Midterm 2 Bootcamp

Assignment 4

Question 1

The two approaches that economists use to measure GDP are:

Answers: A.
the goods flow and investment flow.
B.
current surveys and historical data.
C.
the product flow and spending flow.
D.
household tax returns and corporate tax returns.
E.
the product flow and the earnings flow.
• Question 2

The earnings and product flows:

Answers: A.
provide a check for each other.
B.
measure GDP two different ways.
C.
would be identical in a world of complete information and perfect measurement.
D.
all of the above.
E.
A and B only.

Question 3
 What is the name we give to the total market value of the final goods and services produced within a
nation during a given year?
Answers: A.
Gross Domestic Product.
B.
Gross Domestic Consumption.
C.
Total Value.
D.
Total National Product.
E.
none of the above.
• Question 4

The circular flow model of the economy:

Answers: A.
cannot handle leakages from the spending flow.
B.
is useful only when the economy is at full employment.
C.
compares spending on goods and services with payments to factors of production.
D.
compares consumer spending with corporate investment.
E.
is useful in market economies, but not in planned economies.
• Question 5

Value added is measured as the:

Answers: A.
difference between a firm's sales and its purchases of materials and services from other firms.
B.
difference between net and gross investment.
C.
additional output the economy produces when it is at full employment.
D.
additional consumer goods produced when the economy moves from war-time to peace-
time.
E.
increase in corporate profits from one year to the next.

• Question 6
When economists measure variables in "real" terms it means that:
 Answers: A.
physical goods are separated from intangible services.
B.
data are collected from at least two sources before final measurements are made.
C.
consumption spending is separated from financial investment.
D.
in GDP a distinction is made between financial capital and physical capital.
E.
the data are adjusted to account for changes in prices from one period to the next.
• Question 7

NDP does not include:

Answers: A.
payments made for income taxes.
B.
depreciation allowances.
C.
undistributed profits.
D.
net exports.
E.
the value added from intermediate goods.
• Question 8
0 out of 1 points
Personal income equals disposable income plus:
Answers: A.
personal income taxes.
B.
residual wages.
C.
transfer payments.
D.
dividend payments.
E.
personal savings.

• Question 9

Real GDP is computed by:

 Answers: A.
subtracting depreciation costs from nominal GDP.
B.
multiplying Nominal GDP by a cost-of-living increase.
C.
adding the dollar value of services to Nominal GDP.
D.
dividing Nominal GDP by the GDP price deflator.
E.
none of the above.
• Question 10

The result of subtracting a depreciation allowance from GDP is:

Answers: A.
disposable income.
B.
personal income.
C.
net domestic product.
D.
yearly capital expenditure.
E.
adjusted gross domestic product.
• Question 11

"Double-counting" of national product would result from including:

Answers: A.
total production of autos and total production of bowling balls.
B.
value-added of both bakers and flour mills.
C.
total of investment expenditures and the total of government purchases of goods and
services.
D.
consumer expenditures on bread and the value added of wheat producers.
E.
none of the above.

• Question 12

If an economy consumes more than it produces, then:

 Answers: A.
imports must exceed exports.
B.
depreciation must exceed consumption.
C.
government spending must exceed government tax revenues.
D.
exports must exceed imports.
E.
no economy can be consuming more than it is producing.
• Question 13

"Capital formation" in an economy means:

Answers: A.
net national product.
B.
investment.
C.
depreciation.
D.
existing stock of buildings, equipment, and inventories.
E.
the total quantity of stocks, bonds, gold, and money.
• Question 14

If GDP is falling and GNP is rising, which of the following statements is true?
Answers: A.
The country is in a recession.
B.
The country is experiencing inflation.
C.
The country is producing fewer products overseas and foreigners are producing more in
the country.
D.
The country is producing more products overseas and foreigners are producing less in the
country.
E.
The country is borrowing money from foreigners.

