Econ exam 2

an increase in the unemployment rate

(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in consumer spending, holding everything else constant, which outcome is likely to occur? A) an increase in nominal GDP B) an increase in real GDP C) an increase in the unemployment rate

$500

(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What is the value of GDP in this economy? A) $100 B) $400 C) $500 D) $600

$300.

(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of funds into and out of financial markets is: A) $70. B) $110. C) $170. D) $300.

deficit of $70

(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The government has a budget: A) surplus of $150. B) surplus of $220. C) deficit of $70. D) deficit of $200.

80,000

(Figure: The Labor Market) Use Figure: The Labor Market. What will be the level of employment if firms decide to pay an efficiency wage of $16? A) 80,000 B) 100,000 C) 110,000 D) 200,000 28. (Figure: The Labor

75.8

(Table: CPI) Use Table: CPI. Suppose only bread, laptops, and movies are produced in this economy. Calculate the consumer price index of 2012, using 2008 as the base year. A) 81.9 B) 100 C) 75.8 D) 95

33

(Table: Employment Data) Use Table: Employment Data. If marginally attached workers are included in the labor force, the labor force is _____ million. A) 1 B) 11 C) 32 D) 33

5

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Assuming 2013 was the base year, the growth rate of real GDP from 2013 to 2014 was _____%. A) 5 B) 10 C) 11.25 D) 20

20%.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Assuming that 2014 was the base year, the growth rate of real GDP from 2013 to 2014 was: A) -5%. B) 4.7%. C) 11.25%. D) 20%.

$420.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2013 is the base year, real GDP in 2014 was: A) $400. B) $420. C) $425. D) $445.

$445

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2014 is the base year, real GDP in 2014 was: A) $400. B) $420. C) $425. D) $445.

6.25; 5

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. The growth of nominal GDP from 2013 to 2014 was due to approximately a _____% increase in prices and approximately a _____% increase in aggregate output. A) 11.25; 0 B) 0; 45 C) 5; 11.25 D) 6.25; 5

11.25

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. The growth rate of nominal GDP from 2013 to 2014 was _____%. A) 5 B) 10 C) 11.25 D) 45

$0.5 trillion.

(Table: National Income Accounts) Use Table: National Income Accounts. The value of private savings is: A) $1.8 trillion. B) $0.5 trillion. C) $2.8 trillion. D) $1.6 trillion.

32

14. (Table: Employment Data) Use Table: Employment Data. The labor force is _____million. A) 33 B) 32 C) 31 D) 22

an increase in GDP

7. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in consumer spending, holding everything else constant, which outcome is likely to occur? A) an increase in GDP B) a decrease in GDP C) an increase in the unemployment rate D) a decrease in the inflation rate

2.1%

7. (Table: The Consumer Price Index (CPI)) Use Table: The Consumer Price Index (CPI). The consumer price index in 2009 was 212.2. In 2010, it was 216.7. What was the rate of inflation from 2009 to 2010? A) 12.2% B) 4.5% C) 2.1% D) 16.7%

above; surplus

A binding minimum wage in a labor market is set _____ the equilibrium wage and causes a _____ of labor. A) below; surplus B) below; shortage C) above; surplus D) above; shortage

taxes are greater than government spending.

A budget surplus exists when: A) taxes are greater than government spending. B) taxes are less than government spending. C) taxes are less than government spending plus investment. D) investment is less than government spending less taxes.

is the total factor income earned by residents of a country

A country's GNP: A) must be larger than its GDP. B) is the total factor income earned by residents of a country. C) includes factor income earned by foreigners. D) excludes factor income earned abroad by Americans.

difference between the country's sale of assets to foreigners and its purchases of assets from foreigners.

A country's balance of payments on financial account is the: A) difference between the dollar value of a country's exports and its imports of goods and services. B) difference between the dollar value of a country's exports and its imports of goods only. C) difference between the country's sale of assets to foreigners and its purchases of assets from foreigners. D) same value as the country's merchandise trade balance.

decrease in expected business opportunities.

