ECON 301 Chapter 1-3 Exam Questions with Verified Solutions Graded A+
In microeconomics, when economists state that households and firms "optimize," they mean that: -
Answers firms make production decisions to maximize their profits and households maximize their
utility.
Since the early 1980s, inflation in the United States has been relatively _____ and relatively _____. -
Answers low; stable
The price of a good is observed to rise at the same time that the quantity purchased rises. This can be
explained by a _____ the good. - Answers rise in demand for
Economic growth since 2009 has been lower than normal because: - Answers the recovery from the
Great Recession have been very slow.
Real GDP is often plotted using a logarithmic scale. On such a scale, equal distances represent equal
_____ changes. - Answers percentage
When _____, the _____ rate tends to decrease. - Answers inflation increases; unemployment
Macroeconomics can be considered a science because it - Answers uses real world data to test and
confirm predictions, constitutes a systematized body of knowledge based on observed facts
The market clearing model is useful in describing the market for haircuts because - Answers even though
haircut prices are slow to change they consistently adjust toward the market clearing equilibrium price
over time
Since 1995, the Bureau of Economic Analysis has produced chain-weighted measures of real GDP. With
chain-weighted measures, the base year changes: - Answers continuously over time.
A person with two paying jobs is _____ in the household survey. - Answers counted once
GDP equals _____ minus factor payments from abroad plus factor payments to abroad. - Answers gross
national product (GNP)
The PCE deflator is the ratio of nominal _____ spending to real _____ spending. - Answers consumer,
consumer
The Federal Reserve uses the percentage change in the _____ as its preferred gauge of how quickly
prices are rising. - Answers PCE deflator
When a foreign corporation produces automobiles in Alabama and employs foreign engineers, the
compensation paid to these engineers is part of _____ GDP and _____ GNP. - Answers U.S.; the foreign
The CPI has a fixed basket of goods and is an example of a _____ index. - Answers Laspeyres
, Suppose that nominal GDP increases by 5 percent in a year when the inflation rate, as measured by the
percentage change in the GDP deflator, is 2 percent. This means that the real GDP growth rate is
approximately _____ percent in that year. - Answers 3
The _____ is responsible for compiling the CPI from the prices of thousands of goods and services. -
Answers Bureau of Labor Statistics
All of the following are examples of a factor payment from abroad EXCEPT:
- exports of corn to Niger.
- an interest payment by the Greek government to a U.S. holder of its debt.
- compensation of a U.S. manager working in Thailand.
- repatriation of profits earned by a U.S. company in Spain. - Answers exports of corn to Niger.
A panel of economists appointed by the Senate Finance Committee in 1995 concluded that the best
estimate of the upward bias in the inflation rate as measured by the percentage change in the CPI was
about _____ percent per year. - Answers 1.1
Which of the following statements about the simple circular flow diagram in the text is NOT correct? -
Answers Households generate income through production
The core inflation rate measures the increase in price of a consumer basket that excludes: - Answers
food and energy
In 2012, a residential home built in 2004 is sold. The home sold for $140,000 in 2004. The home sold for
$146,000 in 2012. In 2012, the real estate agent brokering the transaction made $5,000, and the
mortgage company earned $2,000. How much did this transaction contribute to GDP in 2012? - Answers
$7,000
In the United States, in practice, the differences among the measures of inflation computed using the
CPI, the GDP deflator, and the PCE deflator: - Answers are small
In the simple circular flow diagram in the text, income is measured as: - Answers the sum of wages and
profits.
If the unemployment rate is 7 percent and the number of unemployed people is 3 million, then, rounded
to the nearest million, the labor force equals _____ million people. - Answers 43
The GDP statistic is computed every _____ by the Bureau of Economic Analysis. - Answers 3 months
The _____ survey measures the employment of workers that firms have on their payrolls. - Answers
establishment
In microeconomics, when economists state that households and firms "optimize," they mean that: -
Answers firms make production decisions to maximize their profits and households maximize their
utility.
Since the early 1980s, inflation in the United States has been relatively _____ and relatively _____. -
Answers low; stable
The price of a good is observed to rise at the same time that the quantity purchased rises. This can be
explained by a _____ the good. - Answers rise in demand for
Economic growth since 2009 has been lower than normal because: - Answers the recovery from the
Great Recession have been very slow.
Real GDP is often plotted using a logarithmic scale. On such a scale, equal distances represent equal
_____ changes. - Answers percentage
When _____, the _____ rate tends to decrease. - Answers inflation increases; unemployment
Macroeconomics can be considered a science because it - Answers uses real world data to test and
confirm predictions, constitutes a systematized body of knowledge based on observed facts
The market clearing model is useful in describing the market for haircuts because - Answers even though
haircut prices are slow to change they consistently adjust toward the market clearing equilibrium price
over time
Since 1995, the Bureau of Economic Analysis has produced chain-weighted measures of real GDP. With
chain-weighted measures, the base year changes: - Answers continuously over time.
A person with two paying jobs is _____ in the household survey. - Answers counted once
GDP equals _____ minus factor payments from abroad plus factor payments to abroad. - Answers gross
national product (GNP)
The PCE deflator is the ratio of nominal _____ spending to real _____ spending. - Answers consumer,
consumer
The Federal Reserve uses the percentage change in the _____ as its preferred gauge of how quickly
prices are rising. - Answers PCE deflator
When a foreign corporation produces automobiles in Alabama and employs foreign engineers, the
compensation paid to these engineers is part of _____ GDP and _____ GNP. - Answers U.S.; the foreign
The CPI has a fixed basket of goods and is an example of a _____ index. - Answers Laspeyres
, Suppose that nominal GDP increases by 5 percent in a year when the inflation rate, as measured by the
percentage change in the GDP deflator, is 2 percent. This means that the real GDP growth rate is
approximately _____ percent in that year. - Answers 3
The _____ is responsible for compiling the CPI from the prices of thousands of goods and services. -
Answers Bureau of Labor Statistics
All of the following are examples of a factor payment from abroad EXCEPT:
- exports of corn to Niger.
- an interest payment by the Greek government to a U.S. holder of its debt.
- compensation of a U.S. manager working in Thailand.
- repatriation of profits earned by a U.S. company in Spain. - Answers exports of corn to Niger.
A panel of economists appointed by the Senate Finance Committee in 1995 concluded that the best
estimate of the upward bias in the inflation rate as measured by the percentage change in the CPI was
about _____ percent per year. - Answers 1.1
Which of the following statements about the simple circular flow diagram in the text is NOT correct? -
Answers Households generate income through production
The core inflation rate measures the increase in price of a consumer basket that excludes: - Answers
food and energy
In 2012, a residential home built in 2004 is sold. The home sold for $140,000 in 2004. The home sold for
$146,000 in 2012. In 2012, the real estate agent brokering the transaction made $5,000, and the
mortgage company earned $2,000. How much did this transaction contribute to GDP in 2012? - Answers
$7,000
In the United States, in practice, the differences among the measures of inflation computed using the
CPI, the GDP deflator, and the PCE deflator: - Answers are small
In the simple circular flow diagram in the text, income is measured as: - Answers the sum of wages and
profits.
If the unemployment rate is 7 percent and the number of unemployed people is 3 million, then, rounded
to the nearest million, the labor force equals _____ million people. - Answers 43
The GDP statistic is computed every _____ by the Bureau of Economic Analysis. - Answers 3 months
The _____ survey measures the employment of workers that firms have on their payrolls. - Answers
establishment
