1.To encourage formation of small businesses, the government could provide subsidies; these subsidies
A.would be included in GDP because they are part of government expenditures.
B.would be included in GDP because they are part of investment expenditures.
C.would not be included in GDP because they are transfer payments.
D.would not be included in GDP because the government raises taxes to pay for them.
2.Disposable personal income is the income that
A.households have left after paying taxes and non-tax payments to the government.
B.businesses have left after paying taxes and non-tax payments to the government.
C.households and noncorporate businesses have left after paying taxes and non-tax payments to the government.
D.households and businesses have left after paying taxes and non-tax payments to the government.
3.Suppose the government reports that U.S. GDP was about $13 trillion dollars in the most recent quarter. What is the correct interpretation of this number?
A.This number reflects the actual value of final goods and services produced in that quarter.
B.This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value.
C.This number was obtained by taking the actual value of final goods and services produced in that quarter, then multiplying that value by 4.
D.This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value and multiplying it by 4.
4.Which of the following does the level of real GDP measure?
A.total real income
B.productivity
C.the standard of living
D.All of the above are correct.
5.Thomas Edison received patents on many of his inventions. While the patents existed, his ideas were
A.public goods and proprietary knowledge.
B.public goods but not proprietary knowledge.
C.private goods and proprietary knowledge.
D.private goods but not proprietary knowledge.
6. Thomas Publishing has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 1 percent. It has a price to earnings ratio which is
A.high, perhaps indicating that people expect future earnings to rise.
B.high, perhaps indicating that people expect future earnings to fall.
C.low, perhaps indicating that people expect future earnings to rise.
D.low, perhaps indicating that people expect future earnings to rise.
7.You’ve been promised a payment of $400 in the future. In which case is the present value of this payment highest?
A.you wait 4 years and the interest rate is 4%
B.you wait 4 years and the interest rate is 5%
C.you wait 5 years and the interest rate is 4%
D.you wait 5 years and the interest rate is 5%
8.An increase in an investment tax credit would create a
A.shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate.
B.shortage at the former equilibrium interest rate. This shortage would lead to a fall in the interest rate.
C.surplus at the former equilibrium interest rate. This surplus would lead to a rise in the interest rate.
D.surplus at the former equilibrium interest rate. This surplus would lead to a fall in the interest rate.
9.A risk averse person might accept a bet with a 50% chance of losing $100 today if they had a 50% chance of winning
A.of winning $120 in two years and the interest rate was 11%.
B.of winning $114 in two years and the interest rate was 7%.
C.of winning $110 and two years and the interest rate was 3%.
D.A risk averse person would not accept any of the above bets.
10.Suppose that in the small country of Sociopolis there are 6 million people in the adult population, that the labor-force participation rate is 70 percent, and that there are 3.8 million people employed. To the nearest tenth, what is the unemployment rate?
A.10.5%
B.9.5%
C.6.7%
D.None of the above is correct.
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