QUIZ 2 [ANSWERS]
1. In 2011, the imaginary nation of Maconia had a population of 8,200 and real GDP of 210,500.
Maconia had 5% growth in real GDP per person. In 2012 it had a population of 8,400. To the nearest
dollar what was real GDP in Maconia in 2012?
a. 216,815
b. 221,025
c. 226,416
d. None of the above is correct.
ANSWER: c
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.121 - LO: 25-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Measuring Output Growth
KEYWORDS: BLOOM'S: Application
NOTES: r
2. In 2010, the imaginary nation of Bovina had a population of 5,000 and real GDP of 500,000. In 2011 it
had a population of 5,100 and real GDP of 520,200. During 2011 real GDP per person in Bovina 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.
ANSWER: c
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.121 - LO: 25-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Measuring Output Growth
KEYWORDS: BLOOM'S: Application
3. Last year the imaginary nation of Panglossia had real GDP of 400 billion. This year it had real GDP of
472.5 billion. Which of the following changes in population is consistent with a 5 percent growth rate
of real GDP per person over the last year?
a. The population decreased from 75 million to 72 million.
b. The population decreased from 60 million to 50 million.
c. The population increased from 70 million to 80 million.
d. The population increased from 80 million to 90 million.
ANSWER: d
DIFFICULTY: Difficulty: Challenging
4. Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000
final goods. Laborland has a population of 5,000, of whom 3,000 work 7 hours a day to produce a total
of 105,000 final goods.
a. Workland has higher productivity and higher real GDP per person than Laborland.
b. Workland has higher productivity but lower real GDP per person than Laborland.
c. Workland has lower productivity but higher real GDP per person than Laborland.
d. Workland has lower productivity and lower real GDP per person than Laborland.
ANSWER: c
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.122 - LO: 25-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Growth Theory Productivity
KEYWORDS: BLOOM'S: Application
NOTES: r
5. An economy’s production function has the constant-returns-to-scale property. If the economy’s labor
force doubled and all other inputs stayed the same, then real GDP would
a. stay the same.
b. increase by exactly 50 percent.
c. increase by exactly 100 percent.
d. increase, but not necessarily by either 50 percent or 100 percent.
ANSWER: d
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.122 - LO: 25-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Producer Theory Production Function
KEYWORDS: BLOOM'S: Analysis
6. Suppose that there are diminishing returns to capital. Suppose also that two countries are the same
except one has less capital and so less real GDP per person. Suppose that both increase their saving
rate from 3 percent to 4 percent. In the long run
a. both countries will have permanently higher growth rates of real GDP per person, and the growth
rate will be higher in the country with more capital.
b. both countries will have permanently higher growth rates of real GDP per person, and the growth
rate will be higher in the country with less capital.
c. both countries will have higher levels of real GDP per person, and the temporary increase in growth
in the level of real GDP per person will have been greater in the country with more capital.
d. both countries will have higher levels of real GDP per person, and the temporary increase in
growth in the level of real GDP per person will have been greater in the country with less
capital.
ANSWER: d
7. All else equal, which of the following would increase the unemployment rate?
(i) an increase in the number of women who return to work after being stay-at-home mothers
(ii) a preference among older men to retire early
(iii) an increase in the maximum number of weeks for which someone can receive government
unemployment benefits
(iv) an increase in the number of previously unemployed women who stop looking for work and
become discouraged workers
a. (i) and (ii) only
b. (iii) only
c. (ii) and (iii) only
d. (ii), (iii), and (iv) only
ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.136 - LO: 28-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Labor Economics Unemployment
KEYWORDS: BLOOM'S: Analysis
PART II
1. Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government
purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national
saving?
a. -2,000, 1,000, and 2,000, respectively.
b. 1,000, 2,000, and 3,000, respectively.
c. 2,000, -1,000, and 1,000, respectively.
d. 2,000, 1,000, and 2,000, respectively.
ANSWER: c
POINTS: 1
DIFFICULTY: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.127 - LO: 26-2
NATIONAL STANDARDS: United States - Analytic - Skills
TOPICS: DISC: Consumption, Saving, and Investment Saving
KEYWORDS: BLOOM'S: Application
NOTES: r
2. For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is
running a budget surplus of $1,000. Then
a. private saving = $10,000 and GDP = $55,000.
b. private saving = $10,000 and GDP = $63,000.
c. private saving = $12,000 and GDP = $67,000.
d. private saving = $12,000 and GDP = $69,000.
ANSWER: b
POINTS: 1
DIFFICULTY: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.127 - LO: 26-2
NATIONAL STANDARDS: United States - Analytic - Skills
TOPICS: DISC: Consumption, Saving, and Investment Saving
KEYWORDS: BLOOM'S: Application
NOTES: r
3. The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent
national income statistics showed that it had GDP of $600 million merits, no government transfer
payments, taxes of $150 million merits, a budget surplus of $40 billion merits, and investment of $100
billion merits. What were its consumption and government expenditures on goods and services?
a. $460 million merits and $150 million merits
b. $310 million merits and $190 million merits
c. $350 million merits and $190 million merits
d. $390 million merits and $110 million merits
ANSWER: d
POINTS: 1
DIFFICULTY: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.127 - LO: 26-2
NATIONAL STANDARDS: United States - Analytic - Skills
TOPICS: DISC: Consumption, Saving, and Investment Consumption
KEYWORDS: BLOOM'S: Analysis
NOTES: r
4. Suppose that some country had an adult population of about 46 million, a labor-force participation rate of
75 percent, and an unemployment rate of 8 percent. How many people were employed?
a. 2.76 million
b. 31.74 million
c. 34.5 million
d. 42.32 million
ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.136 - LO: 28-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Labor Economics
KEYWORDS: BLOOM'S: Analysis
5. Suppose that the adult population is 6 million, the number of employed is 3.8 million, and the labor-force
participation rate is 70%. What is the unemployment rate?
a. 6.7%
b. 9.5%
c. 10.5%
d. 28%
ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.136 - LO: 28-1