Name: ___________________________ Class: _________________ Date: __________

practice

Multiple Choice

1. Which of the following is an exogenous variables in the Solow model?

a. the saving rate

b. the initial capital stock
c. All of these answers are correct.
d. productivity
e. the depreciation rate

2. The Solow model of economic growth

a. exogenizes investment.
b. endogenizes labor.
c. exogenizes physical capital.
d. endogenizes investment.
e. endogenizes physical capital.

3. An economy’s ________ is/are equal to its ________.

a. consumption; income
b. expenditure on goods; expenditure on services
c. expenditure on goods and services; output
d. investment; government expenditures
e. taxes; net exports

4. If the nominal GDP rises by 3 percent and the price level rises by 5 percent, then
the real GDP ________ by ________ percent.

a. falls; 2
b. falls; 8
c. None of these answers is correct.
 d. rises; 8
e. rises; 2

5. The chain-weighted measure of real GDP uses prices from a

a. constant base year.

b. base year that changes every 10 years.
c. constantly changing base year.
d. None of these answers is correct.
e. base year that changes every five years.

6. If we define per capita GDP in 2020 as y2021 and per capita GDP in 2020 as
y2020, the growth rate of per capita GDP, from 2020 to 2021 is given by

a.

b.
c.

d.

e.

7. The short run is concerned with ________, while the long run is concerned with
________.

a. the causes of economic fluctuations; inflation

b. inflation; unemployment
c. the causes of economic fluctuations; the determinants of economic growth
d. the causes of economic fluctuations; the money supply
e. the determinants of economic growth; the causes of economic fluctuations

8. The equation is called

a. saving.
b. investment.
 c. depreciation.
d. the capital stock.
e. net investment.

9. By how much does GDP change between 2019 and 2020 in the following
scenario? In 2019, a rich homeowner hires a chef for $50,000 to cook for them. In
2020, the homeowner marries the chef, who continues to cook for the family.

a. Not enough information is given.

b. GDP rises by $50,000.
c. GDP falls by $50,000.
d. GDP is unchanged.
e. GDP rises by $25,000.

10.In the Solow model, investment, It, as a function of saving, and output,
is written as

a.
b.
c.
d.
e.

11.The key insight in the Solow model is that

a. capital depreciation enhances economic growth.

b. the relationship between capital and output is static.
c. saving rates are determined in a particular manner.
d. savings have no impact on economic growth.
e. capital accumulation contributes to economic growth.

12.In the Cobb-Douglas production function, if we define y = Y/L as

output per person and k = K/L as capital per person, the per person production
function is

a.
 b.
c.
d.

e.

13.Suppose k, l, and A grow at constant rates given, respectively, by and

What is the growth rate of y if y = Aka l1 - a, a > 0?

a.
b.
c.
d.
e.

14.Using the Solow model, if, in time t = 0, the initial capital stock is K0 = 100,
investment is I0 = 25, and is the depreciation rate, capital accumulation
from period 0 to period 1 is.:

a. ΔK1 = 35.
b. ΔK1 = 115.
c. ΔK1 = 0.
d. ΔK1 = -15.
e. ΔK1 = 15.

15.In the Cobb-Douglas production function, Y = KaL1 - a, if a = 1/3, then

a. capital’s share of income is one.

b. labor’s share of GDP is one-third.
c. labor’s share of GDP is two-thirds.
d. capital’s share of GDP is two-thirds.
e. labor’s share of income is three.

16.In 2018, U.S. national output per person was equal to about
 a. $83,000.
b. $56,000.
c. $14,000.
d. $20.5 billion.
e. $62,000.

17.When using the expenditure approach, investment includes

a. household residential expenditures.

b. fixed firm and household structures, equipment, and inventories.
c. government and firm equipment expenditures.
d. firm structures, equipment, and inventories.
e. government defense and firm equipment expenditures.

18.Nominal GDP means that the value of all goods and services is measured in
________ prices.

a. constant
b. the base year’s
c. average
d. last year’s
e. current

19.In the Solow model, if net investment is positive, then

a. capital accumulation is negative.

b. capital accumulation is zero.
c. capital accumulation is positive.
d. Not enough information is given.
e. savings are negative.

