Ch 9-10 Macro Practice Questions
What are the three ways a country will produce more output?
1. it employs more workers 2. its workers become more highly skilled. (more human capital) 3. it accumulates more physical capital
Suppose that, in year 1, an economy produces 200 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 210 golf balls that sell for $3.50 each and 80 pizzas that sell for $9 each. The value of nominal GDP in years 1 and 2, respectively, is:
$1,200 and $1,455
Janine produces and sells bath towels. The cotton that goes into the average bath towel Janine produces is sold for $5 by a cotton farmer to a textile manufacturer. The textile manufacturer weaves the raw material into yarn, then sells the cloth to a dyer for $15. When the dyeing is complete, Janine purchases the material for $20, and in fabricating the material into a finished bath towel and selling it, Janine adds another $20 to its value. The sum of the value added over all stages of production is _____. The price of a finished bath towel is _____. Assuming this process occurs in one year and in one country, the production of one bath towel adds _____ to GDP.
$40; $40; $40
You make candied cranberry snacks that you sell at amusement parks and events such as fairs, horse shows, and boat shows. Last year, you purchased $50,000 worth of cranberries, sugar, almond oil, salt, orange zest, and labeled paper, which you used to make 100,000 bags of candied cranberry snacks, each of which you priced at $1.00. Your total value added is _____. As a result of your activities, GDP rose by _____.
$50,000; $100,000
How do you calculate the labor force participation rate?
((employed + unemployed)/(working-age population)) x 100
$412.50
(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Real GDP in 2018 was:
-48%
(Table: Pizza Economy III) Use Table: Pizza Economy III. Given that the total population was 1,140 in 2018 and 1,380 in 2019, real GDP per capita between 2018 and 2019 grew at a rate of _____.
What is the average price formula?
(actual price + last yr's price)/2
How do you calculate the unemployment rate?
(unemployed/ labor force) x 100
What are the 6 limitations of GDP?
1. Prices are not values. 2. Nonmarket activities are excluded. 3. The shadow economy is missing. 4. Environmental degradation isn't counted. 5. Leisure doesn't count. 6. GDP ignores distribution.
In 1939, inflation in the United States was −1%, but at the same time, the country recorded a real GDP growth rate of 8%. What was the nominal GDP growth rate?
7%
iceland
Consider the data in the table. In 2016, the country with the highest economic growth rate was:
During the years 2014 to 2018, Bangladesh's economic growth rates always exceeded Kenya's economic growth rates.
Consider the data in the table. Which statement is true?
3.75%
Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the growth rate of real GDP between the two years?
$4,920,000
Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the real GDP for last year?
5%
Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the growth rate of real GDP between the two years?
$262,500
Consider the data shown in the table. Assume that the economy produces only textbooks. What is the real GDP for last year?
$275,625
Consider the data shown in the table. Assume that the economy produces only textbooks. What is the real GDP for this year?
What is real GDP?
GDP measured in constant prices
What is nominal GDP?
GDP measured in today's prices
€3,137 billion
Here is economic data for Germany for 2016, measured in billions of current euros. What was total spending?
What is the difference between income from a microeconomic standpoint versus income from a macroeconomic standpoint?
In microeconomics, income refers to one individual's income, whereas in macroeconomics, income refers to the total income in the entire economy.
What is the dependency ratio?
number of people too young or too old to work per 100 people of working age
In many parts of the world, mobile health clinics travel to villages to treat patients, teach about good nutrition and hygiene, and carry out immunizations. How does this contribute to economic growth?
It helps maintain a healthy population, which leads to development of the labor resource.
Which transaction would be included in a given year's GDP as investment spending? 1. Maggie buys a play-gym set for her day-care business. 2. ABC Company purchases 10,000 shares of IBM stock. 3. Ronnie buys a new BMW. 4. Anton purchases his friend's condo.
Maggie buys a play-gym set for her day-care business
2011 and 2012
Refer to the table, which shows data for the United Arab Emirates (UAE). Based only on the data in this table, in which year(s) did the UAE experience an increase in the standard of living?
Which transaction will be included in the official measure of GDP this year? 1. Monica illegally downloaded movies to her laptop. 2. Ben bought a textbook from his friend, who took the class last semester. 3. Stan sold his 2015 Honda to his sister. 4. Sean bought a new truck this year.
Sean bought a new truck this year.
Which would MOST likely be a microeconomic question?
Should I go to business school or take a job?
Who is marginally attached?
Someone who wants a job, has looked in the past year, but isn't actively seeking work
−36.20%
The table shows data for Central African Republic (CAR). What was the economic growth rate between 2012 and 2013?
What is the total income (GDP) formula?
Total income = Total wages + Total Profits
households
What is box 1?
markets for outputs
What is box 2?
businesses
What is box 3?
markets for inputs
What is box 4?
What is the formula for GDP?
Y = C + I + G + NX
What is the aggregate production function?
