Midterm Practice - Notes PDF

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Midterm Practice Note: none of these questions will appear in the exam. The questions come from the same test bank. This test is only for your preparation. Answer key in the last page. 1. Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is a. $39,333.33. b. $74,000.00. c. $89,333.33. d. $63,559.32. 2. The consumer price index measures approximately the same economic phenomenon as a. Nominal GDP b. Real GDP c. GDP deflator d. Unemployment rate Table 28-2 Labor Data for Aridia Year Adult population Number of employed Number of unemployed

2010 2,000 1,400 200

2011 3,000 1,300 600

2012 3,200 1,600 200

3. Refer to Table 28-2. The unemployment rate of Aridia a. increased both from 2010 to 2011 and from 2011 to 2012. b. increased from 2010 to 2011 but decreased from 2011 to 2012. c. decreased from 2010 to 2011 but increased from 2011 to 2012. d. decreased both from 2010 to 2011 and from 2011 to 2012. 4. Which of the following are financial intermediaries? a. both banks and mutual funds b. banks but not mutual funds c. mutual funds but not banks d. neither banks or mutual funds 5. If an economy’s GDP falls, then it must be the case that the economy’s a. income falls and saving rises. b. income and saving both fall. c. income falls and expenditure rises. d. income and expenditure both fall. 6. Which of the following is not correct? a. The higher average return on stocks than on bonds comes at the price of higher risk. b. Risk-averse persons will take the risks involved in holding stocks if the average return is high enough to compensate for the risk. c. “A customer starts to smoke in bed after purchasing home insurance” is the Adverse Selection problem for the Cengage Learning Testing, Powered by Cognero

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insurance company. d. Risk can be reduced by placing a large number of small bets, rather than a small number of large bets. 7. In 2009, the imaginary nation of Mainland had a population of 7,000 and real GDP of 210,000. In 2010 the population was 7,300 and real GDP of 223,380. Over the year in question, real GDP per person in Mainland grew by a. 2 percent, which is high compared to average U.S. growth over the last one-hundred years. b. 2 percent, which is about the same as average U.S. growth over the last one-hundred years. c. 4 percent, which is high compared to average U.S. growth over the last one-hundred years. d. 4 percent, which is about the same as average U.S. growth over the last one-hundred years. 8. Suppose that a well-respected study published in Child Psychology Today finds that a very high proportion of children raised by stay-at-home fathers are accepted to Harvard University. If a large number of previously working fathers quit their jobs and become stay-at-home dads, which of the following will occur, all else equal? (i) The unemployment rate will decrease. (ii) The size of the labor force will decrease. (iii) The number of unemployed people will increase. (iv) The unemployment rate will increase. a. (i) and (ii) only b. (ii) and (iv) only c. (i), (ii), and (iii) only d. (ii), (iii), and (iv) only 9. Which of the following is correct? a. In unionized industries, wages are below the level that would prevail in competitive markets. b. The introduction of a union in an industry increases the quantity of labor demanded in that industry, causes some workers in that industry to be unemployed, and increases wages in the rest of the economy. c. Critics argue that the allocation of labor resulting from unions is both inefficient and inequitable. d. All of the above are correct. 10. Grapes are considered intermediate goods a. whether the purchaser uses them to make wine to sell or eats them. b. if the purchaser uses them to make wine to sell others but not if the purchaser eats them. c. if the purchaser eats them, but not if the purchaser uses to them to make wine to sell. d. None of the above is correct.

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Answer Key 1. d 2. c 3. b 4. a 5. d 6. c 7. b 8. b 9. c 10. b

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