Unit 2
Suppose the population (age 16 and over) of Japan is 100 million 5 million are unemployed, and 70 million hold jobs. The employment/population ratio of Japan is - 5 percent. - 65 percent. - 70 percent. - 85 percent.
70 percent
If the consumer price index (CPI) at the end of year one was 100 and was 108 at the end of year two, the inflation rate during year two was the CPI of 100 indicates that prices were stable. - 8 percent. - 5 percent. - 108 percent. - zero
8 percent
Which of the following about potential GDP is true? - During a recession, actual GDP will exceed potential GDP. - Actual GDP cannot exceed potential GDP, even for short periods. - Actual output may be either above or below potential output depending on how fully resources are utilized. - The economy's potential output is the maximum output that could be achieved temporarily during a time of economic boom.
Actual output may be either above or below potential output depending on how fully resources are utilized.
Which of the following about potential GDP is true? - During a recession, actual GDP will exceed potential GDP. - Actual GDP cannot exceed potential GDP, even for short periods. - Actual output may be either above or below potential output depending on how fully resources are utilized. - The economy's potential output is the maximum output that could be achieved temporarily during a time of economic boom.
Actual output may be either above or below potential output depending on how fully resources are utlilized
Which of the following transactions would be included in this year's GDP for the United States? - Deion sends $100 to a hotel in Costa Rica as a deposit for his vacation. - Deion buys a shirt while on vacation in Costa Rica. - Deion spends money in an American-owned restaurant in Costa Rica.
Deion buys a travel guide written by a Costa Rican woman living in the United States.
Which of the following would generate a supply of euros in exchange for dollars? - American demand for European real estate. - European demand for U.S. government bonds. - Americans vacationing in Europe. - Purchase of French wines by U.S. importers.
European demand for U.S. government bonds.
As the dollar appreciates, which of the following is most likely to occur? - More Americans will travel abroad. - American imports will fall. - More foreigners will visit the United States. - American firms will reduce their investments abroad.
More Americans will travel abroad.
If people suddenly anticipate that inflation will rise during the next year, which of the following is most likely? - Nominal interest rates will rise. - Nominal interest rates will decline. - The demand for goods and services will decline. - Both the real and nominal interest rates will decline.
Nominal interest rates will rise.
Which of the following about unemployment is true? - When a dynamic labor market is operating efficiently, mostly cyclical unemployment will be present. - Some unemployment will be present even when a dynamic labor market is operating efficiently. - When full employment is present, the rate of unemployment will be zero. - When full employment is present, there will not be any frictional unemployment. - When full employment is present, it will be impossible to sustain the current rate of output in the future.
Some unemployment will be present even when a dynamic labor market is operating efficiently.
Which of the following is necessarily true when an economy is in long-run equilibrium? - Prices will be constant (that is, inflation will be zero). - The actual output will be less than the full-employment (or potential) output. - The actual rate of unemployment equals the natural rate of unemployment. - The output of the economy will be greater than the full-employment output.
The actual rate of unemployment equals the natural rate of unemployment.
Which of the following is true of unemployment? - The natural rate of unemployment is present when the economy is operating at full employment. - The natural rate of unemployment is equal to the number of persons unemployed divided by the number of persons in the labor force. - The natural rate of unemployment is primarily the result of the ups and downs of the business cycle. - Public policy cannot influence the natural rate of unemployment.
The natural rate of unemployment is present when the economy is operating at full employment.
Which of the following will most likely occur during the contractionary phase of a business cycle? - Real GDP rises, and the unemployment rate falls. - Real GDP declines, and the rate of inflation rises. - The sales of most businesses decline, and the unemployment rate rises. - Inflation rises, and employment/population ratio falls.
The sales of most businesses decline, and the unemployment rate rises.
Which of the following about inflation is true? - High and variable rates of inflation will be easy for decision makers to forecast accurately. - Unanticipated inflation is an increase in the general level of prices that was not expected by most decision makers. - In contrast with unanticipated inflation, anticipated inflation implies that the increase in the general level of prices was expected by borrowers but not lenders. - Inflation will increase the prices of goods and services that households purchase but not the wage rates of workers.
Unanticipated inflation is an increase in the general level of prices that was not expected by most decision makers.
Suppose the population (age 16 and over) of France is 50 million 4 million are unemployed, and 36 million hold jobs. What are the rates of unemployment and labor force participation of France? - Unemployment is 10 percent, and labor force participation is 80 percent. - Unemployment is 10 percent, and labor force participation is 75 percent. - Unemployment is 11 percent, and labor force participation is 80 percent. - Unemployment is 11 percent, and labor force participation is 90 percent.
Unemployment is 10 percent, and labor force participation is 80 percent.
Which one of the following persons would be considered unemployed? - a person not working who has given up searching for a job - a part-time worker looking for a full-time job - a construction worker who was laid off due to cold weather - a full-time college student who is not a member of the labor force
a construction worker who was laid off due to cold weather
Which of the following is most indicative of a recession? - a decline in unemployment - a rise in inflation - a decline in real GDP - an increase in the interest rate
a decline in real GDP
The unemployment rate will decrease whenever there is - an increase in the number of persons classified as unemployed. - a decrease in the number of unemployed relative to the size of the labor force. - a decrease in the size of the population and there is no change in the number of persons classified as employed. - a reduction in the size of the labor force. - a decrease in the number of unemployed and the population does not change.
a decrease in the number of unemployed relative to the size of the labor force.