20.The production function Y = K1/3L2/3 describes ________ to generate output.

a. that the ratio of capital stock to labor must be one-third to two-thirds

b. how any amount of capital and a particular amount of labor can be
combined
 c. how any amount of capital and labor can be combined
d. how particular amounts of capital and labor can be combined
e. how any amount of labor and a particular amount of capital can be
combined

21.If we calculate the real GDP using the initial period’s prices, we are using a
________ index. If, instead, we use the final period’s prices, we are using a
________ index.

a. Paasche; chain-weighted
b. chain-weighted; Fisher
c. Laspeyres; Paasche
d. Paasche; Laspeyres
e. Laspeyres; chain-weighted

22.In the Solow model, if capital is in the steady state, output

a. will begin to contract.

b. is also in the steady state.
c. will decline, but its rate of growth will be positive.
d. will continue to grow.
e. will continue to grow, but its rate of growth will slow down.

23.The production function used in the Solow model is

a.
b.
c.
d.
e.

24.The National Income and Product Accounts provide a system for aggregating the
production of

a. all goods into a single measure of economic activity.

b. all services into a single measure of economic activity.
 c. all goods and services into two measures of economic activity.
d. all goods and services into a single measure of economic activity.
e. most goods and services into a single measure of economic activity.

25.When we look at the ________ run, we are concerned with ________.

a. long; the monthly unemployment rate

b. long; the causes of inflation
c. long; the causes of economic growth
d. long; the money supply
e. long; the causes of economic fluctuations

26.A change in the capital stock, ΔKt, can be expressed as a function of the saving
rate, output, the capital stock, Kt; and the depreciation rate, by:

a.
b.
c.
d.
e.

27.One of the simplifying assumptions of the Solow model used in the text is that the

a. saving rate changes each period.

b. number of workers is growing.
c. capital stock is constant.
d. depreciation rate changes each period.
e. number of workers is constant.

28.In the simple Solow model, we assume that

a. the depreciation rate is negative.

b. TFP equals one.
c. net investment is always positive.
d. labor is exogenous.
 e. the saving rate changes frequently.

29.Using the Solow model, if, in time t = 50, the capital stock is K50 = 150,
investment is I50 = 15, and is the depreciation rate, capital accumulation
from period 50 to period 51 is

a. ΔK51 = 120.
b. ΔK51 = 15.
c. ΔK51 = -15.
d. ΔK51 = 5.
e. ΔK51 = 0.

30.If we define the saving rate as , output as and the depreciation rate as
and if the economy is

a. contracting.
b. at the steady state.
c. growing.
d. None of these answers is correct.
e. in its short-run equilibrium.

31.The equation MPK = r* yields the

a. quantity of capital a firm wants to hire at any rental rate of capital.

b. amount of capital in an economy.
c. returns to labor.
d. optimal amount of labor, L*, that a firm hires.
e. optimal amount of capital, K*, that a firm fires.

32.Which of the following production functions exhibits constant returns to scale?

a. Y = K1/4L3/4
b. All of these answers are correct.
c. Y = K0.1L0.9
 d. Y = KaL1 - a
e. Y = K1/3L2/3

33.In the equation the “bars” over the A and K mean that they
are

a. variables that are endogenous.

b. parameters that are endogenous.
c. parameters that are endogenous.
d. parameters that are fixed and exogenous.
e. variables that are fixed but not exogenous.

34.Consider two countries, labeled 1 and 2. Each has the production function
i = 1, 2. If the only difference between the two countries is that A1 >
A2,

a. Country 2 will not produce anything, ceteris paribus.

b. Not enough information is given.
c. each will produce the same amount, ceteris paribus.
d. Country 2 will produce more than Country 1, ceteris paribus.
e. Country 1 will produce more than Country 2, ceteris paribus.

35.In the Solow model, if we define as the saving rate, Yt as output, and Ct as
consumption, investment, It, is given by

a.
b.
c.
d.
e.