• Question 15

The flow-of-product and earnings or cost approaches to GDP:

 Answers: A.
measure two different aspects of GDP and are therefore unrelated to each other.
B.
are two different ways of measuring the same thing.
C.
should both arrive at the same number if GDP is measured in real terms, but not if GDP is
measured nominally.
D.
have nothing to do with the circular-flow diagram.
E.
none of the above.
• Question 16

Real GDP is calculated by:

Answers: A.
multiplying nominal GDP by the GDP deflator.
B.
dividing nominal GDP by the GDP deflator.
C.
evaluating current output at base year prices.
D.
none of the above.
E.
both B and C.
• Question 17

The "double counting" problem occurs when intermediate goods are included in GDP.
Selected Answer: A.
True.
Answers: A.
True.
B.
False.

• Question 18

NDP is a better measure of national output than GDP, because NDP can be more easily calculated.
 Answers: A.
True.
B.
False.
• Question 19

GDP is a measure of the total sales revenues of all government and business enterprises, minus
international sales.
Answers: A.
True.
B.
False.
• Question 20

NDP includes net investment, but excludes depreciation.

Answers: A.
True.
B.
False.
• Question 21

By definition, savings must equal investment plus consumption.

Answers: A.
True.
B.
False.
• Question 22
Dramatic changes in real GDP are often caused by large fluctuations in current prices.
Answers: A.
True.
B.
False.
• Question 23

When GDP is computed as a measure of the goods and services produced in the United States, capital
formation is excluded.
Answers: A.
True.
B.
False.

• Question 24

Which of the following is not included in "investment"?

 Answers: A.
An increase in inventories.
B.
The addition of a new wing to the factory.
C.
The installation of new factory machinery.
D.
New motor truck production.
E.
The purchase of an old factory by a merging conglomerate.
• Question 25

The gross domestic product (GDP) of an economy is:

Answers: A.
the sum in dollar values of all goods consumed within a stated period.
B.
the sum in dollar values of all intermediate goods produced in the economy.
C.
the sum in dollar values of all final goods and services produced in an economy during a
stated period.
D.
the sum in dollar values of all consumption goods, along with purchases by the
government.
E.
the sum in dollar values of all wages and profits related to the production of final goods.
Question 26
Omar wants to calculate the gross domestic product (GDP) of New Zealand for the year 2020.
He can measure it utilizing:
Answers: A.
The product flow approach.
B.
The data available on household tax returns.
C.
The earnings flow approach.
D.
The average prices of stocks at the end of the year.
E.
Both answers A and C are correct.
• Question 27

Karma wants to compute the value of Mauritania’s net exports for the year 2017. She must
accordingly:
 Answers: A.
subtract the value of the total imported goods and services from the value of the total
exported goods and services.
B.
add the value of the total imported goods and services to the value of the total
exported goods and services.
C.
subtract the value of tariffs, or taxes on imports, from the value of the total imported
goods and services and then add the value obtained to the value of the total exported
goods and services.
D.
divide the value of the total imported goods and services by the value of the total
exported goods and services.
E.
subtract the value of the total exported goods and services by the GDP deflator.
• Question 28

Nermine wishes to calculate the gross domestic product (GDP) of the West African country of
Liberia for the year 2010. While examining the receipts of a t-shirt factory, she includes the
total value of the t-shirts sold (sales) as well as the cost of the cotton used to produce the shirts.
This is known as:
Answers: A.
The fallacy of composition.
B.
The earnings approach.
C.
Nominal GDP.
D.
Double Counting.
E.
None of the above.
• Question 29

The real gross domestic product (GDP) is the nominal GDP corrected to account for price
inflation.
Answers:
True
False

• Question 30
 The formula for calculating the real GDP is composed of the nominal GDP divided by 12 to
account for monthly purchased final goods and services.
Answers: True

