Macroeconomics test

A nation's standard of living is best measured by its?

Real GDP per person

In the US, RGDP Per person in 1980 is ____ of RGDP per person in 2010.

60%

Which of the following is not an example of physical capital?

Bond

In the US, since 2008 Real interest rate is negative. It implies

Inflation rate is more than nominal interest rate

Which good has more weight in the CPI calculation

housing

If inflation rate is 3% and a bank gives you 1% interest on your deposit, you are

losing

The inflation rate is defined as the

percentage change in the price level from the previous period.

If consumer price index increases from previous year to this year, inflation rate is

positive

In term of RGDP Per Person South Korea and Nigeria were at ______ level on 1950. However, now RGDP per person is much ___ in South Korea than in Nigeria.

same, higher

T or F: If there is no domestic savings (by government or private citizens) and there is no inflow of foreign capital (Foreign direct investment or foreign portfolio investment) or aid, there will be no capital formation in that country.

true

Because of inflation, purchasing power of money

decreases

Labor force participation rate in the US has been _____ since 2000.

falling

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

$16,008.17

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

$20.00 purchased in 1955.

In 2010 USA had 100 people and RGDP was $100. In 2011, USA had 102 people and RGDP was $103. What is the growth rate of RGDP Per person?

1%

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

116.9 and the inflation rate was 9.8%.

In a country, if the growth rate of RGDP per person is 5%, how long it will take to double its RGDP per person?

14 years

Which of the following order is correct in terms of 'highest to lowest' Growth rate of Real GDP Per Person in the US

1940s, 1960s, 1990s, 2000s

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

1980 and lowest in 1990.

Say total output is 100 apples and total labor-hour is 50. What is labor-productivity (Though to keep things simple in the lecture I maintained labor productivity is output per worker, actually it is output per labor-hour. So it doesn't matter whether 1 worker worked for 50 hours or 100 workers worked for 50 hours, all we need is how many hours in total were worked. Having said that, in real data no. of workers and no. of labor-hours are highly positively correlated.)

2

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

5 percent

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

5 percent

Which of the following is not correct? a. The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. b. The consumer price index is used to monitor changes in the cost of living over time. c. The consumer price index is used by economists to measure the inflation rate. d. The consumer price index is used to measure the quantity of goods and services that the economy is producing

D

Total output or RGDP of a country depends on a) Quantity of labor or worker b) Quantity of physical and human capital c) Quantity of natural resources d) Level of technology e) All of the above

E

What of the following are the reasons for falling labor force participation rate in USA a. Increase of retirees b. More years in school c. Low birth rate d. Generous unemployment allowance e. all of the above

E

Which of the following is not growth enhancing? a. Encouraging savings and investment b. Investing in education. Health, and research c. promoting market economy d. Protecting property rights and institutions e. Obstructing free international trade.

E

When looking at a graph of nominal and real interest rates you notice that nominal rates almost always lie above real rates. From this you conclude

Inflation rate is positive

Labor productivity is measured by

Output per worker (more precisely output per labor-hour)

Human capital is

The knowledge and skills that workers acquire through education, training and experience.

T OR F: If labor-force participation rate is not too small, labor productivity (output per worker or per labor-hour) may mimic/represent living standard (output per person).

True

There is usually high positive correlation between labor productivity and standard of living in a country.

True

Which of the following order is correct in terms of achieving ,consistently, good economic growth (which resulted in high RGDP Per person) between 1900 -2000.

USA, Western Europe, Latin America, China

Why is the growth rate of labor productivity falling in US between 1996 - 2015Q1 (Caution: Labor productivity may be increasing, but it is increasing at a decreasing rate meaning the growth rate of labor productivity is falling). a. May be this is a short term phenomenon b. may be the 'dot.com' technology is yet to be productivity-enhancing c. may be enough people don't have high skill like 'coding' to reap maximum from technology d. maybe all of the above

d

For more than 1 million years before the first industrial revolution (1750), RGDP per person hovered around $100 per year meaning that there was no mentionable _______ and no improvement in __________.

economic growth, living standard

What is the linear trend of annual labor productivity growth in the US between 1996-2015:

falling

There are regional difference in prices. Which of the following may have highest difference in prices

hair cut

Economic growth may not be very successful in eliminating poverty if there is huge________ in the society.

income inequality

In 2009 Real Interest rate is greater than nominal interest rate. It implies

inflation rate is negative

The consumer price index is used to

monitor changes in the cost of living over time.

Which of the following is the correct formula for calculating the consumer price index?

price of basket of goods and services in current year over the price of basket in base year times 100

The CPI is a measure of the overall cost of

the goods and services purchased by a typical consumer.

T or F: Bob and Jill have equal access to physical capital and technology. However, Bob will be more productive if he has more human capital than Jill.

true

The consumer price index is used to

turn dollar figures into meaningful measures of purchasing power.

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

2013

The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia's inflation rate in 2006?

24.4 percent

For an imaginary economy, the value of the consumer price index was 140 in 2013 and 146.5 in 2014. The economy's inflation rate for 2014 was

4.6 percent

For more than 1 million years until 1750 there was almost ___ change in living standard. Soon after 1750 the world experienced rapid acceleration in economic growth which resulted in rapid improvement of living standard. In 1850 living standard was __ times higher than in 1650. Then, only in 100 years (1850- 1950) living standard increased by more than __ times. Then, only in 50 years (1950 - 2000) living standard has increased by __ times.

No, 2, 5, 4

T OR F: Rapid economic growth and thus rapid improvement of living standard started soon after the first industrial revolution around 1750.

True

T or F: Public policy like, tax, can change today's savings and investment rate to change future's capital stock.

True

Why is Economic growth important? a. To have a better living standard than previous generation b. To eradicate poverty c. both a and b

both a and b

What will happen if labor force participation rate falls (meaning labor force is much smaller than the population)?

living standard, measured by RGDP Per Person, may decrease as there will be too many dependent people.

The inflation rate you are likely to hear on the nightly news is calculated from

the CPI

In 1850, RGDP Per person was __ its 1650 level; In 1950 RGDP Per person is more than ___ times its 1850 level; By 2000 RGDP Per person___ times its 1950 level.

twice, five, four

T or F: How physical capital are formed? Households save out of their current income, that savings go to the business firms through financial markets in the form of financial capital, then the business firms use/invest that financial capital to acquire/purchase/form physical capital like computer, infrastructure etc.

true