Macro Exam 1 - Bonnal
When the economy was expanding in early 2007, fewer than _______ percent of the unemployed had been jobless for more than 6 months.
20
The price index which is used to measure changes in the cost of living is the
Consumer Price Index (CPI).
If you were attempting to forecast the level of consumer spending by households, which measure of total production or total income might be most helpful in making your forecast?
Disposable personal income
In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income?
Every penny spent on a good or service must end up as someone's income.
Most economists agree that the above-market wage paid in unionized industries significantly increases the unemployment rate in the United States.
False
Why is GDP an imperfect measurement of total production in the economy?
GDP does not include household production or production from the underground economy.
What happens if we measure GDP by adding up the value of every good and service produced in the economy?
GDP is overestimated because of double counting.
When a significant fraction of domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:
GDP will be much larger than GNP.
Which one of the following is not a measure of the price level?
Government Price Index: an average of the prices paid by the government for goods and services used only by different government agencies.
All of the following are correct except
Gross domestic income does not include health insurance benefits received by the employees.
Why in microeconomics can we measure production in terms of quantity, but in macroeconomics we measure production in terms of market value?
If, in macroeconomics, we measured production using quantities, we would add tons of wheat grown by U.S. farmers to the number of iPods produced by Apple, to gallons of milk, and so on. When we measure total production, we can't just add together the quantities of every good and service because the result would be meaningless. Measuring production using market value in dollar terms allows us to add together many different goods and services.
While GDP is the most important measure of total production and total income, other measures of total production and total income are contained in the National Income and Product Accounts, each of which can be more useful than GDP for some purposes. Which of the following is a correct definition of one of these other measures?
National income equals GDP minus depreciation.
Suppose a house is built and sold in the year 2006. If the house is resold in the year 2017, is the value of the house included in Gross Domestic Product for 2017?
No. GDP for 2017 includes only production that occurs during 2017.
GDP deflator =
Nominal GDP / Real GDP x 100
Which of the following is the correct formula for calculating the unemployment rate?
Number of unemployed / labor force x100
Which of the following would be included in the gross national product (GNP) of the United States?
Production from a U.S. firm that operates in Mexico.
How does real GDP deal with the problem inflation causes with nominal GDP?
Real GDP separates price changes from quantity changes. By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years.
What is the difference between the consumer price index and the producer price index?
The consumer price index is an average of the prices of the goods and services purchased by the typical urban family of four, whereas the producer price index is an average of the prices received by producers of goods and services at all stages of the production process.
The production of LCD television sets in Australia increased by 20% this year as compared to last year. Those TV sets were no less advanced technologically than the sets sold in previous years. However, the value of the contribution LCD television sets made to Australia's nominal GDP during this year was the same as the previous year. Which of the following, if true, would best explain this outcome?
The price of LCD television sets declined in the past year.
How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both (1) discouraged workers and (2) people who work part-time but would prefer to work full-time?
The unemployment rate would increase.
What is the difference between the value of a firm's final product and the value added by the firm to the final product?
The value of a firm's final product is the sale price; value added is the difference between the sale price and the price of intermediate goods.
Which of the following is not one of the conditions someone needs to meet to be counted as unemployed?
They had worked only one hour per week during the previous four weeks.
The producer price index (PPI) tracks the prices firms receive for goods and services at all stages of production.
True
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities.
Which equation represents the relationship between GDP and the four major expenditure components?
Y = C + I + G + NX
GDP
Y= C + I + G + NX
Would the services of a real estate agent who helped sell (or helped buy) the house be included in GDP for 2017?
Yes. GDP for 2017 includes the market value of final goods and services. This includes real estate services.
Is the value of "intermediate goods and services" produced during the year included in "Gross Domestic Product (GDP)"? For example, is cottoncotton used to produce a new shirtshirt included in GDP?
Yes. The value of the cotton is not directly counted in GDP, but the production of cotton is included in the value-added method of measuring GDP
Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there aren't any jobs available. You would be counted as
a discouraged worker.
To calculate personal income from national income, which of the following must the BEA do?
add government transfer payments
When a firm pays a wage that is higher than the market wage in order to increase worker productivity, the wage is called
an efficiency wage.
An underground economy involves all of the following except
buying and selling of goods and services by obtaining a permit from the government.
A breakdown of the four components of GDP shows that
consumption is by far the largest expenditure category, and that consumer spending on services far exceeds consumer spending on goods.
The country of Alaine produces 1,000 tons of corn during a year. It is valued at $500 per ton. A lobbyist for the corn industry in Alaine argues that the total value of corn production should be included in the country's GDP for the same year. The lobbyist's claim is based on the assumption that
corn is not used in the production of other goods.
Workers who lose their jobs because of a recession are experiencing
cyclical unemployment.
Which of the following do we subtract from GDP to obtain national income?
depreciation
When an unemployed person drops out of the labor force, it
does not affect the employment-population ratio.
Since nominal incomes increase with inflation,
expected inflation does not affect the purchasing power of the average consumer.
