MACRO Test 2

Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment​ rate?

(Number of unemployed/ Number in labor force)×100.

The following table shows the hourly output per worker measured as quarts of olive oil and pounds of pasta in Greece and​ Italy: The opportunity cost of producing one more quart of olive oil in Greece is .____ pounds of pasta The opportunity cost of producing one more quart of olive oil in Italy is______ pounds of pasta The opportunity cost of producing one more pound of pasta in Greece is ______ quarts of olive oil. The opportunity cost of producing one more pound of pasta in Italy is ______ quarts of olive oil.

.5 2 2 .5

If a​ 3-month Treasury bill pays​ 5.5% and the change in the consumer price index​ (CPI) is​ 4.7%, what is the real interest rate​ (the true return to​ lending)?

.8%

Consider the simple economy that produces only three products. Use the information in the following table to calculate the​ (annual rate​ of) inflation for 2018 as measured by the consumer price index ​(CPI). The inflation rate for 2018 as measured by the consumer price index​ (CPI) is

10.34%

Suppose FranceFrance and PortugalPortugal produce only cloth and wine. Assume that each country uses only labor to produce each​ good, and that the cloth and wine made in France and Portugal are exactly alike. The table below shows how much each country can produce of each good with one hour of​ labor: Suppose that France and Portugal do not trade with each other. Each has 2000 hours of labor with which to produce cloth and​ wine, and the countries are currently producing amounts of each good shown in the table​ below: Assume now that each country specializes in producing that good in which it has a comparative advantage. ​ Further, assume for simplicity that one unit of cloth can be traded for one unit of wine. If France trades 3,200 units of cloth for 3,200 units of wine with Portugal​, ​then, with​ trade, France will be able to consume the same amount of wine and _______ additional units of cloth ​(enter a numeric response using an​ integer)​, and Portugal will be able to consume the same amount of cloth and ________additional units of wine.

1000 1920

In​ 2011, the value of the GDP deflator is In​ 2012, the value of the GDP deflator is

115 119

Consider the following simple economy that produces only three​ goods: real GDP in 2017 equals

6680

Your father earned​ $34,000 per year in 1984. To the nearest​ dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is​ 104?

70,288

Consider the following​ table: What is the real average hourly wage in​ 2009? What can be said about real average hourly earnings and nominal average hourly earnings between 2008 and​ 2010?

8.21 Both real and nominal average hourly earnings increased

Which of the following transactions is not counted in​ GDP?

A consumer prepares meals for his family.

In August​ 2013, the​ working-age population of the United States was 245.9 million. The​ working-age population is divided into those in the labor force​ (155.5 million) and those not in the labor force​ (90.4 million). The labor force is divided into the employed​ (144.2 million) and the unemployed​ (11.3 million). Those not in the labor force are divided into those not available for work​ (84.1 million) and those available for work​ (6.3 million).​ Finally, those available for work but not in the labor force are divided into discouraged workers​ (0.9 million) and those currently not working for other reasons​ (5.4 million). Use this data to help determine which one of the following statements is​ true:

Both A and B above are true.

As illustrated in the diagram to the​ right, when a nation moves from autarky to free​ trade, economic surplus increases by the areas represented by

C and D

The diagram on the right represents a tariff imposed on an individual market. The total deadweight loss​ (loss in economic​ surplus) from this tariff is illustrated by areas

C and D

The figure above shows the values of the components of GDP for the year 2014. Based on the data​ shown, which of the following statements regarding the components of GDP are​ false?

Consumer spending on services is less than the sum of spending on durable and nondurable goods.

Which of the following is an example of structural​ unemployment?

Due to technological change comma typewriter workers lose jobs and must retrain to find jobs in other industries.Due to technological change, typewriter workers lose jobs and must retrain to find jobs in other industries.

Based on the above table and​ graph, which of the following statements regarding total production and total income is​ true?

Each measure of production and income gives a different value for total production and 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.

________ are goods and services produced domestically but sold to other countries. ________ are goods and services bought domestically but produced in other countries. ________ are taxes imposed by a government on imports of a good into a country.

Exports imports tariffs

Why is GDP an imperfect measurement of total production in the​ economy?

GDP does not include household production or production from the underground economy.

Which of the following is considered to be a problem in using GDP as a measure of national ​well-being​?

GDP is not adjusted for changes in the environment.

national income

GDP minus depreciation

The table and figure above show GDP measured in terms of the total income received by households. Use the table and figure to help determine which of the following statements about the division of income is false.

