macro test 2
calculate private savings
wages + transfer payments + consumptions + paid taxes
Consider the data shown above for Vicuna, a country that produces only two products: oranges and shirts.Refer to Table 8-13. Real GDP for Vicuna for 2016 using 2018 as the base year equals
$5,650
Labor unions cause unemployment because the union contract wage is set
above the market wage, causing a surplus of labor
Minimum wage laws cause unemployment because the legal minimum wage is set
above the market wage, causing labor demand to be less than labor supply.
which of the following is not a financial intermediary
airlines
In 2016, Ford Motor Company's sales were rising. These events were caused by
an economic expansion
What term do economists use to refer to the conflict between the interests of shareholders and the interests of top management?
a principal-agent problem
An underground economy involves all of the following except
buying and selling of goods and services by obtaining a permit from the government.
What is the largest component of spending in the United States?
consumption spending
GDP is not a perfect measure of well-being because
GDP is not adjusted for pollution
Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?
Real GDP grows by 2.3% in the second quarter.
What do we mean by the separation of ownership from control in large corporations?
Shareholders own the corporation, but it is controlled by managers.
Which of the following policies would reduce structural unemployment?
a job retraining program
A bond represents
a loan to a company
The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector
do not pay taxes to the government.
Gross domestic product in the economy is measured by the
dollar value of all final goods and services produced in the economy
labor force equation
employed + unemployed
The natural rate of unemployment is the amount of unemployment
equal to frictional plus structural unemployment.
In the circular flow model, the value of total income for an economy ________ the value of total production.
equals
In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.
equals
Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower
frictional unemployment
Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called
frictional unemployment
A student who just graduated from college but has not found a job would most likely be
frictionally unemployed
final goods and services
good and services purchased by a final user and is used to calculate GDP
Which of the following would decrease the unemployment rate?
government aid to retrain unemployed workers
During the Great Depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment
had no effect on the natural rate of unemployment
In the circular flow diagram, ________ supply the factors of production, and ________ goods and services.
households; buy
During a business cycle expansion, total production ________ and total employment ________.
increase, increase
Legalizing all forms of illegal activities
increases GDP and reduces the size of the underground economy.
Which of the following is not directly counted in GDP?
investment expenditures
If the GDP deflator is less than 100, then for that year, nominal GDP ________ real GDP.
is less than
working age eqution
labor force + not in labor force
labor force participation rate formula
labor force/working age population x 100
In 2016, Ford's sales were rising, but in early 2017, Ford's sales declined. Ford and the U.S. automobile industry were experiencing the effects of
the business cycle
The most widely used measure of inflation is based on which of the following price indices?
the consumer price index
The "underground economy" is also referred to as
the informal sector
What is the potential GDP?
the level of real GDP attained when all firms are operating at capacity.
gross domestic product
the market value of all final goods and services produced within a country in a given period of time
We say that the economy is at full employment if the unemployment rate is equal to
the natural rate of unemployment
natural state of unemployment
the normal rate of unemployment around which the unemployment rate fluctuates
inflation rate
the percentage increase in the price level from one year to the next
recession
the period of a business cycle during which total production and total employment are decreasing
expansion
the period of a business cycle during which total production and total employment are increasing
Value added equals the market price of the firm's product minus
the price of intermediate goods.
cyclical unemployment
unemployment caused by a business cycle recession
structural employment
unemployment that arises from a persistent mismatch between the skills or attributes of workers and the requirements of jobs
frictional unemployment
unemployment that occurs when people take time matching with a job
GDP is defined as the
value of all final goods and services produced within a country in a given period of time.
Real GDP is GDP in a given year
valued in the prices of the base year
Refer to Table 8-4. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals
$1,600
A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.Refer to Table 8-18. What is real GDP in 2018, using 2013 as the base year?