False
Question 31
The gross domestic product (GDP) price deflator is an index that encompasses the prices of
different goods and services and that is used to adjust the GDP to account for inflation.
Answers:
True
False
• Question 32

A base or reference year is used when calculating the real GDP of a country to correct for
changes in prices.
Answers:
True
False
• Question 33

The nominal gross domestic product (GDP) refers to a form of the GDP that accounts for both
a country’s output in a given year as well as the actual, or purchasing, prices then.
Answers:
True
False
• Question 34

If Eid wants to calculate the net investment value for a country for the year 2019, he would
have to:
Answers: A.
add depreciation costs to the gross investment value.
B.
divide the gross investment value by the gross domestic product (GDP) deflator.
C.
subtract the value of exports from the value of imports.
D.
subtract depreciation costs from the gross investment value.
E.
None of the above are valid measurement approaches.

• Question 35
 Laila is an Egyptian citizen working in Canada. She sends a portion of the profits from her
record shop in Canada to her family in Egypt. The sales from Laila’s record shop thus
contributes to:
Answers: A.
Egypt’s gross national product (GNP) only.
B.
Canada’s gross domestic product (GDP) only.
C.
Egypt’s gross domestic product (GDP) and gross national product (GNP).
D.
Canada’s gross domestic product and Egypt’s gross national product (GNP).
E.
Canada’s gross domestic product (GDP) and gross national product (GNP).
• Question 36

The net domestic product (NDP) is:

Answers: A.
calculated by subtracting depreciation costs from the gross domestic product (GDP).
B.
easier than the gross domestic product to calculate.
C.
a more accurate measurement of national output, in comparison to the gross
domestic product (GDP) approach.
D.
Both answer options “A” and “B” are valid.
E.
Both answer options “A” and “C” are valid.
• Question 37

Investment must always exceed savings.

Answers: True

False
• Question 38

The sum of total private domestic investment and net exports must be equal to the sum of
private saving and government saving.
Answers:
True
False
 Answer Sheet
1- E
2- D
3- A
4- C
5- A
6- E
7- B
8- A
9- D
10- C
11- D
12- A
13- B
14- D
15- B
16- E
17- A
18- B
19- B
20- A
21- B
22- B
23- B
24- E
25- C
26- E
27- A
28- D
29- T
30- F
31- T
32- T
33- T
34- D
35- D
36- E
37- F
38- T
 Assignment 5

• Question 1

Economic growth represents:

Answers: A.
the expansion of a country’s potential GDP or national output.
B.
the expansion of the work force.
C.
the expansion of jobs.
D.
the expansion of technology.
E.
none of the above.
• Question 2

Which of the following are factors of economic growth?

Answers: A.
human resources.
B.
natural resources.
C.
capital.
D.
technology.
E.
all of the above.
• Question 3

Some capital investments are only able to be done by the government, we called these
investments what?
Answers: A.
social overhead capital.
B.
social welfare.
C.
big capital projects.
D.
 social reform capital.
E.
none of the above.
Question 4
Technological improvement causes:
Answers: A.
a drop in the return on capital.
B.
a drop in the return on labor.
C.
a reduction in the rate of growth.
D.
a decrease in the rate of capital accumulation.
E.
a rightward shift in the production-possibility frontier.
• Question 5

If the growth rates of output and capital are 3 and 5 percent, respectively, and labor's share of
income is 2/3, then in a neoclassical growth model with no technical change, labor's growth
rate is:
Answers: A.
1 percent.
B.
2 percent.
C.
4 percent.
D.
indeterminable on the basis of data given.
E.
none of the above.
• Question 6

Capital deepening occurs when:

Answers: A.
the stock of capital grows more rapidly than the labor force.
B.
the stock of capital declines more rapidly than the labor force.
C.
the labor force increases faster than the stock of capital.
D.
there is a recession.
 E.
none of the above.
• Question 7

