Economics Exam 2 Study Guide
If the median wage is $9 in country X and $8 in country Y and both countries have similar elasticities of labor supply and demand, then a minimum wage of $4 in both countries will tend to:
make unemployment higher in country Y than in country X.
Which approach measures GDP by adding together consumption, investment, government purchases, and net exports?
the national spending approach
An increase in unemployment benefits tends to:
lower the incentive to search for a job and raise structural unemployment.
Which of the following would be included in 2011's GDP?
the real estate agent's commission on the resale of a house built in 2005
Females started entering the labor force, and particularly professional schools, in increasing numbers beginning around:
1970
The market value of all final goods and services produced within a given country in a year divided by the country's population is:
GDP per capita.
Programmers produce a large amount of software on an unpaid, open-source basis. As a result
GDP under-counts some software production.
Which of the following is NOT true of structural unemployment?
It results from scarcity of information.
Which of the following would be considered unemployed?
Janice, a senior in college, started job hunting early in the hope that she would have secured a job by the time she graduates in May.
Which statement best describes the economic growth patterns in the world since World War II?
Japan and South Korea experienced rapid growth while Argentina and Nigeria experienced slow growth.
Which of the following individuals can be counted as unemployed?
Jean, who left her job to search for a higher-paying position
The portion of women in the workforce has nearly doubled since 1950. As a result, fewer mothers are providing services inside the home. How has this trend affected GDP?
The GDP in 1950 is underestimated relative to today.
Which of the following would be most effective in reducing "free riding" in a communal farming system?
assigning property rights
Which of the following is NOT a reason why unemployment rises during recessions?
because of increases in aggregate demand
In the national spending approach, investment spending involves the acquisition of which of the following?
capital goods
Structural unemployment is:
caused by long-lasting shocks or changes in permanent features of an economy.
In the past 100 years, there has been a decline in the use of unpaid child labor on family farms. Therefore:
changes in GDP overstate the true increase in production over the past 100 years.
Which country had a growth miracle beginning in the late 1970s?
china
GDP is calculated by:
multiplying the quantity of all goods and services by their prices and adding together the results
The correlation between infant mortality and real GDP per capita is:
negative
The GDP deflator is _____ multiplied by 100.
nominal GDP divided by real GDP
Using the national spending approach to measuring GDP, if Tyler buys 50 shares of Apple stock, it is included in GDP as part of:
nothing; it is not included as part of GDP.
The value of goods exported from the U.S. to other countries is included in GDP for:
the united states
What population categories go into the formula for the unemployment rate?
unemployed and employed
Which of the following tends to increase unemployment?
unemployment benefits, minimum wages, and labor
Intermediate goods are goods:
used to produce other goods.
Birmingham Steel sells steel to Winston Golf Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells Winston golf clubs for $1,500,000. How much is added to GDP?
$1,500,000
(Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. What is the growth rate of real GDP in 2009 if 2009 prices are used in the calculation of real GDP?
-2.94%
If a country's real GDP per capita in 1950 was $10,000, and it grew to $20,000 by year 2000, then the country's annual growth rate during this period would have been approximately:
1.4%
(Table: iPhones) This table shows data for a country producing only iPhones. Based on the GDP deflator, the increase in prices between 2000 and 2010 was:
20%
(Table: GDP Data) Using the GDP data in the table, how much did nominal GDP grow between 1995 and 2000?
31.8%
If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force participation rate is:
55%
29. Suppose economies A and B have the same initial level of GDP per capita at $15,000, and each economy begins with a constant growth rate of 1% per year. (Neither country has good institutions for economic growth at first.) Then Country A enters an era of political stability, establishes property rights, and installs incentives for entrepreneurship. Country A's economic growth rate consequently improves to 5%. Assuming population growth rates remain unaffected, how much longer will it take Country B to double its per capita GDP level compared to Country A?
56 years
If real GDP per capita in the United States is currently $50,000 and grows at 2.5% per year, it will take approximately how many years to reach $200,000?
56 years
(Figure: Labor Market) Refer to the figure. What is the number of people who are employed at the market wage? How many people end up unemployed due to the implementation of a $10 minimum wage?
60; 40
A country has a population of 160 million. Thirty million of its people are under the age of 16 and 10% of the population is either in the military or institutionalized. Seventy million people have jobs, and five million are looking for work. What is the labor force participation rate in this country?
66%
(Table: Wheat and Corn) Consider a country that produces only wheat and corn. Based on the data in the table, the growth rate of real GDP from 2007 to 2008 (in 2005 dollars) is:
8.3%
If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's unemployment rate is:
9.1%.
Which statement is TRUE for the Great Leap Forward period in China?
A lack of private property rights provided no incentive for farmers to be productive.
The value of production by a U.S. worker employed by a firm located in Canada is included in:
Canada's GDP only.
When the Communist Party took over China, "The Great Leap Forward" was instituted as a system to encourage the growth of agricultural production in China. Yet, during this time, millions of people starved to death. Why did this occur?
Farmers' self-interest was not aligned with social interest.
Which of the following represents the factor income approach to splitting GDP?
GDP = wages + rent + interest + profit.
Suppose a doctor spends half of the year in the United States and the other half in Canada and works in both places. How does his production get allocated between U.S. and Canadian GDP?