A decrease in the demand for loanable funds would MOST likely be caused by a(n): A) decrease in the inflation rate. B) increase in the budget deficit. C) decrease in expected business opportunities. D) increase in expected business opportunities.

current account; from

A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners. A) current account; from B) current account; to C) financial account; from D) financial account; to

financial account; to

A financial investor from Los Angeles purchases bonds issued by the government of Peru. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners. A) current account; from B) current account; to C) financial account; from D) financial account; to

frictionally

A recent college graduate with a major in economics attends a job fair but has not yet found a job. This graduate is counted as a _____ unemployed worker. A) structurally B) seasonally C) cyclically D) frictionally

causing a shortage of funds for investment in physical capital.

A relatively low saving rate affects productivity growth by: A) causing a shortage of funds for investment in physical capital. B) decreasing consumption spending and increasing investment in human capital. C) reducing the tax base and preventing the government from providing public goods. D) stimulating imports and increasing the trade deficit.

20

A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%. A) 12.5 B) 20 C) 25 D) 50

rises to 33.3%

A survey reveals that, on a small island, initially 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. Suppose that 10 of the 30 people who weren't working or looking for work now begin looking for work. There are now 20 people without jobs but looking for work and 40 people working. The unemployment rate: A) rises to 33.3%. B) rises to 50%. C) falls to 25%. D) Nothing happens to the unemployment

cyclical; 3.1

According to the Bureau of Labor Statistics, the actual unemployment rate was 8.3% in February 2012 and the natural rate of unemployment was 5.2%. The _____ unemployment rate was _____%. A) frictional; 4 B) cyclical; 3.1 C) structural; 4 D) cyclical; 14

$12,200

According to the information in Table: Calculating GDP, what is GDP? A) $47,475 B) $12,200 C) $21,485 D) $34,085

server farms, or arrays of linked computers.

Amazon's primary type of investment spending is the purchase of: A) server farms, or arrays of linked computers. B) health care for its employees. C) stock in Yahoo and Google. D) U.S. Treasury securities.

geologist who is permanently laid off because of an increase in wages won by labor unions

An example of structural unemployment is a(n): A) autoworker who is temporarily laid off because of a decline in sales. B) geologist who is permanently laid off because of an increase in wages won by labor unions. C) worker at a fast-food restaurant who quits work and attends college. D) real estate agent who leaves a job

may be due to an increase in prices, in the production of goods and services, or both.

An increase in the value of nominal GDP over time: A) is always due to an increase in prices. B) is always due to an increase in the production of goods and services. C) may be due to an increase in prices, in the production of goods and services, or both. D) may be due to a decrease in prices, in the production of goods and services, or both.

frictionally unemployed

Anna recently moved to Boston with her husband Joe, who has a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is: A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) counted as employed since she is likely to receive a job offer soon

hyperinflation

Between 1921 and 1923, Germany underwent: A) deflation. B) disinflation. C) an increase in the purchasing power of its currency. D) hyperinflation.

always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year

Choose the best answer. A price index: A) always includes a base year. B) measures the cost of purchasing a market basket of output across different years. C) is normalized to 100 for the base year. D) always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

reducing private investment spending on physical capital.

Crowding out hampers the economy by: A) decreasing government borrowing. B) decreasing consumption. C) increasing private borrowing. D) reducing private investment spending on physical capital.

foreign exchange

Currencies can be exchanged for each other in the _____ market. A) loanable funds B) foreign exchange C) resource D) goods and services

the business cycle.

Cyclical unemployment is the result of: A) normal job turnover (job searches). B) discrimination. C) the business cycle. D) the minimum wage.

decreasing aggregate price level.

Deflation is a: A) decrease in unemployment. B) decreasing aggregate price level. C) decline in wages. D) recession.

unemployment increases and the growth rate of real GDP decreases.

During a recession: A) unemployment and the growth rate of real GDP both decrease. B) unemployment decreases and the growth rate of real GDP increases. C) unemployment increases and the growth rate of real GDP decreases. D) there is no relation between unemployment and the growth rate of real GDP.

general price level falls

During deflation, the: A) general price level falls. B) general price level increases. C) interest rate rises. D) general price level becomes negative.

$1,000

Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. What is GDP? A) $200 B) $700 C) $1,000 D) $1,080

110,000

Figure: The Labor Market) Use Figure: The Labor Market. What is the size of the labor force at an efficiency wage of $16? A) 80,000 B) 100,000 C) 110,000 D) 200,000

27%

Figure: The Labor Market) Use Figure: The Labor Market. What is the unemployment rate at an efficiency wage of $16, assuming all workers without a job are searching? A) 10% B) 20% C) 27% D) 73%

it reduces the risk of losing the best workers.

