Econ 2315 Quiz #1 Ch 1+2+3

Which of the following will cause an increase in the demand for​ labor? A. An increase in the productivity of workers. B. A reduction in the stock of capital. C. A decrease in the supply of labor. D. An increase in the real wage.

A. An increase in the productivity of workers.

What are the three approaches to measuring economic​ activity? A. the income​ approach, the expenditure​ approach, and the international approach B. the income​ approach, the expenditure​ approach, and the product approach C. the income​ approach, the international​ approach, and the product approach D. the international​ approach, the expenditure​ approach, and the product approach

B. the income​ approach, the expenditure​ approach, and the product approach

Since U.S. investment is generally higher than U.S. national​ saving: A. the U.S. current account balance is generally negative. B. U.S. national saving will rise in the future. C. the U.S. current account balance is generally positive. D. U.S. investment will fall in the future.

A. the U.S. current account balance is generally negative.

Which of the following fits the definition of a job from the gig​ economy? ​(Select all that​ apply) A. Selling items at a farmers market. B. Child care services. C. Selling used cars at a dealership. D. Driving for Uber. The Federal Reserve performed a study to find the number of people active in the gig​ economy, which of the following represents one of their​ findings? A. The study found that the percent of adults engaged in gig work declined from 2016 to 2017. B. The study found that a majority of all adults engaged in gig work in 2017. C. Less than​ 20% of gig workers said doing gig work was their main source of income in 2017. D. A majority of gig workers said they did gig work as their main source of income in 2017. The Federal Reserve finds that the gig economy is large and growing.

A. Selling items at a farmers market. + B. Child care services. + D. Driving for Uber. C. Less than​ 20% of gig workers said doing gig work was their main source of income in 2017.

Suppose the government levies a​ lump-sum tax on workers. Which of the following best explains the effect on the supply of​ labor? A. A​ lump-sum tax has only an income​ effect, so increasing the tax will cause the supply of labor to increase. B. A​ lump-sum tax has only a substitution​ effect, so increasing the tax will cause the supply of labor to decrease. C. A​ lump-sum tax has only an income​ effect, so increasing the tax will cause the supply of labor to decrease. D. A​ lump-sum tax has only a substitution​ effect, so increasing the tax will cause the supply of labor to increase. E. A​ lump-sum tax has both income and substitution​ effects, so the overall effect on the supply of labor is uncertain.

A. A​ lump-sum tax has only an income​ effect, so increasing the tax will cause the supply of labor to increase.

To prepare for this​ problem, read carefully the In Touch with Data and Research box on Developing and Testing an Economic Theory. ​ 1) Which of the following best describes the use of assumptions in the creation of economic​ theory? A. Assumptions should be simple but should also capture the most important aspects of the issue or problem. B. A theory​ should, as a​ rule, use as few assumptions as possible. C. Assumptions should be as complex as possible to reflect all aspects of the complicated issues they attempt to explain. D. None of the above are​ true--assumptions irreparably hurt the ability of theory to mirror a​ real-world issue. ​ 2) When an economist is conducting empirical​ analysis, she A. creates a mathematical model and tests it with hypothetical numeric data. B. makes provisional assumptions to get ready to test a theory. C. compares her written analysis with the writings of others on the same topic. D. compares​ real-world data with a​ theory's implications. ​3) Which of the following is true about what happens after a theory has been compared to​ real-world data? A. There is never a reason to make do with a theory that fits only somewhat well with​ real-world data B. If the theory fits poorly with​ real-world data, it is best to move on to an entirely new research question before attempting to revise the failed theory. C. If the theory fits well with the​ data, you can use that theory to make predictions. D. If the theory fits poorly with the​ data, the researcher should keep trying to find a new data set that matches well with the theory and gives him the results he was hoping​ for, even if this requires using several different data sets.

A. Assumptions should be simple but should also capture the most important aspects of the issue or problem. D. compares​ real-world data with a​ theory's implications C. If the theory fits well with the​ data, you can use that theory to make predictions.

Full-employment output is A. the level of output that firms supply when wages and prices in the economy have fully adjusted. B. the level of output that firms supply when capital is fully employed. C. the level of output that firms supply when the unemployment rate is zero. D. the level of output that firms supply when the inflation rate is zero. How is​ full-employment output affected by an increase in labor​ supply? A. Full-employment output will not change. B. Full-employment output will increase. C. Full-employment output will decrease. D. The effect on​ full-employment output cannot be determined. How is​ full-employment output affected by a beneficial supply​ shock? A. Full-employment output will decrease. B. Full-employment output will not change. C. Full-employment output will increase. D. The effect on​ full-employment output cannot be determined.

A. the level of output that firms supply when wages and prices in the economy have fully adjusted. B. Full-employment output will increase. C. Full-employment output will increase.

An unemployment spell is a period of time that a person is continually unemployed​, and unemployment duration is the length of time that a person is continuously unemployed. The duration of most unemployments spells is short​, but most people who are unemployed at a particular time are experiencing spells with long durations. This seemingly contradictory observation about unemployment spells and duration can be explained because A. there are many people unemployed very briefly and a few people who are unemployed for long periods of time. B. in​ reality, there are very few people who have short spells of unemployment. C. there are many people who are unemployed for very long periods of time. D. unemployment statistics do not correctly measure spells and duration of unemployment.