Gross domestic income is measured precisely.

Which of the following is an example of cyclical​ unemployment?

In an economic downturn, a manufacturing plant reduces production and temporarily lays off workers.

How does the U.S. economy create and destroy millions of jobs each​ year? ​(Mark all that​ apply.)

In the market​ system, new firms are constantly entering and exiting various industries. Some businesses are​ expanding, while others are contracting.

The BLS uses the establishment survey to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage.

It is based on company payroll and not on unverifiable answers. It does not include information about​ self-employed people.

Which of the following can give an early warning of future increases in the price​ level?

Producer price index

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.

Suppose the base year is 2001. Looking at GDP data from the United States from 2001 to the​ present, what would be true of the relationship between nominal GDP and real GDP?

RGDP​ < NGDP because prices are rising.

What effect do labor unions have on unemployment?

Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate.

Complete the following table:

The CPI in 2014 equals 145.45 The CPI in 2016 equals 140.91

​Congratulations! Your boss has given you a raise. ​However, you want to know whether your purchasing power has actually​ increased, since inflation is rising as well. The table below gives you data for wages and the Consumer Price Index​ (CPI) for the last two years.

The nominal percentage increase in your wage is 5% The real percentage increase in your wage is -2.9%

Using the numbers in the​ table, determine which country has a comparative advantage in producing each product. Which of the following statements is true?

The opportunity cost for CanadaCanada to produce one Smartwatch is 0.60 Fitness Bracelet.

Who is harmed when individual nations move from autarky to free​ trade?

The owners of the firms that went out of business.

How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment​ rate?

They decrease the opportunity cost of job search.

Some politicians argue that eliminating U.S. tariffs and quotas would help the U.S. economy only if other countries eliminated their tariffs and quotas in exchange.

This statement is​ false; the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

What do most economists find to be the most persuasive argument in favor of​ protectionism?

Trade barriers protect infant industries that initially have relatively high costs.

Indicate whether the following statement is true or false and why. ​"A wage rising slower than the rate of inflation is actually​ falling."

True. If wages are increasing slower than the average price of goods and​ services, purchasing power falls.

What are the four categories of​ income?

Wages, Interest,​ Rent, and Profit.

Click on the graph in the window on the right and select Multiple Time Series to graph nominal GDP and real GDP for the years​ 1990-2006. For Y axis1 select nominal​ GDP, and for Y axis2 select real GDP. Roll your cursor over the plotted data to identify each series. For this​ data, the base year for calculating GDP is 2000. Use the graph to help determine which one of the following statements regarding nominal and real GDP is FALSE.

When nominal GDP​ increases, real GDP falls

Which of the following equations sums up the components of Gross Domestic Product​ (GDP)?

Y = C+I+G+NX

Which equation represents the relationship between GDP and the four major expenditure​ components?

Y=C+I+G+NX

Suppose that the inflation rate turns out to be much higher than most people expected. In that​ case,

a borrower will gain from the situation while a lender will lose.

The United States produces beef and also imports beef from other countries. The graph to the right shows the supply and demand for beef in the United​ States, under the assumption that the United States can import as much as it wants at the world price of beef without causing the world price of beef to increase.

a. How much beef does the United States import at the world​ price(WP)? 500 million pounds of beef b. Now suppose that the United States imposes a tariff on beef of​ $0.50 a pound. How much beef is now​ imported? 200 million pounds of beef c. Do domestic producers of beef gain or lose when the United States imposes a tariff on​ beef? Gain d. Does the government gain or lose when the United States imposes a tariff on​ beef? Gain e. Do domestic consumers of beef gain or lose when the United States imposes a tariff on​ beef? Lose

Which of the following are likely to increase the measured level of GDP and which are likely to reduce​ it?

a. When the number of people working outside the home increases​, the measured level of GDP increases b. when there is a sharp increase in the crime rate, the measured level of GDP may increase or decrease. c. if lower tax rates cause fewer people to hide income they earn, the measured GDP increases

Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. a. You purchase a new Ford Escape Hybrid from a Ford dealer. b. You purchase a 2013​ (preowned) Ford Escape Hybrid from a friend. c. Ford purchases door handles for the Escape from an auto parts manufacturer in Indiana. d. Ford produces​ 1,000 Escapes in a factory in Missouri and ships them to a car dealer in​ Shanghai, China. e. Ford purchases new machine tools to use in its Missouri Escape factory. f. The state of Missouri builds a new highway to help improve access to the Ford Escape plant.