36.If the production function is given by and if and K = L = 8, then

total output equals

a. Y = 16.
 b. Y = 14.
c. Y = 8.
d. Y = 2.
e. Y = 6.

37.In the Solow model, net investment is defined as

a. investment minus capital depreciation.

b. the saving rate plus the depreciation rate.
c. None of these answers is correct.
d. investment plus capital depreciation.
e. the saving rate minus the depreciation rate.

38.In the Cobb-Douglas production function, defining y = Y/L as output

per person and k = K/L as capital per person, the per person production function
is

a.
b.
c.
d.
e. .

39.If the nominal GDP rises by 6 percent and the price level rises by 3 percent, then
the real GDP ________ by ________ percent.

a. rises; 3
b. rises; 9
c. None of these answers is correct.
d. falls; 9
e. falls; 3

40.A production function exhibits constant returns to scale if when you

a. hold inputs constant—you double the output.

b. double each input—you less than double the output.
 c. double each input—you more than double the output.
d. double one input—you double the output.
e. double each input—you double the output.

41.The equation Y = Ka L1 - a is called the ________ function.

a. Keynesian welfare
b. Glass-Steagall utility
c. Lucas expectations
d. Cobb-Douglas production
e. Friedman-Schwartz money

42.Suppose x grows at a rate of percent and y grows at a rate of

percent. If z = y × x, then z grows at ________ percent; if z = x/y, z grows at
________ percent.

a. -17; 7
b. 60; -42
c. 60; 42
d. 7; -17
e. 17; -7

43.Real GDP is the ________ of all goods and services produced in a period of time
using ________ prices.

a. summation; current
b. value; base-year
c. summation; base-year
d. value; 1970
e. value; 1945

44.Household consumption as a share of GDP ________ and investment as a share

of GDP ________ between 2015 and 2018.

a. increased; stayed the same

b. decreased; increased
 c. stayed the same; increased
d. increased; decreased
e. stayed the same; stayed the same

45.A central topic of study in macroeconomics is ________, while a central topic of

study in microeconomics is ________.

a. an individual market; the overall performance of an economy

b. the performance of international trade; the individual firm
c. the overall performance of an economy; an individual market
d. the cosmos; particle physics
e. consumer behavior; firm behavior

46.Suppose k grows at a rate of percent and l grows at a rate of percent.

If y = k1/3 l1/3, then y grows at ________ percent.

a. 3
b. 12
c. -3
d. -4
e. 4

47.The equation is an example of

a. the production possibilities frontier.

b. a growth model.
c. a consumption function.
d. a production function.
e. a utility function.

48.The production function describes

a. how any amount of capital and labor can be combined to generate output.
b. how particular amounts of capital and labor can be combined to generate
output.
c. what output would be in a so-called perfect economy.
 d. how any amount of capital and a particular amount of labor can be
combined to generate output.
e. how any amount of labor and a particular amount of capital can be
combined to generate output.

49.Assume that a production function is given by If and and if

the steady-state capital stock is 8.0, the steady-state level of output is about:

a. 45.4.
b. 4.0.
c. 22.6.
d. 2.0.
e. 8.0.

50.If the production function is given by Y = K1/3L2/3 and if K = 27 and L = 8, then

total output equals

a. Y = 1.
b. Y = 18.
c. Y = 2.25
d. Y = 12.
e. Y = 8.

51.The equation is an example of

a. a utility function.
b. a consumption function.
c. a production function.
d. the production possibilities frontier.
e. a growth model.

52.In the equation the lack of a “bar” over the L means that it
is:

a. equal to one.
b. a parameter.
 c. an endogenous variable.
d. an exogenous variable.
e. constant.

53.In the Solow model, if we define as the saving rate, Yt as output, and It as
investment, consumption, Ct, is given by

a.
b.
c.
d.
e.

54.The study of economic growth concentrates on understanding the determinants of

the

a. rate of price changes.

b. role of monetary policy.
c. short-term change in per capita GDP.
d. change in per capita GDP over the long term.
e. rate of population growth.