Firms pay an efficiency wage because: A) it reduces the risk of losing the best workers. B) it is required by law. C) they don't have to offer health insurance if they pay efficiency wages. D) it reduces the employee's income tax liability.

if we counted the value of all goods, we would count inputs, such as the value of steel in a new automobile, more than once.

GDP counts the dollar value of only final goods and services because: A) we can measure only the value of final goods and services, not the value of inputs. B) if we counted the value of all goods, we would count inputs, such as the value of steel in a new automobile, more than once. C) intermediate goods reduce GDP. D) only final goods and services matter for the economy

$2 trillion

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending? A) $3.5 trillion B) $3 trillion C) $2.5 trillion D) $2 trillion

$2 trillion

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is national saving? A) $3.5 trillion B) $3 trillion C) $2.5 trillion D) $2 trillion

$3.5 trillion

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is private saving? A) $4 trillion B) $2.5 trillion C) $3.5 trillion D) -$0.5 trillion

a deficit of $1.5 trillion

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. What is the government budget balance? A) a surplus of $1.5 trillion B) a deficit of $1.5 trillion C) a surplus of $0.5 trillion D) a deficit of $0.5 trillion

increase in the unemployment rate.

Generous unemployment benefits are likely to cause a(n): A) increase in the employment level. B) reduction in job search time. C) decrease in the unemployment rate. D) increase in the unemployment rate.

the amount of funds raised by government in financial markets

Government borrowing is: A) the amount of funds raised by government in financial markets. B) government spending on goods and services. C) government tax revenues. D) the amount of funds raised by government in the financial markets, government spending on goods and services, and government tax revenues.

imports.

Households do NOT derive income from: A) wages or labor income. B) interest from lending. C) rent from allowing firms to use their land. D) imports.

will go up.

If deflation occurs and your income is fixed, your real income: A) will fall. B) will go up. C) will still be equal to your nominal income. D) is constant.

real income will fall.

If money income remains the same while the average price level doubles: A) nominal income will fall. B) real income will fall. C) interest rates will fall. D) purchasing power will increase.

supply of; increase; decrease; increase

If private savings increase, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____. A) demand for; increase; increase; increase B) demand for; decrease; decrease; decrease C) supply of; increase; decrease; increase D) supply of; decrease; increase; decrease

fallen

If real GDP rises while nominal GDP falls, then prices on average have: A) risen. B) fallen. C) stayed the same. D) decreased and then been offset by an equal increase.

U.S. exports to other countries will decline.

If the U.S. dollar appreciates, we do NOT expect that: A) Americans will buy more foreign currency. B) Americans will buy more goods from abroad. C) U.S. exports to other countries will decline. D) Americans will buy fewer goods from abroad.

-$50 billion.

If the United States exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers, the balance on the current account is: A) $250 billion. B) -$250 billion. C) $50 billion. D) -$50 billion.

The United States will sell assets, generating a liability that obligates Americans to pay for those imports in the future

If the United States imports more goods from Japan than it exports to Japan, how will the difference be financed? A) U.S. consumers will borrow money from domestic banks. B) The United States will buy more Japanese assets. C) The United States will sell assets, generating a liability that obligates Americans to pay for those imports in the future. D) The United States will sell assets to the Japanese, which would reduce its liabilities.

5%.

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is: A) 2%. B) 5%. C) 7%. D) 9%.

gross domestic product.

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's: A) disposable income. B) gross domestic product. C) trade deficit. D) budget deficit.

10.5

In 2017, 10 million people did not have a job but were actively looking for employment, and 85 million people had either a full-time or a part-time job. The unemployment rate in 2017 was _____%. A) 10 B) 9.5 C) 10.5 D) 8.5

the quantities stay constant and the prices may change.

In a market basket of goods: A) the quantities stay constant and the prices may change. B) the quantities may change and the prices are held constant. C) both the prices and the quantities are held constant. D) both the prices and the quantities may change.

