.2.5. From the data in the table, compute Southton's real GDP in the current year. A) $226 B) $208 C) $209 D) $197 E) It cannot be calculated given the data. 11) Suppose Angela falls in love with and subsequently marries her regularly employed housekeeper, Tony. What effect would this action have on GDP? A) It would rise. B) It would stay the same. C) It would fall but then increase after the honeymoon was over. D) It would fall. E) It depends on whether he starts to work in the house free of charge or whether she still pays him. 12) Which of the following would reduce the labor force participation rate, all else equal? A) an increase in the number of people in the labor force B) an increase in the unemployment rate C) a decrease in the unemployment rate D) an increase in the working-age population

13) To derive net domestic income at market prices from GDP (income approach), A) subtract the statistical discrepancy from GDP. B) subtract gross investment from GDP. C) add depreciation to GDP. D) add the statistical discrepancy to GDP. E) subtract depreciation from GDP . 14) What we produce during our working time is ________ as part of GDP and the enjoyment we gain from our leisure time is ________ as part of GDP. A) not included; not included B) included; included C) included; not included D) not included; included E) included; sometimes but not always included Use the table below to answer the following question. Table 20.2.7 Item Billions of dollars Wages paid to labour 223 Consumption expenditure 766 Net domestic income at factor cost 435 Investment 245 Government expenditure 268 Net exports -37 Depreciation 367 15) Table 20.2.7 shows items of income and expenditure in an economy. GDP using expenditure approach equals A) $1,242 billion . B) $875 billion. C) $802 billion. D) $435 billion. E) $2,267 billion. 16. The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment? A) frictional unemployment B) structural unemployment C) cyclical unemployment D) seasonal unemployment 17) The advice to "retrain" would be most appropriate for which of the following types of unemployment? A) frictional unemployment B) structural unemployment C) cyclical unemployment D) core unemployment 18) During the Great Depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment

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A) increased the natural rate of unemployment. B) decreased the natural rate of unemployment. C) had no effect on the natural rate of unemployment . D) could have increased or decreased the natural rate of unemployment 19) Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ________ unemployment in the near future A) permanent B) cyclical C) frictional D) structural 20) If cyclical unemployment is eliminated in the economy, then A) the economy is considered to be at full employment . B) the unemployment rate is below the natural rate of unemployment. C) the unemployment rate is above the natural rate of unemployment. D) the economy is at less than full employment. 21) If real GDP per capita in the United States is $8,000 in 2016, and if real GDP per capita is $12,000 in 2026, what is the average annual percent change in the growth rate of GDP per capita between 2016 and 2026? A) 3.33% B ) 5% C) 33% D) 50% 22) If a country's real GDP is rising by 3% per year while its population is rising at 5% per year, which of the following is true ? A) The country's standard of living is falling . B) The country's standard of living is rising. C) Growth in nominal GDP outweighs growth in the population. D) Growth in nominal GDP is less than the growth in the population The Australian dollar fell against the U.S. dollar to its lowest value in the past two weeks. The CPI inflation rate was reported to be generally as expected but not high enough to justify previous expectations for an aggressive interest rate rise by Australia's central bank next week. Source: Reuters, October 28, 2009 23) Consider Fact 25.3.1. Australia's exchange rate policy is a flexible exchange rate. An expected rise in the Australian interest rate with no change in the Canadian interest rate, everything else remaining the same, ________ the demand for Australian dollars and ________ the supply of Australian dollars. A) decreases; increases B ) increases; decreases C) does not change; does not change D) decreases; decreases E) increases; increases 24) Suppose the Bank of Canada follows a fixed exchange rate of $1 U.S. per Canadian dollar. If the demand for Canadian dollars temporarily increases, to maintain the target exchange rate, the Bank can A) violate interest rate parity. B) enforce interest rate parity. C) buy Canadian dollars. D) sell Canadian dollars .

E) violate purchasing power parity 25) Refer to Figure 22-4. The movement from A to B to C illustrates A) an improvement in technology. B) a productive work force. C) more immigration . D) a rise in labor demand. -

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