Review Chapter 6,7,8,9

(Table: Kenya's Economy in 2010) Look at the table Kenya's Economy in 2010. Aggregate output at the end of 2010, assuming no changes in the price level, was about

$32,632 billion

If real GDP in country A is $500 billion one year and is $540 billion the following year, this means the growth rate for this country between the two years is

8%

(Figure:The Labor Market) Look at the figure The Labor Market. What will be the level of unemployment if firms decide to pay an efficiency wage of $16?

80,000

A trade surplus occurs

when the value of imports is less than the value exports

The key measure used to track economic growth is

real GDP per capita

The convergence hypothesis

seems to hold only when other things such as education and infrastructure are held equal

If the population and GDP increase by the same percentage, then real GDP per capita

stays the same

The real interest rate is the nominal interest rate less the rate of inflation

True

The three main reasons that the average U.S. worker today produces far more than his or her counterpart a century ago are more physical capital, more human capital, and a great deal of technological progress

True

Total factor productivity is the amount of output that can be achieved with a given amount of factor inputs

True

The percentage of the labor force that is unemployed is the

Unemployment rate

An example of physical capita is

a truck a company purchases for deliveries

(Figure:The Labor Market) Look at the figure The Labor Market. The level of employment at the equilibrium wage rate is

100,000

(Figure:The Labor Market) Look at the figure The Labor Market. The size of the labor force at the equilibrium wage rate is

100,000

(Scenario: Market Basket) Look at the Scenario Market Basket. What is the rate of inflation between 2010 and 2011?

11%

(Figure:The Labor Market) Look at the figure The Labor Market. What is the size of the labor force at an efficiency wage of $16?

110,000

(Scenario: Market Basket) Look at the Scenario Market Basket. What is the value of the price index in 2011?

111

(Table: Price Levels) Look at the table Price Levels. What is the rate of inflation from 2012 to 2013?

2.0%

(Table: Price Levels) Look at the table Price Levels. What is the rate of inflation from 2011 to 2012?

2.9%

If real GDP grows at an average rate of 3% per year, it will double in approximately _____ years.

23

(Scenario: Capital) Look at the scenario Capital. In three years' time, what is the level of physical capital per worker in this economy?

266.2

(Figure:The Labor Market) Look at the figure The Labor Market. What is the unemployment rate at an efficiency wage of $16?

27%

(Scenario: Growth Rates) Look at the scenario Growth Rates. How long will it take real GDP per capita of the United States to double?

35 years

If real GDP grows at an annual rate of 1%, it will double in approximately ____ years.

70

Keynesians argue that low levels of spending

Can lead to prolonged recessions

Which country had the fastest growth rate of real GDP per capita between 1980 and 2010?

China

Growth accounting estimated the contribution of each major factor in the aggregate production function to economic growth

True

The convergence hypothesis says international difference in real GDP per capita tend to increase over time

False

Which of the following changes would contribute to a nation's rapid long-run economic growth?

Faster technological progress

The modern macroeconomic tools used by the government are______ policy and ____ policy.

Fiscal; Monetary

A business cycle is a

Short-run alternation between economic upturns and downturns

Purchases of imported products are

Subtracted from GDP

Fiscal policy attempts to affect the level of overall spending by making changes in

Taxes and Spending

The review that the government should take an active role in the macroeconomy dates to

The Great Depression

Macroeconomics focuses on

The economy as a whole.

Wages

The income households earn by selling their labor

Private saving by households is

The portion of disposable income not spent on goods and services

Final goods and services are sold to the final or end user

True

Which of the following will NOT increase the productivity of labor?

an increase in the size of the labor force

(Scenario: Capital) Look at the scenario Capital. If there is no inflation and output per worker is initially $1,000, what does the estimated output per worker equal after one year?

$1,025

(Figure:The Labor Market) Look at the figure The Labor Market. The equilibrium wage rate is

$15

If a country has a population of 1,000 and area of 100 square miles, and a GDP of $5 million, then its GDP per capita is

$5,000

(Table: Kenya's Economy in 2010) Look at the table Kenya's Economy in 2010. Aggregate output per capita at the beginning of 2010 was:

$775

(Figure:The Labor Market) Look at the figure The Labor Market. The unemployment rate at the equilibrium wage rate is

0%

(Table: Price Levels) Look at the table Price Levels. What is the rate of inflation from 2013 to 2014?

1.1%

(Scenario: Market Basket) Look at the Scenario Market Basket. What is the value of the price index in 2011?

100

Investment spending refers to the

Addition to the economy's supply of productive capital

Deflation

An overall decrease in the price level

The GDP deflator

Equal to 100 in the base year

The rule of 70 is most useful in

Estimating the doubling time of real GDP for a given growth rate

When an economy is expanding, unemployment tends to____ and overall prices tend to _____

Fall; Rise

A high unemployment rate implies a high level of GDP

False

Disinflation is a drop in the price level

False

If the price level at the end of year 1 is 150 and the price level at the end of year 2 is 160, the inflation rate in year 2 is 10%

False

Inflation reduces nominal interest rate.

False

Which of the following is FALSE? GDP can calculated by summing

Government spending and tax revenues

Disposable income

Household income and government transfers less taxes

Unexpected inflation ____ lenders and _____borrowers

Hurts; benefits

In the paradox of thrift

Increased saving by individuals increases their chances of becoming unemployed.

Monetary policy attempts to affect overall level of spending by making changes in

Interest rates and quantity of money

The construction of new housing is considered part of

Investment spending

The General Theory of Employment, Interest, and Money was written by

John Maynard Keynes

GDP for given period measures the

Market value of the final goods and services produced within the borders of a country

If real GDP falls when nominal GDP increases, then prices have increased

True

An expansion is a period in which

Output rises

Real per capita GDP is

Real GDP divided by the population

The standard of living in a country can be best measured by

Real GDP per capita

Periods in which output and employment are falling are

Recessions

Unanticipated inflation

Reduces the real value of debt

Economists say the long-run economic growth is almost entirely due to

Rising productivity

Inflation

When overall price levels rise over time

Which of the following is NOT included in the calculation of GDP?

Your granny's monthly Social Security payment

When inflation rises quickly, borrowers will ____ and lenders will ____

benefit; be hurt

The term human capital describes improvement

in a worker's skills made possible by education, training, and knowledge

Physical capital includes

machine tools