Econ 201 exam 2
Suppose the CPI last year is 121 and the CPI this year is 137. The correct method to calculate the inflation rate is
(137 - 121)*100=113.2
Labor force participation rate =
(labor force)/(working age population)*100
The real wage rate equals
(money wage rate)/(price level)
Calculate the percent change in nominal income
(old - new)/(old) *100
Which of the following means that the CPI overstates the actual inflation rate
1.) Outlet substitution bias 2.) New Good Bias 3.) Quality change bias 4.)All of the above!!!!!!!!!!!!!!!!*****$$$$$$
T/F Misery index = inflation rate - unemployment rate
False
T/F unlike cyclical unemployment, both frictional and structural unemployment rise during recessions and fall during expansions
False
GDP using the expenditure approach equals the sum of personal consumption expenditures plus
Gross private investment plus government expenditure on goods and services plus net exports of goods and services.
The marginal product of labor is diminishing because as labor hours
Increase, capital and technology are fixed.
The largest component of GDP in the INCOME APPROACH (ie. national income) is
Labor income (compensation of employees)
Which of the following will shift the loanable funds curve leftward
a decrease in disposable income
purchasing power parity prices
can be used to make more valid per capita GDP comparisons between one country between one country and another.
Economics became known as the dismal science because of the
classical growth theory prediction of subsistence wage rates in the long run
Saving by households
increases when the real interest rate rises
If the central bank (FED) increases the money supply
interest rates will fall
A recessionary gap means that short run macroeconomic equilibrium GDP
is less than full employment GDP
According to the new growth theory of paul romer
knowledge is not subject to diminishing returns
If the nominal interest rate is 10 percent and the inflation rate is 7 percent the real interest rate is approximately..
3 percent
Economic growth is measured by
Changes in real GDP
_______Economists believe that the economy is self regulating and will be at full employment
Classical
The commodity substitution bias is that
Consumers decrease the quantity they buy of goods whose relative price falls
T/F When the economy is at full employment the unemployment rate equals the natural unemployment rate
True
U3
Official unemployment
According to the Boskin Commission, the CPI
Overstates inflation by 1.1 percentage points per year
Labor productivity
Real GDP per hour of labor
T/F The Classical school focuses primarily on monetary policy and the Keynesian school focuses on fiscal policy
True
An assumption of the neoclassical theory of growth is that
all technological advancements are the the result of chance
The equilibrium real interest rate is determined by the
demand for loanable funds curve and the supply of loanable funds curve
A recession causes a decrease in the demand for housing, resulting in substantial layoffs in the construction industry. The people laid off
cyclical unemployment
net exports of goods and services equal the
exports of goods and services minus the imports of goods and services
Net investment equals
gross investment minus depreciation
According to the law of diminishing returns, an additional unit of
labor produces less output the the previous unit
U1
longterm unemployment
Gross domestic product is the total ______ produced within a country in a given time period.
market value of all final goods and services
The income approach measures GDP by adding together compensation of employees, proprietors' income, ___________.
net interest, rental income, and corporate profits.
Which growth theory models growth as a perpetual motion machine
new growth theory
Personal consumption expenditures include all of the following EXCEPT
new housing
The working age population is defined as
people over the age of 16 who are not in jail, hospitalized, or otherwise institutionalized.
The unemployment rate is the ____who are unemployed
percentage of people in the labor force
What is the classical growth theory
real GDP and population growth are inversely tied.
U2
real unemployment
Greater optimism about the expected profits from investment projects
shifts the demand for loanable funds curve rightward
an advance in technology shifts the production function upward and shifts the labor
supply curve rightward
The labor demand curve slopes downward because
the firm maximizes profits by hiring more labor when the real wage rate falls
At potential GDP
unemployment is at its natural rate