A. there are many people unemployed very briefly and a few people who are unemployed for long periods of time.

The idea of the invisible hand is that A. with free markets and individuals acting in their best​ interests, the economy will function well. B. since prices adjust​ slowly, it is necessary for governments to intervene in markets to give them a helping hand. C. the government must invisibly guide markets to achieve the best outcomes for the economy. D. there is no role for the goverment in a market economy.

A. with free markets and individuals acting in their best​ interests, the economy will function well.

Keynes believed that the classical model was inconsistent with​ real-world data because A. in the real​ world, markets do not clear without government intervention. B. in the real​ world, individuals do not act in their own self interest. C. in the real​ world, unemployment persists for long periods of time. D. in the real​ world, prices are completely flexible.

C. in the real​ world, unemployment persists for long periods of time.

​Full-employment output is A. the level of output that firms supply when the unemployment rate is zero. B. the level of output that firms supply when capital is fully employed. C. the level of output that firms supply when the inflation rate is zero. D. the level of output that firms supply when wages and prices in the economy have fully adjusted. How is​ full-employment output affected by an increase in labor​ supply? A. Full-employment output will not change. B. Full-employment output will increase. C. Full-employment output will decrease. D.The effect on​ full-employment output cannot be determined. How is​ full-employment output affected by a beneficial supply​ shock? A. Full-employment output will not change. B. Full-employment output will increase. C. Full-employment output will decrease. D. The effect on​ full-employment output cannot be determined.

D. the level of output that firms supply when wages and prices in the economy have fully adjusted. B. Full-employment output will increase. B. Full-employment output will increase.

A​ nation's gross domestic product​ (GDP) is defined as the market value of final goods and services newly produced within a nation during a fixed period of time. There are many practical issues that arise in measuring economic activity as defined above. Which is NOT one of​ them? A. Capital goods are those that are used to produce other goods but not used up in the same period. Hence they are intermediate goods but classified as final goods. B. Some​ non-market goods and​ services, such as activities in the underground​ economy, are estimated and partially incorporated in official GDP measure. C. The measure leaves out the economic costs of environmental degradation in the calculation of​ firms' contribution to​ output, creating an upward bias. D. There are some useful goods and services that are not sold in formal markets and so they are excluded from the​ measure, creating a downward bias.

A. Capital goods are those that are used to produce other goods but not used up in the same period. Hence they are intermediate goods but classified as final goods.

What is structural​ unemployment? A. Long-term, chronic unemployment that exists even when the economy is not in a recession. B. The difference between the actual rate of unemployment and the natural rate of unemployment. C. Unemployment arising as workers search for suitable jobs and firms search for suitable workers. D. Temporary unemployment due to recessions. What are the two principal sources of structural​ unemployment? A. workers with limited​ skills, and​ long-term declines in some industries B. sticky wages that prevent the labor market from reaching​ equilibrium, and minimum wages C. recessions and inflationary periods D. the time it takes to find a good job​ match, and the mismatch of jobs and skills

A. Long-term, chronic unemployment that exists even when the economy is not in a recession. A. workers with limited​ skills, and​ long-term declines in some industries

Which is NOT a correct statement about the national income​ accounts? A. The income approach to measuring economic activity provides a figure that is equal to the sum of revenues by the producers of​ output, which in turn is equivalent to that of the product approach. B. The product approach to measuring economic activity is calculated as the sum of the value added by producers. C. There are three approaches to measuring current economic​ activity: the product​ approach, the income​ approach, and the expenditure approach. In​ principle, the three approaches give the same answer. D. The alternative approaches to measuring economic activity are useful because each approach gives a different perspective on the economy.

A. The income approach to measuring economic activity provides a figure that is equal to the sum of revenues by the producers of​ output, which in turn is equivalent to that of the product approach.

Can average labor productivity fall even though total output is​ rising? A. Yes, if employment rises faster than output.. B. No, average labor productivity cannot fall if total output is rising. C. Yes, if output rises faster than employment. Which of the following cases would result in increased total output but a higher unemployment​ rate? (Check all that​ apply) A. The labor force decreases by​ 1%. The level of employment decreases by​ 3%. Labor productivity increases by​ 5%. B. The labor force​ doesn't change. The level of employment increases by​ 2%. Labor productivity increases by​ 5%. C. The labor force​ doesn't change. The level of employment decreases by​ 5%. Labor productivity increases by​ 3%. D. The labor force increases by​ 7%. The level of employment increases by​ 5%. Labor productivity decreases by​ 3%.

A. Yes, if employment rises faster than output. A. The labor force decreases by​ 1%. The level of employment decreases by​ 3%. Labor productivity increases by​ 5%. + D. The labor force increases by​ 7%. The level of employment increases by​ 5%. Labor productivity decreases by​ 3%.

