HE Unit 3 True/False

When the expected profit changes, there is a movement along the demand for loanable funds curve.

False

A change in the real wage rate measures the change in the goods and services that an hour's work can buy.

True

A country's real GDP does not take into account the extent of political freedom in the country.

True

A recession follows a business cycle peak.

True

Although the female labor force participation rate increased over the last 40 years, it is still less than the male labor force participation rate.

True

An increase in unemployment benefits, other things remaining the same, will increase the amount of time spent on the job search.

True

An increase in wealth lends to a decrease in saving.

True

As currently measured, real GDP does not include the value of household production.

True

At the labor market equilibrium the real wage rate sets the quantity of labor demanded equal to the quantity of labor supplied.

True

Classical macroeconomics says that markets work well and government intervention cannot improve on the performance of markets.

True

If Bob has been laid off by Ford, but expects to be recalled within the next three weeks, he is part of the labor force.

True

If the cost of the CPI market basket at current period prices exceeds the cost of the CPI market basket at base period prices, the inflation rate between these two periods is positive.

True

If the nominal interest rate is 8 percent a year and the inflation rate is 5 percent a year, then the real interest rate is 3 percent a year.

True

Increasing unemployment benefits increase the natural unemployment rate.

True

Inflation measured using the GDP price index is generally lower than inflation measured using the CPI.

True

Investment banks and commercial banks are both examples of financial institutions.

True

Net investment equals gross investment minus depreciation.

True

Other things remaining the same, the higher the real interest rate, the smaller the quantity of loans or funds demanded.

True

Potential GDP is the amount of real GDP when the economy is at full employment.

True

The CPI bias can distort private contracts.

True

The CPI is a biased measure of the cost of living.

True

The GDP price index is influenced by the prices of investment goods as well as the prices of exported goods and services.

True

The Ricardo-Barro effect holds that the government budget deficit has no effect on the real interest rate or investment.

True

The amount of job search depends on a number of factors including demographic change.

True

The bias in the CPI is estimated to overstate inflation by approximately 1.1 percentage points a year.

True

The expenditure approach measures GDP by using data on consumption expenditure, investment, government expenditures on goods and services, and net exports of goods and services.

True

The loan market is one of the nation's financial capital markets.

True

The nominal interest rate is the percentage return on a loan expressed in dollars; the real interest rate is the percentage return on a loan expressed in purchasing power.

True

The number of workers employed part-time for economic reasons rises during recessions.

True

The real interest rate is the opportunity cost of consumption expenditure.

True

The unemployment rate decreases when unemployed workers find jobs.

True

The unemployment rate during the 2008-2009 recession was lower than the unemployment rate during the Great Depression.

True

The value of net exports of goods and services can be negative.

True

The value of production equals income, which equals expenditure.

True

When the labor market is in equilibrium, the economy is at full employment and real GDP equals potential GDP.

True

With no Barro-Ricardo effect, an increase in government saving leads to a fall in the real interest rate.

True

With no Barro-Ricardo effect, an increase in government saving leads to an increase in the quantity of investment.

True

When the US economy is at full employment, the unemployment rate is zero.

False

A bond issued by a firm is a certificate of ownership and claim to the profits that the firm makes.

False

A firm that is insolvent must also be illiquid.

False

Commodity substitution bias refers to the ongoing replacement of old goods by new goods.

False

Disposable personal income is usually larger than GDP.

False

During the 2008-2009 recession, the unemployment rate that included marginally attached workers and discouraged workers as unemployed was double the unemployment rate that did not include these workers.

False

Expenditure on a bulldozer is consumption expenditure.

False

Financial capital and physical capital are two different names for the same thing.

False

Governments do not participate in the loanable funds market.

False

If the CPI increases from 110 to 121, the inflation rate is 11 percent.

False

If the cost of the CPI basket at current period prices equals $320, then the CPI equals 320.

False

If the real interest rate is greater than the equilibrium real interest rate, there is a shortage of loanable funds in the financial market.

False

In the US, expenditure on used goods is becoming an increasingly large fraction of GDP.

False

In the reference base period, the CPI equals 1.0.

False

Job rationing has no effect on the natural unemployment rate.

False

Job rationing results in a shortage of labor.

False

Marginally attached workers have jobs.

False

People are counted as unemployed if they work less than 40 hours per week.

False

Production in the underground economy is part of the "investment" component of GDP.

False

Real GDP can exceed potential GDP permanently.

False

Real GDP equals nominal GDP divided by the CPI, multiplied by 100.

False

Real prices and nominal prices are unrelated.

False

Teenage labor is not affected by the minimum wage.

False

The CPI market basket is changed from one month to the next.

False

The computer chip that Dell Corp. buys from Intel Corp. is a final good.

False

The consensus view asserts that the problem of business cycle fluctuations is much more important than the problem of sustaining economic growth.

False

The core inflation rate is the inflation rate of energy and food prices.

False

The crowding-out effect is the tendency of a government budget surplus to crowd out private saving.

False

The income approach uses data on consumption expenditure, investment, government purchases of goods and services to calculate GDP.

False

The labor force participation rate measures the percentage of the labor force that is unemployed.

False

The nominal wage rate influences the quantity of labor demanded because what matters to firms is the number of dollars they pay for an hour of labor.

False

The production function shows how the quantity of labor hired depends on the real wage rate.

False

The production of anti-pollution devices installed by electric utilities is not counted in GDP because the devices are designed only to eliminate pollution.

False

The unemployment that arises when technology changes is termed technological unemployment.

False

There can easily be times when there is no unemployment.

False