In 1960, U.S. nominal GDP was $527 billion and the GDP chain price index is 23.3.
Real GDP in 1996 dollars is:
a. $1,228 billion.
b. $2,262 billion.
c. $3,000 billion.
d. $3,262 billion.
Carroll Corporation began the year with total assets of $800,000 and total liabilities of
$620,000. Use the accounting equation to answer the following questions. Assume no
additional investment by owners when answering these questions. A) What was the
amount of Carroll’s total assets at the end of the year if liabilities decreased by $60,000
and owners’ equity increased by $90,000? B) Was the company profitable? Explain
your answer.
Suppose that John Maestro, the owner of a tennis shop in Evanston, Illinois, decides to
purchase a new machine that restrings tennis rackets in half the time it formerly took.
The new technology costs $1,000, and the MPC is 0.80. How much real GDP will be
generated from John’s $1,000 initial investment?
a. $200
b. $500
c. $1,000
d. $2,000
e. $5,000
Suppose your nominal income this year is 5 percent higher than last year. If the
inflation rate for the period was 3 percent, then your real income was:
a. increased by 1.67 percent.
b. increased by 2 percent.
c. increased by 8 percent.
d. decreased by 0.6 percent.
A grocery store is an example of a wholesaler.
a. True
b. False
Personal income taxes:
a. make recessions and inflationary episodes more severe.
b. make recessions and inflationary episodes less severe.
c. make recessions more severe and inflationary episodes less severe.
d. make recessions less severe and inflationary episodes more severe.
e. have no effect on the severity of recessions and inflationary episodes.
Foreachstatementprovided,choosetheletteroftheappropriatetermfromthelistthateachstate
mentbestdescribes.Sometermsmaybeusedmorethanonce,whileothersarenotusedatall.
a. Capital stock
b. Asset
c. Owners’ equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
An entity that lends a company money with the expectation of repayment.
Mathematically, the marginal propensity to consume is:
a. consumption divided by income.
b. the change in consumption divided by the change in income.
c. income divided by consumption.
d. the change in income divided by the change in consumption.
The expenditure approach to GDP accounting includes:
a. wages and salaries.
b. net exports.
c. net interest.
d. corporate profit.
e. proprietors’ income.
Stephen Moreno reported to the government interviewer that he worked 40 hours last
week as a stocker at a Target department store. He is:
a. a member of the civilian labor force who is employed.
b. a member of the civilian labor force who is unemployed.
c. a member of the civilian labor force who is underemployed.
d. a discouraged worker who is not a member of the labor force.
e. not a member of the labor force.
The Federal Reserve’s most important function is to change the money supply in order
to smooth out the business cycle.
A GDP price chain price index number of 120.0 for a given year indicates that prices in
that year are 20 percent higher than prices in the base year.
Why does the aggregate demand (AD) curve slope downward? What could cause the
AD curve to shift to the right? What impact would a rightward shift of the AD curve
have on the economy?
Public choice theory argues that one reason for rational voter ignorance is the
indivisibility of public service.
A sustained decrease in the price level is known as deflation.
How can the Fed increase the money supply? How can the Fed decrease the money
supply? Be specific.
The quantity of real GDP rises with the price level, ceteris paribus.
Explain why the marginal propensity to save and the marginal propensity to consume
sum to