ECON 110 EXAM 2 QUESTIONS AND
CORRECT ANSWERS
Deviation of unemployment from natural rate is ____ rate of unemployment: ✅✅CORRECT
ANSW-Cyclical
The CPI is not a perfect measure of inflation because______: ✅✅CORRECT ANSW-Substitution
The BLS produces data on unemployment from a regular survey of households called the
✅✅CORRECT ANSW-Current population survey
The nominal interest rate is real interest rate ____inflation rate ✅✅CORRECT ANSW-Plus
One cost of inflation is: ✅✅CORRECT ANSW-Menu cost
The PPI is the average of prices faced by ____ of goods and services ✅✅CORRECT ANSW-
Producers
During a business cycle expansion, total production ________ and total employment ________.
✅✅CORRECT ANSW-Increases; increases
Labor force is ______ workers in the economy ✅✅CORRECT ANSW-Employed + Unemployed
Natural Rate of unemployment is the sum of: ✅✅CORRECT ANSW-Structural + Frictional
Labor force participation rate measures percentage of _______in labor force. ✅✅CORRECT
ANSW-Adult population
All modern dynamic economies are subject to ____ of job. ✅✅CORRECT ANSW-Creative-
destruction
Which of the following is NOT directly counted in GDP? ✅✅CORRECT ANSW-Intermediate goods
, Refer to Table below. Suppose that a simple economy produces only four goods and services: shoes,
DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and
the other half of the tomatoes are purchased by households. Using the information in the above
table, nominal GDP for this simple economy equals
Product Quantity Price
Shoes 40 $60.00
DVDs 100 18.00
Tomatoes 2,000 1.00
Ketchup 300 4.00 ✅✅CORRECT ANSW-$6,400
The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that:
A) the value of output in 2015 was around $17.3 trillion.
B) total income in 2015 was around $17.3 trillion.
C) total spending in 2015 was around $17.3 trillion.
D) all of the above are true. ✅✅CORRECT ANSW-D) all of the above are true.
Investment, as defined by economists, would include the purchase of a
A) corporate bond
B) government bond
C) share of stock in ExxonMobil
D) computer by an accusing firm ✅✅CORRECT ANSW-computer by an accounting firm
The purchase by a foreign government of an airplane produced in the United States is included in
U.S. ✅✅CORRECT ANSW-Net exports
Gross domestic product in the economy is measured by the ✅✅CORRECT ANSW-Dollar value of
all final goods and services produced in the economy
Which of the following are NOT considered part of government purchases?
CORRECT ANSWERS
Deviation of unemployment from natural rate is ____ rate of unemployment: ✅✅CORRECT
ANSW-Cyclical
The CPI is not a perfect measure of inflation because______: ✅✅CORRECT ANSW-Substitution
The BLS produces data on unemployment from a regular survey of households called the
✅✅CORRECT ANSW-Current population survey
The nominal interest rate is real interest rate ____inflation rate ✅✅CORRECT ANSW-Plus
One cost of inflation is: ✅✅CORRECT ANSW-Menu cost
The PPI is the average of prices faced by ____ of goods and services ✅✅CORRECT ANSW-
Producers
During a business cycle expansion, total production ________ and total employment ________.
✅✅CORRECT ANSW-Increases; increases
Labor force is ______ workers in the economy ✅✅CORRECT ANSW-Employed + Unemployed
Natural Rate of unemployment is the sum of: ✅✅CORRECT ANSW-Structural + Frictional
Labor force participation rate measures percentage of _______in labor force. ✅✅CORRECT
ANSW-Adult population
All modern dynamic economies are subject to ____ of job. ✅✅CORRECT ANSW-Creative-
destruction
Which of the following is NOT directly counted in GDP? ✅✅CORRECT ANSW-Intermediate goods
, Refer to Table below. Suppose that a simple economy produces only four goods and services: shoes,
DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and
the other half of the tomatoes are purchased by households. Using the information in the above
table, nominal GDP for this simple economy equals
Product Quantity Price
Shoes 40 $60.00
DVDs 100 18.00
Tomatoes 2,000 1.00
Ketchup 300 4.00 ✅✅CORRECT ANSW-$6,400
The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that:
A) the value of output in 2015 was around $17.3 trillion.
B) total income in 2015 was around $17.3 trillion.
C) total spending in 2015 was around $17.3 trillion.
D) all of the above are true. ✅✅CORRECT ANSW-D) all of the above are true.
Investment, as defined by economists, would include the purchase of a
A) corporate bond
B) government bond
C) share of stock in ExxonMobil
D) computer by an accusing firm ✅✅CORRECT ANSW-computer by an accounting firm
The purchase by a foreign government of an airplane produced in the United States is included in
U.S. ✅✅CORRECT ANSW-Net exports
Gross domestic product in the economy is measured by the ✅✅CORRECT ANSW-Dollar value of
all final goods and services produced in the economy
Which of the following are NOT considered part of government purchases?
