Econ Chapter 5,6 & 7

Federal purchases - 800 Services - 500 Imports - 200 Changes in business inventories - 40 Durable goods - 300 Non durable goods - 600 Exports - 50 Residential investments - 200 State and local purchases - 200 Nonresidential investments - 650 Personal consumption expenditures in billions of dollars are

$ 1,400 Because personal consumption expenditures includes services (500), durable (300) and non durable goods (600)

Which of the following is included in both the U.S. GDP and GNP? a) The value of all cars produced by General Motors in the U.S. b) The value of cars produced by Nissan in Japan and the U.S. c) The value of all cars produced by Ford in Mexico. d) The value of all cars produced by Toyota in the U.S.

a) The value of all cars produces by General Motors in the U.S.

In a business cycle, a peak represents the end of a) a recession. b) an expansion. c) a depression. d) trough.

b) and expansion

Employed - 14,000 Unemployed - 3,000 Not in the labor force - 4,000 The labor force equals...

17,000 people

Federal purchases - 800 Services - 500 Imports - 200 Changes in business inventories - 40 Durable goods - 300 Non durable goods - 600 Exports - 50 Residential investments - 200 State and local purchases - 200 Nonresidential investments - 650 The value for gross private domestic investment in billions of dollars is

$ 890 Because gross private domestic investment includes changes in business inventories (40), residential (200) and nonresidential investments (650)

If net investment in 2012 is $350 billion and gross investment in 2012 is $500 billion, depreciation in 2012 is

$150 billion Because gross investment (500) minus net investment (350) = 150

In a business cycle, a trough represents the end of a) a peak. b) a recession. c) an expansion. d) an inflation.

b) a recession

Federal purchases - 800 Services - 500 Imports - 200 Changes in business inventories - 40 Durable goods - 300 Non durable goods - 600 Exports - 50 Residential investments - 200 State and local purchases - 200 Nonresidential investments - 650 The value of net exports in billion of dollar is

-150 Because Exports (50) minus Imports (200) = -150

A company produced 8 dishwasher machines in 2012. The company sold 6 in 2012 and added 2 to its inventories. The market value of the dishwasher machines in 2012 was $200 per unit. What is the value of this company's output that will be included in the 2012 GDP?

1,600 Because everything produced in 2012 counts --> 8*200 = 800

Employed - 14,000 Unemployed - 3,000 Not in the labor force - 4,000 The unemployment rate is ...

17.6% Because: unemployment rate = (unemployed) / (employed + unemployed) * 100 3,000/(14,000+3,000) * 100 = 17.6%

Durable goods - 800 Nonresidential investment - 400 Federal purchases of goods - 300 Exports - 400 State and local purchases of goods - 200 Residential investments - 50 Services - 500 Imports - 250 Change in business inventories - -25 Nondurable goods - 700 Personal consumption expenditures in billions of dollars are...

2,000 Because personal consumption expenditures are durable goods (800), nondurable goods (700), and services (500) = 2,000

In 2012 the change in business inventories is -$70 billion and GDP is $200 billion. Final sales in 2012 a) are $130 billion. b) are $200 billion. c) are $270 billion. d) are $340 billion.

a) are $130 billion.

When there is a shortage of a product in an unregulated market, there is a tendency for a) quantity supplied to decrease. b) price to rise. c) price to fall. d) quantity demanded to increase.

b) price to rise.

The GDP deflator is the a) difference between nominal GDP and real GDP multiplied by 100. b) ratio of nominal GDP to real GDP multiplied by 100. c) ratio of real GDP to nominal GDP multiplied by 100. d) difference between real GDP and nominal GDP multiplied by 100.

b) ratio of nominal GDP to real GDP multiplied by 100

The demand for corn has increased in May without any change in supply. Eight months later there still has been no change in corn prices. This is an example of a a) price floor. b) sticky price. c) macroeconomic price. d) price control.