$4 trillion

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending? A) $2 trillion B) $3 trillion C) $3.5 trillion D) $4 trillion

$2 trillion

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is national saving? A) $4 trillion B) $3.5 trillion C) $2 trillion D) $5.5 trillion

$2 trillion

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is the net capital inflow? A) $1 trillion B) $2 trillion C) $3 trillion D) $4 trillion

a net capital inflow of $10 billion

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was: A) a net capital inflow of $10 billion. B) capital inflows of $10 billion and capital outflows of $20 billion. C) a trade surplus of $20 billion and a financial deficit of $20 billion.

national savings plus capital inflow.

In an open economy, total investment equals: A) national savings plus capital inflow. B) private savings plus national savings plus capital inflow. C) private savings plus capital inflow. D) national savings minus private savings minus capital inflow.

inflation.

Increases in the average level of prices are called: A) depreciation. B) deflation. C) inflation. D) expectations.

decrease in frictional

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment. A) increase in frictional B) increase in cyclical C) decrease in frictional D) decrease in structural

productive physical capital.

Investment spending is spending on: A) productive physical capital. B) stocks. C) mutual funds. D) corporate bonds

underemployed.

Jim has a part-time job. He would prefer to have a full-time job but has been unable to find one. Jim is classified as: A) a discouraged worker. B) underemployed. C) unemployed. D) out of the labor force

II only

MOST physical capital, except for infrastructure, is provided by: I. governments through public education. II. investment spending by private sector firms. A) I only B) II only C) both I and II D) neither I nor II

foreign purchases of U.S. goods and services.

Money flows into the United States from other countries as a direct result of: A) foreign purchases of U.S. goods and services. B) U.S. purchases of foreign goods and services. C) U.S. investment in foreign companies. D) U.S. purchases of foreign assets.

wages.

Most households derive the bulk of their income from: A) wages. B) interest. C) profit. D) rent.

the budget balance.

National savings is the sum of private savings and: A) private consumption. B) government tax revenue. C) the budget balance. D) trade surplus.

imports minus exports

Net capital inflow equals: A) national savings. B) imports minus exports. C) consumption. D) consumption plus government spending

in the latter, foreign savings complement domestic savings in financing investment spending

One difference between a closed and an open economy is that: A) in the latter, foreign savings complement domestic savings in financing investment spending. B) in the latter, the government is more open to the idea of financing investment spending than in the former. C) in the former, foreign savings complement domestic savings in financing investment spending. D) in the former, foreign savings finance more investment spending than in the latter

increased by 2%.

Over the past year, Eli has been working very hard. His employer has taken notice and is giving Eli a 6% raise in salary. During this past year, overall prices in the economy have increased by 4%. Given this information, Eli's real wage has: A) stayed constant. B) increased by 6%. C) increased by 2%. D) decreased by 4%.

frictional

People who are changing jobs are counted in _____ unemployment. A) frictional B) involuntary C) structural D) cyclical

savings

Physical capital is purchased through investment spending, which in turn is MOSTLY financed out of: A) taxes. B) savings. C) import tariffs. D) consumption expenditure

income after taxes minus consumption.

Private savings equals: A) income after taxes minus consumption. B) taxes minus government spending on goods and services. C) the total amount of savings accounts plus stocks plus bonds owned by households. D) income plus investment.

structurally

Sam, who is 55 years old and has been a steelworker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is _____ unemployed. A) cyclically B) permanently C) frictionally D) structurally

increased cost of transactions due to inflation.

Shoe-leather costs are the: A) effect of inflation on the prices of food, clothes, and other necessities. B) increased cost of transactions due to inflation. C) high price of leather goods. D) effect of inflation on transportation costs.

fluctuations in the business cycle

Structural unemployment CANNOT be caused by: A) minimum wages. B) labor unions. C) efficiency wages. D) fluctuations in the business cycle.

there being more job hunters than there are jobs.

Structural unemployment consists of people who are unemployed because of: A) temporary changes in jobs. B) there being more labor demanded than there is labor supplied. C) the time it takes for employers and workers to find each other. D) there being more job hunters than there are jobs.

inflows; fall

Suppose that interest rates rise in the United States. We expect capital _____ to/from the United States and the U.S. dollar price of foreign currencies to _____, all other things equal. A) outflows; fall B) outflows; rise C) inflows; fall D) inflows; rise

It will fall because 2 million people are not in the labor force this month and are not counted as unemployed.