The value of the services produced in the United States gets counted in U.S. GDP and the value of the services produced in Canada gets counted in Canadian GDP.
Which of the following is TRUE of the effects of employment protection laws?
They create employment security for workers with a job.
A minimum wage is:
a labor market price floor.
Agricultural productivity in China sharply declined during its experiment with communal farming. This was primarily a result of:
a lack of property rights for farm land.
Discouraged workers are counted as part of the:
adult population
For most of recorded human history, long-run economic growth was:
almost nonexistent.
Increases in corruption cause economic growth to:
decrease
What is the term for workers who have given up looking for a job but would still like one?
discouraged workers
Which of the following would NOT be included in the calculation of GDP as a government purchase?
distribution of food stamps
(Figure: Economic Growth in Major World Regions) Refer to the figure, which shows real GDP per capita over time in different regions of the world. The chart shows that living standards in different regions began to _____ at the beginning of the nineteenth century.
diverge
Economies more open to foreign trade are more efficient in production partly because:
economies of scale occur in larger markets.
The labor force is made up of:
employed and unemployed workers.
Which doctrine indicates that an employee may quit and an employer may fire an employee at any time for any reason?
employment-at-will
Creative destruction occurs at the level of the:
firm, industry, and entire economy
Active labor market policies:
focus on getting unemployed workers back to work.
In a nonrecession year, the majority of U.S. unemployment is:
frictional
A real variable is one that:
includes a correction for inflation.
Increasing the amount of physical capital tends to _____ output per hour of workers and _____ the value of workers.
increase, increase
If a country's nominal GDP increases by 5% between two years while its GDP deflator increases by 4%, the country's real GDP:
increased by 1%
The most important factor that contributed to China's rapid growth at the end of the 1970s and early 1980s was:
institutional reforms.
Which best describes the growth process from its ultimate to its immediate causes?
institutions incentives factors of production real GDP per capita
High-income economies generally have _____ that incentivize individuals' self-interest by using _____.
institutions; profit-seeking motives
Economists call private spending on the tools, plant, and equipment used to produce future output:
investment
A worker who works past retirement age but loses retirement benefits:
is essentially being taxed for working.
The percentage of adults in the labor force is the:
labor force participation rate.
GDP calculations account for:
medical services
Which is considered an immediate cause of economic growth?
physical capital
Countries with high GDP per capita tend to have a lot of:
physical capital, human capital, and technological knowledge per worker.
In the national spending approach, consumption expenditures refer to:
private spending on all final goods and services.
For most of recorded human history, real GDP per capita has:
remained about the same.
Property rights encourage:
savings and investments in both physical and human capital
(Figure: Economic Growth in Major World Regions) Refer to the figure, which shows real GDP per capita over time in different regions of the world. The chart shows that:
significant growth has occurred in some regions only since 1950.
Over the past 200 years, economic growth in the United States has been:
slow and consistent.
Which are immediate causes of the wealth of nations?
technical knowledge and human capital
A developing country could buy (or be given) _____ and _____ more easily than _____.
technological knowledge; physical capital; human capital
According to the text, we can understand the "wealth of nations" best by examining:
the laws and regulations that affect people's incentives to work and invest
When people consume more leisure:
the nation's GDP will decrease as a result of fewer hours worked.
If U.S. per capita GDP is $50,000 and grows at 5% per year, what will U.S. per capita GDP be in 70 years?
$1.6 million
(Table: Components of GDP) Use the data in this table to calculate GDP.
$14,055 billion
If a country produced nothing but 20 smartphones and 10 Blu-ray players in 2011, priced at $100 per smartphone and $200 per Blu-ray player, its GDP in 2011 would be:
$2,000
(Table: Data from Europia) Based on the data in the table, what is interest income in the economy of Europia?
$2,800
(Table: Three-Good Economy I) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. If prices in 2008 are used to calculate real GDP, what is the real GDP in 2008?
$21,134
(Table: Three-Good Economy I) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and price of goods sold in 2008 and 2009. What is the nominal GDP in 2009?
$31,400
At an annual growth rate of 0.7%, approximately how long does it take for real GDP per capita to increase from $30,000 to $60,000 in a country?
100 years
Which of the following activities is counted as part of U.S. GDP?
Jeff stays in a hotel in Colorado while on a skiing trip.
Which of the following is considered unemployed?
John, on temporary layoff from his work, awaits recall.
The largest spending component of GDP in the United States is:
consumption
If the wage demands of workers are high relative to the prices of products,:
cyclical unemployment will be higher.
Unemployment correlated with the business cycle is called:
cyclical unemployment.
Economies more open to foreign trade are more efficient in production partly because:
free trades opens a country up to new ideas and innovations
Honest government _____ economic growth.
fuels
Discouraged workers are workers who have:
given up looking for work but would still like a job.
A nominal variable is one that:
has not been adjusted for inflation.
From 1950 to 1970 Japan's growth rate was:
high and positive
Countries that have high per capita GDP tend to have:
high levels of all three factors of production.
Wealthier countries have:
more material goods.
If minimum wages are higher relative to the median wage, then minimum wage will affect:
more people and create more unemployment.
U.S. farms today produce _____ output using _____ land as they did in 1950.
more, less