b) sticky price

Profits earned in the United States by foreign-owned companies are included in a) the U.S. GNP but not GDP. b) the U.S. GDP but not GNP. c) both the U.S. GDP and GNP. d) neither the U.S. GDP nor GNP.

b) the U.S. GDP but not the GNP

If no foreign companies produce in a country, but many of the country's companies produce abroad, then a) the country's GNP and GDP will tend to be equal. b) the country's GNP will tend to exceed its GDP. c) the country's GDP will tend to be equal to its domestic income. d) the country's GDP will tend to exceed its GNP.

b) the country's GNP will tend to exceed its GDP

The labor force participation rate is the a) total number of people who are participating in the labor force. b) ratio of the labor force to the total population 16 years old or older. c) ratio of the number of employed people to the number of unemployed people. d) the number of people in the labor force minus the number of people who are unemployed.

b) the ratio of the labor force to the total population 16 years old or older

Which of the following would NOT be counted in 2013's GDP? ta) he commissions earned by a real estate agent in selling condominiums built prior to 2013 b) the value of a 2008 boat you purchase from a boat dealer in 2013 c) the value of a refrigerator manufactured in 2013 but not sold in 2013 d) the 2013 salary of a used motorcycle salesperson

b) the value of a 2008 boat you purchase from a boat dealer in 2013

If Mr. Garrison is paid an interest rate of 4% on his savings, but the inflation rate is 7%, the real interest rate Mr. Garrison earns is a) 28%. b) 4%. c) -3%. d) -7%.

c) -3%

If the labor force is 500 and employment is 450, then the unemployment rate is a) 100%. b) 90%. c) 10%. d) 0%.

c) 10 % Because unemployed (50)/labor force (500) *100 = 10%

If nominal GDP is $8 trillion and real GDP is $6 trillion, the GDP deflator is a) 48. b) 75. c) 133.33. d) 480.

c) 133.33 Because nomianl GDP (8) / real GDP (6) * 100 = 133.33

If real GDP in 2012 using 2011 prices is higher than nominal GDP of 2012, then a) real GDP in 2012 is larger than real GDP in 2011. b) prices in 2012 are higher than prices in the base year. c) nominal GDP in 2012 equals nominal GDP in 2011. d) prices in 2012 are lower than prices in the base year.

d) prices in 2012 are lower than prices in the base year (2011).

Durable goods - 800 Nonresidential investment - 400 Federal purchases of goods - 300 Exports - 400 State and local purchases of goods - 200 Residential investments - 50 Services - 500 Imports - 250 Change in business inventories - -25 Nondurable goods - 700 The value of gross domestic product in billions of dollars is

3,075 Because gross domestic product in everything except imports and change in business inventories (3350) minus imports (250) and minus change in business inventories because its negative (-25) = 3075

Federal purchases - 800 Services - 500 Imports - 200 Changes in business inventories - 40 Durable goods - 300 Non durable goods - 600 Exports - 50 Residential investments - 200 State and local purchases - 200 Nonresidential investments - 650 The value of gross domestic product in billion of dollar is

3,140 Because add everything (3,340) minus imports (200) = 3,140

Durable goods - 800 Nonresidential investment - 400 Federal purchases of goods - 300 Exports - 400 State and local purchases of goods - 200 Residential investments - 50 Services - 500 Imports - 250 Change in business inventories - -25 Nondurable goods - 700 The value for gross private domestic investment in billions of dollars is

425 Because gross private domestic investment includes changes in business inventories (-25), residential (50) and nonresidential investments (400) = 425

Employed - 14,000 Unemployed - 3,000 Not in the labor force - 4,000 The labor force participation rate is

80.9% Because: labor force participation = labor force (employed + unemployed) / population (everybody) * 100

Structural unemployment is the a) portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries. b) unemployment that results when people become discouraged about their chances of finding a job so they stop looking for work. c) unemployment that occurs during recessions and depressions. d) portion of unemployment that is due to the normal working of the labor market.

a) portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries.

