Econ 104 Test 1

How many districts are there in the federal reserve system?

12

A recession occurs when an economy experiences a period in which there is A. a decrease in total production. B. a negative amount of net exports. C. an increase in total employment. D. a decrease in the inflation rate.

A. a decrease in total production.

The business cycle exists because A. total production experiences periods of increases and periods of decreases. B. exports and imports do not always increase and decrease at the same rate which causes cyclical movements in net exports. C. there are changes in the level of government​ expenditures, sometimes they increase and sometimes they decrease. D. the price level tends to increase over some periods and decrease over others.

A. total production experiences periods of increases and periods of decreases.

Suppose the base year is 2001. Looking at GDP data from the United States from 2001 to the​ present, what would be true of the relationship between nominal GDP and real GDP? A. RGDP​ = NGDP because prices are stable. B. RGDP​ < NGDP because prices are rising. C. RGDP​ > NGDP because prices are falling. D. The relationship is uncertain without more information on prices.

B. RGDP​ < NGDP because prices are rising.

Which of the following number in the US is higher? A. U-3 B. U-6 C. Rate of inflation D. Fed Fund rate range

B. U-6

The three types of unemployment are A. voluntary, structural, and cyclical unemployment. B. frictional, structural, and cyclical unemployment. C. full, frictional, and involuntary unemployment. D. natural, unnatural, and cyclical unemployment.

B. frictional, structural, and cyclical unemployment.

An important conclusion to draw from the​ circular-flow diagram is that A. the value of total income equals the value of​ GDP, but does not equal the value of expenditures. B. we can measure GDP by calculating the total value of expenditures on final goods and​ services, or we can measure GDP by calculating the value of total income. C. the total value of expenditures equals the value of​ GDP, but does not equal the value of income. D. personal consumption expenditures are equal to the value of GDP

B. we can measure GDP by calculating the total value of expenditures on final goods and​ services, or we can measure GDP by calculating the value of total income.

Which of the following is always a true statement? A. In the base year, nominal GDP is higher than real GDP B. In the base year, nominal GDP is lower than real GDP C. In the base year, nominal GDP is the same as real GDP D. None of these statements are always true

C. In the base year, nominal GDP is the same as real GDP

Why is GDP an imperfect measurement of total production in the​ economy? A. The official measure of GDP does not include intermediate goods and services. B. GDP measures total income paid to the factors of​ production, not production. C. The BEA does not include the value of new houses in GDP. D. GDP does not include household production or production from the underground economy.

D. GDP does not include household production or production from the underground economy.

Which of the following is a reason why the GDP is not a perfect measure of production? A. It doesn't include intermediate goods B. It doesn't include crime rates C. It doesn't include health measure like life expectancy D. It doesn't include household production and some black market activities

D. It doesn't include household production and some black market activities

The​ circular-flow diagram shows that​ ________ should equal​ ________. A. consumption; total expenditure B. investment; government expenditures C. taxes plus​ savings; net exports D. total​ expenditure; total income

D. total​ expenditure; total income

When is the unemployment rate in the US updated?

First Friday, 8:30 am

The labor force participation rate is calculated by?

Labor force/(Working-age population) x 100

What equation represents the relationship between GDP and the four major expenditure​ components?

Y = C + I + G + NX

How do you calculate unemployment rate?

number of unemployed/labor force x 100

Suppose a sandwich maker pays $3 for tomatoes and lettuce, $1 for bread, and $2 for ham. She then sells each ham sandwich for $10. How much does each sandwich contribute to GDP?

$10

Identify whether the following topics belong in microeconomics or​ macroeconomics: 1. How does the price of corn change if the price of wheat​ increase? ________ 2. Identify the best measurement of total output in the US economy. _______ 3. How will an increase in government spending impact the inflation​ rate? ___ 4. The most efficient market structure is perfect competition. _______

1. Microeconomics 2. Macroeconomics 3. Macroeconomics 4. Microeconomics

1. A person who is in between jobs but actively engaged in a job search is considered to be ________________________. 2. Experts in​ hand-drawn animation who remain unemployed due to the film​ industry's switch to​ computer-generated animation are considered to be _____________________. 3. When a company reduces production and employment during economic​ recessions, those employees who lose their jobs are generally considered to be ___________________________.

1. frictionally unemployed 2. structurally unemployed 3. cyclically unemployed

Which component of GDP is the largest? A. Consumption B. Investment C. Government purchases D. Net exports

A. Consumption

What are the four major components of expenditures in​ GDP?

