Macroecon Unit 2
A headline states, "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?
cyclical
Increases in the value of a product to each user, including existing user, including existing users, as the total number users rises is called:
network effects
Real GDP is preferred to nominal GDP as a measure of economic performance because
nominal GDP uses current prices and thus may over or understate true changes in output
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are
not counted
Supply shocks
occur when sellers face unexpected changes in the availability and/or prices of key inputs
National income accountants can avoid multiple counting by
only counting final goods
Suppose that real GDP increases by 5 percent while the population of a country increases by 7 percent. Then:
output per person necessarily decreases
Under what circumstances do rates of economic growth understate the growth of economic well-being?
product quality has improved
A consumer price index attempts to measure changes in:
the price of a select market basket of goods and services
An anti-growth view would be that there may be a significant trade-off between productivity and
the quality of life
Human capital refers to
the skills and knowledge that enable a worker to be productive
Labor productivity is defined as
total output/worker-hours
For comparing changes in potential military strength and political preeminence, the most meaningful measure of economic growth would be changes in
total real output
The GDP tends to:
understate economic welfare because it does not take into account increases in leisure
During periods of full employment:
unemployment rate for African-Americans is about twice the rate for whites
Real GDP measures the
value of final goods and services produced within the borders of a country, corrected for price changes
A price index is
a comparison of the current price of a market basket to a fixed point of reference
A college graduate using the summer following graduation to search for a job would best be classified as:
a part of frictional unemployment
The GDP gap measures the difference between
actual GDP and potential GDP
Shocks to the economy occur when
actual economic events do not match what people expected
Which is a demand factor in economic growth?
an increase in total spending in the economy
Economic growth can be portrayed as
an outward shift of the production possibilities curve
The system that measures the economy's overall performance is formally known as
national income accounting
If the annual inflation rate is 5 percent a year, about how many years will it take for the price to doulbe?
14 years
If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is:
$320 billion
What is the correct way to calculate the unemployment rate?
(unemployed/labor force)*100
GDP in an economy is $4,600 billion. Consumer expenditures are $3,500 billion, government purchases are $900 billion, and gross private domestic investment is $400 billion. Net exports are:
-$200 billion
1. Improvements in technology. 2. Increases in the supply (stock) of capital goods 3. Purchases of expanding output 4. Obtaining the optimal combination of goods, each at least-cost production 5. increases in the quantity and quality of natural resources 6. increases in the quantity and quality of human resources. Use the accompanying list to answer the following question. As distinct from the supply factors and demand factor of economic growth, the efficiency factor(s) of economic growth is (are)
1 and 3 only
A nation's average annual real GDP growth rate is 2.5 percent. Based on the rule of 70, the approximate number of years that it would take for this nation's real GDP to double is
28 years
If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is
300
A nation has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under sixteen years old. There are 210 million who are employed and 10 million who are unemployed. What is the unemployment rate?
4.5 percent
If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation was approximately
5.9 percent
The unemployment rate in an economy is 6 percent. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is
9 million
In which of the following cases would real income rise? A. Nominal income rises by 8 percent, and the price level rises by 10 percent B. Nominal income rises by 2 percent, and the price level remains unchanged C. Nominal income falls by 4 percent, and the price level fall by 4 percent D. real income will rise in all of the above cases
B. Nominal income rises by 2 percent, and the price level remains unchanged
In which industry or sector of the economy is out put LEAST likely to be affected by the business cycle? A. automobile production B. agricultural commodities C. housing construction D. capital goods production
B. agricultural commodities
Which of the following statements is correct? A. Search unemployment is the broadest unemployment category because it covers all other types of unemployment B. structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology C. Frictional unemployment is the result of friction between labor and management over how best to perform work D. Cyclical unemployment is also called wait unemployment because this unemployment depends on the timing of the business cycle
B. structural unemployment is unemployment resulting from changes in structure of consumer demand or technology
Which of the following measure the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? A. the Retail Trade survey B. The Wholesale Price index C. The Consumer Price index D. The GDP price index
C. The consumer price index
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
Expansion
The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work Which individual is cyclically unemployed?
George
Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
Structural
During a severe recession, we would expect output to fall the most in
The construction industry
The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:
capital goods and durable consumer goods
When oil and energy prices rise, the economy tends to experience
cots-push inflation
In calculating the unemployment rate, part-time workers are
counted as employed because they are receiving payment for work
Which of the following would most likely occur during the expansionary phase of the business cycle?
demand-pull inflation
As applied to the price level, the "rule of 70" indicates that the number of years required for the price level to double can be found by
dividing the annual rate of inflation into 70
Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as
employed
Okun's law indicates that for
every 1 percent that the actual unemployment rate exceeds the natural unemployment read, a 2 percent GDP gap is generated
The natural rate of unemployment is the
full-employment unemployment rate
The best example of a "frictionally unemployed" worker is one who
is in the process of voluntarily switching jobs
The unemployment rate is interpreted as the percentage of the
labor force that are not employed
Computation of GDP by expenditures method would include the purchase of
land by the U.S. Department of Interior
A recession is a decline in
real GDP that lasts six months or longer
Demand shocks
refer to unexpected changes int he desires of households nad businesses to buy goods and services
A worker who loses a job at a call center because the company moved the call center operations to another country is an example of
structural unemployment
The inflation rate measures the percentage growth rate of
the CPI from one year to the next
The following national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP in this economy?
