Macro Exam 3

When a minimum-wage law forces the wage to remain above the equilibrium level, the result is:

A surplus of labor and a shortage of jobs

In a simple circular-flow diagram, total income and total expenditure are:

Always equal because every transaction has a buyer and a seller

Most goods and services produced at home:

And most goods and services produced illegally are excluded from GDP

Natalia worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?

Both Natalia and Tabitha

For the purpose of calculating GDP, investment is spending on:

Capital equipment, inventories, and structures, including household purchases of new housing

A budget deficit:

Changes the supply of loanable funds

If the natural rate of unemployment is 4.7 percent and the actual rate of unemployment is 5.5 percent, then by definition there is:

Cyclical unemployment amounting to 0.8 percent of the labor force

Crowding out occurs when investment declines because:

Deficit makes interest rates rise

True or False: Every adult who was not employed during the previous four weeks is included in the Bureau of Labor Statistics' "unemployed" category.

False

Government purchases include spending on goods and services by:

Federal, state, and local government

Financial intermediaries are:

Financial institutions through which savers can indirectly provide funds to borrowers

Institutions that help to match one person's saving with another person's investment are collectively called the:

Financial system

Which of the following demonstrates human capital and physical capital in that order?

For a restaurant: the chef's knowledge about preparing food and the equipment in the kitchen

The CPI and the GDP deflator:

Generally move together

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has:

Gradually decreased

In the early 1900s, Henry Ford introduced a:

High-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory

Countries with low GDP per person tend to have:

Higher rates of infant mortality

Teenagers have more frequent unemployment spells and spend more time searching for jobs. Other thing the same, this means that teenagers have a:

Higher unemployment rate. If a larger portion of the adult population were teenagers, the natural rate of unemployment would be higher

Minimum-wage laws are least likely to affect the wages paid to:

Highly-educated workers

The nominal interest rate tells you:

How fast the number of dollars in your bank account rise over time

The real interest rate tells you:

How fast the purchasing power of your bank account rises over time

In the CPI, goods and services are weighted according to:

How much consumers buy of each good or service

The source of the supply of loanable funds:

Is saving and the source of demand for loanable funds is investment

The catch-up effect refers to the idea that:

It is easier for a country to grow fast and so catch-up if it starts out relatively poor

The theory of efficiency wages explains why:

It may be in the best interest of firms to offer wages that are above the equilibrium level

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with:

Longer life expectancy and a higher percentage of the population that is literate

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily:

Market prices

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity:

More in the short run than in the long run

The labor force equals the:

Number or people employed plus the number of people unemployed

One variable responsible for most significant explanation of variations in living standards around the world is:

Productivity

In order to promote growth in living standards, policymakers must:

Protect property rights and maintain political stability

A recession has traditionally been defined as a period during which:

Real GDP declines for two consecutive quarters

Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise:

Real GDP per person and productivity in Eurnesia

Given that Sarah's income exceeds her expenditures, Sarah is best described as a:

Saver or as a supplier of funds

At the broadest level, the financial system moves the economy's scarce resources from:

Savers to borrowers

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied:

Shortage and the interest rate is below the equilibrium level

Social Security payments are indexed for inflation using:

The CPI

Two common measures of the overall level of prices are:

The GDP deflator and the consumer price index

We associate the term debt finance with:

The bond market, and we associate the term equity finance with the stock market

If the price of Italian shoes imported into the U.S. increases, then:

The consumer price index will increase, but the GDP deflator will not increase

The term inflation is used to describe a situation in which:

The overall level of price increases in the economy

Collective bargaining refers to:

The process by which unions and firms agree on the terms of employment

National saving is:

The total income in the economy that remains after paying for consumption and government purchases

Which of the following is not correct?

The unemployment rate occasionally falls to zero

Who of the following is not included in the Bureau of Labor Statistics' "employed" category?

Those waiting to be recalled to a job from which they has been laid off

True or False: Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience.

True

True or False: International data on real GDP per person gives us a sense of how standards of living vary across countries.

True

True or False: It is possible for a country without a lot of domestic natural resources to have a high standard of living.

True

True or False: When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than if many of its workers were idle.

True

The consumer price index is used to:

Turn dollar figures into meaningful measures of purchasing power

Indexation refers to:

Using a law or contract to automatically correct a dollar amount for the effects of inflation.

GDP is define as the:

Value of all final goods and services produced within a country in a given period of time

An organization that tries to encourage the flow of investment from advanced countries to poor countries is the:

World Bank

Net exports equal:

Y-(C+I+G)

Cyclical unemployment refers to:

Year-to-year fluctuations of unemployment around its natural rate