Chapter 5-17 Practice Questions

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Mary- Ann Spencer

Practice Questions Econ-1103-007 – Chapter 5-17 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. The information below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest? Country Nominal GDP 2000 Population 2000 Kenya $10,400 million 30.1 million Tanzania $9,000 million 33.7 million Zimbabwe $7,200 million 12.6 million a. Kenya, Tanzania, Zimbabwe b. Kenya, Zimbabwe, Tanzania c. Zimbabwe, Kenya Tanzania d. Zimbabwe, Tanzania, Kenya ____ 2. Senator Noitall says that in order to help poor countries develop, Canada should: 1. Prevent Canadian corporations from investing in poor countries because they take profits that the poor countries should have; 2. Not import goods from poor countries that use child labour; 3. Work to promote political stability in poor countries; and 4. Reduce poor countries' reliance on market forces in their economies. How many of these ideas are likely to help poor countries grow? a. 1 b. 2 c. 3 d. 4 ____ 3. The country of Nemedia does not trade with any other country. Its GDP is $20 billion. Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Nemedia, and what is the value of the goods and services purchased by the government of Nemedia? a. -$2 billion and $3 billion b. $1 billion and $3 billion c. -$1 billion and $4 billion d. There is not enough information to answer the question. ____ 4. Latoya, a homemaker who works as a volunteer at the local Red Cross and is currently not looking for a job, is counted as a. employed and in the labour force. b. unemployed and in the labour force. c. unemployed and not in the labour force. d. not in the labour force. e. None of the above are correct. ____ 5. Rick loses his job and immediately begins looking for another. Ceteris paribus, the unemployment rate a. increases, and the labour-force participation rate decreases. b. increases, and the labour-force participation rate is unaffected. c. is unaffected, and the labour-force participation rate increases. d. decreases, and the labour-force participation rate is unaffected. ____ 6. Which of the following would be associated with the type of unemployment created by the minimum wage law? a. Greg quits his job as a grocery cashier because he would rather work at the library. b. Fred decides to close his Thai restaurant because he cannot afford to pay workers the going wage. c. In hopes of earning higher income Bruce goes back to trade school to get further training. d. Liz pays the workers for her plumbing and heating company more than the equilibrium wage because she believes it will make them work harder. e. None of the above are correct. ____ 7. Suppose a bank has $10,000 in deposits and $7,000 in loans. It has a reserve ratio of a. 3 percent. b. 7 percent. c. 30 percent. d. 70 percent. e. None of the above are correct. ____ 8. When people use more resources to reduce their money holdings because of high inflation, this is an example of a. inflation-induced tax distortions. b. relative-price variability costs. c. shoeleather costs. d. menu costs. e. None of the above are correct. ____ 9. Given a nominal interest rate of 10 percent, in which case below would you earn the highest after-tax real interest rate? a. Inflation is 6 percent; the tax rate is 20 percent. b. Inflation is 5 percent; the tax rate is 30 percent. c. Inflation is 4 percent; the tax rate is 40 percent. d. Inflation is 3 percent and the tax rate is 50 percent. e. The after-tax real interest rate is the same for all of the above. ____ 10. According to the sticky wage theory of the short-run aggregate supply curve if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, real wages a. rise, so firms will hire more workers. b. rise, so firms will hire fewer workers. c. fall, so firms will hire more workers. d. fall, so firms will hire fewer workers. ____ 11. In the first few years of the Great Depression, unemployment rose to about a. 10
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