ECON MIDTERM

If real GDP grew by 6 percent and population grew by 2 percent, then real GDP per person grew by approximately ______ percent.

4

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent.

4.7

The economic statistic used to measure the level of prices is:

CPI.

Which of the following statements about economic models is true?

Economists use different models to address different economic phenomenon.

If Y is output, K is capital, u is the fraction of the labor force in universities, L is labor, and E is the stock of knowledge, and the production Y = F(K,(1 - u) EL) exhibits constant returns to scale, then output (Y) will double if:

K and E are doubled.

In the Solow growth model with population growth, but no technological change, which of the following will generate a higher steady-state growth rate of total output?

a higher population growth rate

The marginal product of labor is:

additional output produced when one additional unit of labor is added.

If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a:

higher saving rate leads to a higher growth rate

An example of an imputed value in the GDP is the:

housing services enjoyed by homeowners.

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

The unemployment insurance system may be desirable because unemployment insurance:

induces workers to reject unattractive job offers.

The endogenous growth model's assumption of constant returns to capital is more plausible if capital is defined to include:

knowledge

Macroeconomics is based on microeconomics for all of the following reasons except:

macroeconomic decision makers, when they make their choices, are required to maximize utility functions.

GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad.

minus; plus

Data on unemployment in the United States show that:

most weeks of unemployment are attributable to the long-term unemployed.

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate _________ and output per worker grows at rate ___________.

n; 0

The new chain-weighted measures of real GDP are an improvement over traditional measures because the prices used to compute real GDP are:

never far out of date.

The real interest rate is the:

nominal interest rate minus the rate of inflation.

Discouraged workers are counted as:

out of the labor force.

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

In the national income accounts, all of the following are classified as government purchases except:

payments made to Social Security recipients.

The rate of inflation is the:

percentage change in the level of prices.

In the national income accounts, government purchases are goods and services purchased by:

the federal, state, and local governments.

All of the following are important macroeconomic variables except:

the marginal rate of substitution.

The CPI is determined by computing:

the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.

The GDP deflator is equal to:

the ratio of nominal GDP to real GDP.

If increased immigration raises the labor force, the neoclassical theory of distribution predicts that:

the real wage will fall, and the real rental price of capital will rise.

If consumers correctly anticipate their future incomes:

the saving rate will be low when consumers anticipate a boom.

Frictional unemployment is unemployment caused by:

the time it takes workers to search for a job.

If consumers have rational expectations and follow the permanent-income hypothesis, their current consumption will increase when:

they receive an unexpected inheritance

The employment statistics computed from the establishment survey do not include:

those who are self-employed.

A consumer spending excessively today, intending to start saving for retirement tomorrow, but deciding to continue spending when tomorrow arrives is an example of

time-inconsistent preferences

An economy's ______ equals its ______.

total income; total expenditure on goods and services

In the model of the steady-state unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the ______ who find a job each month, while the rate of job separation equals the percentage of the ______ who lose their job each month.

unemployed; employed

The real wage is the return to labor measured in:

units of output.

Since GDP includes only the additions to income, not transfers of assets, ______ are not included in the computation of GDP.

used goods

According to Modigliani's life-cycle hypothesis, the consumption function shifts upward as ___

wealth

If two economies are identical (with the same population growth rates and rates of technological progress), but one economy has a lower saving rate, then the steady-state level of income per worker in the economy with the lower saving rate:

will be at a lower level than in the steady state of the high-saving economy

Assume that a tire company sells 4 tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is:

$20,000.

If the underground economy is larger in Europe than in the United States, then the difference in the _____ number of hours worked between Europe and the United States may be smaller than the difference in the _____ numbers of hours worked.

actual; measured

If an economy is in a steady state with a saving rate below the Golden Rule level, efforts to increase the saving rate result in:

both higher per-capita output and higher per-capita depreciation, but the increase in per-capita output would be greater.

An example of decreasing returns to scale is when capital and labor inputs:

both increase 10 percent and output increases 5 percent.

If a neutral technological advance improves the production function, the neoclassical theory of distribution predicts:

both the real wage and the real rental price of capital will rise.

Based on a Cobb-Douglas production function and perfect capital mobility, capital should flow to economies in which:

capital is relatively scarce.

Real GDP means the value of goods and services is measured in ______ prices.

constant

If an increase of an equal percentage in all factors of production increases output of the same percentage, then a production function has the property called:

constant returns to scale.

Nominal GDP measures the value of goods and services in ______ prices, while real GDP measures the value of goods and services in ______ prices.

current; constant

A severe recession is called a(n):

depression

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:

do not have a job but have looked for work in the past four weeks.

Macroeconomics is the study of the:

economy as a whole.

Hypotheses to explain the positive correlation between factor accumulation and production efficiency include each of the following except:

efficient economies make capital accumulation unnecessary

Variables that a model tries to explain are called:

endogenous.

In the long run, the level of national income in an economy is determined by its:

factors of production and production function.

As the relative demand for unskilled workers falls, wages for unskilled workers ______ and unemployment compensation becomes a ______ attractive option.

fall; more

An estimate of the number of unemployed workers in the economy can be obtained from:

from the household survey, but not from the establishment survey.

In the Solow model with technological progress, the steady-state growth rate of output per (actual) worker is:

g.

Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation,

gives a better measure of ongoing, sustained price changes.

If a consumer is a borrower in period one and the interest rate rises, the:

income and substitution effects both tend to make consumption lower in the first period.

Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will:

increase until the new steady state is reached.

Changes that can increase measured total factor productivity include:

increased expenditures on education.

Empirical evidence supports the theory that free trade:

increases economic growth

The best measure of the economic satisfaction of the members of a society is:

real GDP.

According to Franco Modigliani's life-cycle hypothesis, the time of life at which an individual has the largest amount of wealth is at:

retirement.

According to the permanent income hypothesis, households will finance a temporary increase in taxes by: reducing ___ or increasing ___.

saving; borrowing

The type of legal system and the level of corruption in a country have been found to be:

significant determinants of the rate of economic growth in a country

The life-cycle model assumes that consumers use saving and borrowing to ____ consumption over their life cycle.

smooth

According to the permanent-income hypothesis, if consumers receive a permanent increase in their salary then they will:

spend most of it in the current year