2.     The major difference between GNP and GDP is?
A.     GDP measures all spending done by entities affiliated with the nation in question,
         while GNP focuses in on aggregate spending within the borders of a country
B.     GNP measures all spending done by entities affiliated with the nation in question,
        while GDP focuses in on aggregate spending within the borders of a country
C.     the question is mute, there is no difference between the two
D.     the formula for deriving them are completely different

3.     The unemployment rate that exists when the economy is at a peak of the business cycle is:
A.     the structural unemployment rate
B.     the actual unemployment rate
C.     the rate of cyclical unemployment
D.     the natural rate of unemployment

4.     Which of the following best defines the business cycle?
A.     contractions and expansions
B.     ups and downs in business activity
C.     fluctuations in the economy's GNP
D.     none of the above

5.     If the rate of inflation is 10% and the growth rate of nominal income is 5%, real income:
A.     will rise
B.     will fall
C.     will remain the same
D.     cannot be determined

6.     Police Officers on average received wages of $10,000 per year in 1964. In 1994 the
    average wage of police officers was $50,000. Using 1964 as the base year, and if the CPI
    in 1994 was 840. You can conclude that:
A.     the real wage of police officers on average increased between 1964 and 1994.
B.     the nominal wage of police officers on average decreased between 1964 and 1994.
C.     the real wage of police officers on average remained constant between 1964 and 1994.
D.     the real wage of police officers on average decreased between 1964 and 1994.
E.     Both choice B & C are correct

7.     According to the circular flow diagram, one possible cause of higher rates of
        inflation is:
A.     a decrease in demand for imports by domestic consumers
B.     an decrease in government spending on military goods
C.     a increase in taxes
D.     a decrease in demand for investment goods by business

8.     Which of the following caused the NRU to increase during the 1970s?
A.     lower structural unemployment
B.     a larger percentage of frictionally unemployed women
C.     decreased labor force participation of women
D.     increased labor force participation of men

9.     If Fiat, a European car manufacturer, opens a plant in Georgia which of the following
        would occur:
A.     the GDP of the United States would increase
B.     the GDP of the United States would decrease
C.     the GNP of the United States would increase
D.     the GNP of the United States would decrease
E.     two of the above are correct

10.     If Ford, a United States car manufacturer, opens a plant in Georgia which of the following
          would occur:
A.     the GDP of the United States would increase
B.     the GDP of the United States would decrease
C.     the GNP of the United States would increase
D.     the GNP of the United States would decrease
E.     two of the above are correct

11.   Suppose that 1990 is the base year used to calculate the CPI. And the CPI in the year
        2000 is 110. What is the value of the CPI in 1990?
A.     100
B.     110
C.     10%
D.     none of the above

12.     Suppose that 1990 is the base year used to calculate the CPI. And the CPI in the year
        2000 is 110. How much of a C.O.L.A. adjustment will you receive?
A.     a 10% increase in the nominal wage
B.     a 10% increase in the real wage
C.     a 10% decrease in the nominal wage
D.     no wage change

13.     Tariffs are more favorable to an importing country than quotas because:
A.     Tariffs help the importing country through increased taxation revenue.
B.     Import quotas do not transfer any extra revenues to the exporting country
C.     The tax revenue earned from a tariff is transferred to the exporting country
D.     none of the above

14. Kramer earns $80,000 annually and Newman earns $160,000 annually. Kramer pays
$16,000 in taxes while Newman pays $2,000 in taxes, the income tax system is:
A.     progressive
B.     regressive
C.     flat rate
D.     confiscatory

15.     What is (are) the primary reason(s) to trade
A.     To acquire goods you do not have access too
B.     To acquire goods that you poorly produce
C.     To acquire goods in which you have a limited amount of resources that are needed
         in the production of the good
D.     all of the above

Use the following information for questions 16 - 18

                    U.S.A.                 United Kingdom (UK)
Wheat             1000                         100
Cloth                 100                         1000

16.     The US has an absolute advantage in the production of which good(s)?
A.     wheat                           C.     both wheat and cloth
B.     cloth                             D.     neither

17.     The specialization levels of output are?
A.     US 2000 wheat and 0 cloth : UK 2000 cloth and 0 wheat
B.     US 200 wheat and 0 cloth : UK 200 cloth and 0 wheat
C.     US 1100 wheat and 0 cloth : UK 1100 cloth and 0 wheat
D.     US 2000 cloth and 0 wheat : UK 2000 wheat and 0 cloth
E.     US 200 cloth and 0 wheat : UK 200 wheat and 0 cloth

18.     What are the gains from trading for each country?
A.     US 900 cloth and the UK 900 wheat
B.     US 300 wheat and the UK 300 cloth
C.     US 1100 wheat and the UK 1100 cloth
D.     US 2000 wheat and the UK 2000 cloth
E.     there are no gains because trade was found to be unacceptable.

Use the following information to answer the following questions 19 - 24
Consumption spending = $10,000,000 Gross Investment = $4,000,000
Export spending = $5,000,000 Governmental Spending = $4,000,000
Imports = $3,000,000 Savings = $1,000, 000
taxes = $10,000,000

19.     Compute GDP?
A.     $20,000,000                 C.         $23,000,000
B.     $26,000,000                 D.         $37,000,000

20 Describe the situation in the area of trade?
A.     Trade balance                                   & nbsp;   D.             Trade Surplus of $8,000,000
B.     Trade Surplus of $2,000,000                 E.             Trade Deficit of $8,000,000
C.     Trade Deficit of $2,000,000

21.     Compute Disposable Income
A.     $10,000,000             C.     $11,000,000
B.     $20,000,000             D.     $9,000,000

22.     In terms of a dollar amount what do leakages equal?
A.     $13,000,000         C.     $14,000,000
B.     $23,000,000         D.     $18,000,000

23.     In terms of a dollar amount what do injections equal?
A.     $13,000,000         C.     $14,000,000
B.     $23,000,000         D.     $18,000,000

24.     Is this economy in equilibrium?
A     Yes because leakages = injections
B.     No, unemployment exists because injections are greater than leakages
C.     No, inflation exists because injections are greater than leakages
D.     No, unemployment exists because leakages are greater than injections
E.     No, inflation exists because leakages are greater than injections

Use the following information about the labor force of the economy to answer questions 25 - 31

1,000,000 people voluntarily quit their jobs to attend college full time
180,000 out of work lifeguards in the winter
200,000 autoworkers losing their jobs because of no skills working with robots
120,000 parents that are returning to work people since their kids are going to school full time
1,500,000 are employed

25.     How many people can be categorized as frictionally unemployed?
A.         180,000         C.         200,000
B.         120,000         D.         1,000,000

26.     How many people can be categorized as structurally unemployed?
A.         180,000         C.         200,000
B.         120,000         D.         1,000,000

27.     How many people can be categorized as cyclically (or seasonally) unemployed?
A.         180,000         C.         200,000
B.         120,000         D.         1,000,000

28.     How many people are in the labor force?
A.         3,000,000         C.     1,500,000
B.         2,000,000         D.     1,000,000

29.     How many people are not in the labor force?
A.         180,000         C.         200,000
B.         120,000         D.         1,000,000

30.    What is the unemployment rate?
A.     16%
B.     20%
C.     18%
D.     25%
E.     none of the above

31.     What is the natural rate of unemployment?
A.     16%
B.     20%
C.     18%
D.     25%
E.     none of the above