Suppose that roughly 8 million people in the United States were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the official unemployment rate this month, all other things unchanged? A) It will rise because 2 million people are not in the labor force this month and are not counted as unemployed. B) It will fall because 2 million people are not in the labor force this month and are not counted as unemployed. C) It will be unaffected because the same number of people is unemployed. D) The unemployment rate will decrease by 25%.

demand for the dollar to fall, depreciating the dollar.

Suppose that the United States and European Union are the only trading partners in the world. If interest rates in the United States are significantly lower than those in the European Union, we would expect the: A) supply of the dollar to fall, appreciating the dollar. B) demand for the dollar to fall, depreciating the dollar. C) supply of euros to increase, depreciating the euro. D) demand for euros to decrease, depreciating the euro.

demand for euros to increase, appreciating the euro.

Suppose that the United States and European Union are the only trading partners in the world. If the United States lowers import restrictions from the European Union, we would expect the: A) demand for euros to increase, appreciating the euro. B) demand for the dollar to increase, appreciating the dollar. C) supply of dollars to increase, appreciating the dollar. D) supply of euros to increase, depreciating the euro.

200.

Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gasoline costs $1 per gallon. In 2011, textbooks cost $80 each and gasoline costs $3 per gallon. The USPI for 2011 is: A) 100. B) 150. C) 200. D) 250.

4

Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is _____%. A) 3 B)4 c)10 D) 7

depreciated; appreciated

Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.24 on July 5, 2012. This implies that during this period the euro _____ and the dollar _____. A) depreciated; appreciated B) appreciated; depreciated C) depreciated; fluctuated D) appreciated; did not change

$5 trillion

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. There is a new government and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of investment spending now? A) $7 trillion B) $5 trillion C) $18 trillion D) -$4 trillion

9.1

Table: Employment Data) Use Table: Employment Data. If marginally attached workers are included in the labor force and in the unemployment rate, the unemployment rate is _____%. A) 39.4 B) 30.3 C) 9.1 D) 6.25

6.25

Table: Employment Data) Use Table: Employment Data. The unemployment rate is _____%. A) 6.25 B) 6.45 C) 9.09 D) 9.37

1.4

Table: The Consumer Price Index (CPI)) Use Table: The Consumer Price Index (CPI). The inflation rate between 2011 and 2012 was _____%. A) 10 B) 3.7 C) 1.4 D) 24.6

a discouraged worker.

The Bureau of Labor Statistics calls a person who is out of work, would like to work, but has given up looking for work: A) unemployed. B) employed. C) a discouraged worker. D) lazy.

expected real rate of interest is unaffected by the change in expected inflation

The Fisher effect states that the: A) nominal rate of interest is unaffected by the change in expected inflation. B) nominal rate of interest is unaffected by the change in unexpected inflation. C) expected real rate of interest is unaffected by the change in expected inflation. D) expected real rate of interest increases by one percentage point for each percentage change in expected inflation.

nominal; divided by real

The GDP deflator for a given year is 100 times _____ GDP for that year _____ GDP for that year. A) nominal; divided by real B) real; divided by nominal C) nominal; minus real D) real; plus nominal

cyclical

The National Bureau of Economic Research announced that the U.S. economic recession that began in December of 2007 hit a trough in June of 2009. During that period, which type of unemployment increased for sure? A) frictional B) natural C) cyclical D) structural

the importance of distinguishing between nominal and real GDP

The Venezuela example illustrates: A) that the difference between nominal and real GDP is negligible in most cases. B) that there is no difference between nominal and real GDP in the real world. C) the importance of distinguishing between nominal and real GDP. D) that GNP, rather than GDP, is a better measure of a country's economic activity.

consumer price index

The _____ is MOST widely used to measure inflation in the United States. A) producer price index B) consumer price index C) GDP deflator D) national income account

balance of payments

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is the: A) singular account. B) euro-dollar account. C) universal exchange account. D) balance of payments.

Bridgestone tires purchased by Ford Motor Co.

The calculation of GDP does NOT include the value of: A) Firestone tires sold at your local garage. B) Bridgestone tires purchased by Ford Motor Co. C) Goodyear tires purchased by the United States Secret Service. D) Michelin tires purchased by Canadian car collectors.

the key concepts in the national accounts.