a. consumption expenditure b. not included in GDP calculation c. not included in GDP calculation d. net export expenditure e. investment expenditure f. government expenditure

By​ trading, countries are able to consume more than they could without trade. This outcome is possible because A. shifting production to the more efficient countrylong dash—the one with the comparative advantagelong dash—increases total production. B. world production of both goods increases after trade. C. inefficiencies in resource allocation are reduced. D. all of the above.

all of the above

Even perfectly anticipated inflation imposes costs.​ Why? A. Menu costs. B. Some wages will fail to keep up with anticipated inflation. C. Paper money loses its purchasing power by the rate of inflation. D. All of the above. .E. A and C only.

all of the above

Real GDP per capita is often used as a measure of general​ well-being. While increases in real GDP often do lead to increases in the​ well-being of the​ population, why is real GDP not a perfect measure of​ well-being? A. GDP does not include crime rates or income distribution. B. The costs of pollution are not included. C. The value of leisure is not included. D. All of the above.

all of the above

The World Trade Organization​ (WTO) A. generally aids in negotiating trade agreements that include not only goods but also services and intellectual property. B. replaced the General Agreement on Tariffs and Trade​ (GATT) in January 1995. C. is an international organization that oversees international trade agreements. D. all of the above.

all of the above

When the economy is at full​ employment, A. the unemployment rate is greater than zero. B. the natural rate of unemployment prevails. C. all remaining unemployment is either frictional or structural. D. All of the above.

all of the above

Which of the following causes changes in the CPI to overstate the true inflation​ rate? A. New product bias B. Substitution bias C. Increase in quality bias D. All of the above

all of the above

Why do some people oppose the World Trade Organization​ (WTO)? A. Some opponents are specifically against the globalization process that began in the 1980s and became widespread in the 1990s. B. Some opponents desire to erect trade barriers to protect domestic firms from foreign competition. C. Some critics of the WTO support globalization in principle but believe that the WTO favors the interests of the​ high-income countries at the expense of the​ low-income countries. D. All of the above.

all of the above

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy? Discouraged workers are not considered unemployed. B. It fails to account for illegal activities. C. It does not account for inaccurate responses to the Current Population Survey. D. Underemployed people are considered employed. E. All of the above

all of the above

Among the main sources of comparative advantage are the​ following:

climate and natural​ resources, relative abundance of labor and​ capital, technology, external economies.

Indicate whether each of the following is a final​ good, an intermediate​ good, or neither.

coffee beans purchased by a coffee shop - intermediate good one share of google stock- neither a new pick-up truck purchased by a consumer- final good a new home purchased by a family- final good

What index is used to measure the average prices paid by a typical​ family? An average of the prices of the goods and services purchased by a typical family is​ the: Suppose the​ economy's consumer price index​ (CPI) in 2008 was 185 and the CPI in 2009 was 198. The inflation rate over the period from​ 2008-2009 was equal to

consumer price index (CPI) 7%

One reason some oppose free trade and the reduction of trade barriers is protectionism. What does​ old-fashioned protectionism seek to​ protect? Protectionism traditionally seeks to use trade barriers to protect

domestic jobs

According to​ Costco's CEO, Jim​ Sinegal: ​"Paying good wages and keeping your people working for you is good business...Imagine that you have​ 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for​ you." ​Sources: Alan B. Goldberg and Bill​ Ritter, "Costco CEO Finds​ Pro-Worker Means​ Profitability," ABCnews.com​, Aug.​ 2, 2006; Lori​ Montgomery, "Maverick CEO Joins Push to Increase Minimum​ Wage," Washington Post​, Jan.​ 30, 2007. What is​ Costco's CEO referring​ to?

efficiency wages

Inventories are part of investment and therefore included in GDP because

firms produce​ goods, however sometimes the goods may be unsold at the time GDP is computed.

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status?

frictionally unemployed

The​ circular-flow diagram shows that all sources of income are owned by

households

A simple economy produces four​ goods, corn​, cornbread​, cell phones​, and software . All of the production of corn is used in the production of cornbread. Use the information in the following table to compute GDP for the current year.

in this year, the nominal value of GDP in this economy is 325,300.00

The real interest rate Suppose an economy has an inflation rate of 3.1​% and a bank makes a loan with an interest rate of 6.5​%.

is equal to the nominal interest rate minus the inflation rate. in this case, the real interest rate is 3.4%

Dumping

is selling a product for a price below its cost of production.

Comparative advantage

is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors.

