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Unit 2 Chatgp2

The document consists of a series of multiple-choice questions related to economic concepts, including household income, GDP estimation, unemployment types, inflation rates, and economic policies. Each question presents a scenario or concept that tests understanding of economic principles and their implications. The questions cover various topics such as the circular flow model, GDP measurement, business cycles, and inflation effects.

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ys Lee
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15 views4 pages

Unit 2 Chatgp2

The document consists of a series of multiple-choice questions related to economic concepts, including household income, GDP estimation, unemployment types, inflation rates, and economic policies. Each question presents a scenario or concept that tests understanding of economic principles and their implications. The questions cover various topics such as the circular flow model, GDP measurement, business cycles, and inflation effects.

Uploaded by

ys Lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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21.

Which of the following would cause an increase in both household


income and firm revenue in the circular flow model?
A) A decrease in government spending
B) An increase in imports
C) An increase in government transfer payments
D) A decrease in business investment
E) A tax increase on businesses

22. Which scenario would lead to an overestimation of GDP’s true


reflection of economic well-being?
A) The rise of a significant underground economy
B) The inclusion of non-market transactions in GDP
C) A rise in real GDP while income inequality increases
D) An increase in the production of environmentally harmful goods
E) An increase in net exports due to currency depreciation

23. Which of the following would be considered frictional unemployment?


A) A factory worker laid off due to automation
B) A software developer quitting her job to start her own business
C) A college graduate looking for their first job
D) A worker laid off due to a recession
E) A seasonal retail worker being let go after the holiday season

24. If the nominal GDP growth rate is 8% and the inflation rate is 5%,
what is the real GDP growth rate?
A) -3%
B) 2%
C) 3%
D) 5%
E) 13%

25. Which of the following describes a key menu cost associated with
inflation?
A) The purchasing power of wages decreases over time
B) Businesses must frequently update prices and catalogs
C) Lenders face losses due to unexpected inflation
D) Real interest rates increase
E) Nominal GDP overestimates economic growth

26. If a country experiences deflation, which of the following is true?


A) Nominal GDP will be higher than real GDP
B) Nominal GDP will be lower than real GDP
C) Nominal GDP and real GDP will be equal
D) The unemployment rate will decrease
E) The economy is likely in an expansion phase

27. Which of the following is most likely to occur at the peak of a business
cycle?
A) High unemployment and falling wages
B) A rapid increase in consumer spending
C) The Federal Reserve increasing interest rates
D) Firms reducing production due to weak demand
E) Rising business investment

28. Which of the following would be counted in U.S. GDP?


A) A U.S. citizen working abroad and sending money home
B) A Canadian company producing lumber in Washington State
C) A factory in China owned by an American corporation
D) A used car sale at a dealership
E) An illegal transaction in the underground economy

29. Which of the following is most likely to cause structural


unemployment?
A) A technological shift leading to automation
B) A sudden drop in consumer spending
C) A rise in seasonal jobs
D) A period of economic expansion
E) An increase in government hiring

30. If the GDP deflator increases from 110 to 121, what is the approximate
inflation rate?
A) 9%
B) 10%
C) 11%
D) 12%
E) 21%

31. If the actual inflation rate is lower than the expected inflation rate,
which of the following is true?
A) Borrowers benefit at the expense of lenders
B) Lenders benefit at the expense of borrowers
C) Wages automatically adjust for inflation
D) The economy experiences hyperinflation
E) The government decreases taxation

32. A discouraged worker is someone who:


A) Works part-time but wants full-time work
B) Is actively searching for a job
C) Has given up searching for a job
D) Is unemployed due to a business cycle downturn
E) Is employed in an underground economy

33. Which of the following is an example of cost-push inflation?


A) An increase in household income leads to increased demand for goods
B) A central bank increases the money supply
C) A labor union negotiates higher wages, raising production costs
D) A government reduces corporate tax rates
E) Consumer confidence rises, increasing overall spending

34. Which of the following policies is most likely to reduce the natural rate
of unemployment?
A) Increasing government spending
B) Lowering interest rates
C) Improving job retraining programs
D) Raising the minimum wage
E) Decreasing taxes

35. Which indicator is considered a leading indicator of economic growth?


A) Unemployment rate
B) GDP growth rate
C) New housing construction permits
D) Government spending
E) Corporate tax revenue

36. Hyperinflation typically occurs when:


A) A country imports too many goods
B) A government prints excessive amounts of money
C) The stock market crashes
D) The natural rate of unemployment rises
E) Wages decline across the economy

37. If a country has 200 million people, with 150 million in the labor force,
and 15 million unemployed, what is the unemployment rate?
A) 7.5%
B) 8%
C) 9%
D) 10%
E) 12%

38. Which of the following individuals is least affected by unexpected


inflation?
A) A lender with a fixed-rate loan
B) A retiree with a fixed pension
C) A borrower with a fixed-rate mortgage
D) A worker with a fixed wage
E) A firm with long-term fixed-price contracts

39. Which policy is most likely to increase long-term economic growth?


A) Raising corporate tax rates
B) Increasing infrastructure spending
C) Reducing money supply
D) Increasing import tariffs
E) Raising the minimum wage

40. Which policy is least effective in addressing stagflation?


A) Cutting interest rates
B) Reducing government spending
C) Raising taxes
D) Increasing business subsidies
E) Price controls on consumer goods

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