The circular-flow diagram illustrates: A) the minimum wage state by state. B) fluctuations in exchange rates. C) changes in worker productivity. D) the key concepts in the national accounts.

equal to

The circular-flow diagram is important because it shows that the flow of money into each market or sector of the economy is _____ the flow of money coming out of that sector. A) greater than B) equal to C) less than D) unrelated to

changes in the prices of goods and services typically purchased by consumers.

The consumer price index reflects: A) changes in the prices of goods and services typically purchased by consumers. B) the level of prices for intermediate goods and services purchased by businesses. C) the level of prices for raw materials. D) the prices of all goods and services computed from the ratio of nominal GDP to real GDP.

real gross domestic product.

The inflation-adjusted measure of aggregate output typically used by economists is called: A) aggregate output. B) nominal gross national product. C) net domestic product. D) real gross domestic product.

shoe-leather costs of inflation.

The introduction of ATMs reduced the: A) menu costs of inflation. B) shoe-leather costs of inflation. C) unit-of-account costs of inflation. D) amount of seigniorage.

number of people who are employed or unemployed.

The labor force is the total: A) number of people employed. B) population. C) number of people in the population of working age. D) number of people who are employed or unemployed.

is based on the cost of a basket typically purchased by producers; is based on the cost of a basket typically purchased by consumers

The major difference between the producer price index and the consumer price index is that the producer price index _____ and the consumer price index _____. A) is based on retail prices; is based on wholesale prices B) measures the cost of living of self-employed workers; measures the cost of living of salaried workers C) generally registers a higher rate of inflation; generally registers a lower rate of inflation D) is based on the cost of a basket typically purchased by producers; is based on the cost of a basket typically purchased by consumers

exchange rates.

The national accounts do NOT keep track of: A) the spending of consumers and the government. B) the sales of producers. C) business investment. D) exchange rates.

Bureau of Economic Analysis

The national income and product accounts are calculated by the: A) Congressional Budget Office. B) Federal Reserve. C) Bureau of Economic Analysis. D) Office of Management and Budget.

equal to the sum of frictional and structural unemployment.

The natural rate of unemployment is: A) the rate during recessions. B) equal to the sum of frictional and cyclical unemployment. C) equal to the sum of frictional and structural unemployment. D) cyclical unemployment less frictional unemployment.

interest rate.

The price in the loanable funds market is the: A) rate of return of a project. B) price level. C) interest rate. D) consumer price index.

the natural rate

The rate of unemployment when the economy is at full employment is: A) zero. B) the natural rate. C) the structural rate. D) less than the full employment rate of unemployment

savings and investment spending are always equal for the economy as a whole.

The savings-investment spending identity says that: A) each person in the economy must invest as much as he or she saves. B) savings and investment spending are always equal for the economy as a whole. C) savings must equal government investment for the economy as a whole. D) each person in the economy must save as much as he or she invests.

final value of the good.

The total of the values added at every stage of production for a good leads to the: A) total cost of the labor used to produce the good. B) prices of the factors of production used to produce the good. C) final value of the good. D) intermediate value of the good.

be out of work and be actively looking for a job during the past four weeks.

To be counted as unemployed, one must: A) have had a job previously. B) be out of work and be actively looking for a job during the past four weeks. C) have had a job before and be actively looking for work. D) be actively looking for a job and have at least a high-school diploma or its equivalent.

lower taxes on the returns from savings so that total savings increase and the interest rate falls

To help increase investment spending, the government can: A) lower taxes on consumption so that disposable income rises. B) lower taxes on the returns from savings so that total savings increase and the interest rate falls. C) raise taxes on the returns from bonds while lowering taxes on stock dividends. D) lower taxes on investment spending while raising taxes on savings so that total tax revenue remains constant.

helps borrowers and hurts lenders.

Unanticipated inflation: A) helps those on fixed incomes. B) hurts borrowers and helps lenders. C) helps borrowers and hurts lenders. D) causes interest rates to decrease.

cyclical unemployment.

Unemployment is at its natural level if there is no: A) unemployment. B) frictional unemployment. C) structural employment. D) cyclical unemployment.

African American teenagers

Unemployment rates are usually HIGHEST for: A) white teenagers. B) African American teenagers. C) male workers aged 25 to 54. D) female workers aged 25 to 54.

unemployment benefits are more generous in Europe than they are in the United States.