$10,275
Refer to Table 8-2. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals
$6400
Consider the following data for Tyrovia, a country that produces only two products: guns and butter.Refer to Table 8-11. Real GDP for Tyrovia for 2018 using 2009 as the base year equals
$690
Refer to Table 8-1. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals
$8,750.
inflation rate CPI formula
(CPI year x - CPI year y)/(CPI year y) X 100
employment population ratio equation
(employment/working age population) x 100
Consumer price index (CPI) formula
(expenditures in the current year/expenditures in the base year) x 100
Monthly expenditures for a family of 4 in 2017 averaged $1,400. In 2018, the cost of the same purchases was $1,500. If 2017 is the base year, what was the CPI in 2018?
107
Refer to Table 8-14. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2018 equals
108.5
Based on the table below, in 2011, the value of the GDP deflator is ....
116.57
Refer to Table 8-1. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals.
3090 units
If the GDP deflator is 142, by how much have prices changed since the base year?
42%
The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is
5% higher in year 2 than in year 1.
The nominal GDP of the U.S. in 2016 was approximately $18.6 trillion. This means that
A) the value of output in 2016 was around $18.6 trillion. B) total income in 2016 was around $18.6 trillion. C) total spending in 2016 was around $18.6 trillion.
business cycle
Alternating periods of economic expansion and economic recession
What are the four major categories of expenditure?
Consumption, investment, government purchases, and net exports
Which of the following equations correctly measures GDP in an economy?
GDP = C + I + G + NX
The ________ is a measure of the price level and is calculated by dividing ________ by ________ and multiplying by 100.
GDP deflator, nominal GDP, real GDP
Why is GDP an imperfect measurement of total production in the economy?
GDP does not include household production or production from the underground economy
implicit costs
Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur
GDP Deflator Equation
Nominal GDP/Real GDP x 100
Nominal GDP equation
Price x Quantity
What are the three main factors affecting labor productivity growth?
Property rights, Capital, Technological change
How do we calculate Real GDP per capita?
Real GDP divided by population
if a minimum wage of $8 per hour is imposed, which of the following will result?
The quantity of labor demanded by firms will fall
public savings formula
Total taxes collected - transfer payments - government purchases
What are the four categories of income?
Wages, Interest, Rent, and Profit.
GDP equation
Y = C + I + G + NX
In a closed economy, which of the following equations reflects investment? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
Y-C-G
economic growth rate equation
[(real GDP year 2 - real GDP year 1)/real GDP year 1] x 100
GDP only counts...
new goods and services
The measure of production that values production using current prices is called
nominal GDP
Calculate Deflator
nominal/real gdp times 100
If Jose is 22-years old, is available to work but does not have a job and made no specific efforts to find a job for the previous month, Jose is classified in the Current Population Survey as
not in the labor force
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as
not in the labor force
unemployment rate equation
number of unemployed/labor force x 100
Rule of 70 formula
number of years to double = 70/growth rate
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force.
explicit costs
out-of-pocket costs for a firm, for example, payments for wages and salaries, rent, or materials
Suppose that shortly after graduating from college you decide to start your own business. Assuming you are starting a small business and realize that you need someone with particular expertise or business skills, which category of firm are you most likely to start?
partnership
To examine how the total production of an economy has changed over time, it would be better to examine
real GDP
The producer price index measures the prices that firms
receive for the goods and services they use at all stages of production.
what are the three Key Services of the Financial System?
risk sharing, liquidity, information
Emma is a road construction worker. During the winter months, Emma finds it more difficult to get work. The unemployment Emma experiences in the winter is
seasonal unemployment
A(n) _____ is a financial security that represents partial ownership of a firm, while a _____ is a financial security that represents a promise to repay a fixed amount of funds.
stock, bond
A..... is a financial security representing partial ownership of a firm. While a ..... is a financial security promising to repay a fixed amount of funds.
stock; bond
Structural unemployment is the result of
technology changes or foreign competition
economic growth
the ability of the economy to increase the production of goods and services
labor productivity refers to
the quantity of goods and services that can be produced by one worker or by one hour of work
According to the text, economists consider full employment to occur when
the unemployment rate consists of only frictional and structural unemployment
When the labor market is at full employment
there is no cyclical unemployment in the economy
two ways to measure economic activity
total income or total production