Y = f(L,H,K)
Which scenario shows a production function at work? 1. You go to the library and read a book. 2. You go to Home Depot and buy some paint. 3. You write a personal letter to your family. 4. You buy flour and eggs and bake a cake to sell in your bakery.
You buy flour and eggs and bake a cake to sell in your bakery.
Which is NOT consumption? 1. a new home that a family purchases 2. the rent you pay for you apartment 3. a dozen eggs that one buys at a grocery store 4. imputed rent that a homeowner implicitly pays to her- or himself
a new home that a family purchases
The Industrial Revolution led to: (i) increased intellectual pursuits. (ii) increased production of food. (iii) economic growth. (iv) a rise in inventions.
all
What change will NOT increase the productivity of labor?
an increase in the size of the labor force
Macroeconomists: 1. study decisions of individuals and firms regarding utility and profit maximization, respectively. 2. analyze aggregate data on real GDP, the price level, and unemployment 3. do not consider government intervention in markets important 4. do not consider long-term growth important
analyze aggregate data on real GDP, the price level, and unemployment
A rise in a country's population:
boosts real GDP but not necessarily real GDP per person
When your household buys goods and services, this is called:
consumption
A factor that does NOT drive productivity growth is:
convergence of real GDP per capita across nations
What does a production function do?
describe the methods by which inputs are transformed into outputs
Economists frequently use real GDP per capita to show:
differences in living standards across countries
The production function exhibits _____ returns to physical capital.
diminishing
Intermediate goods are NOT counted in GDP because:
doing so would result in double counting
The rule of 70 is a simple rule of thumb for:
evaluating long-term growth rates
Technological progress allows workers to produce more:
even when the amount of physical capital and human capital does not change.
A minimum wage that is above the equilibrium wage is a(n):
example of a price floor
What are the three types of unemployment?
frictional, structural, and cyclical
In the market for inputs:
households sell resources
The aggregate production functionY= f(L,H, K) shows that economic growth can occur if: (i) human capital increases. (ii) labor productivity falls. (iii) the capital stock in the country depreciates. (iv) the depreciation rate increases.
i only
You work for your state's commerce department analyzing the outlook for industrial activity around the state. The Secretary of Commerce asks you for strategies to increase capital accumulation in the state. Which option are you most likely to suggest to her? 1. send state business leaders abroad to look for investment opportunities 2. place ownership and financial regulations on foreign investments in the state 3. to avoid raising taxes, defer plans to improve the telecommunications infrastructure 4. increase the state sales tax
increase the state sales tax
a to b
increase the state sales tax
What is not included in GDP?
intermediate goods, existing goods and services, stocks, imports
The steady state in the Solow growth model occurs when:
investment equals depreciation
Investment spending:
is financed by the savings of domestic or foreign households
In microeconomics, output refers to _____, whereas in macroeconomics, output refers to _____.
output your individual business produces; output produced by all businesses in the economy
Who isn't in the labor force?
people who are neither employed or unemployed
What is labor productivity?
quantity of goods and services that each person produces on average per hour of work
What is the nominal GDP formula?
quantity sold(actual price)
What is inflation?
rising aggregate price level
In the circular flow diagram, businesses:
sell goods and services
Who is underemployed?
someone who is working but wants more hours or whose job isn't adequately using their skills
Who is involuntarily part time?
someone who is working part-time but wants full-time work
The production function does NOT depend on: 1. the amount of natural resources available 2. the state of technology 3. human capital per worker 4. the quantity of physical capital per worker
the amount of natural resources available
What does the circular flow diagram illustrate?
the interdependence of the macroeconomy
What is human capital?
the knowledge and skills a worker gains brought to a job
What is the labor force participation rate?
the percentage of the working-age population who are either employed or unemployed
What is the labor force?
the sum of the employed and unemployed
The direct calculation of aggregate output does NOT include the value of: 1. a new shower installed in a 1920s house. 2. Firestone tires sold at your local auto shop. 3. the six-CD player replacing the factory-mounted radio-cassette player in your car. 4. the tires on brand-new Volvo station wagons.
the tires on a brand-new car
What is labor input?
the total number of hours worked across the whole economy
Who is in the working age population?
those 16 and older who are not in the military or institutionalized
What is physical capital?
tools, machinery and structures
What is capital stock?
total quantity of physical capital used in the production of goods and services
Transfer payments are payments that:
transfer income from one person to another
What is frictional unemployment?
unemployment that is due to the time it takes for employers to search for workers and for workers to search for jobs
What is structural unemployment?
unemployment that occurs because wages don't fail to bring labor demand and supply into equilibriuim
What does the law of diminishing returns state?
when one input is held constant, increases in the other inputs will, at some point, being to yield smaller and smaller increases in output
Who is employed?
working age people who are working
Who is unemployed?
working age people without jobs who are trying to get them
One factor that does NOT explain why the average worker in the United States today produces more output than the average worker a century ago is that the modern worker:
works longer hours
What is the real GDP formula?
△P(Q)