Chapter 2

The percentage change of a ratio of two variables is approximately the percentage change in the numerator _____ the percentage change in the denominator.

minus

Kathleen has a full-time job and a part-time job. If Kathleen quits the part-time job, the household survey will show _____ in employment, and the establishment survey will show _____ in employment.

no change; a decrease

A stock broker charges a 1 percent fee to purchase stock for clients. If a household uses the broker to buy 100 shares of a stock at $50/share, then the transaction contributes _____ spending to GDP.

$50 of consumption

Bill sells his car to a used car dealer for $4,000, which then sells it to another household for $5,000. Together, these transactions add _____ dollars to the GDP.

$1,000

In 2016, total U.S. GDP was about _____ , U.S. per capita GDP was _____ , and U.S. average borrowing per person from abroad was about $1,573.

$18.6 trillion; $57,638

Adjustment of the CPI to reflect the measurement problems that currently result in overstatement of price increases will:

reduce government spending.

The percentage change of a product of two variables is approximately the _____ of the percentage changes in each of the variables.

sum

In the simple economy shown in the circular flow diagram in Figure 2-1 in the text, when firms increase the production of bread:

income will increase when either wages increase or profits increase.

Gross domestic product is computed by adding the market value of all goods and services produced. The market value is determined by multiplying the _____ by the quantity of the good or service produced during a specific time period.

market price

A bakery sells 300 loaves of bread for $2.80 each during one week. In order to produce this amount of bread, the bakery bought flour at a value of $30 from a mill. The bakery also paid $10 for advertising during this time period. This bread production adds _____ to GDP.

$840

If the current year is 2014 and the base year is also 2014, then the GDP deflator takes on the value:

1.0

Suppose that consumers purchase fish and cell phones. In 2010, one pound of fish costs $1, a cell phone costs $1, and the typical consumer buys 10 pounds of fish and 10 cell phones. In 2011, one pound of fish costs $2, a cell phone costs $0.50, and the typical consumer buys 5 pounds of fish and 20 cell phones. In 2012, one pound of fish costs $2.10, a cell phone costs $0.90, and the typical consumer buys 12 pounds of fish and 20 cell phones. Using 2010 as the base year, the inflation rate between 2011 and 2010 is _____ percent.

25

Suppose that nominal GDP increases by 5 percent in a year when the inflation rate, as measured by the percentage change in the GDP deflator, is 2 percent. This means that the real GDP growth rate is approximately _____ percent in that year.

3

Suppose that nominal GDP increases by 6 percent in a year when real GDP increases by 3 percent. This means that the inflation rate, as measured by the percentage change in the GDP deflator, is approximately _____ percent in that year.

3

Suppose that consumers purchase fish and computer chips. In 2010, one pound of fish costs $1, a computer chip costs $1, and the typical consumer buys 10 pounds of fish and 10 computer chips. In 2011, one pound of fish costs $2, a computer chip costs $0.50, and the typical consumer buys 5 pounds of fish and 20 computer chips. In 2012, one pound of fish costs $2.10, a computer chip costs $0.90, and the typical consumer buys 12 pounds of fish and 20 computer chips. Using 2011 as the base year, the inflation rate between 2012 and 2011 is _____ percent.

42.5

Suppose that real GDP increases by 3 percent in a year when the GDP deflator increases by 2 percent. This means that nominal GDP increases by approximately _____ percent in that year.

5

With an unchanged number of unemployed workers, retirements of employed workers will _____ the labor force participation rate and will _____ the unemployment rate.

decrease; increase

According to the text, the inflation rate measured by the percentage change in the CPI usually exceeds the inflation rate measured by the percentage change in the PCE deflator. This is MOST likely because the:

CPI may overstate the inflation rate.

Suppose that unemployed workers decide to retire rather than continue to seek employment. All else equal, this phenomenon would cause the unemployment rate to:

fall

If both final and intermediate goods and services were included in the gross domestic product (GDP) calculation, economies with more complex supply chains but the same amount of final goods and services produced would have _____ level of measured GDP than economies with less complex supply chains.

a greater

Real GDP calculations are sensitive to the choice of the base year and might generate vastly different conclusions regarding the real GDP growth rate, depending on the base year chosen. The _____ measures of real GDP avoid this problem by using the _____ of prices in two base years.

chain-weighted; average

The PCE deflator is based on only the _____ component of GDP.

consumption

A consumer in the United States buys a T-shirt at a retail store for $24. The label in the T-shirt says "Made in Turkey." The retailer paid $8 to the supplier who shipped the T-shirt from Turkey to the United States. This purchase counts as:

consumption and imports.

Dominique got laid off from a job at a multinational corporation and decided to create her own business. As a result:

the establishment survey will show a drop in employment.