Unemployment rates are usually higher in Europe than they are in the United States because: A) the minimum wage is higher in the United States than it is in Europe. B) U.S. economic policy is much more effective than is European economic policy. C) there are more unskilled, uneducated workers in Europe than there are in the United States. D) unemployment benefits are more generous in Europe than they are in the United States.

loss of the reliability of money as a relative unit of measurement.

Unit-of-account costs refer to the: A) increase in prices during inflation. B) decrease in the value of money during inflation. C) loss of the reliability of money as a relative unit of measurement. D) increased costs of servicing bank accounts during inflation.

financial

When a Japanese investor buys stock in General Motors, the _____ account is affected. A) current B) financial C) reserve D) foreign exchange

A) shoe-leather cost.

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily has a: A) shoe-leather cost. B) menu cost. C) unit-of-account cost. D) Fisher effect.

menu cost.

When hyperinflation forces Pedro to change the price stickers on the books in his bookstore very frequently to keep up with the aggregate price level, economists say that Pedro has a: A) shoe-leather cost. B) menu cost. C) unit-of-account cost. D) debt deflation.

U.S. goods become more expensive in Canada.

When the dollar appreciates relative to the Canadian dollar: A) Canadian goods become more expensive in the United States. B) U.S. goods become more expensive in Canada. C) U.S. residents tend to buy more from Canada, since the United States has a weak currency. D) the United States sells more goods to Canada.

Swiss exports were more expensive in the United States

When the dollar value of the Swiss franc was very high following the financial crisis in 2008: A) Swiss exports were more expensive in the United States. B) Swiss exports were less expensive in the United States. C) the Swiss National Bank sold Swiss francs to increase its value. D) the Swiss National Bank bought francs to decrease its value

cyclical unemployment

When the economy is at full employment, _____ is zero. A) unemployment B) cyclical unemployment C) frictional unemployment D) the natural rate of unemployment

a Chinese video game imported into the United States

Which asset would NOT be included in the U.S. financial account? A) a Japanese factory purchased by a U.S. company B) U.S. stock sold to someone in Japan C) a Japanese bond sold to someone in the United States D) a Chinese video game imported into the United States

the total value of all final goods and services produced in the economy during a given year

Which definition BEST describes GDP? A) the total value of all final goods and services produced in the economy during a given year B) the total value of all goods and services produced in the economy during a given year C) the total value of all primary, intermediate, and final goods and services produced in the economy during a given year D) the total value of all goods and services produced and sold in the economy during a given year

Stephanie bought a laptop for her brother.

Which example illustrates consumption expenditure? A) Samantha bought an oven for her cooking show on Food Network. B) Stephanie bought a laptop for her brother. C) Jim purchased 200 shares of Google stock. D) Herman Smith spent $1,500 to buy a used car for his son.

An autoworker is laid off because a recession has caused a decline in sales.

Which example illustrates cyclical unemployment? A) An autoworker is laid off because a recession has caused a decline in sales. B) A geologist is permanently laid off from an oil company because of a technological advance. C) A worker at a fast-food restaurant quits work and attends college. D) A real estate agent leaves a job in Texas and searches for a similar, higher-paying job in California.

payments by the Defense Department for a new weapons system

Which example is NOT a government transfer? A) unemployment compensation B) food stamps C) payments by the Defense Department for a new weapons system D) Social Security benefits paid to someone who is retired

People tend to make more transactions.

Which example is a LIKELY response to inflation? A) People choose to carry higher money balances. B) People tend to make fewer transactions. C) People tend to make more transactions. D) People tend to hold on to fewer interest-bearing assets.

imports

Which factor causes an outflow of funds from a domestic economy? A) household savings B) government tax collections C) government transfer payments D) imports

the purchase of stocks and bonds by a business

Which factor is NOT included in investment spending in the national income accounts? A) new residential construction B) the purchase of machinery and other productive physical capital C) the purchase of stocks and bonds by a business D) spending on inventories

the producer price index

Which factor is a measure of changes in the cost of a market basket of raw commodities, such as steel, electricity, and coal? A) the GDP deflator B) the Dow Jones Industrial Average C) the consumer price index D) the producer price index

the dollar value of a repair job done by your cousin on her own car

Which item would NOT be included in GDP? A) the dollar value of a repair job done by your cousin on her own car B) the dollar value of a lawyer's service C) new car sales by a local dealer D) production of new cars that were not sold in the current year

the purchase of your neighbor's house, which was built in 1994

Which item would NOT be included in this year's GDP? A) the production of a television show B) the purchase of a new hybrid truck C) the hiring of a new schoolteacher D) the purchase of your neighbor's house, which was built in 1994

The total amount of borrowing decreases.