55.If MPK = r, the firm

a. should hire more labor.

b. should hire more capital until MPK= w.
c. should hire more capital until MPK = 0.
d. has the optimal amount of capital.
e. should get rid of some capital until MPK = r.

56.The steady-state level of output per worker in the Solow model, with the
production function is given by

a.
 b.

c.

d.

e.

57.When and then output is determined by

a. the total amount of capital in an economy.

b. the total amount of capital and labor available in an economy.
c. a percentage of capital and labor in an economy.
d. the total amount of labor in an economy.
e. Not enough information is given.

58.Which of the following is/are NOT included in the expenditure approach to

national income accounting?

a. health care expenditures

b. software
c. taxes
d. software investment
e. defense expenditures

59.If the production function is given by the saving rate, s, is 20 percent;

the depreciation rate, is 10 percent; and the steady-state level of
output is

a. 3.5.
b. 2.0.
c. 1.4.
d. 8.0.
e. 4.0.
60.________ are inputs to the model and generally are fixed over time, while
________ are the outcomes of the model.

a. Endogenous variables; exogenous variables

b. Endogenous variables; shocks
c. Shocks; parameters
d. Parameters; system variables
e. Exogenous variables; endogenous variables

61.In 2018, household expenditures accounted for about ________ percent of total
GDP.

a. 72
b. 15
c. 4
d. 68
e. 95

62.The solution to the firm’s profit maximization is

a. MPL = w and MPK = r.

b. MPL > w and MPK = r.
c. MPL = w and MPK = 0.
d. MPL = w.
e. MPL < w and MPK = r.

63.Income per person began at ________ in 1870 and ________ by more than a
factor of 15 to ________ in 2018.

a. $44,000; fell; $3,500

b. $40,000; fell; $2,500
c. $2,800; rose; $58,000
d. $3,600; rose; $61,600
e. $2,500; rose; $35,000

64.Real gross domestic product is defined as the value of all goods

 a. and services produced by an economy’s citizens, regardless of where they
live, over a period of time, at base-year prices.
b. and services produced by an economy’s citizens, regardless of where they
live, over a period of time, at current prices.
c. and services produced by an economy, within its borders, over a period of
time, at base-year prices.
d. and services produced by an economy, within its borders, over a period of
time, at current prices.
e. produced by an economy, within its borders, over a period of time, at
current prices.

65.Nominal GDP is the ________ of all goods and services produced in a period of
time using ________ prices.

a. summation; current
b. value; 1945
c. value; a previous year’s
d. value; current
e. summation; base-year

66.In the past 60 years or so, labor’s share of GDP in the United States

a. has been equal to capital’s income share.

b. has been roughly one-third.
c. has been roughly two-thirds.
d. has been exactly 50 percent.
e. has risen sharply.

67.Assume that a production function is given by If and the

depreciation rate is and the saving rate is then the steady-state
level of capital is about

a. 0.6.
b. 0.1.
c. 8.0.
d. 1.6.
e. 2.5.
68.The marginal product of the labor curve represents the

a. supply of labor.
b. demand for wages.
c. demand for labor.
d. supply of wages.
e. demand for capital.

69.Assume a production function is given by If the depreciation

rate is and the saving rate is the steady-state level of capital is
about

a. 0.8.
b. 0.3.
c. 2.8.
d. 1.6.
e. 1.3.

70.In the Solow model, if the capital stock

a. stays the same.

b. grows.
c. declines.
d. None of these answers is correct.
e. Not enough information is given.

71.If per capita GDP in 2019 was $1,000 and in 2020 it was $1,200, the growth rate
of per capita GDP was

a. 1.2 percent.
b. 120 percent.
c. 20 percent.
d. about 17 percent.
e. Not enough information is given.
72.In the Solow model, the parameter denotes ________ and is ________.

a. investment; greater than one

b. investment; less than one
c. consumption; greater than one
d. the depreciation rate; less than one
e. the depreciation rate; equal to zero

73.In the Solow model, the equation of capital accumulation is

a.
b. Kt + It = Kt + 1.
c.
d.
e.

