Econ test 2

Suppose you graduated from college in 2013 and received a starting offer of $75,000. What would your starting salary need to have been in 1976 for you to have the same purchasing power as $75,000? Assume the CPI in 2013 was 233, and the CPI in 1976 was 56.9. a) $18,315 b) $20,312 c) $30,712 d) $1,316 e) $174,750

a) $18,315

If GDP grows at a rate of 2% per year, approximately how long will it take for GDP to double in size? a) 35 years b) 23 years c) 21 years d) 12 years

a) 35 years

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring? a) Real GDP per capita is rising b) Real GDP is falling c) Incomes are growing at a slower rate than the population d) Living standards are falling

a) Real GDP per capita is rising

The costs to firms of changing prices are called menu costs a) True b) False

a) True

Net exports are negative when: a) a nation's imports exceed its exports b) the economy's stock of capital goods is declining c) depreciation exceeds domestic investment d) a nation's exports exceed its imports e) net exports cannot be negative

a) a nation's imports exceed its exports

What is human capital? a) accumulated knowledge and skills acquired by a worker b) the manager or owner of a business c) a slang term for the underground labor market d) manufactured goods that are used to produce other goods

a) accumulated knowledge and skills acquired by a worker

Someone who does not currently have a job and has not looked for work in a year would be classified as a) not in the labor force b) not in the working-age population c) employed d) unemployed

a) not in the labor force

A period of expansion in the business cycle ends when a) the business cycle reaches its peak b) real GDP is less than potential GDP c) real GDP is equal to potential GDP d) the business cycle reaches its trough

a) the business cycle reaches its peak

A large underground economy results in an understated GDP, ceteris paribus. a) True b) False

a) true

Unanticipated inflation benefits borrowers at the expense of lenders a) True b) false

a) true

Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add? a) $75 b) $1,425 c) $1,500 d) $4,425

b) $1,425

If nominal GDP is $8,400 billion and the GDP deflator is 125, then real GDP is: a) $10,500 billion b) $6,720 billion c) $8,275 billion d) $7,706 billion e) $6,620 billion

b) $6,720 billion

Consider the data in the table above of the consumer price index for 2010 and 2011, using 1980 as the base year. The consumer price index for 1980 is a) 129 b) 100 c) 0 d) Cannot be determined from information given

b) 100

Consider the data in the table above of the consumer price index for 2010 and 2011, using 1980 as the base year. The inflation rate for 2011 is equal to a) 10.4 percent b) 11.6 percent c) 22.0 percent d) 10.8 percent e) 8.96 percent

b) 11.6 percent

Consider data in the table above for a country that produces only two products: guns and butter. Real GDP for 2010 using 2005 as the base year equals a) $960 b) $1,020 c) $880 d) $690 e) $560

d) $690

Refer to the above information. Figures are in millions. The unemployment rate in this economy is: a) 11.3 percent b) 9.3 percent c) 14.3 percent d) 10.2 percent

d) 10.2 percent

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 d) A worker quits his job at the Post Office to find more interesting work

d) A worker quits his job at the Post Office to find more interesting work

In the circular flow diagram, _____ supply the factors of production, and _____ goods and services. a) households; sell b) firms; sell c) firms; buy d) households; buy

d) households; buy

Discouraged workers are classified by the BLS as a) part-time employees b) employed c) part of the labor force d) not in the labor force e) unemployed

d) not in the labor force

If real GDP in a small country in 2000 is $14 billion and real GDP in the same country in 2001 is $14.7 billion, what is the growth rate in real GDP between 2000 and 2001? a) 4.8 percent b) 5 percent c) 7 percent d) cannot be determined from the information given

b) 5 percent

Which of the following is an example of a worker experiencing cyclical unemployment? a) A lifeguard who was hired during the summer season is laid off after summer is over b) A freightliner employee that got laid off because of the recession of 2007-2009 c) A worked who quit his job because he does not get along with his boss d) A worker that changed jobs to move closer to her family e) An assembly line worker who lost his job because of automation

b) A freightliner employee that god laid off because of the recession of 2007-2009

