PRACTICE MIDTERM:
Economics 203(05) Midterm Examination
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
1. If the average income of an Australian is higher than the average income of a Russian, it is most likely
because
a. productivity is higher in Australia than in Russia.
b. Australia has a more industrial economy than Russia.
c. there is more competition in Australia than in Russia.
d. labor unions are more aggressive in Australia than in Russia.
2. If the government wanted to enact a policy to increase living standards in the country, it might
a. allow corporate tax write-offs for money spent on worker safety.
b. make it more difficult to receive unemployment benefits.
c. increase educational opportunities for workers.
d. prohibit unions from organizing.
3. Large or persistent inflation is almost always caused by
a. an increase in demand for domestic production.
b. growth in the quantity of money.
c. foreign competition.
d. higher worker productivity.
4. In the 1990s, inflation in Canada
a. was almost zero.
b. was about 2 percent per year.
c. approached double digits.
d. was caused by too much consumer spending.
Figure 2-1
, 5. Refer to Figure 2-1. Which arrow shows the flow of spending by households?
a. A
b. B
c. C
d. D
6. Macroeconomists study
a. decisions of households and firms.
b. economy-wide phenomena.
c. the interaction of households and firms.
d. regulations of firms and unions.
7. Which of the following is the correct definition of GDP?
a. the market value of all goods produced within a country
b. the market value of all final goods and services produced by the citizens of a country
c. the market value of all final goods and services produced within a country
d. the market value of all goods produced by the citizens of a country
8. If Susan decides to change the oil in her car herself instead of having Speedy Lube change the oil for her GDP
a. necessarily rises.
b. necessarily falls.
c. will be unaffected because the same service is produced in either case.
d. will be unaffected because car maintenance is not included in GDP.
9. Flour is
a. always counted as an intermediate good.
b. counted as an intermediate good if it is used by a company to make bread.
c. counted as a final good if it is used by a consumer who bakes bread for his own
consumption.
d. Both b and c are correct.
10. A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them before the end
of the second quarter, and holds the others in its warehouse.
a. Since the DVDs will eventually be bought by consumers, they are included as
consumption in the second quarter.
b. Since the DVDs were not purchased this quarter, they will be counted as an increase in
third-quarter GDP.
c. The DVDs will be counted as a change in inventory in the second quarter and so will be
included in second-quarter GDP.
d. The DVDs will be counted as a change in inventory in the second quarter, and when sold
in the third quarter will raise GDP.
Economics 203(05) Midterm Examination
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
1. If the average income of an Australian is higher than the average income of a Russian, it is most likely
because
a. productivity is higher in Australia than in Russia.
b. Australia has a more industrial economy than Russia.
c. there is more competition in Australia than in Russia.
d. labor unions are more aggressive in Australia than in Russia.
2. If the government wanted to enact a policy to increase living standards in the country, it might
a. allow corporate tax write-offs for money spent on worker safety.
b. make it more difficult to receive unemployment benefits.
c. increase educational opportunities for workers.
d. prohibit unions from organizing.
3. Large or persistent inflation is almost always caused by
a. an increase in demand for domestic production.
b. growth in the quantity of money.
c. foreign competition.
d. higher worker productivity.
4. In the 1990s, inflation in Canada
a. was almost zero.
b. was about 2 percent per year.
c. approached double digits.
d. was caused by too much consumer spending.
Figure 2-1
, 5. Refer to Figure 2-1. Which arrow shows the flow of spending by households?
a. A
b. B
c. C
d. D
6. Macroeconomists study
a. decisions of households and firms.
b. economy-wide phenomena.
c. the interaction of households and firms.
d. regulations of firms and unions.
7. Which of the following is the correct definition of GDP?
a. the market value of all goods produced within a country
b. the market value of all final goods and services produced by the citizens of a country
c. the market value of all final goods and services produced within a country
d. the market value of all goods produced by the citizens of a country
8. If Susan decides to change the oil in her car herself instead of having Speedy Lube change the oil for her GDP
a. necessarily rises.
b. necessarily falls.
c. will be unaffected because the same service is produced in either case.
d. will be unaffected because car maintenance is not included in GDP.
9. Flour is
a. always counted as an intermediate good.
b. counted as an intermediate good if it is used by a company to make bread.
c. counted as a final good if it is used by a consumer who bakes bread for his own
consumption.
d. Both b and c are correct.
10. A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them before the end
of the second quarter, and holds the others in its warehouse.
a. Since the DVDs will eventually be bought by consumers, they are included as
consumption in the second quarter.
b. Since the DVDs were not purchased this quarter, they will be counted as an increase in
third-quarter GDP.
c. The DVDs will be counted as a change in inventory in the second quarter and so will be
included in second-quarter GDP.
d. The DVDs will be counted as a change in inventory in the second quarter, and when sold
in the third quarter will raise GDP.
