1) ________ is a situation in which resources are limited in quantity and can be used in different ways.
C) Supply and demand
2) The single largest expenditure component in GDP is:
A) consumption expenditures.
B) private investment expenditures.
C) net exports.
D) government purchases.
3) In the circular flow diagram, the different payments made by firms to households are:
A) rent on office and factory buildings.
B) interest on borrowed money.
C) wages and salaries.
D) all of the above.
4) is commonly defined as six consecutive months of declining real GDP.
A) A recession
B) An expansion
C) A peak
D) A trough
5) If gross investment in 2009 is $600 billion and depreciation in 2012 is $50 billion, net investment in 2012 is:
A) $600 billion.
B) $50 billion.
C) $550 billion.
D) none of the above.
6) The number of people classified as employed is 220,000 and the number of people classified as unemployed is 30,000. The size of the labor force:
A) equals 250,000.
B) equals 200,000.
C) equals 300,000.
D) cannot be determined from this information.
7) Unanticipated inflation arbitrarily redistributes income because:
A) medical costs rise faster than health insurance premiums.
B) nominal interest rates fall below real interest rates.
C) actual tax revenue decreases and so do government subsidies.
D) people forecast relative prices incorrectly and either gain or lose purchasing power.
8) A “shoe-leather cost” is the cost associated with:
A) trying to reduce holdings of cash when there is inflation.
B) changing price lists when there is inflation.
C) designing a new basketball sneakers when there is inflation.
D) buying new shoes when there is inflation.