74.In the Cobb-Douglas production function, Y = K1/3L2/3, labor’s share of GDP is

a. two-thirds, regardless of how much labor there is.

b. one-third, regardless of how much labor there is.
c. always equal to one.
d. two-thirds, but it can change as more laborers are added.
e. Not enough information is given.

75.In the Cobb-Douglas production function, Y = KαL1-α, the α represents

a. the total demand for capital in an economy.

b. total income.
c. the share of production contributed by capital.
d. the share of production contributed by labor.
e. the total amount of capital in an economy.

76.A statistic used by economists to measure the value of economic output is

a. the CPI.
b. GDP.
 c. the GDP deflator.
d. the unemployment rate.
e. the federal funds rate.

77.The Solow model assumes that the saving rate

a. is zero.
b. increases as income increases.
c. increases as the interest rate rises.
d. decreases as income increases.
e. is constant.

78.According to the text, per capita GDP in 2018 in the United States was about

a. $1.2 million.
b. $50,000.
c. $120,000.
d. $30,000.
e. $62,000.

79.In the Solow model, in every period, a fraction of total output ________, which
________ the next period’s capital stock.

a. depreciates; adds to
b. is saved; reduces
c. is consumed; adds to
d. is saved; adds to
e. is consumed; reduces

80.In the Cobb-Douglas production function, Y = KaL1 - a, if a = 1/4, then

a. capital’s share of GDP is three-fourths.

b. labor’s share of income is one-fourth.
c. labor’s share of GDP is half.
d. capital’s share of GDP is one-fourth.
e. capital’s share of GDP is four.
81.Nominal gross domestic product is defined as the value of all goods

a. and services produced by an economy’s citizens, regardless of where they

live, over a period of time, at current prices.
b. and services produced by an economy, within its borders, over a period of
time, at base-year prices.
c. and services produced by an economy, within its borders, over a period of
time, at current prices.
d. and services produced by an economy’s citizens, regardless of where they
live, over a period of time, at base-year prices.
e. produced by an economy, within its borders, over a period of time, at
current prices.

82.Suppose we calculate the percent change in real GDP from year 1 to year 2 using
both the Laspeyres and the Paasche indices. With the Laspeyres index we get 12
percent and with the Paasche index we get 9 percent. The chain-weighted growth
of real GDP is ________ percent.

a. 1.33
b. 9.75
c. 9.5
d. 1.5
e. 10.5

83.Goods that are produced in a different year than they are sold are called

a. net national product.

b. inventory.
c. output adjustment.
d. capital depreciation.
e. a loss.

84.If we calculate the real GDP using the ________ index, we use the ________
period’s prices.

a. Paasche; initial
 b. chain-weighted; current
c. chain-weighted; final
d. Paasche; final
e. Laspeyres; final

85.In the Solow model, if investment is ________ depreciation, the capital stock
________.

a. greater than; grows

b. equal to; declines
c. less than; grows
d. equal to; grows
e. greater than; declines

86.In the equation the “bar” over the A means that it is a

a. variable that is fixed but not exogenous.

b. parameter that is fixed and exogenous.
c. variable that is endogenous.
d. parameter that is variable or exogenous.
e. parameter that is endogenous.

87.In the Solow model, if, in the absence of any shocks, the capital stock remains at
K* forever, this rest point is called the

a. dynamic system.
b. short-run equilibrium.
c. saving rate.
d. rate of capital accumulation.
e. steady state.

88.In the equation 1/3 represents

a. the real interest rate.

b. physical capital.
c. total factor productivity.
 d. natural resources.
e. the output share of capital.

89.The National Income and Product Accounts identity states that

a. Production = Expenditure - Income.

b. Production = Expenditure + Income.
c. Expenditure = Production + Income.
d. Production = Expenditure = Income.
e. Expenditure = Production - Income.

90.If we define the saving rate as output as and the depreciation rate as
and if the economy is

a. growing.
b. in its short-run equilibrium.
c. contracting.
d. None of these answers is correct.
e. at the steady state.

91.If per capita GDP in 2018 was $900, in 2019 was $1,000, and in 2020 was
$1,200, the growth rate of per capita GDP between 2018 and 2020 was

a. 20 percent.
b. about 133 percent.
c. about 11 percent.
d. 25 percent.
e. about 33 percent.

