Econ quiz 2

A business buys $2,000 worth of inputs from other firms in order to produce a product. The business makes 100 units of the product and each of them sells for $45. The value added by the business to these products is

$2,500.

If real GDP in a year was $4,220 billion and the price index was 112, then nominal GDP in that year was approximately

$4,726 billion.

GDP in an economy is $12,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports must be

$916 billion.

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Which set of items in the accompanying list would shift an economy's production possibilities curve outward?

1, 2, 5, and 6 only

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Use the accompanying list to answer the following question. As distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are

1, 2, 5, and 6 only.

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about

1.6 percent.

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6 percent. But if the rate of inflation was anticipated to be 4 percent, the bank would most likely charge the firm an annual interest rate of

10 percent.

(Advanced Analysis) Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per-unit prices of these three goods are A = $2, B = $3, and C = $1. If the per-unit prices of the three goods were each $1 in a base year used to construct a GDP price index, then the GDP price index in the current year is

255.5.

Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percentage of potential GDP is

8 percent.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the information suggests that the production capacity in economy

C is growing more rapidly than that in economy B.

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is structurally unemployed?

Jeanette

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is frictionally unemployed?

Mollie

In which of the following cases would real income rise?

Nominal income rises by 2 percent, and the price level remains unchanged.

Which of the following institutional structures is most likely to promote growth?

a well-enforced system of patents and copyrights

Suppose that inventories were $40 billion in 2015 and $50 billion in 2016. In 2016, national income accountants would

add $10 billion to other elements of investment in calculating total investment.

Inflation is undesirable because it

arbitrarily redistributes real income and wealth.

Rising per-unit production costs are most directly associated with

cost-push inflation.

Real GDP measures

current output at base year prices.

A headline states, "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

cyclical

A competitive market system

encourages growth by allowing producers to make profitable investment decisions based on market signals.

Transfer payments are

excluded when calculating GDP because they do not reflect current production.

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect

labor productivity to rise.

The presence of discouraged workers

may cause the official unemployment rate to understate the true amount of unemployment.

Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is

not in the labor force.

Demand-pull inflation

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

Strong property rights are important for modern economic growth because

people are more likely to invest if they don't fear that others can take their returns on investment without compensation.

Tom Atoe grows fruits and vegetables for home consumption. This activity is

productive but is excluded from GDP because no market transaction occurs.

A recession is defined as a period in which

real domestic output falls.

Core inflation measures

underlying increases in the CPI after removing volatile food and energy prices.

Which of the following institutional arrangements is most likely to promote growth?

unrestricted trade between nations