ECO202 - Chapter 8
** Which of the following could cause nominal GDP to increase, but real DDP to decrease? ** A)The price level rises and the quantity of final goods & services produced falls. B)The price level rises and the quantity of final goods & services produced rises. C)The price level falls and the quantity of final goods and services produced rises. D)The price level falls and the quantity of final goods and services produced falls.
A)The price level rises and the quantity of final goods & services produced falls.
The natural rate of unemployment is A. the sum of structural unemployment and frictional unemployment. B.the sum of seasonal unemployment and cyclical unemployment. C. the sum of cyclical unemployment and frictional unemployment. D.the sum of structural unemployment and cyclical unemployment.
A. the sum of structural unemployment and frictional unemployment.
In the circular flow model, the value of total income for an economy ________ the value of total production. A.equals B.is less than C.is greater than D.may be greater than or less than
A.equals
Increases in real GDP would overstate the increase in the well−being of a country over time if, over that time period, the .... A. price level increased. B. average hours worked per week increased. C. amount of pollution decreased. D.crime rate decreased.
B. average hours worked per week increased.
Which of the following is a true statement about real and nominal GDP? A.Nominal GDP is a better measure than real GDP in comparing changes in the production of goods and service year after year. B.If real GDP increases from one year to the next, we know that production of goods and services has risen. C.If nominal GDP increases from one year to the next, we know that production of goods and services has risen. D.Increases in average prices do not affect the calculation of nominal GDP.
B.If real GDP increases from one year to the next, we know that production of goods and services has risen.
The payment of government unemployment insurance reduces the severity of recessions by A.adding to the level of frictional and structural unemployment. B.preventing a huge drop in income and spending for the unemployed. C.prolonging the job search period for unemployed workers. D.giving extra income to everyone and thus increasing consumption spending.
B.preventing a huge drop in income and spending for the unemployed.
When an unemployed person drops out of the labor force, the unemployment rate ... A.overstates the true degree of joblessness in the economy. B.understates the true degree of joblessness in the economy. C.is not affected by the existence of such workers. D.becomes more reliable as all the potential erroneous data are removed.
B.understates the true degree of joblessness in the economy.
What are the four major categories of expenditure? A.Labor, capital, natural resources, and entrepreneurship. B.Consumption, investment, government purchases, and net exports. C.Wages, interest, rent, and profit. D.Final goods, intermediate goods, production, and income.
B.Consumption, investment, government purchases, and net exports.
All of the following are problems in measuring the unemployment rate except that ... A.lack of verification of people's responses in the household survey. B.part-time workers are included as employed. C. people on active military service are included as unemployed. D.discouraged workers are not included in the labor force.
C. people on active military service are included as unemployed.
Gross Domestic Product is calculated by summing up .... A. the total market value of goods and services in the economy. B.the total quantity of goods and services in the economy. C.the total market value of final goods and services produced in the economy during a period of time. D.the total quantity of goods and services produced in the economy during a period of time.
C. the total market value of final goods and services produced in the economy during a period of time.
The employment-population ratio measures the A.percentage of the working age population that is in the labor force. B.percentage of the working age population that is not employed. C.percentage of the working age population that is employed. D.portion of the total population that is employed.
C.percentage of the working age population that is employed.
Many economists prefer A.the household survey because it gives data on unemployed and self-employed individuals. B.the household survey because it provides a large sample of the population and so is more inclusive. C.the establishment survey because it is determined by actual payroll records rather than unverified answers. D.the establishment survey because it can predict future stock prices of the companies it surveys.
C.the establishment survey because it is determined by actual payroll records rather than unverified answers.
When the economy is at full employment, unemployment is equal to A. normal rate of unemployment - abnormal rate of unemployment B.cyclical unemployment -seasonal unemploymen C.the natural rate of unemployment D.zero.
C.the natural rate of unemployment
Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that ... A. real GDP in 2016 was greater than real GDP in the base year. B.real GDP in 2016 was less than real GDP in the base year. C.the price level in 2016 was greater than the price level in the base year. D.the price level in 2016 was less than the price level in the base year.
D. the price level in 2016 was less than the price level in the base year.
In August 2013, the working-age population of the United States was 245.9 million. The working-age population is divided into those in the labor force (155.5 million) and those not in the labor force (90.4 million). The labor force is divided into the employed (144.2 million) and the unemployed (11.3 million). Those not in the labor force are divided into those not available for work (84.1 million) and those available for work (6.3 million). Finally, those available for work but not in the labor force are divided into discouraged workers (0.9 million) and those currently not working for other reasons (5.4 million). Use this data to help determine which one of the following statements is true: A.The unemployment rate is (11.3million/155.5million)*100 = 7.3% B. The labor force participation rate is (155.5million/245.9million)*100 = 63.2% C.The labor force is 245.9 million. D.Both A and B above are true.
D.Both A and B above are true. A.The unemployment rate is (11.3million/155.5million)*100 = 7.3% B. The labor force participation rate is (155.5million/245.9million)*100 = 63.2%
Sarah is a full−time student who is not looking for work. What kind of unemployment is Sarah experiencing? A.frictional B.structural C.cyclical D.Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.
