Macro Econ Test 1: Homework Q's (ch. 5-8)
Causes change in the CPI that overstates the true inflation rate
* Increase in Quality Bias * New Product Bias * Substitution Bias
Which is the largest component of GDP?
Consumption
Business cycles were more extreme before World War II than they have been since then.
True
Business cycles were more extreme before World War II than they were after it.
True
Gross domestic product is best defined as the:
market value of all final goods and services produced in a country during a period of time
The classical model is based on the critical assumption that
markets always clear.
Disposable personal income is equal to personal income minus:
personal tax payments
To fund its budget deficit, the government can borrow by
selling treasury bills to the public.
If there is an inflation rate of 5% and nominal wages increase by 2%,
the purchasing power is redistributed from wage earners to producers-sellers
In macroeconomics we study the interactions of three markets:
goods-and-services market, labor market, and money market.
Which of the following is included in the economist's definition of investment?
The purchase of new machines, factories or houses
Macroeconomics is the study of the economy as a whole, while microeconomics deals with the individual decision-making units.
True
The unemployment rate is usually closely related to the economy's aggregate output.
True
Because the consumer price index (CPI) is a fixed-weight index, it has a tendency to underestimate the rate of inflation.
False
In order to pursue the macroeconomic goal of stability, policy makers want to avoid prolonged periods of inflation and instead push for prolonged periods of deflation.
False
If the total dollar value of U.S. imports exceeds U.S. exports it will result in a:
lower GDP
Your college bookstore receives a shipment of new economics texts for $60,000. This transaction is
not included in GDP calculation, since books bought by the bookstore are intermediate goods.
Per capita output is
output per worker or productivity
The CPI tends to
overestimate the extent of inflation because it uses fixed weights and ignores substitution of lower priced items for higher priced items
The total national income actually received by a country's residents is:
smaller than the value of GDP
GDP is different from final sales since
final sales ignores changes in inventory, which are included in GDP calculation
Which of the following accurately describe the financial flows into and out of households?
*Taxes flow out of households and to the government. *Interest flows into households as payment on corporate and government bonds and dividends from firms *Wages flow into households as payment for their labor services.
Since 1970, the highest unemployment rate in the United States occurred during the recession that began in
1980
Since 1970, the longest recession in the United States began in
1980
To calculate personal income from national income, which of the following must be done by the BEA?
Add government transfer payments
How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?
By adding the value in dollar terms of all the final goods and services produced domestically.
Which of these do we subtract from GNP to obtain NNP?
Depreciation
Which of the following is considered to be a problem in using GDP as a measure of national well-being?
GDP is not adjusted to account for depletion of natural resources.
When a significant fraction of the domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:
GNP will be much larger than GDP
The application of macroeconomic models to economy-wide problems began
In the 1930s
The capacity for long-run economic growth for an economy is determined
by the size of its labor force, its capital stock, and productivity of labor and capital
Imports are subtracted in the expenditure approach to calculatingGDP, because
consumption, investment, and government spending are overstated as these include expenditures on both domestic and foreign goods
Suppose that in one month the number of discouraged workers as classified by the Bureau of Labor Statistics increases by 50,000. As a result,
the number of unemployed workers declines by 50,000; the size of the labor force falls by 50,000; unemployment rate falls.
The GDP is a measure of the:
total dollar value of all goods and services produced within the borders of a country
The difference between the value of production inputs and outputs is known as:
value added