A. Consumption, Intermediate​ Goods, Goods and​ Services, and Net Exports B. Consumption, Investment, Government​ Purchases, and Net Exports C. Consumption, Intermediate​ Goods, Government​ Purchases, and New Expenditures D. ​Consumption, Investment, Government​ Purchases, and​ Non-Durable Expenditures

In the​ circular-flow diagram, who supplies factors of production in exchange for​ income? A. households B. firms C. the government D. All of the above

A. households

The payment of government unemployment insurance reduces the severity of recessions by A. preventing a huge drop in income and spending for the unemployed. B. giving extra income to everyone and thus increasing consumption spending. C. prolonging the job search period for unemployed workers. D. adding to the level of frictional and structural unemployment.

A. preventing a huge drop in income and spending for the unemployed.

If the GDP deflator in 2012 has a value of​ 98.0, then A. prices have decreased 2 percent between the base year and 2012. B. the inflation rate in 2012 is 2 percent. C. the inflation rate in 2012 is​ -2 percent. D. prices have increased 9.8 percent between the base year and 2012.

A. prices have decreased 2 percent between the base year and 2012.

The type of unemployment most likely to result in hardship for the people who are unemployed is A. structural because this type of unemployment requires retraining to acquire new job skills. B. cyclical because people have to wait for a recession to end. C. frictional because people need to find a new job in the labor market. D. cyclical and frictional because these two types are closely related.

A. structural because this type of unemployment requires retraining to acquire new job skills.

Transfer payments are not included in GDP calculations because A. transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service. B. transfer payments do not include movements of income between countries so they should only be included in foreign country GDPs. C. transfer payments come from taxes and government expenditures so they are already included in government purchases. D. None of the above because transfer payments are included in GDP.

A. transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status? A. Structurally unemployed B. Frictionally unemployed C. Cyclically unemployed D. Seasonally unemployed

B. Frictionally unemployed

According to your required reading​ titled, What full employment really means​, the phenomenon​ short-term unemployment could become​ long-term unemployment is known​ as: A. slack B. hysteresis C. friction D. excessive aversion

B. Hysteresis

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called A. cyclical unemployment. B. structural unemployment. C. frictional unemployment. D. seasonal unemployment.

B. structural unemployment

Gross domestic product is best defined as A. the total value of all goods that can be found in a country. B. the market value of all final goods and services produced in a country during a period of​ time, typically one year. C. the total quantity of goods and services produced in a country during a period of time. D. the amount of all incomes earned by all citizens of a​ country, including those living overseas.

B. the market value of all final goods and services produced in a country during a period of​ time, typically one year.

What happens if we measure GDP by adding up the value of every good and service produced in the​ economy? A. This is the correct measure of nominal GDP but not real GDP. B. GDP is underestimated because of double counting. C. GDP is overestimated because of double counting. D. This is the correct measure of real GDP but not nominal GDP.

C. GDP is overestimated because of double counting.

Which of the following could cause nominal GDP to increase next year, but real GDP to decrease? A. The price level falls and the quantity of final goods and services produced falls B. The price level falls and the quantity of final goods and services produced rises C. The price level rises and the quantity of final goods and services produced falls D. The price level rises and the quantity of finals goods and services produced rises

C. The price level rises and the quantity of final goods and services produced falls

Gross Domestic Product​ (GDP) is A. the amount of income generated from​ wages, rents, and profits in a country during a period of time. B. the value of all expenditures made by households and firms in a country during a period of time. C. the market value of all final goods and services produced in a country during a period of time. D. the quantity of all final goods and services produced in a country during a period of time.

C. the market value of all final goods and services produced in a country during a period of time.

The natural rate of unemployment is A. the sum of cyclical unemployment and frictional unemployment. B. the sum of seasonal unemployment and cyclical unemployment. C. the sum of structural unemployment and frictional unemployment. D. the sum of structural unemployment and cyclical unemployment.

C. the sum of structural unemployment and frictional unemployment.

Which of the following is considered part of GDP? A. German-made car you bought at a local dealership B. Jeans you bought at Goodwill C. A government bond you purchased D. A new pair of jeans you bought at Macy's E. None of the above

D. A new pair of jeans you bought at Macy's

The nominal GDP of the U.S. in 2016 was approximately $18.6 trillion. This means that A. Total income in 2016 was around $18.6 trillion B. The value of output in 2016 was around $18.6 trillion C. Total spending in 2016 was around $18.6 trillion D. All of the above

D. All of the above

Indicate whether you agree or disagree with the following​ statement: ​"In years when people buy many shares of​ stock, investment will be high ​and, therefore, so will gross domestic product ​(GDP)." A. Agree: When investment is high, people must have more money to spend. ​ Therefore, GDP increases. B. Disagree: While GDP will be high in this​ case, it is the result of an increase in consumer expenditure on​ stocks, not investment spending. C. Agree: GDP​ = C​ + I​ + G​ + NX. ​ Therefore, as​ "I" (Investment) increases​, GDP increases. D. Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and​ inventory, not stock purchases.

D. Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and​ inventory, not stock purchases.

The difference between microeconomics and macroeconomics is A. microeconomics studies how individuals make decisions while macroeconomics studies how government makes decisions. B. macroeconomics studies smaller parts of the economy such as markets and​ individuals, while microeconomics studies the economy as a whole. C. microeconomics studies smaller parts of the economy such as GDP and​ inflation, while macroeconomics studies the economy as a whole. D. microeconomics studies smaller parts of the economy such as markets and​ individuals, while macroeconomics studies the economy as a whole.

D. Microeconomics studies smaller parts of the economy such as markets and​ individuals, while macroeconomics studies the economy as a whole.

How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment​ rate? A. The payments are costly and firms are forced to lay off workers. B. They increase the opportunity cost of job search. C. They are paid as long as the unemployed person remains unemployed. D. They decrease the opportunity cost of job search.

D. They decrease the opportunity cost of job search.

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available. You would be counted as A. underemployed. B. unemployed. C. part of the labor force. D. a discouraged worker.

D. a discouraged worker

Consider the effect of each of the following on the unemployment​ rate: 1. The minimum wage law A. increases cyclical unemployment in the economy. B. has a significant effect on the unemployment rate since a large part of the labor force earns the minimum wage. C. increases the unemployment rate among highly skilled workers. D. has only a small effect on the unemployment rate since only a small part of the labor force earns the minimum wage. 2. The effect of labor unions on overall unemployment is _____ since only a _____ percentage of the labor force outside the government is unionized. 3. An efficiency wage A. increases the unemployment rate since firms pay a​ higher-than-market wage that increases the quantity of labor supplied. B. decreases the unemployment rate since firms pay a​ lower-than-market wage that decreases the quantity of labor supplied. C. decreases the unemployment rate since it increases the labor productivity. D. has no impact whatsoever on the unemployment rate.

D. has only a small effect on the unemployment rate since only a small part of the labor force earns the minimum wage. small, small A. increases the unemployment rate since firms pay a​ higher-than-market wage that increases the quantity of labor supplied.

The​ circular-flow diagram shows that all sources of income are owned by A. corporations. B. landlords and foreigners. C. firms and government. D. households.

D. households

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

When the economy is at full​ employment, unemployment is equal to A. normal rate of unemployment minus abnormal rate of unemployment B. zero. C. cyclical unemployment minus seasonal unemployment D. the natural rate of unemployment.

D. the natural rate of unemployment.

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy? A.It fails to account for illegal activities. B. Discouraged workers are not considered unemployed. C. It does not account for inaccurate responses to the Current Population Survey. D. Underemployed people are considered employed. E. All of the above.

E. All of the above

Which type of unemployment does a recent graduate encounter most often?

Frictional

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

GDP will increase

Are imports bad for GDP?

No

How is GDP deflator calculated?

Nominal GDP/Real GDP x 100

The inflation rate for a given year is measured by taking the...

Percentage change in the price level from the previous year

Which type of unemployment deals with not having useful skills anymore?

Structural

What country do you believe has the highest GDP?

United States

Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. a. You purchase a new Ford Escape Hybrid from a Ford dealer. ___________ b. You purchase a 2013​ (preowned) Ford Escape Hybrid from a friend. ____________________ c. Ford purchases door handles for the Escape from an auto parts manufacturer in Indiana. __________________ d. Ford produces​ 1,000 Escapes in a factory in Missouri and ships them to a car dealer in​ Shanghai, China. ______________________ e. Ford purchases new machine tools to use in its Missouri Escape factory. _________________ f. The state of Missouri builds a new highway to help improve access to the Ford Escape plant. ___________________

a. Consumption expenditure b. Not included in GDP calculation c. Not included in GDP calculation d. Net export expenditure e. Investment expenditure f. Government expenditure

Assuming that inflation has occurred over​ time, what is the relationship between nominal GDP and real GDP in each of the following​ situations? a. In years after the base​ year, nominal GDP is ____________ real GDP. b. In the base​ year, nominal GDP is __________ real GDP. c. In years prior to the base​ year, nominal GDP is ___________ real GDP.

a. greater than b. equal to c. less than

Which of the following is considered to be a problem in using GDP as a measure of national ​well-being​? a. GDP does not include the value of goods and services produced in the underground economy b. Items included in U.S. GDP are measured in dollars c. GDP does not include the value of household production d. GDP is not adjusted for changes in the environment

d. GDP is not adjusted for changes in the environment