The production function slopes​ upward, but its slope declines from left to right. It slopes upward because A. additional units of input lead to additional output. B. prices rise as output increases. C. supply shocks cause output to increase. D. supply shocks cause output to decrease. Its slope declines from left to right because A. there is diminishing marginal productivity because at least one input is fixed. B. the quality of the labor force declines as more workers are employed. C. there are decreasing returns to scale in the production of all goods. D. the economy produces less as prices increase.

A. additional units of input lead to additional output. A. there is diminishing marginal productivity because at least one input is fixed.

In November of​ 2007, the Fed announced that it would increase the frequency of its forecasts of inflation and other variables from 2 times per year to 4 times per year. At its FOMC​ meetings, the Fed reports A. both the overall PCE inflation rate and core PCE inflation rate. B. the CPI inflation rate. C. the overall PCE inflation rate. D. the core PCE inflation rate. Using the data in the​ figure, which data series displays the least amount of​ volatility? A. Core PCE inflation. B. Both series exhibit about the same amount of volatility. C. Overall PCE inflation.

A. both the overall PCE inflation rate and core PCE inflation rate. A. Core PCE inflation.

National wealth is equal to A. domestic physical assets plus net foreign assets. B. domestic physical assets plus private saving plus domestic investment. C. domestic physical assets minus net foreign assets. D. domestic physical assets plus net foreign assets minus the government budget deficit. E. domestic physical assets plus net foreign assets plus private saving.

A. domestic physical assets plus net foreign assets.

How have total output and output per worker changed over time in the United​ States? Total output has​ ________ and output per worker has​ ________. A. grown​ strongly; grown strongly B. declined​ slightly; declined slightly C. grown​ strongly; declined slightly D. declined​ slightly; declined strongly These changes have affected the lives of typical people by leading to A. a lower standard of living. B. a higher standard of living. C. greater inflation. D. lower standards of living in other countries.

A. grown​ strongly; grown strongly B. a higher standard of living.

​1.) The mean duration of unemployment usually rises during and immediately following a recession and then falls after an expansion has been underway for a time. ​2.) Compared to previous​ recessions, the mean duration of unemployment during the 2007dash-2009 recession A. increased—rising to a level about twice its typical level. B. decreased—falling to a level almost half its typical level. C. followed the same trend as previous recessions. D. due to the housing and financial crisis cannot be compared to other recessions. ​ 3.) According to the​ article, what explains this change in unemployment duration during the 2007-2009 ​recession? A. An extension of unemployment benefits from 26 weeks to up to 99 weeks. B. A decrease in​ wealth, which led to a decrease in demand for consumer goods. C. A change in the measurement data used to calculate unemployment duration. D. All of the above are possible explanations.

A. increased—rising to a level about twice its typical level. D. All of the above are possible explanations.

The definition of an inflationary period is a A. period in which average prices are rising over time. B. one-time increase in the price level. C. one-time decrease in the price level. D. period in which average prices are falling over time. Before World War​ II, consumer prices in the United States generally rose during wars and fell during peacetime. After World War​ II, consumer prices in the United States have generally increased steadily

A. period in which average prices are rising over time.

What problem does government control of prices create for economists attempting to measure a​ country's GDP? A. prices do not measure market value B. inflation is biased upwards C. the government sets prices systematically too high D. taxes are not accounted for properly In countries in which people grow their own​ food, make their own​ clothes, and provide services for one another within a family or village​ group, why might official GDP figures underestimate these​ nations' actual​ GDPs? A. such goods and services are not sold on the​ market, making their value difficult to measure B. the lack of prices for such goods and services leads to an upward bias in inflation and a downward bias in GDP C. since no one pays for the goods and​ services, they are worthless D. such goods and services are undervalued in the market

A. prices do not measure market value A. such goods and services are not sold on the​ market, making their value difficult to measure

True or false. A worker cannot be included in more than one measure of unemployment. A. True B. False Will the​ U-4 measure of unemployment always be equal to or greater than​ U-3? A. Yes, because​ U-4 includes the same people as​ U-3 plus marginally attached and discouraged workers. B. No, if the​ U-3 measure contains an unusually large number of structurally unemployed​ workers, U-4 will be lower. C. No, it's possible for​ U-4 to be lower than​ U-3 if the number of discouraged workers is very low. D. Yes, because​ U-4 includes the same people as​ U-3 plus discouraged workers. John has been looking for work for the past 6 months and recently accepted a​ part-time job, which is​ not, for economic​ reasons, ideal. Although he wants and needs a​ job, he is considering quitting his​ part-time job and giving up his job search. Which of the following statements is​ false? A. John is considered as employed in​ U-1. B. John would be marginally attached if he quit his​ part-time job. C. Using the​ U-4 measure of​ unemployment, John would not be considered unemployed. D. John is considered as unemployed in​ U-3.

B. False D. Yes, because​ U-4 includes the same people as​ U-3 plus discouraged workers. D. John is considered as unemployed in​ U-3.

Intermediate goods and services are used up in the production of other goods and services​, and include items such as grain, crude oil, and lumber. Why is the distinction between intermediate and final goods important for measuring​ GDP? A. Intermediate goods do not go through markets and thus do not have market value. B. GDP only includes final​ goods, in order to avoid double counting. C. Intermediate goods have no value until they are used in production. D. Only final goods are part of the production of a nation.

