Macro Quiz 1

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If an American firm opens a production facility in​ India, the total value of the production will be included in the

gross domestic product of India.

The measure of production that values production using current prices is called

nominal GDP.

Which of the following is counted in​ GDP?

the cost of a speed boat purchased by drug smugglers

What are menu​ costs?

the costs to a firm of changing prices.

Gross domestic product understates the total production of final goods and services because of the omission of

the underground economy.

If the nominal interest rate is​ 6% and the inflation rate is​ 2% then the real interest rate is

4%

What is the largest component of spending in the​ U.S.?

Consumption Spending

If China decides to enact laws to clean up the​ environment, what would be the effect on​ GDP?

GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls.

Which of the following is a true statement about real and nominal​ GDP?

If real GDP increases from one year to the​ next, we know that production of goods and services has risen.

If a German firm produces cars in the United​ States, that production should count towards

U.S. GDP

An example of a seasonally unemployed worker would be

a ski lift operator who loses his job when the snow melts in the spring.

Labor unions cause unemployment because the union contract wage is set

above the market​ wage, causing a surplus of labor.

Gross domestic product is generally​ ________ national income.

greater than

​Investment, as defined by​ economists, would include the purchase of a

computer by an accounting firm.

The real wage equals the nominal wage​ ________ the​ CPI, all times 100.

divided by

The natural rate of unemployment is the amount of unemployment

equal to frictional plus structural unemployment.

The increased generosity of unemployment insurance programs in Canada as compared to the U.S. should

increase the duration of unemployment in Canada as compared to the U.S.

The percent increase in the CPI from one year to the next is a measure of the

inflation rate.

If the quantity of goods and services produced in the economy decreases

it may be possible for nominal GDP to increase.

Jack just received a promotion at work and now works 50 hours per week instead of 35. As a​ result,

neither the unemployment rate nor the labor force participation rate changed.

If your nominal wage rises faster than the price​ level, we can say your real wage has​ ________ and the purchasing power of your income has​ ________.

risen; risen

During a deflationary​ period,

the nominal interest rate is less than the real interest rate.

Mike has been unemployed for over a year. He​ hasn't looked for a job in the last three​ months, but​ he's just started looking for work again. Because Mike started looking for a new​ job,

the unemployment rate increased.

​Suppose, in​ 2016, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for​ 2016?

the value of the services of the real estate agent

If inflation is positive and is perfectly​ anticipated,

those that hold paper money lose.

The formula for calculating the CPI is

​(Expenditures in the current​ year/Expenditures in the base​ year) times × 100.


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