One effect of tariffs and quotas

is to cost jobs outside the industries immediately affected.

Suppose the fixed interest rate on a loan is​ 5.75% and the rate of inflation is expected to be​ 4.25%. The real interest rate is​ 1.5%. Suppose now that instead of​ 4.25%, the inflation rate unexpectedly reaches​ 5.5%. Who gains and who loses from this unanticipated​ inflation? ​(Mark all that​ apply.)

lenders lose from a lower real interest rate borrowers gain from a lower real interest rate

Comparative advantage

may change as time passes and circumstances change.

Identify whether the following topics belong in microeconomics or​ macroeconomics: How does the price of corn change if the price of wheat​ increase? Identify the best measurement of total output in the US economy. How will an increase in government spending impact the inflation​ rate? The most efficient market structure is perfect competition.

micro macro macro micro

The difference between microeconomics and macroeconomics is

microeconomics studies smaller parts of the economy such as markets and​ individuals, while macroeconomics studies the economy as a whole.

personal income is

national income minus retained corporate earnings plus government transfer payments and interest on government bonds.

One major component of GDP that can be negative is

net exports

We do not see complete specialization in the real world because

not all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products differ.

Disposable personal income is

personal income minus personal taxes.

When compared to the Great​ Depression, the typical length of unemployment in the modern​ (post-Great Depression-era) U.S. economy is

relatively brief.

Protectionism is the use of trade barriers to shield domestic firms from foreign competition. Protectionism is usually justified on the basis of several arguments which​ include:

saving​ jobs, protecting infant​ industries, and protecting national security.

In​ 1999, at a meeting of the World Trade Organization in​ Seattle, Washington, a large number of people protested attempts to reduce trade barriers. What is a reason why some would want to prevent trade barriers from being​ reduced? Some want to prevent trade barriers from being reduced because they

seek to protect against domestic wages

The unemployment rate Suppose an economy is given by the​ following: Population​ = 243 million Labor force​ = 182 million The number of people employed​ = 172.9 million The number of people unemployed​ = 9.1 million Given the information​ above, the unemployment rate is____

shows the percentage of the labor force that is considered unemployed. 5%

Economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage​ (and less of that for which a country does not have a comparative​ advantage). ​ However, countries rarely specialize completely. ​ Why? Even with international​ trade, countries rarely specialize completely because

some goods and services cannot be traded internationallysome goods and services cannot be traded internationally.

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

structurally unemployed

Assume that each country uses only labor to produce each​ good, and that Japanese and U.S. cell phones and digital music players are exactly the same. Determine the missing opportunity costs in the table below and fill in the missing values. ​(Enter your responses rounded to one decimal​ place.) From the tables above it is clear that​ _____ has an absolute advantage in the production of both goods and that​ _____ has a comparative advantage in cell​ phones, while​ _____ has a comparative advantage in digital music players.

the United States​,the United States​,Japan

________ is the percentage of the​ working-age population in the labor force. Suppose an economy is given​ by: Population​ = 212 million ​Working-age population​ = 144 million Labor force​ = 92 million The number of people employed​ = 84 million The number of people unemployed​ = 88 million The labor force participation rate for this economy is____

the labor force participation rate 63.9%

Gross Domestic Product​ (GDP) is

the market value of all final goods and services produced in a country during a period of time.

The primary difference between a quota and a voluntary export restraint​ (VER) is that

the quota is unilaterally imposed by one nation on the other while the VER is the result of negotiations between nations.

The​ circular-flow diagram shows that​ ________ should equal​ ________.

total​ expenditure; total income

The largest component of gross domestic income is

wages

​_____ is a situation in which a country does not trade with other countries. The​ _____ is the ratio at which a country can trade its exports for imports from other countries.

​Autarky, terms of trade

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.

If the U.S. Bureau of Economic Analysis​ (BEA) added up the values of every good and service sold during the​ year, would the total be larger or smaller than measured gross domestic product​ (GDP)?

​Larger: The value of all goods and services sold would include intermediate goods.

What are the four categories of​ income?

​Wages, Interest,​ Rent, and Profit.

In addition to tariffs and​ quotas, governments sometimes erect other barriers to trade. For​ example, all governments require that imports meet certain health and safety requirements. Many governments also restrict imports of certain products on national security grounds. Explain whether you agree or disagree with the following​ statement: ​Sometimes, however, governments use these requirements to shield domestic firms from foreign competition.

​Yes, sometimes governments impose stricter health and safety requirements on imported goods than on goods produced by domestic firms.