92.According to the expenditure approach, if Y is GDP, C is consumption, I is

investment, G is government purchases, and NX is net exports, the national
income identity can be written as

a. Y = C + I + G.
b. Y = (C + I + G)/NX.
c. Y = C + I + G + NX.
 d. Y = C + I + G - NX.
e. Y + C = I + G + NX.

93.Differences in per capita output across economies with the same per capita
capital stock can be explained by

a. differences in resource use.

b. differences in labor.
c. differences in total factor productivity.
d. similarities in physical capital.
e. similarities in total factor productivity.

94.The firm’s profit maximization problem is

a. All of these answers are correct.

b. max π = F(K, L) - rK - wL {r, w}.
c. max π = F(r, w) - rK - wL {r, w}.
d. max π = rK + wL - F(K, L) {K, L}.
e. max π = F(K, L) - rK - wL {K, L}.

95.The steady state is defined as the point where capital accumulation, ΔKt, is equal
to

a. zero.
b. the population growth rate.
c. the saving rate.
d. the depreciation rate.
e. the productivity growth rate.

96.The two main inputs we consider in a simple production function are

a. capital and labor.

b. capital and land.
c. utilities and capital.
d. natural resources and labor.
e. land and labor.
97.The amount of capital in an economy is a(n) ________, while the amount of
investment is a(n) ________.

a. final good; intermediate good

b. stock; flow
c. None of these answers is correct.
d. flow; stock
e. intermediate good; final good

98.In the equation represents

a. natural resources.
b. total factor productivity.
c. the real interest rate.
d. the capital-labor ratio.
e. physical capital.

99.The National Income and Product Accounts allow us to relate ________ to

________ to ________.

a. total output; total spending; inflation

b. total output; inflation; total income
c. total output; total spending; total income
d. household income; household expenditure; total output
e. household income; government income; firm income

100. The marginal product of labor is defined as

a. the additional output generated by hiring an additional unit of capital.

b. the additional output generated by hiring an additional unit of labor and
capital.
c. output divided by labor.
d. the additional output generated by hiring an additional unit of labor.
e. the additional revenue generated by hiring an additional unit of labor.
101. If Ct denotes consumption, It denotes investment, and Yt denotes output,
the resource constraint in the Solow model is

a. Yt = Ct - It.
b.
c.
d. None of these answers is correct.
e. Yt = Ct + It.

102. One of the key characteristics of the Cobb-Douglas production function is

a. that it compacts all inputs into a single equation.

b. constant returns to scale.
c. increasing returns to scale.
d. decreasing returns to scale.
e. that it is an exact replication of a firm’s production function.

Refer to Figure 5.1 when answering the following questions.

Figure 5.1: Solow Diagram

103. In Figure 5.1, if the economy begins with the initial capital stock at K1, the
capital stock will ________ and the economy will ________.

a. decrease; grow
b. increase; grow
c. stay constant; shrink
d. decrease; shrink
 e. stay constant; grow

104. In Figure 5.1, if the economy begins with the initial capital stock at K2, the
capital stock will ________ and the economy will ________.

a. decrease; grow
b. increase; grow
c. stay constant; be in its steady state
d. stay constant; shrink
e. stay constant; grow

105. In Figure 5.1, if the economy begins with the initial capital stock at K3, the
capital stock will ________ and the economy will ________.

a. increase; grow
b. decrease; shrink
c. stay constant; be in its steady state
d. decrease; be in its steady state
e. stay constant; shrink

106. In Figure 5.1, the capital stock at K1 is not the steady state because

a. the saving rate is too low.

b. the saving rate is too high.
c. the depreciation rate is too low.
d. gross investment is higher than capital depreciation.
e. gross investment is lower than capital depreciation.

107. In Figure 5.1, at K1, net investment is ________ and the economy
________.

a. negative; will grow

b. positive; is in its steady state
c. zero; is in its steady state
d. positive; will grow
e. negative; will contract
Refer to Figure 5.2 when answering the following questions.
Figure 5.2

108. In Figure 5.2, steady-state consumption is represented by

a. a minus b.
b. c minus a.
c. Consumption is not represented.
d. b.
e. a minus d.