Any person without a job is considered by the Bureau of Labor Statistics to be unemployed a) true b) false

b) False

GDP = consumption + interest + government purchases + exports a) True b) False

b) False

Government spending on transfer payments is included in government purchases when calculating GDP because it results in the production of new goods and services. a) True b) False

b) False

When discouraged workers become more hopeful about their job prospects and begin actively searching for employment, the official unemployment rate will fall, indicating the economy has possibly begun a recovery. a) True b) False

b) False

Which of the following is considered investment by economists? a) The U.S. government increased military spending in Afghanistan by $120 billion b) Target purchased new shopping baskets for their new store in Gastonia c) I purchased a $10,000 Treasury bond from the U.S. government d) My husband is saving cash in a safe in our basement e) all of the above

b) Target purchased new shopping baskets for their new store in Gastonia

In calculating the unemployment rate, part-time workers are: a) counted as unemployed because they are not working full-time b) counted as employed because they are receiving payment for work c) used to determine the size of the labor force, but not the unemployment rate d) treated the same as "discouraged" works who are not actively seeking employement

b) counted as employed because they are receiving payment for work

If prices on average in the U.S. economy, the purchasing power of a dollar also rises a) True b) False

b) false

The best measure of the standard of living is a) nominal GDP per capita b) real GDP per capita c) nominal GDP d) real GDP

b) real GDP per capita

Refer to the above table. Assume the market basket for the consumer price index has two products - meats and potatoes - with the given values for price and quantity. Also assume 2006 is the base year. The Consumer Price Index for 2011 equals a) 112 b) 71.4 c) 125 d) 150 e) 140

c) 125

Which of the following describes a person hurt by inflation? a) a person who lends money during a period when inflation is over-predicted b) a person who borrows money during a period when inflation is under-predicted c) a person paid a fixed income during an inflationary period d) a retiree whose pension is adjusted for inflation

c) a person paid a fixed income during an inflationary period

An example of a transfer payment is a) a purchase of a new bridge in Alaska b) a teacher's paycheck c) a social security payment d) a paycheck for a member of the national guard

c) a social security payment

Tom grows tomatoes for home consumption. This activity is: a) excluded from GDP in order to avoid double counting b) excluded from GDP because an intermediate good is involved c) productive but is excluded from GDP because no market transaction occurs d) included in GDP because it reflects production

c) productive but is excluded from GDP because no market transaction occurs

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animations are examples of persons who are experiencing a) cyclical unemployment b) natural unemployment c) structural unemployment d) seasonal unemployment e) frictional unemployment

c) structural unemployment

The advice to "retain" would be most appropriate for which of the following types of unemployment? a) core unemployment b) cyclical unemployment c) structural unemployment d) frictional unemployment

c) structural unemployment

In constructing the CPI, it is assumed that: a) both prices and quantities of goods purchased remained constant between the base year and the year in question b) the prices of the goods purchased remained constant between the base year and the year in question c) the quantity of the goods purchased remained constant between the base year and the year in question d) neither prices nor quantities of goods purchased remained constant between the base year and the year in question

c) the quantity of the goods purchased remained constant between the base year and the year in question

Gross domestic product is defined as a) the total quantity of goods and services produced in the economy during a period of time b) the total quantity of goods and services in the economy c) the total market value of final goods and services produced in the economy during a period of time d) the total market value of all goods and services in the economy

c) the total market value of final goods and services produced in the economy during a period of time

When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called a) discrimination bias b) outlet bias c) increase in quality bias d) substitution bias

d) substitution bias

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

e) You buy a new iPod

Which of the following people would the Bureau of Labor Statistics consider to be unemployed? a) a 55-year-old steel worker who was laid off 18 months ago and has given up trying to find a job b) A student who is not working during college but plans to look for a job after graduation in December c) a young man who recently received his Ph.D. but is driving a taxi because of an inability to find a teaching job d) all of the above e) none of the above

e) none of the above