B. GDP only includes final​ goods, in order to avoid double counting

Why is the classical model of the labor market discussed in this chapter not very useful for studying​ unemployment? A. It assumes that the production function has a constant slope. B. It assumes that any worker who wants to work at the equilibrium real wage can find a job. C. It assumes that the number of workers employed has no effect on output. D. It assumes that the labor market is not in equilibrium.

B. It assumes that any worker who wants to work at the equilibrium real wage can find a job.

In​ 2002, President George W. Bush imposed tariffs on certain types of imported steel. He argued that foreign steel producers were dumping their steel on the U.S. market at low prices. The foreign steel producers were able to sell steel cheaply because they received subsidies from their governments. The Bush administration argued that the influx of steel was disrupting the U.S.​ economy, harming the domestic steel​ industry, and causing unemployment among U.S. steel workers.​ _____ economists are most likely to be sympathetic to these​ claims, because they​ _____ government intervention in the economy. A. Keynesian; oppose B. Keynesian; favor C. Classical; oppose D. Classical; favor

B. Keynesian; favor

Saving is a flow variable​, while wealth is a stock variable. Which of the following best describes the relationship between saving and​ wealth? A. Wealth is a flow into the stock of saving. B. Saving is a flow into the stock of wealth. C. Saving is a flow out of current​ income, but wealth is a flow into current income. D. Saving and wealth are unrelated variables.

B. Saving is a flow into the stock of wealth.

The CPI is calculated as A. The current cost of a fixed market basket of producer goods divided by prices of the same goods in a base year multiplied by 100. B. The current cost of the basket of consumer items divided by the cost of the same basket of items in the reference base period multiplied by 100. C. The prices of all goods that are part of GDP divided by prices of the same goods in a base year multiplied by 100. D. The prices of a changing market basket of consumer goods divided by prices of similar goods in a base year multiplied by 100. E. Nominal GDP divided by real GDP multiplied by 100. Which of the following is a reason why CPI inflation may overstate true​ inflation? A. The CPI does not include the prices of intermediate goods and raw materials. B. The CPI does not account for substitution away from relatively more expensive goods to relatively cheaper goods. C. The CPI measures quantities of​ goods, not prices of​ goods, and thus does not measure inflation accurately. D. The CPI includes imported​ goods, which are not relevant to domestic inflation.

B. The current cost of the basket of consumer items divided by the cost of the same basket of items in the reference base period multiplied by 100. B. The CPI does not account for substitution away from relatively more expensive goods to relatively cheaper goods.

A technological breakthrough raises a​ country's total factor productivity A by​ 10%. How does this change affect the graphs of both the production function relating output to capital and the production function relating output to​ labor? A. The graphs of both production functions shift downward. B. The graphs of both production functions shift upward. C. The graph of the production function relating capital to output shifts upward and the graph of the production function relating labor to output shifts downward. D. The graph of the production function relating capital to output shifts downward and the graph of the production function relating labor to output shifts upward. A​ 10% increase in A will increase the MPK by 10% and increase the MPN by 10%.

B. The graphs of both production functions shift upward.

Okun's law states that the gap between output and​ full-employment output increases by​ 2% for each​ 1% that the unemployment rate increases. Why does a​ 1% increase in unemployment lead to twice as large an effect on​ output? A. If firms are employing fewer​ workers, they must also be choosing to produce lower output due to recession and a falling price level. B. When cyclical unemployment is​ rising, other factors such as the labor force and worker hours tend to be​ falling, further reducing output. C. With fewer​ workers, the marginal productivity of labor is​ lower, and thus output is lower. D. According to​ Okun's law, every worker produces two units of output.

B. When cyclical unemployment is​ rising, other factors such as the labor force and worker hours tend to be​ falling, further reducing output.

The correct interest rate for studying most economic decision is the expected real interest rate. A problem with using the expected real interest rate to study economic decisions is​ that: A. people do not generally make informed economic decisions. B. it is difficult to determine what the​ public's expected rate of inflation is. C. interest rates are important to banks and businesses but not to consumers. D. interest rates change​ frequently, so the public cannot form stable expectations.

B. it is difficult to determine what the​ public's expected rate of inflation is.

Keynesians think that wages and prices adjust​ _____ when the economy is out of equilibrium. If the Keynesian theory is​ correct, unemployment​ _____. A. slowly; will not persist B. slowly; will persist C. rapidly; will persist D. rapidly; will not persist

B. slowly; will persist

Classical economists believe that the best way to solve the problem of high unemployment is A. increases in the money supply to increase investment. B. to do​ nothing; the economy will rapidly adjust on its own. C. increases in taxes to reduce consumption D. increases in government spending to stimulate demand.

B. to do​ nothing; the economy will rapidly adjust on its own.

According to the​ text, which of the following conditions is necessary for a theory to be​ useful? A. The theory must be applicable to all situations found in the real world. B. The​ theory's assumptions must be applicable to all economic models. C. It must have implications that can be tested by empirical analysis. D. It must include all markets. E. All of the above conditions must hold for a theory to be useful.

