20 MCQ Nominal GDP is not an accurate measure of the real level of economic activity in a country because

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Question 1 of 20 5.0 Points
Nominal GDP is not an accurate measure of the real level of economic activity in a country because:

A. taxes distort the real value of all the goods and services produced.
B. inflation distorts the real value of all the goods and services produced.
C. base year prices are likely to experience substitution bias.
D. the GDP deflator constantly underestimates the real cost of living.
Question 2 of 20 5.0 Points
According to the International Monetary Fund statistics, the U.S.:

A. invests a lower fraction of its GDP than China or France.
B. consumes a lower fraction of its GDP than China or Germany.
C. invests a higher fraction of its GDP than Germany.
D. government consumes a higher fraction of its GDP than Germany.
Question 3 of 20 5.0 Points
Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 1990 is ________ the nominal GDP.

A. greater than
B. equal to
C. less than
D. There is insufficient information to answer this question.
Question 4 of 20 5.0 Points
The production function describes the relationship between the quantities of which two variables?

A. output and revenue
B. inputs and output
C. output and profit
D. inputs and cost
Question 5 of 20 5.0 Points
The profit from IBM’s production in Italy is included in the U.S. ________ and in the Italian ________.

A. GDP; GDP
B. GNP; GDP
C. GNP; GNP
D. GDP; GNP
Question 6 of 20 5.0 Points
Payments received from the government upon becoming unemployed is called:

A. social security.
B. welfare.
C. unemployment insurance.
D. unemployment salary.
Question 7 of 20 5.0 Points
Because GDP must be divided among competing demands in the economy, we should expect:

A. increases in imports to reduce exports when the economy is in full employment.
B. increases in private saving to reduce private investment when the economy is in full employment.
C. increases in government expenditure to reduce private investment when the economy is in full employment.
D. increases in consumption to reduce net exports when the economy is in full employment.
Question 8 of 20 5.0 Points
Another term for full-employment output is:

A. actual output.
B. maximum output.
C. perfectly competitive output.
D. potential output.
Question 9 of 20 5.0 Points
Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 2009 is ________ the nominal GDP.

A. equal to
B. greater than
C. less than
D. There is insufficient information to answer this question.
Question 10 of 20 5.0 Points
In order to estimate the level of full-employment output, economists typically:

A. estimate potential output when the unemployment rate is equal to the natural rate of unemployment.
B. estimate potential output when there is no idle capital stock.
C. subtract cyclical unemployment from the level of potential output.
D. estimate potential output when the unemployment rate is equal to the cyclical rate of unemployment.
Question 11 of 20 5.0 Points
A worker who currently is not working, but is not looking for a job is considered as:

A. not in the labor force.
B. employed.
C. unemployed.
D. in the labor force.
Question 12 of 20 5.0 Points
A man is fired from his job because he was late for work too many times. While he is searching for another job he would be classified as:

A. structurally unemployed.
B. not in the labor force because his employer had a legitimate reason for firing him.
C. frictionally unemployed.
D. cyclically unemployed.
Question 13 of 20 5.0 Points
The presence of unemployment in the labor market implies that:

A. there is excess demand in the labor market.
B. people are not willing to work at the current wage.
C. there are some people who will not work at the current wage.
D. at the current wage, there are people who want to work but cannot find work.
Question 14 of 20 5.0 Points
Which of the following cannot be true when it is observed that government spending is causing crowding out?

A. The investment spending is decreasing.
B. The government spending is decreasing.
C. The net exports spending is decreasing.
D. The consumption spending is decreasing.
Question 15 of 20 5.0 Points
When an economics professor quits his job from a university and starts looking for a job in another university, he is:

A. naturally unemployed.
B. frictionally unemployed.
C. structurally unemployed.
D. cyclically unemployed
Question 16 of 20 5.0 Points
If no foreign companies produce in a country, but many of the country’s companies produce abroad, then it is probably true:

A. the country’s GDP equals its domestic income.
B. the country’s GNP exceeds its GDP.
C. the country’s GDP exceeds its GNP.
D. the country’s GNP and GDP are equal.
Question 17 of 20 5.0 Points
More abundant leisure time increases ________, but it ________ real GDP.

A. nominal GDP; decreases
B. nominal GDP; leaves unchanged
C. social welfare; decreases
D. economic welfare; decreases
Question 18 of 20 5.0 Points
According to Application 3, “Social Norms, Unemployment, and Perceived Happiness,” people’s well-being declined when:

A. others around them become unemployed.
B. they become unemployed.
C. their wages decrease.
D. both A and B are correct.
Question 19 of 20 5.0 Points
The labor demand curve is:

A. downward sloping, because a lower real wage entices firms to hire more workers.
B. upward sloping, because a lower real wage entices workers to work less.
C. upward sloping, because a lower real wage entices firms to hire more workers.
D. downward sloping, because a lower real wage entices workers to work less.
Question 20 of 20 5.0 Points
According to the book, the estimate of the natural rate of unemployment in the U.S. in recent years is between:

A. 4.0 -5.5 percent.
B. 0-10 percent.
C. 5.0 -6.5 percent.
D. 6.0 -7.5 percent.

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