$3,237 billion
Which of the following countries would economists say DEFINITIVELY is achieving modern economic growth? A: Nigeria experiences a 2.7 percent increase in real GDP per person B: Ghana experiences a 3.6 percent increase in nominal GDP per person C: Zimbabwe experiences a 5.6 percent increase in nominal GDP D: South Africa experiences a 4.2 percent increase in real GDP
A: Nigeria experiences a 4.2 percent increase in real GDP
Which of the following is included in GDP? A: fees received by stockbrokers B: cash gifts from relatives during the holidays C: welfare payments received by some households D: payments received from selling stocks in one's protfolio
A: fees received by stockbrokers
Gross domestic private investment, as define in national income accounts, would include the following, EXCEPT A: government construction of new highways and dams B: the value of all capital goods bought by business firms C: changes to business inventories D: all domestic construction done by the private sector
A: government construction of new highways and dams
Which of the following institutional arrangements is most likely to promote growth? A: unrestricted trade between nations B: all of these C: patents and copyrights that expire quickly and are loosely enforced D: strong government control over resource allocation decisions
A: unrestricted trade between nations
Which of the following economic regions has experienced the LEAST growth in real GDP per capita since 1820?
Africa
Which of the following is an example of a demand shock? A: Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico B: Consumers become more worried about job loss and buy fewer goods and services than expected C: Floods in the Midwest destroy crops D: the federal government unexpectedly requires automobile producers to raise fuel efficiency standards
B: Consumers become worried about job loss and buy fewer goods and services than expected
Which of the following statements is most accurate about advanced economies? A: economies experience a positive growth trend over the short run but experience significant variability in the long run B: economies experience a positive growth trend over the long run but experience significant variability in the short run C: economies experience positive and stable growth over both the long run and short run D: economies experience long-run growth in output but can experience significant growth in the short run
B: Economies experience a positive growth trend over the long run but experience significant variable in the short run
Which of the following is included in GDP: A: cash gifts from relatives during the holidays B: fees received by stockbrokers C: payments received from selling stocks in one's portfolio D: welfare payments received by some households
B: fees received by stock brokers
Which of the following activities is excluded form GDP, causing GDP to understate a nation's production? A: the services of healthcare workers B: goods and services produced in the underground economy C: the services of military personnel D: the construction of new buildings
B: goods and services produced in the underground economy
Which of the following is not included in personal consumption expenditures? A: new furniture and appliances bought by homeowners B: purchases of mutual funds by consumers C: payments for cable and Internet services to homes D: food purchased at supermarkets
B: purchases of mutual funds by consumers
Which would be considered an investment according to economists? A: the purchase of newly-issued shares of stock in Microsoft B: the construction of a new computer chip factory by Intel C: the purchase of shares of stock by Fidelity, a mutual fund company D: the sale of government bonds by the nation's central bank
B: the construction of a new computer chip factory by Intel
All of the following are sources of increasing returns and economies of scale EXCEPT A: simultaneous consumption B: the multiplier effect C: network effects D: learning by doing
B: the multiplier effect
Which is best considered a supply factor for the long-run economic growth? A: government spending B: the stock of capital goods C: full employment of resources D: personal consumption expenditures
B: the stock of capital goods
Which of the following is an example of a supply shock? A: A surprise tax rebate from the government gives people more money to spend B: A surge in consumer optimism prompts increased buying of goods and services C: A dramatic increase in energy prices increase production costs for firms in the economy D: Government increases spending on education
C: A dramatic increase in energy prices increases production costs for firms in the economy
Which of the following is the best example of financial investment? A: Ford Motor Company builds a new manufacturing plant B: A student pursues an MBA degree C: A retiree purchases Google stock D: a young couple purchases a new home
C: a retiree purchase Google stock
Which of the following institutional structure is most likely to promote growth? A: a system of tariffs and other trade barriers to protect domestic companies B: all of these C: a well-enforced system of patents and copyrights D: a tightly regulated market system
C: a well-enforced system of patents and copyrights
Which of the following is NOT a supply factor in economic growth? A: the stock of capital B: the size and quality of the labor C: aggregate expenditures of households, businesses, and government D: technological advance
C: aggregate expenditures of households, businesses, and government
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production? A: the services of health care workers B: the services of military personnel C: goods and services produced in the underground economy D: the construction of new buildings
C: goods and services produced in the underground economy
Which of the following activities is excluded from GDP, causing GDP to understate a nation;s well-being? A: The construction of new houses B: the services of used-car dealers C: the child-care services provided by stay-at-home parents D: government expenditures on military equipment
C: the child-care services provided by stay-at-home parents
Which of the following would an economist consider to be investment? A: a stockbroker buying 10,000 shares of Starbucks stock B: all of these C: Oprah buying a $10 million home from a fellow celebrity D: Boeing building a new factory
D: Boeing building a new factory
Which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices? A: Firms are quick to let go of workers when negative demand shocks occur B: Firms are reluctant to adjust inventory levels because the costs are higher than changing the quantity of output produced C: Firms respond to shorter-term demand shocks by adjusting production levels; more persistent changes in demand result in changes in inventories D: Firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels
D: Firms respond to shorter-term demand shocks by adjust inventories; more persistent changes in demand result in changes in production levels
Which of the following is an example of a supply shock? A: A surge in consumer optimism prompts increased buying of goods and services B: a surprise tax rebate from the government gives people more money to spend C: Government increases spending on education D: a dramatic increase in energy prices increases production costs for firms in the economy
D: a dramatic increase in energy prices increases production costs for firms in the economy
Which of the following is a final good or service? A: fertilizer purchased by a farm supplier B: diesel fuel bought for a delivery truck C: Chevrolet windows purchased by a General Motors assembly plant D: a haircut purchased by a father for his 12-year-old son
D: a haircut purchased by a father for his 12-year-old son
What is the difference between financial investment and economic investment?
Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods
The monetary value of all final goods and services produced by the United States economy during a year is:
GDP
Suppose the total monetary value of all final goods and services PRODUCED in a particular country in 2008 is $500 billion and the total monetary value of final goods and services SOLD is $450 billion. We can conclude that:
GDP in 2008 is $500 billion
Why are economists concerned about inflation?
Inflation lowers the standard of living for people whose income does not increase as fast as the price level
If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?
Nominal GDP would rise, but real GDP would be unchanged
What effect will a negative supply shock have on the main measures of economic performance?
Real GDP will decrease, inflation will increase, and unemployment will increase
Net exports is a POSITIVE number when
a nation's exports of goods and services exceed its imports
Net exports are negative when
a nation's imports exceed its exports
If prices of goods and services were free to quickly adjust, then
a negative demand shock would have no short-run effect on unemployment
Higher oil prices are most likely to lead to:
a negative supply shock
Unemployment describes the condition where
a person cannot get a job but is willing to work and is actively seeking work
The entry of women into the workforce since the 1960s resulted in:
a shift outward in the production possibilities curve in the United States
For which of the following goods and services are prices LEAST sticky?
airline tickets
Critics of economic growth
argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth
Real GDP per capita:
can grow either more slowly or more rapidly than real GDP
Trends in educational attainment in the U.S> since 1960 indicate that the percentage of adults
completing college has been rising, and so has the percentage completing high school
The largest component of total expenditures in the United States is
consumption
GDP can be calculated by summing
consumption, investment, government purchases, and net exports
Real GDP measures:
current output at base year prices
Real GDP per capita is found by
dividing real GDP by population
What economic concept would be most closely associated with a situation where an aluminum plant expands its operations and uses extensive computerization in the production line to reduce per-unit costs of production?
economies of scale
Economic growth is best defined as an increase in
either real GDP or real GDP per capita
A competitive market system
encourages growth by allowing producers to make profitable investment decisions based on market signals
One major aspect of the socio-cultural-political environment of the United States which has generally been conducive to economic growth is the
favorable attitude toward work and risk-taking
Final goods and services refers to
goods and services purchased by ultimate users, rather than for resale or further processing
Real GDP and nominal GDP differ because the real GDP:
has been adjusted for changes in the price level
Gross domestic product (GDP) measures and reports output
in dollar amounts and percentage growth
Economists who believe that the recent increase in the average productivity growth rate may be permanent claim that the above-normal economic growth in the United States between 1995 and 2009 was created by:
increased entrepreneurial activity, application of information technology, and global competition
A nation's gross domestic product (GDP)
is the dollar value of all final output produced within the borders of the nation during a specific period of time
Growth is advantageous to a nation because it:
lessens the burden of scarcity
When gross investment is positive, net investment
may be either positive or negative
The rate of unemployment when the economy is at its potential output is called the:
natural rate of unemployment
If depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:
net investment is negative
Banks and other financial institutions
promoted economic growth by helping to direct household savings to businesses that want to invest
A nation's infrastructure refers to
public capital goods such as highways and sanitation systems
Before the period of modern economic growth:
rates of population growth virtually matched rates of output growth
The three statistics that are the main focus for those measuring maroeconomic health are
real GDP, inflation, and unemployment
When economists refer to "investment," they are describing a situation where
resources are devoted to increasing future output
If an economy wants to increase its current level of investment, it must:
sacrifice current consumption
The business cycle depicts
short-run fluctuations in output and employment
The business cycle depicts:
short-run fluctuations in output and employment
In economics, the word "shocks" refers to:
situations where firms; expectations are unmet
A decline in a nation's rate of productivity growth will:
slow the growth of the standard of living
Economic historians identify which invention as a major factor that started the Industrial Revolution in Britain?
steam engine
Macroeconomics is mostly focused on
the economy as a whole
If depreciation exceeds gross investment
the economy's stock of capital is shrinking
real per capita GDP
was much more equal across nations in 1820 than it is today
Shocks to the economy occur
when expectations are unmet
Real gross domestic product
will increase if there is an increase in the level of output