ECON 1A Final Review Part 2

If nominal GDP is $2,000 billion and the GDP price index is 120, then real GDP is ________ billion.

$1667

Last year in Candamice, consumption expenditure was $20 billion, interest, rent, and profit were $2.5 billion, government expenditure on goods and services was $7 billion, net exports of goods and services was $5 billion, and investment was $2 billion. Hence total expenditure was

$34 billion

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals

$945,000

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate (in percent) equals

(241.2 - 231.4) / 231.4 x 100

Assume the U.S. population is 300 million. If 200 million people are of working age, 125 million are employed, and 15 million are unemployed, what is the size of the labor force?

140 million

If the GDP price index is 137, this value means that prices have increased

37 percent since the base year.

You borrow at a nominal interest rate of 10 percent. If the inflation rate is 4 percent, then the real interest rate is

6 percent

In August os 2013, the number of employed persons in the United States was 144.2 million, the number of unemployed persons was 11.3 million, and the number of persons not in the labor force was 90.5 million. What was the labor force participation rate in August of 2013?

63.2%

If the cost of the CPI market basket at current period prices is $275 and the cost of the CPI market basket at base period prices is $350, the CPI is

79

In fall 2009, the population of the United States was 301 million, the working-age population was 235.7 million, the total number of people employed and unemployed was 154.9 million, and the total number of unemployed people was 14.7 million. What is the unemployment rate?

9.5%

In the critical thinking model, GDP, the CPI, and U3 Unemployment formulas are

Concepts and Theories

If a wealthy woman marries her butler, quits paying him and does not hire a new butler, then

GDP definitely decreases

If the purchase of used goods was to be incorporated into measuring GDP using the expenditure approach, then

We will be counting the value of the used goods both at the time of their production and at the time of their re-sale

The CPI is a measure of the

average prices paid by consumers for a fixed basket of goods and services

A restaurant buys fish to offer as a daily menu special. The purchase of the fish by the restaurant is

an intermediate good

The commodity substitution bias is most likely to put ______ into the CPI and so ______ the inflation rate.

an upward bias; overstate

Which type of unemployment is a permanent healthy phenomenon in a dynamic economy?

frictional

Unemployment benefits in Western Europe are more generous than in the United States. As a result, ________ in the United States

frictional unemployment is lower

Unemployment rates in the U.S. during the past 60 years

have risen and fallen in a range between approximately 4 and 10 percent.

During a recession, cyclical unemployment ______ and real GDP ______.

increases; decreases

In the critical thinking model, the observations economists and the Bureau of Labor Statistics make through surveys but calculate GDP, the CPI, and U3 unemployment rate calculations are

information

Because a third of government outlays are linked directly to the CPI, as time passes, the CPI bias means that the government's outlays are

larger than needed to keep pace with the cost of living.

When the nominal price of a good increases over time, the real cost of buying the good

might increase, decrease, or stay the same depending on how much the CPI changed.

Mexico City is notorious for its excessive pollution. Mexico's measure of GDP is

not affected by the estimated value of the pollution's harm.

The percentage return on a loan expressed in terms of goods and services is the

real interest rate

In 2009 in the United States, consumption expenditure was $9,996 billion, investment was $1,559 billion, government expenditures on goods and services were $2,927 billion, and total exports were $1,492 billion. GDP equaled

some amount, but there is not enough information given to calculate GDP

If the Federal government expands its support of education and retaining workers who have been unemployed for a relatively long length of time, which type of unemployment would the education and retraining most likely be targeted?

structural

In part, the increase in the labor force participation rate in the United States over the last 50 years can be attributed to

technological change in the home increasing the time available for paid employment.

The income approach measures GDP by summing

the incomes paid to households for the resources they own

At the peak of a business cycle, the

unemployment rate is below the natural unemployment rate.

During a recession, the unemployment rate

usually increases but not necessarily to 10 percent or 25 percent

The CPI market basket

weighs the goods and services according to the budget of an average urban household.

The Federal Reserve's mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rate" is an example of ______ of public policy.

A purpose

Suppose a 23-year old graduate student is looking for a full-time job, but has to take a part-time job instead. He or she will be categorized in the Current Population Survey as ________ when calculating the unemployment rate.

Employed

Nominal GDP increases

If either prices and/ or total production increase.

U.S. net exports include

Sales of Hollywood movies to the rest of the world

Which type of unemployment arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs?

Structural

Your starting salary is $35,000 per year. After one year, you are given a raise that increases your nominal salary. Which of the following salaries would you prefer the most?

a $38,000 salary with a CPI of 104.0

A standard definition of recession is

a decrease in GDP that lasts for at least 6 months.

Structural unemployment usually lasts ______ period of time ______ unemployment

a longer; than frictional

Which of the following is NOT a source of bias in the CPI

iii. quantity change bias

If we use GDP to measure our standard of living, then our procedure is

inaccurate because our standard of living does not depend only on goods and services.

Since 1960, the labor force participation rate in the United States has

increased for women and decreased for men.

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007, when the CPI was 172, then

the price of the soda was greater in real value in 1970 than in 2007.

Which of the following is true?

the real interest rate can be negative.

As more women decide to work outside the home and therefore hire others to work around their home, GDP will increase by

the value of the output produced by the newly working women plus the value of any household work they are now hiring someone to perform.