Macro Exam 1 Review Questions
Of the following items, which would NOT be included in GDP? A) the dollar value of a repair job done by your professor on his or her own car B) the dollar value of a lawyer's service C) new car sales by a local car dealer D) production of new cars that were not sold in the current year
A
Suppose that a sweatshop buys $20,000 worth of cloth, $5000 worth of thread and $2000 worth of buttons to produce $50,000 worth of shirts that it sells to a store, which it then sells for $77,000 to customers. The total incomes generated by the sweatshop and store must be: A) $50,000. B) $77,000. C) $43,000. D) None of the above.
A
Unit-of-account costs of inflation are the: A) costs associated with money being a less reliable unit of measurement. B) costs of transactions associated with avoiding the inflation tax. C) costs associated with businesses changing prices. D) transfers the government gets from printing money.
A
39. Real GDP tends to understate our economic well-being because it: A) includes the value of services produced in the home. B) excludes the value of leisure. C) includes expenditures on crime prevention equipment. D) includes health care costs related to the consumption of cigarettes.
B
Domestic entities' purchases of foreign financial assets is considered A) a capital inflow B) a capital outflow C) an addition to national saving D) a deduction from national saving.
B
Suppose the average nominal wage in 2012 was $20/Hr. while in 2013 it was $19/Hr. If prices _________ from 2012 to 2013, the purchasing power, over goods and services, of the average wage ____________. A) decreased 10%; decreased B) decreased 10%; increased C) decreased 20%; decreased D) None of the above
B
40. GDP per capita is: A) a perfect measure of a country's standard of living. B) the only way to measure living standards among different countries. C) an incomplete measure of a country's standard of living. D) used by the United Nations to compare nations based on measures of welfare.
C
An increase in transfer payments would: A) cause the the economy to contract. B) decrease disposable income. C) decrease national saving. D) do all of the above.
C
Efficiency wages cause: A) total employment to be higher than it would otherwise be. B) the quantity of labor supplied to be lower than it would otherwise be. C) the labor force to be higher than it would otherwise be. D) unemployment be lower than it would otherwise be.
C
Frictional unemployment is considered to be: A) bad, because people are not getting a paycheck. B) good, because people learn how other folks live. C) good, since that means people may be seeking for jobs that match their job skills. D) bad, because people are out of work.
C
Juan lost his job in an automobile factory due to automation and cannot find another job in the industry because his skills are in the area of automobile assembly and factories throughout the industry are automating. Juan is: A) cyclically unemployed. B) seasonally unemployed. C) structurally unemployed. D) frictionally unemployed.
C
Menu costs of inflation are the: A) costs associated with money being a less reliable unit of measurement. B) costs of transactions associated with avoiding the inflation tax. C) costs associated with businesses changing prices. D) revenue the government gets from printing money.
C
Unanticipated inflation: A) helps those on fixed incomes. B) hurts borrowers and helps lenders. C) helps borrowers and hurts lenders. D) causes interest rates to decrease.
C
When is minimum wage binding? A) when the wage is below the equilibrium wage B) when the wage is equal to the equilibrium wage C) when the wage is above the equilibrium wage D) none of the above
C
36. If nominal GDP increases from one year to the next: A) prices must have risen from one year to the next. B) real GDP must have risen from one year to the next. C) prices and real GDP must have risen from one year to the next. D) either output or prices or both must have risen from one year to the next.
D
Assume that the United States has a trade surplus with the Island of Zukaku. We can expect all of the following except: A) The United States' exports to Zukaku equal Zukaku's imports from the United States B) Zukaku has a trade deficit with the United States C) Zukaku's imports from the United States exceed the United States' imports from Zukaku D) Zukaku is lending to the United States.
D
Suppose that people's expected rate of inflation rose from 2% to 5%. Which of the following would likely result from this?: A) A 5% decrease in real interest rates. B) A 3% decrease in real interest rates. C) A 3% increase in real interest rates. D) A 3% increase in nominal interest rates
D
The major difference between the CPI and the producer price index is that: A) the producer price index is based on retail prices and CPI is based on wholesale prices. B) the producer price index measures the cost of living of self-employed workers and the CPI measures the cost of living of salaried workers. C) the producer price index generally registers a higher rate of inflation than the CPI. D) the producer price index is based on the cost of a basket typically purchased by producers, while the CPI is based on the cost of a basket typically purchased by consumers.
D
Which of the following would shift the production function down? A) Improvements in production technology. B) An upgrading of the skills set of the labor force. C) A decrease in how much capital an average worker works with. D) None of the above.
D
T/F: To calculate the labor force participation rate you take the labor force / total population
False you take the (labor force / all those 16+) * 100
In the circular flow diagram, A) transfer payments are represented as a flow out of the income stream. B) exports are represented as a flow into the domestic economy from foreign economies. C) imports are represented as a flow into the domestic economy from foreign economies D) disposable income is equal to GDP.
V
How do you calculate inflation when given real GDP growth rate and nominal GDP growth rate?
nominal GDP rate - real GDP rate