Test 2

If the price of a market basket of goods in year one is $10 and $25 in year three in the base year is your onethe price index for year three is _____.

250

If the number of people employed is 150,000 and the labor force is 160,000 the unemployment rate is:

6.25%

As a result of unanticipated inflation, workers are better off while firms are worse off if the actual inflation rate:

is less than the expected inflation rate

The unemployment rate is calculated by dividing the number of _____ by the _____ times 100.

unemployed; labor force

Net private domestic investment is:

what is left over from total new private investment after depreciation

When the expected rate of inflation is added to the real interest rate, the result is called the _____.

Nominal interest rate

The interest rates quoted in the market are known as ______.

Nominal interest rates

Which of the following are characteristics of public goods?

Non-excludability non-rivalry

It is widely accepted that the immediate cause of large cyclical changes in the levels of _____ and _____ is the level of unexpected total spending.

Output; employment

Which of the following explains why the BLS official unemployment rate could be understated?

Part-time workers are considered fully employed. Discouraged workers are classified as "not in the labor force"

The situation when people can receive the benefits from the good without having to pay for it is called the _____ rider problem

free

Residential construction is counted as _____.

gross private domestic investment

According to Okun's law, if the unemployment rate in 2009 was 9.6, the natural rate of unemployment was 7.4, and the potential GDP was $8,500 billion, what was the loss of output associated with the above-natural unemployment rate?

$374 billion

The value of the GDP price index will be _____ for the base year.

100

If the price of a market basket of goods in year one is $10 and $25 in year three and the base year is your won the price index for year three is _____.

250

If the nominal GDP of an economy is equal to $140, and the price index is equal to 200, then the GDP of the economy would be equal to_____.

70

A lender who charges inflation premium to a borrower is altering the redistribution of income due to_____.

Anticipated inflation

The formula for the _____ _____ _____ (full name) is the price of the most recent market basket in a particular year divided by the price estimate of the market basket in the previous year (known as the base year) multiplied by 100.

Consumer price index

The rocket in prices of imported oil in 1973-1974 and again in 1979-1980 are good illustrations of _____.

Cost-push inflation

A worker who, after unsuccessfully seeking unemployment for sometime, becomes frustrated and stops actively seeking work is referred to as a(n) _____ worker.

Discouraged

The labor force is the sum of the _____ and _____.

Employed; unemployed

Which of the following goods can be classified as non-excludable?

Environmental protection street lighting

Sticky prices prevent economy from adjusting to a shock because prices cannot _____ quickly the demand and supply of goods.

Equalize

True or false: government purchases include only federal expenditures on final goods.

False

Workers that are _____ unemployed live in areas where jobs exist and they have marketable skills.

Frictionally

Which statements about frictional and structural unemployment or true?

Frictionally unemployed workers have marketable skills, while structurally unemployed workers do not. Frictionally unemployed workers live in areas where jobs exist, while structurally unemployed workers do not have appropriate jobs available to them.

The bureau of labor statistics list all part time workers as_____.

Fully employed

Which of the following describes why unemployment rates are higher for African-Americans in hispanics than for whites?

Greater concentration in lower skilled occupations Lower rates of educational attainment

Economist compare the _____ value of total output in various years, rather than _____ volumes of production.

Market; actual

A price index:

Measure the cost of purchasing a market basket of output across different years.

Income that is received as wages and is not adjusted for inflation is called _____ income.

Nominal

A(n) _____ _____ Is a measure of a specified collection of goods and services in a given year as compared to the value of a highly similar collection of goods and services in a reference year.

Price index

Inflation exists when there is an increase in _______over a sustained period of time.

Prices

Government _____, officially labeled "government consumption expenditures and gross investment," include all federal, state, and local government outlays on final goods. (Enter one word for the blank.)

Purchases

Household purchases are affected by the business cycle and the negative affects of a recession because_____.

Purchases of durable goods can be postponed

GDP does not capture the full value of improvements in product quality because GDP is a _____ (qualitative/quantitative) measure.

Quantitative

______ income will be affected if the change in the price level differs from the change in the person's nominal income.

Real

The phase of the business cycle that describes a decline in total output, income, and employment is called a(n)

Recession

A private good is characterized by _____and excludability.

Rivalry

Which of the following would be considered a cost of cyclical unemployment.

Severe psychological cost to the job loser Wasted resources because the workers are not being utilized Higher crime, suicide, and divorce rates

The _____ (social/opportunity) cost of negative gross domestic byproducts reduce a nations economic well-being.

Social

A positive externality has a uncompensated

Spillover

The formula for calculating a price index is

The price of a market basket in a specific year divided by the price of the same market basket in a base year multiplied by 100.

True or false: GDP reveals nothing about the way Output is distributed.

True

True or false: core inflation excludes volatile prices of goods like food and energy.

True

By not counting discouraged workers as unemployed, the government official unemployment rate _____ the problem of unemployment.

Understates

Okun's Law indicates that for every percentage point by which the _____ unemployment rate exceeds the _____ rate, a negative GDP gap of about 2% occurs.

actual natural

The market demand curve for positive externalities reflects:

only the direct, private benefits to those who demand and use the product

Deflation is a great economic problem because:

prices and wages fall but debts remain the same

Which of the following is counted as gross private domestic investment?

residential construction

The biggest cost associated with unanticipated inflation is:

the arbitrary redistribution of income and wealth