Econ 110 with al hambdi test 2

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2018, then the value of your grandfather's salary in 2018 dollars is approximately

$84775

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 decrease

To reduce the bias in the consumer price index, the Bureau of Labor Statistics

updates the market basket every two years, rather than every 10 years.

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

If an economy experiences deflation, the real interest rate

will be greater than the nominal interest rate

Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?

younger men are staying in school longer than in the past

Labor unions cause unemployment because the union contract wage is set

above the market wage causing a surplus of labor

Minimum wage laws cause unemployment because the legal minimum wage is set

above the market wage, causing labor demand to be less than labor supply

The labor force equals the number of people

employed plus unemployed

In the circular flow model, the value of total income for an economy ________ the value of total production.

equals

If Gladys sells her 2003 Jeep Cherokee for $3,500 in 2018, the sale of her car contributes $3,500 to 2018 GDP.

false

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.

false

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

false

Nominal GDP measures the value of all final goods and services at base-year prices.

false

Paying efficiency wages are a way for a company to cut costs and become more efficient, and are therefore lower than market wages.

false

The inflation rate measures the average prices of goods and services in the economy.

false

The natural rate of unemployment consists of frictional unemployment plus cyclical unemployment.

false

To obtain real average hourly earnings, nominal average hourly earnings are multiplied by the CPI.

false

Transfer payments are subtracted from national income to get to personal income.

false

The output of Mexican citizens who work in Texas would be included in the

gross national product of Mexico

Nominal GDP will increase

if either the price level or the quantity of goods and services produced rises.

A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will

increase GDP and decrease well-being in the economy.

The cost to firms of changing prices

is called a menu cost

If the GDP deflator is less than 100, then for that year, nominal GDP ________ real GDP.

is less than

The United States has ________ social insurance programs, and generally has a ________ unemployment rate, as compared to Canada and Western Europe.

less generous; lower

capital

manufactured goods used to make other goods and services

The purchase by a household in China of a CD produced in the United States is included in U.S.

net exports

The stated interest rate on a loan is the

nominal interest rate

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

not in the labor force

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ________ quality increases. This causes the CPI to ________ the cost of the market basket.

not; overstate

Full employment is not considered to be zero unemployment, because

people do not find jobs instantaneously

If the CPI changes from 125 to 120 between 2017 and 2018, how did prices change between 2017 and 2018?

prices decrease by 4%

If the GDP deflator is 142, by how much have prices changed since the base year?

prices will increase by 42%

The producer price index measures the prices that firms

receive for the goods and services they use at all stages of production

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.

risen; risen

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

rose 60% from the cost of the market basket in the base year.

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering

structural unemployment

The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect

that stock prices are more likely to fall

potential gdp

the level of real GDP attained when all firms are producing at capacity

labor productivity

the quantity of goods and services that can be produced by one worker or by one hour of work

when deflation occurs

the real interest rate is greater than the nominal interest rate.

An example of an intermediate good would be

the rims on a new car

During the month of May, 10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result

the unemployment rate fell

Why might firms pay wages that are above the equilibrium wage in a market?

to increase the productivity of their workers

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

true

If inflation expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.

true

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.

true

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?

3 percent

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?

475 million

If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is

5%

Which of the following describes the accuracy of the Consumer Price Index?

Changes in the CPI overstate the true rate of inflation.

Which of the following would increase the unemployment rate?

an increase in unemployment insurance payments

When actual inflation is less than expected inflation

borrowers lose and lenders gain

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm

Which of the following price indices comes closest to measuring the cost of living of the typical household?

consumer price index

The underground economy can be described as

economic activity that is hidden from the government to avoid taxes or because the activity is illegal.