Capital-deepening coupled with steady profit rates and technological progress must result in:
Answers: A.
a higher capital-output ratio.
B.
a lower interest rate.
C.
a higher wage rate.
D.
an increase in labor's relative share of GDP.
E.
capital depreciation increases.
• Question 8

If the growth of labor, of capital, and of output were always 1 percent, 6 percent, and 2
percent, respectively with no technological change, then labor's share of output in the
neoclassical growth model would be:
Answers: A.
1/3.
B.
1/2.
C.
2/3.
D.
1/4
E.
4/5
• Question 9

Use the following figure to answer questions 9-10:

Figure 25-1

In Figure 25-1, a movement from point A to point B along an aggregate production function
would illustrate:
Answers: A.
labor deepening.
B.
capital-deepening.
C.
an increase in the amount of capital per worker.
D.
both B and C.
E.
none of the above.

• Question 10
 Use the following figure to answer questions 9-10:
Figure 25-1

In Figure 25-1, a shift in the aggregate production function from APF1 to APF2 could be
caused by:
Answers: A.
an increase in technology.
B.
an improvement in the quality of labor.
C.
a discovery of new resources.
D.
all the above.
E.
A and C only.
• Question 11

Productivity is best measured as the:

Answers: A.
ratio of capital to labor.
B.
ratio of inputs to output.
C.
ratio of output to inputs.
D.
increased educational level of the labor force.
E.
increase in level of experience of the labor force.
• Question 12
 Social overhead capital includes:
Answers: A.
government investments in roads.
B.
government investments in water projects.
C.
measures to improve public health.
D.
investments in infrastructure.
E.
all of the above.
• Question 13

According to the Solow growth model, capital deepening refers to:

Answers: A.
the process by which the capital-labor ratio increases over time.
B.
technological advances in capital equipment over time.
C.
the decline in economic growth resulting from the displacement of workers by
capital equipment.
D.
the self-perpetuating cycle of growth between technological advances and capital
equipment.
E.
none of the above.
• Question 14

Which of the following occurs in the long run neoclassical growth model without
technological change?
Answers: A.
Capital deepening ceases.
B.
Real wages stop growing.
C.
The return to capital is constant.
D.
Real interest rates are constant.
E.
All of the above.
• Question 15
 The aggregate production function relates total national output to:
Answers: A.
inputs and outputs.
B.
inputs and technology.
C.
employment and growth.
D.
the production possibilities frontier.
E.
inflation and economic growth.
• Question 16

As capital deepening occurs, the wage rate of labor will tend to fall.
Answers: A.
True.
B.
False.
• Question 17

Economic growth inevitably rides on the four wheels of labor, government, investment and
money.
Answers: A.
True.
B.
False.
Question 18
The fundamental equation of growth accounting includes a measurement of technological
change.
Answers: A.
True.
B.
False

• Question 19
 Assume the growth-accounting equation is: % Q growth = 4/5 (% L growth) + 1/5
(% K growth) + T.C. Calculate the growth of output if labor grows at 2 percent per year,
capital grows at 7 percent per year, and technological change is ¼ percent per year.
Answers: A.
3 percent
B.
3.5 percent
C.
3.25 percent
D.
0.3 percent
E.
0.35 percent
• Question 20

Assume the labor’s share of output in the neoclassical growth model is 2/3 and technological
change is 1¼ percent per year. If the labor growth rate is 2.5 percent per year and capital
growth rate is 4.25% per year, what would the output growth rate be?
Answers: A.
3.4 percent
B.
5 percent
C.
4.67 percent
D.
4.33 percent
E.
0.4 percent
• Question 21

If the growth of labor, of capital, and of output were always 2 percent, 12 percent, and 4
percent, respectively with no technological change, then labor's share of output in the
neoclassical growth model would be:
Answers: A.
1/3
B.
1/2
C.
2/3
D.
1/4
 E.
4/5
• Question 22

Capital-deepening can cause output per capita to rise steadily and thus mask the law of
diminishing returns.
Answers: A.
True.
B.
False.
• Question 23

The equation for growth accounting includes measures for labor growth, capital growth, and
technical change.
Answers: A.
True.
B.
False.
• Question 24

Capital-deepening, other things equal, results in a lower interest rate.