Which scenario is NOT associated with government budget deficits? A) The government becomes a borrower in the market for loanable funds. B) The interest rate rises. C) The total amount of borrowing decreases. D) Private investment spending is crowded out.

the entrance of many new people into the labor force

Which situation is likely to increase the natural rate of unemployment? A) the entrance of many new people into the labor force B) a decrease in unemployment compensation benefits C) a decrease in job search time due to information advances like the Internet D) the elimination of the minimum wage

both I and II

Which source(s) provide(s) funds for Amazon's investment spending? I. investors who purchase shares of stock in the company II. borrowing from savers A) I only B) II only C) both I and II D) neither I nor II

The producer price index measures the cost of a basket of goods typically purchased by producers.

Which statement about the producer price index is TRUE? A) The producer price index is just another term for the GDP deflator. B) Changes in the producer price index generally follow changes in the consumer price index. C) The producer price index measures the cost of a basket of goods typically purchased by producers. D) The producer price index shows how the cost of all purchases by urban families changes.

Foreign companies often bring new technology to the recipient country, which increases productivity.

Which statement describes an advantage to the recipient of foreign investment? A) Foreigners are content to receive lower profits and interest rates than are domestic investors. B) Foreigners don't expect to receive profits and interest as often as do domestic investors. C) Domestic firms with foreign investors are exempt from domestic income taxes on a portion of their net income. D) Foreign companies often bring new technology to the recipient country, which increases productivity.

The labor force is the total number of people working plus those who are unemployed.

Which statement is TRUE? A) The number of people not working but who have looked for work in the past year is equal to the number of unemployed people. B) The labor force is the total number of people working plus those who are unemployed. C) The unemployment rate is the number of people unemployed expressed as a percentage of the population. D) The labor force is the same as the population.

A Domino's Pizza store has purchased a new pizza oven.

Which statement is an example of investment spending in macroeconomics? A) The owner of a Domino's Pizza store has employed two students to deliver pizzas. B) The manager of a Domino's Pizza store has deposited cash in the bank. C) A Domino's Pizza store has purchased a new pizza oven. D) The owner of the Domino's Pizza store has bought stock in Domino's

GM builds a new plant.

Which statement is considered investment spending in macroeconomics? A) GM builds a new plant. B) Ryan Jones buys GM stock. C) Ryan Jones buys GM bonds. D) Ryan Jones buys GM stock and bonds.

We cannot unambiguously say whether government spending that increases deficits lowers or increases economic growth

Which statement is the MOST accurate? A) Deficits increase economic growth. B) Deficits decrease economic growth. C) Deficits do not affect economic growth. D) We cannot unambiguously say whether government spending that increases deficits lowers or increases economic growth.

CPI changes only in the base year, every five to seven years.

Which statement regarding the consumer price index is FALSE? A) CPI reflects changes in the prices of goods typically purchased by consumers. B) CPI contains hundreds of goods and services. C) CPI is calculated by the Bureau of Labor Statistics. D) CPI changes only in the base year, every five to seven years.

Sean bought a new truck

Which transaction will be included in the official measurement of GDP? A) Stan sold his 2015 Honda to his sister. B) Monica illegally downloaded movies to her laptop. C) Ben bought a textbook from his friend who took the class last semester. . D) Sean bought a new truck.

not part of the labor force

You are a college student and NOT working or looking for work. You are: A) unemployed. B) in the labor force but not employed. C) not part of the labor force. D) counted in the labor force as underemployed.

savings exceed investment spending.

if the interest rate in the market for loanable funds is above the equilibrium rate: A) there is a shortage of loanable funds. B) savings exceed investment spending. C) the quantity demanded of loanable funds exceeds the quantity supplied. D) consumption is smaller than savings.

lender; higher

rate is 4%. Over the course of the year, overall prices increase by 4%. This rate of inflation hurt the _____ because the actual rate of inflation was _____ than the anticipated rate. A) borrower; lower B) borrower; higher C) lender; higher D) lender; lower