C. It must have implications that can be tested by empirical analysis.

Which of the following best explains why the​ profit-maximizing level of employment for a firm occurs when the marginal revenue product of labor ​(MRPN​) equals the nominal wage ​(W​)? A. At that level of​ employment, the firm has the optimal quantity of capital and thus is maximizing profit. B. At that level of​ employment, further increases in employment would reduce total output. C. At that level of​ employment, the marginal benefit from the last worker is equal to the marginal cost of the last worker. D. At that level of​ employment, the​ firm's output is maximized and thus it earns the highest possible profit. How can this​ profit-maximizing condition be expressed in real​ terms? In the equations​ below, MPN is the marginal product of​ labor, MRPN is the marginal revenue product of​ labor, W is the nominal​ wage, and P is the price level. A. MPN​ = P/W B. MPN​ = W C. MPN​ = W/P D. MRPN​ = W/P E. MRPN​ = P/W

C. At that level of​ employment, the marginal benefit from the last worker is equal to the marginal cost of the last worker. C. MPN​ = W/P

National income and product data are generally revised. What effects would the following revisions have on​ consumption, investment, government​ purchases, net​ exports, and​ GDP? It is discovered that consumers bought​ $6 billion more furniture than previously thought. This furniture was manufactured during the current year in North Carolina. A. Investment increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. B. Investment increases by​ $6 billion and GDP increases by​ $6 billion. C. Consumption increases by​ $6 billion and GDP increases by​ $6 billion. D. Consumption increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. E. None of the above answers are correct. It is discovered that consumers bought​ $6 billion more furniture than previously thought. This furniture was manufactured during the current year in Sweden. A. Consumption increases by​ $6 billion and GDP increases by​ $6 billion. B. Consumption increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. C. Investment increases by​ $6 billion and GDP increases by​ $6 billion. D. Investment increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. E. None of the above answers are correct. It is discovered that businesses bought​ $6 billion more furniture than previously thought. This furniture was manufactured during the current year in North Carolina. A. Investment increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. B. Consumption increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. C. Consumption increases by​ $6 billion and GDP increases by​ $6 billion. D. Investment increases by​ $6 billion and GDP increases by​ $6 billion. E. None of the above answers are correct. It is discovered that businesses bought​ $6 billion more furniture than previously thought. This furniture was manufactured during the current year in Sweden. A. Investment increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. B. Consumption increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. C. Consumption increases by​ $6 billion and GDP increases by​ $6 billion. D. Investment increases by​ $6 billion and GDP increases by​ $6 billion. E. None of the above answers are correct.

C. Consumption increases by​ $6 billion and GDP increases by​ $6 billion. B. Consumption increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change. D. Investment increases by​ $6 billion and GDP increases by​ $6 billion. A. Investment increases by​ $6 billion, imports increase by​ $6 billion, and GDP does not change.

Which of the following is a true statement about economic​ modeling? A. A theory can be useful even if it cannot be tested by empirical analysis. B. A theory can only be useful if it fits the data very well. C. Economists often disagree on the best way to model a given economic situation. D. Macroeconomic research is done only at colleges and​ universities, not in the private sector.

C. Economists often disagree on the best way to model a given economic situation.

A temporary increase in the wage rate is likely to increase the amount of labor supplied. This is because for temporary wage​ changes, the income effect is likely to be less than the substitution effect. Which of the following statements best states the effect of a permanent increase in the real​ wage? A. For a permanent wage​ increase, the income effect is likely to exceed the substitution​ effect, thus the quantity of labor supplied will rise. B. For a permanent wage​ increase, the income effect is likely to be less than the substitution​ effect, thus the quantity of labor supplied will rise. C. For a permanent wage​ increase, the income effect is likely to exceed the substitution​ effect, thus the quantity of labor supplied will fall. D. For a permanent wage​ increase, the income effect is likely to be less than the substitution​ effect, thus the quantity of labor supplied will fall.

C. For a permanent wage​ increase, the income effect is likely to exceed the substitution​ effect, thus the quantity of labor supplied will fall.

How does GDP differ from​ GNP? A. GDP and GNP both measure​ production, so there is no difference between them. B. GDP measures production but GNP measures income. C. GNP measures the output of factors of production owned by a​ nation, while GDP measures production taking place in a nation. D. GDP measures national​ productivity, while GNP measures both national and international productivity. If a country employs many foreign​ workers, GDP is likely to be higher than GNP.

C. GNP measures the output of factors of production owned by a​ nation, while GDP measures production taking place in a nation.

What is national​ wealth? A. National wealth is a​ country's domestic physical and financial assets minus its net foreign assets. B. National wealth is a​ country's domestic physical and financial assets plus its net foreign assets. C. National wealth is a​ country's domestic physical assets plus its net foreign assets. D. National wealth is a​ country's domestic physical assets minus its net foreign assets. Why is national wealth​ important? A. The exchange rate depends on one​ country's wealth compared to another​ country's wealth. B. The​ long-run economic​ well-being of a country depends on wealth. C. Interest rates are​ lower, the greater a​ country's wealth. D. Wealth is more important than income in affecting consumption. How is national wealth linked to national​ saving? A. National wealth is the change in private national saving minus government saving. B. National saving is the change in private national wealth minus government wealth. C. National saving is the flow of additions to the stock of national wealth. D. National wealth is the flow of additions to the stock of national saving.