Answers: A.
True.
B.
False.
• Question 25

An increase in the capital-labor ratio is implied by capital-deepening.

Answers: A.
True.
B.
False.
 Answer Sheet

1- A
2- E
3- A
4- E
5- B
6- A
7- C
8- E
9- D
10- D
11- C
12- E
13- A
14- E
15- B
16- B
17- B
18- A
19- C
20- D
21- E
22- B
23- A
24- A
25- A
 Assignment 6

• Question 1

Which of the following situations would you expect to see during a period of economic
expansion?
Answers: A.
Falling tax receipts.
B.
Falling corporate profits.
C.
Falling unemployment claims.
D.
Falling stock prices.
E.
All of the above.
• Question 2

Which of the following situations would you expect to see during a period of recession?
Answers: A.
Falling tax receipts.
B.
Falling corporate profits.
C.
Falling stock prices.
D.
Falling business investment.
E.
All of the above.
• Question 3

Use the following Figure to answer questions 3-4:

What type of government activity would move the economy from E to F in above Figure?
Answers: A.
Nuclear war.
B.
High taxes.
C.
Public health spending.
D.
Building of highways.
E.
C and D.

• Question 4
 Use the following Figure to answer questions 3-4:

What type of event could move the economy from E to D in above Figure?
Answers: A.
Inefficient dictator takes over government.
B.
Nuclear war.
C.
New income taxes on A.
D.
A and B
E.
None of the above
• Question 5

An example of a government transfer payment is

Answers: A.
the cost of a submarine purchased by the government.
B.
a mail carrier's wage.
C.
payments to General Electric to develop nuclear energy.
D.
the salary of a Department of State employee.
E.
unemployment insurance compensation

• Question 6
 The best technical description of a progressive tax is a:
Answers: A.
tax which takes more money from the rich than from the poor.
B.
tax likely to discourage incentive
C.
more equitable tax than a regressive one.
D.
tax which takes a higher proportion of extra dollars received as income rises.
E.
tax which falls directly on those in the high income bracket.
• Question 7

Which of the following are typical characteristics of a recession?

Answers: A.
Consumer purchases decline sharply.
B.
Business inventories of durable goods increase unexpectedly.
C.
The demand for labor falls.
D.
All of the above.
E.
Choices A and B only.
Question 8
A general sales tax is:
Answers: A.
a progressive tax because it applies to luxuries as well as necessities
B.
a progressive tax because wealthy people spend more than poor people.
C.
a regressive tax because wealthy people spend a smaller percentage of their total
income on taxed commodities.
D.
a regressive tax because more money is collected from a poor person than from a
rich one.
E.
a proportional tax because everybody pays the same tax percentage on each
purchase.
• Question 9
As people's incomes rise, a progressive tax is best described as taking:
 Answers: A.
an increasing amount of tax.
B.
the same amount of tax.
C.
the same percent of income as tax
D.
an increasing percent of additional income as tax.
E.
a decreasing percent of additional income as tax.
• Question 10

Which of the following is an appropriate economic goal for government in a mixed economy?
Answers: A.
Improving economic efficiency.
B.
Reducing economic inequality.
C.
Stabilizing the economy through macroeconomic policies.
D.
Conducting international economic policy.
E.
All of the above.
• Question 11

Double-taxation in the U.S. tax system generally refers to:

Answers: A.
the fact that both employers and employees pay a payroll tax.
B.
the taxation as regular income of dividends paid to stockholders out of profits upon
which taxes have already been paid.
C.
the occasional imposition of a tax surcharge on the personal income tax paid by
Americans to their federal government.
D.
the doubling of the corporate profits tax rate as corporations' incomes climb above
$100,000.
E.
none of the above.
• Question 12

Welfare payments are an example of a redistributional government policy.