Between a peak and a trough, the economy goes through a(n) a) recession. b) inflation. c) boom. d) expansion.

a) recession

Which of the following would NOT be counted in 2012's GDP? a) the value of a 2006 convertible you purchase from a dealer in 2012 b) the value of a laser printer manufactured in 2012 but not sold in 2012 c) the 2012 salary of a used furniture salesperson d) the commissions earned by a sales associate in selling home theater systems built prior to 2012

a) the value of a 2006 convertible you purchased from a dealer in 2012. Because the value of the car was already counted in 2006 when it was produced

If the number of people classified as unemployed is 20,000 and the number of people classified as employed is 400,000, what is the unemployment rate? a) 2.0% b) 4.8% c) 5.0% d) 9.2%

b) 4.8% Because unemployed (20,000)/ labor force (420,000) * 100 = 4.76 = 4.8 %

DVDs and DVD players are complements. An increase in the price of DVD players would cause which of the following in the market for DVDs? a) The equilibrium price and quantity of DVDs would increase. b) The equilibrium price and quantity of DVDs would decrease. c) The equilibrium price of DVDs would decrease, and the equilibrium quantity would increase. d) The equilibrium price of DVDs would increase, and the equilibrium quantity would decrease.

b) The equilibrium price of DVDs would decrease

Which of the following is an example of a final good or service? a) coffee beans Starbucks purchases to make coffee b) a computer purchased by Federal Express to track shipments c) wheat a bakery purchases to make bread d) lumber purchased by a construction company to used in building houses

b) a computer purchased by Federal Express to track shipments

If net investment is zero, then a) gross investment is greater than depreciation. b) gross investment equals depreciation. c) gross investment is less than depreciation. d) depreciation is zero.

b) gross investment equals depreciation

A farmer buys a new tractor from John Deere to use on her cotton farm. This tractor is included in GDP as a) a durable consumption good. b) part of gross private domestic investment. c) a service. d) a nondurable consumption good.

b) part of gross private domestic investment

SCENARIO 3.2: Lettuce and spinach are substitutes. Lettuce and tomatoes are complements. Lettuce is a normal good. During the winter, about 20% of the lettuce crop was destroyed by flooding. Refer to Scenario 3.2. The floods that destroyed part of the lettuce crop would have caused the equilibrium price of spinach to ________ and the equilibrium quantity of spinach to ________. a) decrease; increase b) increase; decrease c) increase; increase d) decrease; decrease

c) increase; increase The floods that destroyed part of the lettuce crop would have caused the equilibrium price of spinach to increase and the equilibrium quantity of spinach to increase.

If real GDP in 2012 using 2011 prices is lower than nominal GDP of 2012, then a) nominal GDP in 2012 equals nominal GDP in 2011. b) prices in 2012 are lower than prices in 2011. c) prices in 2012 are higher than prices in 2011. d) real GDP in 2012 is larger than real GDP in 2011.

c) prices in 2012 are higher than prices in 2011

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are a) regulatory prices. b) market prices. c) sticky prices. d) administered prices.

c) sticky prices

The GDP deflator in year 2 is 110 using year 1 as a base year. This means that, on average, the price of goods and services is a) 110% higher in year 1 than in year 2. b) 110% higher in year 2 than in year 1. c) 5% higher in year 1 than in year 2. d) 10% higher in year 2 than in year 1.

d) 10% higher in year 2 than in year 1. Because if year 1 is the base with 100% and year 2 increased to 110% there was in increase of 10%.

If improvements in technology have reduced the cost of producing personal computers, you accurately predict that in the market for personal computers, there will be a(n) a) decrease in the supply of personal computers, an increase in the price, and a decrease in the demand. b) increase in the supply of personal computers, a reduction in the price, and an increase in the demand. c) increase in the quantity supplied of personal computers, a reduction in the price, and an increase in the quantity demanded. d) increase in the supply of personal computers, a decrease in the price, and an increase in the quantity demanded.

d) an increase in the supply of personal computers, a decrease in the price, and an increase in the quantity demanded.