test 2

What is the real GDP in 2014 if nominal GDP in $15,000 billion, the GDP deflator in 2014 is 110, and the GDP deflator in 2010 was 100?

(100÷110)∗15,000= $13,636 Billion or (15,000∗ 100)÷ 110=$13,636 Billion (nominal GDP∗base year) ÷current year

Last year the consumer price index (CPI) was 115 and this year's CPI is 125. The rate of inflation is:

(125-115)÷115 ∗ 100= 8.7% (current cpi - pervious cpi) ÷ (pervious cpi) ∗ 100

False statement on growth

economic growth always leads to more equitable distribution of income

Wages set high to discourage employee turnover are called ________ wages.

efficiency

Government funding of Los Alamos National Labs is an example of government acting in its role to promote economic growth by:

enchanting physical and human capital

In a simple circular flow diagram, total spending on goods and services in product market:

equals the total income earned in the resource market

NOT a problem in using GDP to measure the standard of living.

failure to include exports and imports

GDP=?

investment + purchases + (exports - imports)

The twin perils of the modern macroeconomy are said to be:

inflation and unemployment

The expenditure category that accounts for the largest share of GDP is _____________

personal consumption expenditures

NOT a concern regarding GDP as a measure of economic activity

value of non-market work

Business Cycles:

vary in duration and magnitude

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP eqauls

$140

A sheep ranch produces $30 worth of wool. A suit manufacturer produces $60 worth of suits. A retail outlet sells a suit for $180. The change in GDP would be:

$180

Suppose Robert has a wage contract subject to an escalator clause. He earned $22 an hour last year; in that same year, the consumer price index rose from 120.0 ro 126.0. What should his new wage be?

(126-120)÷ 120 ∗ 100= 5% 22∗5=110 110÷100= 1.1 $22 + $1.1= $23.10

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is:

(20,000÷16,000)∗100= 125

2010 $200 2011 $230 2012 $250 If 2010 is the base year, then the consumer price index for 2012 is:

(250÷200) ∗100 = 125

Problems in using GDP to measure the standard of living.

1.) failure to include environmental impact 2.)failure to include the value of investments in human capital 3.)failure to include tge value of nonmarket work

Concerns regarding GDP as a measure of economic activity

1.) the value of investments in human capital 2.)the value of non-market natural resources 3.)the value of investments in the stock and bonds market

Main uses of the national income and product accounts?

1.) to gauge the economy's position in the business cycle 2.) to track sucess of the macroeconomic policy 3.) compare US economic performace with that of other countries

The GDP for 2010 was Personal consumption 10,353.5 Billion Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2

10,353.5+ 1,769.1+ 2,251.5+ (1,746.1 - 2,251.5) GDP= $14,592.3 billion

If output equals A∗(5K + 2L), what is the output if A=2,000m capital equals 10, and labor equals 100

2,000∗((5∗10)+(2∗100)) 2,000∗((50)+(200)) 2,000∗(250)= 500,000

Population 500 Number of employed 300 Number of unemployed 50 What is the labor force of this economy?

300+50= 350

Population 500 Number of employed 300 Number of unemployed 50 What is the unemployment rate of this economy?

50÷350= .143 ∗ 100= 14.3%

If the growth rate in an economy is 3.5% then its GDP will double in about

70÷3.5= 20 years

_________________ unemployment includes workers who voluntarily quit their jobs to search for better positions.

Frictional

If in the past you have alway painted your house but now you hire a painting contractor to do the work, what is the effect on the GDP?

GDP raises as a result of this change

Zach has been laid off from his job as an aircraft worker and is afraid that he will not be recalled. He has been looking for a job but has had no luck for the past sic weeks. According to the bureau of Labor Statistics, Zach is:

a discouraged worker

At the peak of the business cycle, the economy is typically operating:

at its capacity

Which group is helped by inflation?

creditors

The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

cyclical

The US gross domestic product is equal to the total market value of all

final goods and services produced by resources in the United States.

Inflation is a:

general raise in price

An activity that is an example of a non market transaction?

growing your own food in a vegetable garden

As a rule, the more capital employed with workers, the______________ their productivity and the ______________ their earnings

higher; higher

NOT considered a source of long-run growth

increase in demand

The benefit of using GDP per capita instead of GDP is that:

it takes into account the size of the population when measuring the value of the goods and services a country produces

A legal system that enforces property rights is important to economic growth because:

legal protection of ideas and technologies gives people who innovate the ability to protect their work

Physical capital includes

manufactured products that are used to produce other goods and services

NOT a factor in the production function

money

NOT a source of productivity growth

moving resources from production to pension benefits

Tom is living with his parents. He looks at help wanted ads but has not replied to any in the past four weeks. Tom is:

not in the labor force

Infrastructure is defined as a country's

public capital

Economic growth is most commonly measured by:

real GDP per capita

Which phase of the business cycle occurs immediately brfore a trough?

recession

Improvements in production capacity will:

shift the PPF outward

NOT a main use of the national income and product accounts?

supporting the macroeconomic theory of the political party

If a country's population increases at a slower rate then the growth in its real GDP

the GDP per capita has increased

____________________ Is a measure of change in average price paid by urban consumers for a typical market basket of goods and services.

the consumer price index

False statement

the natural rate of unemployment is the level at which inflationary pressures in the economy are at their maxium.

At one time, Pittsburgh, Pennsylvania, was known for its poor air quality. Locals said that when a man wearing a white shirt walked into the city would have a black shirt when he left it. Since that time, the city has greatly reduced its air and water pollution. As a result of cleaner air and water:

the standard of living of the citizens of Pittsburgh increased, even though the improvement in the enviroment was not reflected in the GDP

Scott who has a PH.D in physics, waits on tables for a living. Scott is categorized as:

underemployed

During a typical economic recovery:

unemployment drops