C. National wealth is a​ country's domestic physical assets plus its net foreign assets. B. The​ long-run economic​ well-being of a country depends on wealth. C. National saving is the flow of additions to the stock of national wealth.

1.) Say that Americans view butter and cream cheese as perfect substitutes​ - in other​ words, they are completely indifferent between them. If the price of butter increases greatly while the price of cream cheese stays the​ same, Americans will likely A. buy more cream​ cheese, the price of the market basket will look too​ high, and inflation will look lower than it really is. B. buy more cream​ cheese, the price of the market basket will look too​ low, and inflation will look higher than it really is. C. buy more cream​ cheese, the price of the market basket will look too​ high, and inflation will look higher than it really is. D. buy more​ butter, the price of the market basket will look too​ high, and inflation will look higher than it really is. ​ 2.) Consider a common medical procedure included in the market basket of the CPI. Over time the price of this procedure increases​ significantly, but so does the quality of the procedure​ (in terms of reduced mortality rates and decreased pain and recovery time​ afterward). If the CPI does not include accurate information about quality in its market basket A. the procedure will seem less expensive in real terms than it really is and inflation will be overstated. B. the procedure will seem more expensive in real terms than it really is and inflation will be understated. C. the procedure will seem more expensive in real terms than it really is and inflation will be overstated. D. the procedure will seem less expensive in real terms than it really is and inflation will be understated. ​ 3.) Which of the following is a potential problem if official measures of the inflation rate make it look higher than it is in​ reality? A. Social Security recipients will not receive enough money to keep up with inflation. B. The economy will look better than it actually​ is, giving citizens a false sense of security. C. The government deficit will rise faster because the government will spend more than necessary on public programs. D. All of the above.

C. buy more cream​ cheese, the price of the market basket will look too​ high, and inflation will look higher than it really is. C. the procedure will seem more expensive in real terms than it really is and inflation will be overstated. C. The government deficit will rise faster because the government will spend more than necessary on public programs.

The components of total spending are A. consumption, imports,​ investment, and the money supply. B. consumption, investment,​ exports, and imports. C. consumption, investment, government​ spending, and net exports. D. investment, intermediate​ goods, and factors of production. Why are imports subtracted when GDP is calculated in the expenditure​ approach? A. They are not part of consumption in the domestic economy. B. They do not go through formal markets and thus cannot be counted in GDP. C. They are valued in currencies other than the domestic currency. D. They are produced​ abroad, and GDP only counts domestic production.

C. consumption, investment, government​ spending, and net exports. D. They are produced​ abroad, and GDP only counts domestic production.

Since the​ 2007-2009 recession labor participation rates have declined​, over that same period participation rates among​ prime-age workers​ (aged 25-54) have A. risen significantly. B. declined significantly. C. declined slightly. Other than the​ recession, what factors could have caused this change in overall labor participation​ rates? ​(Select all that​ apply) A. An increase in the number of people retiring. B. An increase in the number of discouraged workers. C. An increase in the number of people claiming disability. D. An increase in the number of people becoming working age. ​Overall, since the​ 1960's prime-age labor force participation rates have increased​, this was driven by changes in women's participation rates. If a country provides benefits that are family friendly​ (such as paid parental​ leave) there would likely be A. a decrease in the labor force participation​ rate, especially among men. B. an increase in the labor force participation​ rate, especially among men. C. an increase in the labor force participation​ rate, especially among women. D. a decrease in the labor force participation​ rate, especially among women.

C. declined slightly. A. An increase in the number of people retiring. + B. An increase in the number of discouraged workers. + C. An increase in the number of people claiming disability. C. an increase in the labor force participation​ rate, especially among women.

According to​ Okun's law, if unemployment increases by 1​%, the gap between actual output and​ full-employment output will A. decrease by 2​%. B. decrease by 1%. C. increase by 2​%. D. not change. E. increase by 1​%.

C. increase by 2​%.

Keynesian economists believe that the best way to solve the problem of high unemployment is A. increases in the money supply to increase investment. B. to do​ nothing; the economy will rapidly adjust on its own. C. increases in government spending to stimulate demand. D. increases in taxes to reduce consumption.

C. increases in government spending to stimulate demand.

Macroeconomic forecasting is mainly concerned with predicting what will happen to the economy in the future. According to the​ text, there are relatively few economists focused on economic forecasting because A. there is no value in economic​ forecasting, because it is not perfectly accurate. B. economic analysis of the current economy is more valuable and important. C. it is very​ difficult, because it is impossible to take into account all factors that impact future trends. D. economic research into how the economy works is more valuable and important.

C. it is very​ difficult, because it is impossible to take into account all factors that impact future trends.

The main steps in developing and testing an economic model or theory are each of the following EXCEPT A. state the research question. B. make provisional assumptions that describe the economic setting and the behavior of the economic actors. C. prove that the assumptions are valid. D. work out the implications of the theory. E. conduct an empirical analysis to compare the implications of the theory with the data. F. evaluate the results of your comparisons. The criteria for a useful theory or model are each of the following EXCEPT A. it has reasonable and realistic assumptions. B. it covers all possible situations. C. it is understandable and manageable enough for studying real problems. D. its implications can be tested empirically using​ real-world data. E. its implications are consistent with the data.

