Econ 201 Exam 2 F2002
Professor Phil Miller
Student Number: ________________
Multiple Choice (90 points total - 3 points each)
Directions: Identify the letter of the choice that best completes the statement or answers the question. Fill in the circle on
your scantron that corresponds to this letter. Hand in your scantron and this test.
____ 1. The unemployment rate is equal to
a. the number unemployed divided by the labor force.
b. the number unemployed divided by the population.
c. the number unemployed divided by the number employed.
d. the labor force divided by the population.
____ 2. Gross Domestic Product is the
a. most comprehensive measure of prices the economy.
b. total of goods and services desired by consumers.
c. most comprehensive measure of total output in the United States.
d. most accurate measure of the trade balance of the United States.
____ 3. Which of the following is not an example of a macroeconomy?
a. The Mankato economy.
b. The Minnesota economy.
c. The combined economies of Minnesota, North Dakota, South Dakota, Nebraska, and
d. The market for crude oil in the United States.
____ 4. If you as a lender want an increase in purchasing power of 4 percent (assuming prices are held constant from
today's perspective) and you set the nominal interest rate at 9 percent, then your
a. expected rate of inlation is 9 percent.
b. expected rate of inflation is 5 percent.
c. real rate of interest is 2.25 percent.
d. real rate of interest is 36 percent.
____ 5. An increase in the amount of capital available in an economy will shift the economy's production function
____ 6. Compared to the 1947 to 1973 period, the period from 1973 to 1995 can be characterized as a period of
a. faster real GDP growth.
b. faster labor productivity growth.
c. slower labor productivity growth.
d. lower labor force growth.
____ 7. Properly enforced property rights will usually cause
a. lower levels of investment spending.
b. lower levels of real interest rates.
c. higher levels of investment spending.
d. higher levels of real interest rates. ____ 8. When you subtract the expected rate of inflation from the nominal rate of interest, you calculate the
a. real interest rate.
b. real inflation rate.
c. expected rate of interest.
d. expected rate of price increases.
____ 9. The higher education wage premium in the United States represents a
a. cost of higher education.
b. decreasing return to higher education.
c. a return to completing a college education.
d. result of declining college attendance since 1973.
____ 10. Richard loses his job at the railroad due to a downturn in general business conditions. He is experiencing
____ 11. In order to stimulate capital investment, the government could
a. increase the inheritance tax.
c. reduce the tax on corporate profits.
d. increase the personal income tax.
____ 12. Relative to 2001, the 2002 inflation rate stands at
a. less than 2%.
b. between 2% and 3%.
c. between 3% and 4%.
d. above 4%.
____ 13. The current productivity speed-up in the United States began in the
b. mid 1980s.
d. beginning o2001.
____ 14. Nominal GDP is
a. also called real GDP.
b. a more accurate measure than real GDP.
c. the same as real GNP.
d. GDP as if prices were held constant.
____ 15. The profitability of an investment project will decrease if
a. tax rates decrease.
b. real interest rates increase.
c. real interest rates decrease.
d. business tax deductions increase.
____ 16. Suppose that after a particular loan has been paid off, neither the borrower nor the lender has lost purchasing
power. Therefore, it must be true that actual inflation was
a. greater than expected inflation.
b. equal to expected inflation.
c. less than expected inflation.
d. greater than the nominal rate of interest. ____ 17. The base year is 1996. What is the value of the price index in 1996?
d. It cannot be determined with the given information.
____ 18. If aggregate demand shifts inward and aggregate supply is held constant, the economy will experience
a. decreases in the unemployment rate.
e. higher interest rates.
____ 19. In describing an overall economy, economists combine various goods and services into a convenient grouping
is called a(n)
____ 20. An increase in the capital stock has the same effect on the produ