econ test 1

Which of the following equations is correct?

% growth rate of output per capita % growth rate of output − % growth rate of population

If the rate of growth of output per capita is 8% and the rate of growth of population is 2%, what is the rate of growth of output?

10%

Suppose a country's potential level of real GDP grows at a rate of 6% per year. Use the rule of 72 to calculate how long it takes for the country's potential output to double.

12 years

Using the aggregate demand-aggregate supply model, predict what happens in the short run if an increase in health insurance premiums paid by firms raises the cost of employing each worker.

The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases.

The arrow marked "A" represents the flow of:

personal consumption expenditures.

Economic growth is best measured by the increase in

potential output.

Economic data that are adjusted for price-level changes are said to be expressed in terms of:

real dollars.

Economic growth can be represented by

a rightward shift of an economy's long-run aggregate supply curve.

The skills, training, and education possessed by workers contribute to economic growth

by increasing the quality of labor.

The purchases of U.S. products by the citizens of Mexico are:

counted as U.S. exports.

Which of the following will not increase labor's productivity?

growth in output

According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is:

not a member of the labor force.

Transfer payments are:

not included in GDP because they do not represent income derived from current production.

A complete business cycle is defined by the passage from:

one peak to the next peak.

The total value of all final goods and services produced in a country during a given period, adjusted to eliminate the effects of changes in prices is called:

real GDP.

All other things unchanged, an increase in personal income tax rates will

shift the aggregate demand curve to the left.

All other things unchanged, an increase in government spending will

shift the aggregate demand curve to the right.

Investment in human capital

shifts the aggregate production function upward.

The costs of the market basket in the current period will be compared against the costs of the market basket in _____ when computing a price index.

the base period

Potential output is

the level of real GDP that exists when the quantity of labor supplied is equal to the quantity of labor demanded.

All the following explain price stickiness EXPECT

the more firms produce, the lower the average cost of production. Therefore, firms are willing to not raise prices as long as they can sell more.

Economic growth is defined as

the process by which a country's potential output grows over time.

Aggregate demand is defined as

the relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged.

The total labor force comprises:

those who are employed plus those who are unemployed.

The point at which a recession ends and the expansion begins is called the:

trough.

The rule of 72 states that grows at some exponential rate of z percent

will double in value in approximately 72 ÷ z years.

Suppose you have been hired by an electronics store as a salesperson. Which of the following flows represents this transaction?

C and D

What are the four sources of aggregate demand?

Consumption, private investment, government purchases, and net exports

Which of the following statements is true of inflation?

It refers to an increase in the average level of prices.

Consider a bakery that buys flour to bake cakes. Which of the following statements is true?

Only the value of the cake is counted in GDP.

Suppose that real GDP per capita of a rich country is $40,000. Real GDP per capita in a poor country is $10,000. Suppose that rate of growth of GDP per capita in the rich country is 3.6% per year and in the poor country is 7.2% per year. Using the rule of 72, calculate how many years it will take for real GDP per capita in the poor country to catch up with GDP per capita in the rich country?

40 years

Which two flows represent your purchase of groceries from Safeway?

A and B

Which of the following is a source of wage stickiness?

I. fixed wage contracts II. minimum wage laws III. workers and firms want to avoid complexity of negotiating contracts frequently

A change in the price level, all other things unchanged, causes

a movement along the aggregate demand curve.

Economic growth occurs when

a nation's capacity to produce increases.

The arrow marked "B" represents the flow of

consumer goods and services.

The components of gross domestic income include:

employee compensation, profits, rental income, and net interest.

Economic growth can generally be achieved through a(n)

increase in the proportion of GDP used for saving.