C. prove that the assumptions are valid. B. it covers all possible situations.

Goods and services are counted in GDP at market value A. so that price inflation can be accurately measured. B. because it is the most accurate measure of quantities of all goods produced. C. so that different types of goods and services can be added together. D. because there is no other way to count production. A problem in using market values to measure production is that A. there may be unemployment in some markets. B. market values of products are not good measures of production. C. some goods and services are not sold in formal markets. D. market values of products are not good measures of inflation.

C. so that different types of goods and services can be added together. C. some goods and services are not sold in formal markets.

What is the marginal product of labor ​(MPN​)? A. the additional amount of output produced when one unit of capital and one unit of labor is added. B. the additional amount of output produced when one unit of capital is added. C. the additional amount of output produced when one unit of labor is added. D. the total amount of output produced when an additional unit of labor is added. How is the MPN curve related to labor​ demand? A. The MPN curve is identical to the labor demand curve. B. The MPN curve multiplied by the price level is the labor demand curve. C. The MPN curve is not related to the labor demand curve. D. The MPN curve divided by the price level is the labor demand curve.

C. the additional amount of output produced when one unit of labor is added. A. The MPN curve is identical to the labor demand curve.

What is a business​ cycle? A. the​ long-run growth trend of the economy B. the​ short-run movements​ (inflations and​ deflations) of prices C. the​ short-run movements​ (expansions and​ recessions) of economic activity D. the relationship between political activity and economic activity The unemployment rate increases during recessions and decreases during​ expansions, and never reaches zero

C. the​ short-run movements​ (expansions and​ recessions) of economic activity

Which of the following causes the aggregate supply of labor to shift to the​ right? A. A decrease in the participation rate. B. A decrease in the​ working-age population. C. An increase in the wealth of workers. D. A decrease in the expected future real wage.

D. A decrease in the expected future real wage.

Assuming the production function is Y = AK^.3 x N^.7, what would happen to output if the quantity of capital and labor both​ doubled? A. Output would increase to more than double its original level. B. There would be no change in output. C. Output would increase to less than double its original level. D. Output would increase to double its original level. Assuming the production function is Y = AK^.3 x N^.7​, what would happen to output if total factor​ productivity, A​, ​doubled? A. Output would increase to less than double its original level. B. Output would increase to more than double its original level. C. There would be no change in output. D. Output would increase to double its original level. Assuming the production function is Y = AK^.3 x N^.7, what would happen to output if total factor​ productivity, A​, the quantity of​ capital, and the quantity of labor all​ doubled? A. Output would increase to more than double its original level. B. There would be no change in output. C. Output would increase to double its original level. D. Output would increase to less than double its original level.

D. Output would increase to double its original level. D. Output would increase to double its original level. A. Output would increase to more than double its original level.

Which of the following statements is an incorrect description of the difference between the CPI price index and PCE price​ index? A. The weights used on various consumer goods and services items are different. B. The formulas used to calculate the indexes are different. C. The PCE price index covers different items than the CPI price index. D. The PCE price index is subject to substitution​ bias, while the CPI price index is not.

D. The PCE price index is subject to substitution​ bias, while the CPI price index is not.

​Okun's law states​ that: A. The gap between output and​ full-employment output increases by​ 3% for each​ 1% that the unemployment rate increases. B. The gap between output and​ full-employment output increases by​ 1% for each​ 2% that the unemployment rate increases. C. The gap between output and​ full-employment output increases by​ 3% for each​ 2% that the unemployment rate increases. D. The gap between output and​ full-employment output increases by​ 2% for each​ 1% that the unemployment rate increases.

D. The gap between output and​ full-employment output increases by​ 2% for each​ 1% that the unemployment rate increases.

For the purposes of assessing an​ economy's growth​ performance, the more important statistic is real GDP. Real GDP is a better measure of economic growth than nominal GDP because A. an increase in nominal GDP does not correctly measure market values of production in the economy. B. an increase in nominal GDP only shows increases in prices. C. an increase in nominal GDP only shows increases in output. D. an increase in nominal GDP may show an increase in prices rather than an increase in output.

D. an increase in nominal GDP may show an increase in prices rather than an increase in output.

Each of the following is a principal professional activity of macroeconomists EXCEPT A. macroeconomic research. B. macroeconomic data development. C. macroeconomic analysis. D. analyzing a​ firm's pricing decisions. E. forecasting key macroeconomic variables.

D. analyzing a​ firm's pricing decisions.

Private saving is equal to A. government spending minus taxes. B. income minus consumption minus taxes plus government spending. C. income minus consumption. D. disposable income minus consumption. National saving is equal to A. government saving plus private saving. B. the same as government saving. C. the same as private saving. D. government saving plus private saving plus capital inflow from abroad.