 Answers: A.
True
B.
False
• Question 13

Income redistribution is usually accomplished through taxation and spending policies.

Answers: A.
True
B.
False
• Question 14

Government intervention is necessary to control breakdowns in the market mechanism.

Answers: A.
True
B.
False
Question 15
Governments can function to reallocate resources more equitably, but are powerless to effect
greater efficiency.
Answers: A.
True
B.
False
• Question 16

On March 6th, 2021, the US Senate passed a coronavirus relief package that includes the
distribution of up to $1,400 stimulus, or financial aid, checks over most Americans. These
stimulus checks would:
Answers: A.
be considered transfer payments.
B.
be considered governmental expenditures.
C.
contribute to the aggregate demand.
D.
All of the above are valid answers.
E.
None of the above are valid answers.
• Question 17
 If a government’s expenditures exceed its tax revenues and assuming that this
government maintains no other source of income, this must mean that there is
a(n):
Answers: A.
government surplus.
B.
government deficit.
C.
reduction in taxes.
D.
decrease in the funding for the public education sector.
E.
population decline.
• Question 18

Mariam is contemplating taking a new job that would offer her a higher pay. Her
current monthly salary is EGP 10,000, while the new job is offering her EGP
15,000. However, she realized that she would have to pay a higher income tax
percentage on the additional EGP 5,000. If she accepts the job, Mariam would be
subjected to:
Answers: A.
regressive taxation.
B.
proportional taxation.
C.
progressive taxation.
D.
indirect taxation.
E.
corporate income taxation.

• Question 19

A government might impose taxes:

 Answers: A.
To accumulate funding for a new infrastructure project.
B.
To deter people from exercising a bad habit.
C.
To reduce demand and thus inflation.
D.
As a mean for wealth and resource redistribution.
E.
All of the above are valid answers.
• Question 20

A proportional tax is based on the horizontal equity principle of taxation.

Answers:
True
False
• Question 21

Marginal tax rate refers to the additional tax imposed on every dollar of extra
income.
Answers:
True
False
Question 22
If the government imposes additional tariffs, or tax on imports, on baby hygiene
products, then for the customers of Pampers, an American brand for baby
products, this tax would be considered a(n):
Answers: A.
direct tax.
B.
indirect tax.
C.
progressive tax.
D.
regressive tax.
E.
personal income tax.
• Question 23

If Yehia wants to calculate the effective or average tax rate, he would have to:
 Answers: A.
divide total taxes by 12 to obtain the monthly rate.
B.
multiply the average personal income tax rate by the average
individual’s income.
C.
divide total taxes by total income.
D.
subtract the old tax rate from the new tax rate and then dividing the
obtained value by the old tax rate.
E.
None of the above are valid methods for calculating the effective tax
rate.
• Question 24

When the government decided to set up toll booths in Suez route, the
government was employing which of the following taxation principle?
Answers: A.
Benefit Principle
B.
Progressive Taxation Principle
C.
Ability-to-Pay Principle
D.
Regressive Taxation Principle
E.
Indirect Taxation Principle

• Question 25

The difference between the ability-to-pay principle and the benefit principle is
that the ability-to-pay principle:
Answers: A.
 takes into account the different income levels in a society.
B.
may be employed as a method for wealth, or resource, distribution.
C.
includes taxes that compose a diminishing component of government
revenues.
D.
Both answers “A” and “B” are valid distinctions.
E.
All of the above are valid distinctions.

Answer Sheet

1- C
2- E
3- E
4- D
5- E
6- D
7- D
8- C
9- D
10- E
11- B
12- A
13- A
14- A
15- B
16- D
17- B
18- C
19- E
20- T
21- T
22- B
23- C
24- A
25- D