EC 3113 Test 1 Xiaoxiao Bai

If Y=AK^0.3L^0.7 and A=1 and K and L are all 100, the marginal product of capital is:

0.3

If the consumption function is given by C = 500 + 0.5(Y-T), and Y=6,000 and if we assume T is given by T=200 + 0.2Y, the C equals:

2,800

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent.

4.7%

Real gross domestic product (GDP) is a better measure of economic well-being than nominal GDP because real GDP:

measures changes in the quantity of goods and services produced by holding prices constant

Gross national product (GNP) equals gross domestic product (GDP) _____ income earned domestically by foreigners _____ income that nationals earn abroad.

minus; plus

When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is like to be _____ the equilibrium wage.

much greater than

An economy's factors of production and its production function determine the economy's

output of goods and services

A fixed-weight price index like the consumer price index (CPI) _____ the change in the cost of living because it _____ take into account that people can substitute less expensive goods for ones that have become more expensive.

overestimates; does not

A graph of the rate of inflation in the United States over the twentieth century shows:

periods of deflation mixed with positive rates of inflation before 1955 but only positive rates of inflation after 1955

Wage rigidity:

prevents labor demand and labor supply from reaching the equilibrium level

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases

productivity

Any policy aimed at lowering the natural rate of unemployment must either _____ the rate of job separation of _____ the rate of job finding.

reduce; increase

Since 1960, the U.S. ratio of labor income to total income has:

remained relatively steady

Economists call the changes in the consumption of demand among industries and regions:

sectoral shifts

An assumption of _____ is more plausible for studying the short-run behavior of the economy, while an assumption of _____ is more plausible for studying the long-run, equilibrium behavior of the economy.

sticky prices; flexible prices

The amount of capital in an economy is a(n) _____, and the amount of investment is a(n) _____.

stock; flow

The assumption that the factor's supply (supply of K or L) is fixed will imply that the factor's:

supply curve is vertical

An increase in the price of goods bought by firms and the government will show up in:

the GDP deflator but not the CPI

In Chapter 3's model, the supply and demand for goods and services are balanced by:

the interest rate

In the Chapter 3's model, each firm hires labor until the point where

the marginal product of labor equals the real wage

All of these EXCEPT ____ are important macroeconomic values

the marginal rate of substitution

In a Cobb-Douglas production function, the marginal product of capital will increase if:

the quantity of labor increases

Two equivalent ways to view gross domestic product (GDP) are as the:

total income of everyone in the economy or the total expenditure on the economy's output of goods and services

Sectoral shifts:

make frictional employment inevitable

In the U.S. economy today (2022), real gross domestic product (GDP) per person, compared with its level in 1900, is about:

ten times as high

An increase in the price of imported goods will show up in:

the CPI but not in the GDP deflator

Assume that a tire company sells four tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is:

$20,000

If the unemployment rate is 6 percent and the number of persons employed is 188 million, then the labor force equals ____ million

200 million

If disposable income is 4,000, consumption is 3,500, government purchases is 1,000, and taxes are 800, national saving is equal to:

300

Assume that equilibrium GDP (Y) is 5,000. Consumption (C). is given by the equation C = 500 + 0.6Y. Investment (I) is given by the equation I=2,000-100r, where r is the real interest rate, in %. In addition, assume that G=0. In this case, the equilibrium real interest rate is:

5%

The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if there is a tax law change that makes investment projects less profitable and decrease the demand for investment goods (but does not change the amount of taxes collected in the economy)?

Point A

The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts spending, holding other factors constant?

Point B

The natural rate of unemployment is:

The average rate of unemployment around which the economy fluctuates

When the unemployment rate is at a steady state:

The number of unemployed people finding jobs equals the number of employed people losing jobs

All of the following are results from permitting a higher minimum wage for teenagers except:

a lot more easier for teenagers to get a job

Compared with real GDP during a recession, real GDP during a depression:

decreases more severely

The price received by each factor of production is determined by:

demand and supply of factors

With a Cobb-Douglas production function, the share of output going to labor:

does not depend on the amount of labor in the economy

Macroeconomics is the study of the

economy as a whole

Macroeconomics models are used to explain how _____ variables influence _____ variables.

exogenous; endogenous

To avoid double counting in the computation of gross domestic product (GDP), GDP includes only the value of _____ goods

final

Short-term unemployment is MOST likely to be _____ unemployment, while long-term unemployment is most likely to be _____ unemployment.

frictional; structural

The unemployment rate:

has never been zero in the United States

When saving (the supply of loanable funds) increases as the interest rate increases (i.e. we have a upward sloping supply curve), an increase in investment demand results in a _____ real interest rate and _____ in the quantity of investment.

higher; an increase

An example of an imputed value in the gross domestic product (GDP) is the:

housing services enjoyed by homeowners

In Chapter 3's model, a decrease in the real interest rate could be the result of a(n):

increase in taxes

In a simple model of the supply and demand for pizza, when buyers' income increases, in the new equilibrium, the price of pizza _____ and the quantity purchased _____.

increases; increases

When some iPads are produced but unsold this year and put away for the future sale, the are called:

investments in inventories

One reason for unemployment is that:

it takes time to match workers and jobs

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, workers should experience high rates of real wage growth when:

labor productivity is growing rapidly

If the gross domestic product (GDP) deflator in 2009 equals 125 and nominal GDP in 2009 equals $15 trillion, what is the value of real GDP in 2009?

$12 trillion

Assume that a firm buys all the parts that it puts into an automobile for $10,000 and sells the automobile for $22,000. In this case, the value added by the automobile company is:

$12,000

If gross domestic product (GDP) measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then the government purchases are:

$2,977

Assume that the production function is Cobb-Douglass with parameter a=0.3. If capital and labor are paid their marginal products, they receive the shares of income:

0.3 (K) and 0.7 (L)

In an economy, suppose we have a fixed typical consumer's basket of goods including 20 units of A and 10 units of B. In the base year, the price of A is 10 and the price of B is 15; in the later year, the price of A is 11 and the price of B doesn't change. CPI for this later year approximately equals _____.

105.7

In this economy, quantity produced and price of goods are listed as follows, then the GDP deflator in the later year should be:

166.7

During the period between 1900 and 2000, the unemployment rate in the United States was the highest in: (Hint: The unemployment rate peaked during the Great Depression.)

1930s

If the nominal gross domestic product (GDP) grew by 5% and real GDP grew by 3%; then the GDP deflator grew (inflation rate) by approximately _____ percent.

2%

If bread is produced using a constant return to scale production function, then if the:

amounts of equipment and workers are both doubled, twice as much bread will be produced

If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is _____ the equilibrium rate (natural rate of unemployment), and in the next period it will move _____ the equilibrium rate.

below; toward

The two MOST important factors of production are:

capital and labor

In the national income accounts, the purchases of durables, nondurables, and services by households are classified as:

consumption

All of these are reasons for frictional unemployment except:

unemployed workers accept the first job offer that they receive

All of these are causes of structural unemployment except:

unemployment insurance