D. disposable income minus consumption. A. government saving plus private saving.

Which of the following is not a use of an​ economy's private​ saving? A. financing the government budget deficit B. financing investment in new​ capital, houses, and inventory C. lending to foreigners D. financing consumption E. All of the above are uses of an​ economy's private saving

D. financing consumption

You are informed that you have won​ $3,000,000 in the New Jersey State​ Lottery, to be paid to​ you, in​ total, immediately. Which of the following best explains how this transaction would be recorded under the expenditure approach to calculating​ GDP? A. a​ $3,000,000 increase in consumption and a​ $3,000,000 increase in government spending. B. a​ $3,000,000 increase in domestic value added. C. ​$3,000,000 increase in consumption. D. no change in GDP. E. a​ $3,000,000 increase in wages. ​ Now, the New Jersey state government pays you an additional​ $5,000 fee to appear in a TV commercial publicizing the state lottery. How would this change your​ answer? A. $5,000 in consumption. B. $5,000 in government spending. C. $5,000 in advertising services. D. no change in GDP. E. $5,000 in investment.

D. no change in GDP. B. $5,000 in government spending.

A beneficial supply shock A. shifts the graph of the production function downward. B. occurs if total factor productivity declines. C. occurs if the price of oil rises. D. shifts the graph of the production function upward. A common​ _____ is a rise in the price of oil. A. beneficial supply shock. B. adverse supply shock. C. beneficial demand shock. D. adverse demand shock. Suppose an adverse supply shock reduces the marginal product of labor for each quantity of labor. As a​ result, A. the labor demand curve shifts up. B. the labor supply curve shifts down. C. the labor supply curve shifts up. D. the labor demand curve shifts down.

D. shifts the graph of the production function upward. B. adverse supply shock. D. the labor demand curve shifts down.

The unemployment rate is A. the number of workers who are not employed. B. all employed and unemployed workers. C. the fraction of the adult population that is in the labor force. D. the fraction of the labor force that is not employed. The labor force participation rate is A. the number of adult workers who are employed. B. the fraction of the adult population that is in the labor force. C. the fraction of the labor force that is employed. D. the number of the adult population who are in the labor force. The employment ratio is A. the fraction of the adult population that is in the labor force. B. all employed and unemployed workers. C. the number of adult workers who are employed. D. the fraction of the adult population that is employed.

D. the fraction of the labor force that is not employed. B. the fraction of the adult population that is in the labor force. D. the fraction of the adult population that is employed.

Colonel Hogwash purchases a Civil​ War-era mansion for​ $1,000,000. The​ broker's fee is​ 6%, which the colonel also​ pays, for a total expenditure of​ $1,060,000. Using the expenditure​ approach, this transaction would be recorded as a A. $60,000 increase in income received by the real estate broker. B. $1,060,000 increase in domestic value​ added, for the value of the house. C. $60,000 increase in domestic value added by the brokerage service. D. $1,060,000 increase in consumption. E. $60,000 increase in residential investment. According to the income​ approach, this transaction would be recorded as a A. $1,060,000 increase in residential investment. B. $60,000 increase in income received by the real estate broker. C. $1,060,000 increase in domestic value​ added, for the value of the house. D. $60,000 increase in residential investment. E. $60,000 increase in domestic value added by the brokerage service. According to the product​ approach, this transaction would be recorded as a A. $60,000 increase in income received by the real estate broker. B. $60,000 increase in residential investment. C. $1,060,000 increase in domestic value​ added, for the value of the house. D. $60,000 increase in domestic value added by the brokerage service. E. $1,060,000 increase in residential investment.

E. $60,000 increase in residential investment. B. $60,000 increase in income received by the real estate broker. D. $60,000 increase in domestic value added by the brokerage service.

How would each of the following affect Helena​ Handbasket's supply of​ labor? The value of​ Helena's home triples in an unexpectedly hot real estate market. A. The effect on​ Helena's labor supply is ambiguous because substitution and income effects go in opposite directions in this case. B. Helena will supply more labor due to the income effect. C. Helena will supply less labor due to both substitution and income effects. D. Helena will supply more labor due to both substitution and income effects. E. Helena will supply less labor due to the income effect. Originally an unskilled​ worker, Helena acquires skills that give her access to a job with a higher hourly wage. ​(Assume that her preferences about leisure are not affected by the change in jobs.​) A. Helena will supply more labor due to both substitution and income effects. B. Helena will supply less labor due to both substitution and income effects. C. The effect on​ Helena's labor supply is ambiguous because substitution and income effects go in opposite directions in this case. D. Helena will supply more labor due to the income effect. E. Helena will supply less labor due to the income effect. A temporary income tax surcharge raises the percentage of her income that she must pay in​ taxes, for the current year only. ​(Taxes are proportional to income in​ Helena's country.​) A. Helena is likely to supply less labor because​ short-run substitution effects are likely to exceed income effects. B. Helena will supply more labor due to the substitution effect. C. Helena will supply more labor due to both substitution and income effects. D. Helena will supply less labor due to the income effect. E. Helena is likely to supply more labor because​ short-run substitution effects are likely to exceed income effects.

E. Helena will supply less labor due to the income effect. C. The effect on​ Helena's labor supply is ambiguous because substitution and income effects go in opposite directions in this case. A. Helena is likely to supply less labor because​ short-run substitution effects are likely to exceed income effects.