Midterm 3 Economics

In a country with 200 million people aged 16 years and older, 120 million are in the labor force, and 114 million are employed, what is the participation rate?

60 percent

Given the following data for the economy, compute the value of GDP.

90

Factories and machines are examples of:

capital goods.

Bank reserves are:

cash and similar assets held to meet depositor withdrawals or payments.

The M1 measure of money consists of the sum of:

currency, checking deposits, and travelers' checks.

Nominal GDP measures the ______ of production.

current dollar value

Fiscal policy refers to:

decisions to determine the government's budget.

Structural policy refers to:

government policies aimed at changing the underlying structure or institutions of the economy.

A government is running a budget deficit if:

government revenue is less than government spending.

The market value of final goods and services produced within a country during a period of time is called:

gross domestic product.

The four categories of final users of GDP are:

households, firms, governments, and the foreign sector.

Average consumption in an economy is best measured by _____, while average productivity in an economy is best measured by _____.

output per person; output per worker

If the actual reserve/deposit ratio equals 8% and the desired reserve/deposit ratio for this bank is 10%, the bank should:

stop making loans.

The central bank of the United States is called:

the Federal Reserve System.

In the United States decisions to increase interest rates are made by the _____ and decisions to increase taxes are made by ____.

the Federal Reserve; Congress

A CPI that equals 1.34 in 2008 (when 2000 is the base year) means that:

the average level of prices is 34 percent higher in 2008 than in the base year.

The amount of money in the United States is determined by:

the combined behavior of commercial banks and the public, as well as actions of the Federal Reserve.

Monetary policy refers to:

the determination of the nation's money supply.

The rate at which prices in general are increasing is called:

the inflation rate.

Macroeconomic policies are government policies designed to affect:

the performance of the economy as a whole.

A relative price is:

the price of a specific good in comparison to the prices of other goods and services.

A trade imbalance occurs when:

the quantity of a country's exports differs significantly from the quantity of imports.

A trade deficit occurs when:

exports are less than imports.

Net exports equal:

exports minus imports.

Commercial banks create new money:

through multiple rounds of lending.

Assume an economy produces only hamburgers and hotdogs and the base year is 2005.

$10,000

The standard of living in an economy is best measured by:

output per person.

If the CPI equaled 1.00 in 1995 and 1.65 in 2005 and a typical household's income equaled $35,000 in 1995 and $40,000 in 2005, then between 1995 and 2005, real household income of 2005 is:

$24,242

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 30 million were employed. What was average labor productivity in Northland?

$33,333

Suppose a jar of DeLux popcorn that is ultimately sold to a customer at Friendly Groceries is produced by the following production process: Name of Company Revenues Cost of Purchased inputs Fulton Family Farm $0.50 0 DeLux Popcorn Co. $2.50 $.50 Friendly Groceries $4.00 $2.50 What is the sum of the value added of all of the firms?

$4.00

Suppose that the total production of an economy consists of 4 oranges and 10 candy bars, each orange sells for $0.25, and each candy bar sells for $0.50. What is the market value of production in this economy?

$6.00

If a pizza maker pays $1 for tomatoes, $1 for cheese, $2 for sausage, and sells the pizza made with these ingredients for $7, then each pizza sold contributes how much to GDP?

$7

Based on the following information, the value of the M1 measure of the money supply is ______ and the value of the M2 measure of the money supply is ______.

$75 billion; $445 billion

If total output is $1 million, population is 1,000, then standard of living is:

1,000

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.20, the deposits are ______ and the money supply is _____.

1,000; 1,400

Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2015 was $6,875. If 2010 is the base year, the CPI for the year 2015 equals:

1.25

The CPI in year one equaled 1.45. The CPI in year two equaled 1.51. The rate of inflation between years one and two was ______ percent.

4.1

Which of the following transactions would be included in the GDP of the United States?

Honda produces cars in Ohio.

The M2 measure of money consists of the sum of:

M1, savings deposits, small time deposits, and money market mutual funds.

The consumer price index measures the cost of:

a fixed basket of goods and services.

The price level is:

a measure of overall prices at a particular point in time.

When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as:

a store of value.

When the price of a pizza is quoted in dollars, this is an example of dollars serving as:

a unit of account.

Normative analysis:

addresses the question of whether a policy should be used.

Positive analysis:

aims at determining only the economic consequences of a particular policy.

Money is:

any asset used to make purchases.

The CPI is a measure of the:

average level of prices relative to prices in the base year.

When an individual deposits currency into a checking account:

bank reserves increase, which allows banks to lend more and increases the money supply.

In 1929, the CPI equaled 0.171 and in 1930, the CPI equaled 0.167. These data provide evidence of a period of:

deflation.

Liabilities of the commercial banking system include:

deposits.

One hundred percent reserve banking refers to a situation in which banks' reserves equal 100 percent of their:

deposits.

To correct a nominal quantity for changes in the price level, one should:

divide it by a price index.

The process of steady increase in the quantity and quality of goods and services the economy can produce is called:

economic growth.

Each person who is 16 years or older is considered to be in one of the following categories:

employed, unemployed, or out of the labor force

Macroeconomic issues include all of the following EXCEPT

energy reserves

During the Great Depression in the United States between 1929 and 1933, banks' reserve/deposit ratio ______ and the amount of currency held by the public ____, while the money supply ______.

increased; increased; decreased

The duration of unemployment _____ during a recession.

increases.

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index is called:

indexing.

The annual percentage rate of change in the price level is the:

inflation rate.

In the base year, real GDP ______ nominal GDP.

is equal to

In a fractional-reserve banking system the reserve/deposit ratio equals:

less than 100 percent.

When the actual reserve/deposit ratio exceeds the desired reserve/deposit ratio banks:

make more loans.

When money is used to purchase goods and services, it serves as a:

medium of exchange.

Average labor productivity equals:

output per employed worker.

Three equivalent ways to measure GDP are total _____, total _____, and total ______.

production; income; expenditure

A measure of GDP in which quantities produced are valued at the prices of a fixed base year is called:

real GDP.

The wage paid to workers measured in terms of real purchasing power is called the:

real wage.

When jobs are hard to find, profits are low, few wage increases are given, and many companies go out of business, the economy is most likely in a(n):

recession.

Assets of the commercial banking system include:

reserves and loans.

In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ____.

sells; decreases

Which of the following is the most aggregated value?

total output of a country

A person 16 years or older who does not work, but is actively looking for work, is officially classified as:

unemployed.

The fraction of people who would like to be employed, but can't find work is called the:

unemployment rate.

Intermediate goods and services are ______ production and ______ counted in GDP

used up in the process of; are not

A firm's revenue from selling its product minus the cost of inputs purchased from other firms is called:

value added.

The Great Depression:

was a period of low production and high unemployment.