Refer to Figure 4.1 when answering the following questions.

Figure 4.1: Production Function
109. Consider Figure 4.1. The shape of this production function suggests

a. Not enough information is given.

b. a diminishing marginal product of labor.
c. a constant marginal product of capital.
d. an increasing marginal product of capital.
e. a diminishing marginal product of capital.

Refer to the following table when answering the following questions.

Table 2.1: U.S. 2015 and 2018 Expenditures ($ billions)
2015 2018

Personal consumption
14,000
expenditures 12,280

Motor vehicles and parts 470 520

Food and beverages 920 1,000

Housing and utilities 2,260 2,570

Health care 2,060 2,350

Gross private domestic

3,630
investment 3,220

Structures 570 630

Equipment 1,120 1,220

Intellectual property products 760 930

Residential 630 790

Net exports of goods and

-640
services -520

Exports 2,270 2,510

Imports 2,790 3,150

Government Purchases 3,590

3,240
National defense 730 790

110. Consider Table 2.1. Total GDP in 2015 was about ________ billion.

a. $32,800
b. $18,220
c. $19,620
d. $14,580
e. $18,740

111. Consider Table 2.1. Total GDP in 2018 was about ________ billion.

a. $37,040
b. $20,580
c. $21,860
d. $16,460
e. $21,220

112. Consider Table 2.1. The federal government’s share of total GDP in 2015
was about ________ percent, and in 2018 it was about ________ percent.

a. 444; 454
b. 23; 22
c. 26; 26
d. 18; 17
e. 4; 4

113. Consider Table 2.1. The household’s share of total investment in 2015
was about ________ percent, and in 2018 it was ________ percent.

a. 20; 22
b. 5; 6
c. 35; 34
d. 56; 65
 e. Not enough information is given.

Refer to Figure 5.3 when answering the following questions.

Figure 5.3: Solow Diagram

114. In Figure 5.3, at K1, the difference between and is ________, and
the difference between Y and is ________.

a. output; investment
b. net investment; consumption
c. gross investment; consumption
d. output; consumption
e. depreciation; gross investment

115. In Figure 5.3, at K2, capital accumulation is ________, the economy is

________, and consumption is ________.

a. positive; growing; positive

b. zero; in the steady state; zero
c. negative; growing; positive
d. zero; in the steady state; positive
e. zero; contracting; negative

Refer to the following table when answering the following questions. In this economy,
only two goods are produced: video games and pistachios.
Table 2.3: National Income Accounting
 2021 2022

Quantity of pistachios 1,000 1,100

Quantity of video games 500 500

Price of pistachios $1.00 $1.50

Price of video games $15.00 $14.75

116. Consider Table 2.3. Using the Laspeyres index, the real GDP in 2021 will
be

a. $8,900.
b. $8,500.
c. $1,500.
d. $15,500.
e. $9,150.

117. Consider Table 2.3. Using the Laspeyres index, the real GDP in 2022 will
be

a. $9,025.
b. $8,500.
c. $8,600.
d. $9,150.
e. $8,475.

118. Consider Table 2.3. Using the Paasche index, the real GDP in 2022 will
be

a. $9,150.
b. $8,500.
c. $8,600.
d. $9,025.
e. $8,475.
119. Consider Table 2.3. Using the Paasche index, the real GDP in 2021 will
be

a. $8,475.
b. $8,500.
c. $8,600.
d. $9,150.
e. $8,875.

120. Consider Table 2.3. Using the Laspeyres index, inflation between 2020
and 2021 will be about ________ percent.

a. 0
b. 5
c. 1
d. 6
e. Not enough information is given.

121. Consider Table 2.3. Using the Laspeyres index, the percent change in
real GDP from 2020 to 2021 will be about ________ percent.

a. 6
b. 5
c. 0
d. 1
e. Not enough information is given.