D.Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.
Which one of the following depicts an accurate description of the household survey and the establishment survey? A.The household survey conducts surveys of small companies and measures the employment and the unemployment rate whereas the establishment survey interviews big establishments and measures the unemployment rate. B.The household survey interviews retired individuals and measures the unemployment rate whereas the establishment survey interviews working population and measures the employment rate. C.The household survey interviews households and measures the employment rate whereas the establishment survey interviews self-employed people and measures the unemployment rate. D.The household survey interviews households and measures the unemployment rate whereas the establishment survey interviews businesses and measures the employment rate.
D.The household survey interviews households and measures the unemployment rate whereas the establishment survey interviews businesses and measures the employment rate.
When an unemployed person drops out of the labor force, it ... A. does not affect the labor force participation rate. B.does not affect the unemployment rate. C.affects the employment-population ratio. D.does not affect the employment-population ratio.
D.does not affect the employment-population ratio.
Government unemployment insurance tends to ... A.decrease the unemployment rate by lowering the opportunity cost of job search. B.have no direct effect on the unemployment rate. C.increase the unemployment rate by increasing the opportunity cost of job search. D.increase the unemployment rate by lowering the opportunity cost of job search.
D.increase the unemployment rate by lowering the opportunity cost of job search.
Which category of consumption varies the most with the business cycle?
Durable goods must save up on good times because that will change drastically with recessions
Four Categories of Expenditures of GDP
GDP = C + I + G + NX Consumption Investment Government Purchases Net Exports
GDP relations VERY IMPORTANT TO KNOW
GDP = Total Production = Total Income
GDP does not include.....
Household Productions: goods & services people produce themselves i.e. - childcare, cooking, cleaning Underground Economy: buying and selling of goods & services that is concealed from the government or because the goods & services are illegal i.e. - prostitution, babysitting 8-10% USA 50% India
Nominal Vs. Real GDP - If the Quantity of goods & Services Produced Decreased, Could Nominal GDP Increase? Could Real GDP Increase?
Nominal - Yes - includes inflation Real - No - adjusted for base year so no inflation
Nominal GDP vs. Real GDP
Nominal GDP: production valued in current-year prices - value of final goods & services evaluated at base year prices - not adjusted for inflation Real GDP: production valued in base-year prices - value of final goods & services evaluated at base year prices - adjusted for inflation Be Able to Calculate, Distinguish, & Analyze
Nominal Vs. Real GDP - Which is the Better Measure of the Output Over Time? Why?
Real It is adjusted for inflation so can be compared directly
Real GDP for Vicuna for 2013 using 2015 as the base year equals ... A.$5,850. B.$4,620. C.$5,100. D.$5,650. Nominal GDP for Vicuna for 2013 equals ... A.$4,920. B.$5,850. C.$5,100. D.$5,300.
Real D.$5,650. 5,650 = 1800(1)+110(35) Nominal A.$4,920. 4,920 = 1800(0.9)+110(30)
Nominal Vs. Real GDP - All Time Top Grossing Movie
Real - Gone with the Wind Nominal - Starwars
Assume the Base Year is 2009 Real GSP for 2016 equals a) $760 b) $670 c) $580 d) $460 Nominal GDP for 2016 equals a) $760 b) $670 c) $580 d) $460
Real - c) $580 Nominal - a) $760
Consumption
Spendings by households on goods and services excluding houses services = medical care, education, hair cuts, etc. Services are greater than the sum of spending on durable and nondurable goods Nondurable goods = food + clothing Durable goods = cars + furniture or anything really with 3+ year use span
GDP not a perfect measure of ......
Wellbeing it does not account for... - leisure time - not adjusted for pollution, & other negative effects of production - not adjusted for changes in crime & other social problems - measures size of pie, not how the pie is divided (wealth not distributed evenly)
When a company reduces production and employment during economic recessions, those employees who lose their jobs are generally considered to be ________ unemployment
cyclically
Net Exports
exports - imports -3% in GDP Exports: goods and services produced in the USA purchases by foreign households, firms, and governments Imports: goods & services produced in foreign countries and purchased by USA firms, households, and government.
A person who is in between jobs but actively engaged in a job search is considered to be ______________ unemployment
frictionally
GDP definition
market value of all final goods & services produced in a country GDP Does Not Measure All Production (householdproduction & underground economy) & Does Not Incorporate All Economic Welfare
Gini Index Distribution of Family Income
measures the degree of inequality in the distribution of family income the more equal the lower the index (0 = perfectly distributed) The more unequal the higher the index (100 = perfect inequality)
Government Purchases
spending by federal, state, & local government on goods and services i.e. - teacher salaries, highways, aircraft carriers does NOT include trasnfer payments (social security + unemployment payments)
Investment
spending by firms on new factories, office buildings, machinery & additions to inventories Also includes spending by households on new homes and firms on new retail and commercial space
Experts in hand-drawn animation who remain unemployed due to the film industry's switch to computer-generated animation are considered to be ____________ unemployment
structurally
When there are workers that drop out of the labor force. the official BLS measure of the unemployment rate _________ the true degree of unemployment.
understates