Econ exam #3 terms and problems

C)

Assume the average annual CPI values for 2015 and 2016 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years? A) 0.96 B) 1.04 C) 3.86 D) 8.0

C)

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate? A) 4.75% B) 7.8% C) 95% D) 96.2%

D

If the number of unemployed workers is 200 million, and the number in the labor force is 500 million, what is the unemployment rate? A) 0.4% B) 4% C) 14% D) 40%

B)

If the quantity of goods and services produced in the economy decreases, A) Real GDP would certainly increase B) It may be possible for Nominal GDP to increase C) Nominal GDP would certainly increase D) It may be possible for Real GDP to increase

C

In 2016, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2016 and unsold cars and trucks were valued at $900,000 on December 31, 2016. What is Kendall Ford's total investment spending in 2016? A) $22,000 B) $322,000 C) $522,000 D) $1,022,000

Business fixed investment

New factories, office buildings, machinery, research and development

GDP Deflator

Nominal GDP divided by Real GDP mulitplied by 100 equals?

GDP per capita

Often used to represent differences in standard of living from country to country

Discouraged workers

People who are available to work but have not looked for a job during the previous 4 weeks

Expansion

Period of business cycle during which the total production and total employment are increasing

B)

Which of the following transactions would be included in the official calculation of GDP? A) You wash and wax your father's car as a favor to him. B) You buy a new iPod. C) You illegally download music off the Internet to put on your new iPod. D) Firestone sells $2 million worth of tires to General Motors. E) A student buys a used textbook at the bookstore.

C)

Which of the following would not be included in the expenditure category called investment expenditures? A) the cars held in inventory on a local Ford dealer's lot B) a purchase of a copy machine by FedEx Office C) a purchase of shares of preferred stock D) spending on new houses

B)

Which of the following would reduce the labor force participation rate, all else equal? A) an increase in the number of people in the labor force B) an increase in the working-age population C) an increase in the unemployment rate D) a decrease in the unemployment rate

Substitution bias

consumers may change their purchasing habits away from goods that have increased in price

increase in quality bias

difficult to separate improvement in quality from price, say in cars or computers

Household production

Childcare, cleaning, and cooking are not typically paid for with money. But such contributions are real if they were performed by non-household members, they would be paid and counted for.

Consumer price index (CPI)

A measure of the average change over time in the prices a typical urban family of 4 pays for the g/s they purchase.

Price level

A measure of the average prices of goods and services in the economy

Employed

A worker that has worked 1+ hours in a past week

Noncooperative equilibrium

An equilibrium in a game in which players do not cooperate but pursue their own self-interest

Business Cycle

Alternating periods of economic expansion and recession

Cooperative equilibrium

An equilibrium in a game in which players cooperate to increase their mutual playoffs

Recession

Business cycle during which total production and total employment are decreasing

Underground economy

Buying and selling of goods/services that is concealed from the government to avoid taxes or regulations, or because the g/s are illegal.

D)

Discouraged workers are classified by the BLS as A) part of the labor force. B) unemployed. C) part-time employees. D) out of the labor force. E) employed.

Frictional unemployment

Short-term unemployment that arises from the process of matching workers with jobs. This occurs mostly because of job search: entering or re-entering the labor force or being between jobs. This could actually increase economic efficiency by allowing for better job matches.

Unemployed

Someone who is not currently at work but is looking within the previous month

Investment

Spending by firms on new factories, office buildings and additions to inventories, plus spending firms on new houses. Produced but not sold yet.

Consumption

Spending by households on g/s. Not including spending on new houses. Services/med. care, educations, haircuts. Nondurable goods: foods/clothing. Durable goods: cars/furniture. Includes domestic and foreign g/s.

Government Purchases

Spending by the Federal, state, and local government on g/s. Like teachers, salaries, highways, and aircraft carriers. Doesn't include transfer payments/social securities, Medicare because they don't result in immediate production of new g/s.

labor force

Sum of employed and unemployed workers in an economy.

Economic Growth

The ability of an economy to produce increased quantities of goods/services

GDP

The market value of all final goods/services produced in a country during a time period. Usually one year.

E)

The natural rate of unemployment is made up of A) frictional and cyclical unemployment. B) frictional, cyclical, and structural unemployment. C) seasonal and structural unemployment. D) cyclical and structural unemployment. E) frictional and structural unemployment.

Inflation rate

The percentage increase in the price level from one year to the next

Unemployment rate

The percentage of workers of labor force that is unemployed

Nominal interest rate

The stated interest rate on a loan.

Nominal GDP

The value of final goods and services evaluated at current-year prices. Focuses on inflation

When does collusion occur?

There is an agreement among firms to change to charge the same price or otherwise not compete.

Real interest rate

This interest rate is equal to the another interest rate minus the inflation rate.

Final good

This is a good/service purchased by a final user. Avoids double counting

Cyclical unemployment

Unemployment caused by business cycles recession. Caused by the state of the economy. In normal recoveries after a recession, unemployment due to this factors will fail.

Structural unemployment

Unemployment that comes from persistant mismatch. Long-term unemployment spells. Workers who are this unemployed may require retraining in order to obtain "modern" jobs.

Net Exports

Value of exports minus the value of imports. The difference might be positive or negative. We want to count domestic production.

Real GDP

Value of final goods and services evaluated at base year prices

E

Which of the following is an example of a worker experiencing frictional unemployment? A) An employee is laid off because the economy is suffering a recession. B) A computer programmer loses her job because it is outsourced to India. C) A United Airlines pilot loses her job because of lack of demand for air travel. E) A worker quits his job at the Post Office to find more interesting work.