122. Consider Table 2.3. Using the Laspeyres index, the percent change in
nominal GDP between 2020 and 2021 will be about ________ percent.

a. 5
b. 1
c. 6
d. 0
e. Not enough information is given.
True/False

123. Macroeconomics is the study of an individual market.

a. True
b. False

124. According to the income approach to GDP, the largest portion of GDP is
compensation to employees.

a. True
b. False

125. A main concern of long-run macroeconomics is the causes of economic

fluctuations.

a. True
b. False

126. The production function of the form Y = K1/3L1/3 exhibits constant returns
to scale.

a. True
b. False

127. A production function of the form Y = KaL1- a is called the Cobb-Douglas

production function.

a. True
b. False

128. An exogenous variable is one that is taken as a given when constructing a

model.

a. True
b. False
129. An endogenous variable is often called a parameter.

a. True
b. False

130. In 2012, consumption expenditures accounted for over 70 percent of the

total GDP.

a. True
b. False

131. The production function of the form Y = K1/2L1/2 exhibits constant returns
to scale.

a. True
b. False

132. A production function of the form Y = KaL1- a exhibits constant returns to

scale.

a. True
b. False

133. In the production function represents a

productivity parameter.

a. True
b. False

134. Exogenous variables are predetermined by the model-builder.

a. True
b. False

135. The two main inputs we consider in our production function model are
labor and land.
a. True
b. False
Answer Key

practice

Multiple Choice

1. Answer: C

2. Answer: E

3. Answer: C

4. Answer: A

5. Answer: C

6. Answer: B

7. Answer: C

8. Answer: E

9. Answer: C

10.Answer: B

11.Answer: E

12.Answer: A

13.Answer: E

14.Answer: E

15.Answer: C

16.Answer: E

17.Answer: B

18.Answer: E

19.Answer: C
20.Answer: C

21.Answer: C

22.Answer: B

23.Answer: A

24.Answer: D

25.Answer: C

26.Answer: B

27.Answer: E

28.Answer: D

29.Answer: E

30.Answer: C

31.Answer: E

32.Answer: B

33.Answer: D

34.Answer: E

35.Answer: E

36.Answer: C

37.Answer: A

38.Answer: A

39.Answer: A

40.Answer: E

41.Answer: D
42.Answer: E

43.Answer: B

44.Answer: A

45.Answer: C

46.Answer: E

47.Answer: D

48.Answer: E

49.Answer: B

50.Answer: D

51.Answer: C

52.Answer: C

53.Answer: A

54.Answer: D

55.Answer: D

56.Answer: C

57.Answer: B

58.Answer: C

59.Answer: C

60.Answer: E

61.Answer: D

62.Answer: A

63.Answer: D
64.Answer: C

65.Answer: D

66.Answer: C

67.Answer: C

68.Answer: C

69.Answer: C

70.Answer: B

71.Answer: C

72.Answer: D

73.Answer: E

74.Answer: A

75.Answer: C

76.Answer: B

77.Answer: E

78.Answer: E

79.Answer: D

80.Answer: D

81.Answer: C

82.Answer: E

83.Answer: B

84.Answer: D

85.Answer: A
86.Answer: B

87.Answer: E

88.Answer: E

89.Answer: D

90.Answer: E

91.Answer: E

92.Answer: C

93.Answer: C

94.Answer: E

95.Answer: A

96.Answer: A

97.Answer: B

98.Answer: B

99.Answer: C

100. Answer: D

101. Answer: E

102. Answer: B

103. Answer: B

104. Answer: C

105. Answer: B

106. Answer: D

107. Answer: D
108. Answer: A

109. Answer: E

110. Answer: B

111. Answer: B

112. Answer: D

113. Answer: A

114. Answer: B

115. Answer: D

116. Answer: B

117. Answer: C

118. Answer: D

119. Answer: E

120. Answer: B

121. Answer: D

122. Answer: C

True/False

123. Answer: B

124. Answer: A

125. Answer: B

126. Answer: B

127. Answer: A

128. Answer: A
129. Answer: B

130. Answer: A

131. Answer: A

132. Answer: A

133. Answer: A

134. Answer: A

135. Answer: B