When the economy is at full employment, which types of unemployment remain?
frictional and structural
The short-term unemployment that arises from the process of matching workers with jobs is called
frictional unemployment.
Since the late 1940s, the overall labor force participation rate
has risen because the decline in the labor force participation rate of adult men has been more than offset by the increase in the labor force participation rate of adult women.
The "normal" underlying level of unemployment in the economy is
he natural rate of unemployment. the sum of structural unemployment and frictional unemployment. the full-employment rate of unemployment.
In August 2015, which of the following demographic groups had a higher rate of unemployment than the unemployment rate for the total population?
high school dropouts
When examining the circular-flow diagram,
households can use some of their income to purchase goods from foreigners as imports.
In the circular-flow diagram, who supplies factors of production in exchange for income?
households,
Government unemployment insurance tends to
increase the unemployment rate by lowering the opportunity cost of job search.
Increases in the minimum wage will
increase unemployment among teenagers.
The unemployment rate that includes discouraged workers and people working part-time who would prefer full-time jobs
is higher than the official unemployment rate, and the difference between the two grows larger in recessions.
The computation of the average annual growth rate of real GDP
is more complex when examining data for a long period of time than when examining data for only a few years.
Potential GDP
is the level of real GDP attained when all firms are producing at capacity.
The chapter explains that it is impossible to know whether a particular nominal interest rate is "high" or "low" because
it all depends on the inflation rate.
If prices rise over time, then real GDP will be
larger than nominal GDP in years before the base year.
Unemployment rates are
lower for college graduates than for people without a high school degree, and vary greatly among ethnic groups.
In an economy with rising prices, compared to the base year,
nominal GDP is larger than real GDP in years after the base year.
The difference between a nominal variable and a real variable is that
nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.
Some countries have larger underground economies than do other countries, because
of government policies that are retarding economic growth.
The employment-population ratio measures the
percentage of the working age population that is employed.
Disposable personal income is equal to
personal income minus personal tax payments.
Disposable personal income is
personal income minus personal taxes.
The payment of government unemployment insurance reduces the severity of recessions by
preventing a huge drop in income and spending for the unemployed.
If the GDP deflator in 2012 has a value of 98.0, then
prices have decreased 2 percent between the base year and 2012.
Which of the following is the best measure of the standard of living of the typical person in a country?
real GDP per person
Long-run economic growth in the United States is best measured using
real GDP per capita, which has been trending strongly upwards over the past century.
Over time, prices may change relative to each other. To take this change into account, the Bureau of Economic Analysis calculates
real GDP using chain weights.
The unemployment rate
rises during recessions, falls during expansions, and is always above zero.
Potential GDP is
sometimes greater, sometimes less, and sometimes equal to actual real GDP.
In calculating GDP, which levels of government spending are included in government purchases?
spending by federal, state, and local governments
The type of unemployment most likely to result in hardship for the people who are unemployed is
structural because this type of unemployment requires retraining to acquire new job skills.
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
structural unemployment.
GDP is best defined as
the market value of all final goods and services produced in a country in a period of time, typically one year.
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment.
The difference between the nominal interest rate and the real interest rate is
the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.
The unemployment rate in the United States typically has been lower than the unemployment rates in Canada and countries in Western Europe because
the opportunity cost of job search is lower in Canada and countries of Western Europe and unemployed workers in those countries search longer for jobs.
Which of the following is included in the economist's definition of investment?
the purchase of new machines, factories, or houses
The two key factors that cause labor productivity to increase over time are
the quantity of capital per hour worked and the level of technology.
The natural rate of unemployment is
the sum of structural unemployment and frictional unemployment.
Real GDP is
the value of goods and services evaluated at base year prices.
What is the best use of the rule of 70 among those listed below?
to judge how rapidly real GDP per capita is growing over long time periods
The type of inflation that is a greater problem to society is
unanticipated inflation, since it causes greater redistribution of income between those making payments and those awaiting payments in the future.
When an unemployed person drops out of the labor force, the unemployment rate
understates the true degree of joblessness in the economy.
In 2014, the largest component of gross domestic income was
wages
Which component of gross domestic income is the largest?
wages
An important conclusion to draw from the circular-flow diagram is that
we can measure GDP by calculating the total value of expenditures on final goods and services, or we can measure GDP by calculating the value of total income.
The extent of job creation and job destruction is
what we would expect in a vibrant market system.
Nominal incomes generally increase with inflation because
when inflation is anticipated, average nominal incomes also increase by the same percentage as the rate of inflation.
What are the four major components of expenditures in GDP?
Consumption, Investment, Government Purchases, and Net Exports
What are the four major categories of expenditure?
Consumption, investment, government purchases, and net exports.
The three types of unemployment are
frictional, structural, and cyclical unemploment.
The unemployment rate in the United States is usually ________ than the unemployment rates in most other high-income countries, partly because the United States has _________ requirements for the unemployed to receive government payments.
lower; more stringent
Two important trends in the labor force participation rates of adults aged 20 and over in the United States since 1948 are the _________ labor force participation rate of adult women and the __________ labor force participation rate of adult men.
rising; falling