During a recession, which of the following will be true? - The actual rate of unemployment will be lower than the natural rate. - Actual GDP will be lower than potential GDP. - The employment/population ratio will increase substantially. - Actual inflation will be higher than was anticipated.
actual GDP will be lower than potential GDP
Who among the following is most likely to favor an appreciation of the U.S. dollar? - a German professor visiting Chicago - an American farmer who depends on exports - an American professor on a tour of Austrian universities - Disney World in Orlando, Florida, a popular destination for foreign tourists
an American professor on a tour of Austrian universities
Which of the following would be most likely to reduce the rate of unemployment? - a business recession - an Internet job listing system that makes it easier to get information about job openings and available employees - an increase in unemployment compensation benefits - a rise in the minimum wage
an Internet job listing system that makes it easier to get information about job openings and available employees
The aggregate demand curve slopes downward indicating that - an increase in the general price level will reduce the aggregate quantity of goods and services demanded. - an increase in the general price level will increase the aggregate quantity of goods and services demanded. - a change in the interest rate will alter the aggregate quantity of goods and services demanded. - consumers substitute between domestic-made and foreign-made goods as their relative prices change.
an increase in the general price level will reduce the aggregate quantity of goods and services demanded.
The unemployment rate will increase whenever there is - an increase in the number of persons classified as unemployed. - an increase in the number of unemployed persons relative to the size of the labor force. - an increase in the size of the U.S. population and there is no change in the number of persons classified as employed. - a reduction in the size of the labor force while the number of unemployed decreases.
an increase in the number of unemployed persons relative to the size of the labor force.
Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has - caused GDP to fall. - not caused any change in GDP. - caused GDP to rise. - probably changed GDP, but in an uncertain direction the direction of the change depends on the difference in the quality of the cleaning that has resulted.
caused GDP to rise.
The actual rate of unemployment will generally - increase as an economy enters an economic boom period. - decrease as an economy enters an economic boom period. - exceed the natural rate of unemployment during an economic boom period. - do both a and c.
decrease as an economy enters an economic boom period.
Actual GDP will be below potential GDP - when the economy is at full employment. - during an economic boom. - when resources are fully utilized. - during a recession.
during recession
Darryl would like to work as an accountant full time. A full-time position is not available, however, so he must accept a part-time job working 15 hours per week. The Bureau of Labor Statistics would categorize Darryl as - employed. - unemployed. - both employed and unemployed. - not in the labor force.
employed
Crime currently affects the measurement of GDP such thatorrect! - expenditures on police protection and detention centers contribute to GDP. - the loss to victims due to crime is subtracted from GDP. - crime is completely ignored because it does not express the economic well-being indicated by GDP. - expenditures on police protection and detention centers are subtracted from GDP.
expenditures on police protection and detention centers contribute to GDP.
If expected inflation is constant, then when the nominal interest rate falls, the real interest rate - falls by more than the change in the nominal interest rate. - falls by the change in the nominal interest rate. - rises by the change in the nominal interest rate. - rises by more than the change in the nominal interest rate.
falls by the change in the nominal interest rate.
Ashley was being treated unfairly by her boss, so she stormed off the job and two days later found another position. For two days, Ashley experienced - cyclical unemployment. - structural unemployment. - seasonal unemployment. - frictional unemployment. - being out of the labor force.
frictional unemployment
If Trevon voluntarily quits one job, possesses marketable skills, and expects to find a new job in a few weeks, then Trevon is considered - frictionally unemployed. - cyclically unemployed. - seasonally unemployed. - structurally unemployed. - unwise to quit his job without already having another one.
frictionally unemployed.
Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house? - The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. - The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. - The 2006 sale increased 2006 GDP by $225,000
furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000. - The 2006 sale affected neither 2005 GDP nor 2006 GDP. ; The 2006 sale affected neither 2005 GDP nor 2006 GDP
During a recession, the actual rate of unemployment will be - less than the natural rate of unemployment.ect! - greater than the natural rate of unemployment. - equal to the natural rate of unemployment. - unaffected by the economic contraction.
greater than the natural rate of unemployment
Which of the following would generally cause firms to expand output in the short run? - a proportional increase in the prices of goods and services and the costs of producing them - higher profit margins as the result of an unexpected increase in the prices of goods and services - an unexpected reduction in aggregate demand - an increase in wages and the prices of other resources
higher profit margins as the result of an unexpected increase in the prices of goods and services
If expected inflation is constant and the nominal interest rate increased 3 percentage points, the real interest rate would - increase 3 percentage points. - increase, but by less than 3 percentage points. - decrease, but by less than 3 percentage points. - decrease by 3 percentage points.
increase 3 percentage points.
In the short run, an unexpected increase in prices will - reduce resource prices and increase the quantity of goods supplied. - decrease the productive capacity of firms and decrease the quantity of goods supplied. - increase the profits of firms, thereby leading them to expand output. - increase the profits of firms, thereby leading them to reduce output.
increase the profits of firms, thereby leading them to expand output.
The natural rate of unemployment - increases sharply during a recession but declines significantly during a business expansion. - is the unemployment rate accompanying the economy's maximum sustainable output. - is generally less than the unemployment rate associated with the economy's full-employment rate of output. - is present when the economy operates at approximately 94 percent of its potential GDP.
is the unemployment rate accompanying the econmy's maximum sustainable output
If nominal GDP increases by 4 percent, then - real output has increased by 4 percent - the price level has increased by 4 percent - consumer spending must have increased by 4 percent - it is possible that all of the increase was caused by an increase in the price level - net exports increased by 4 percent
it is possible that all of the increase was caused by an increase in the price level
Other things constant, a decrease in aggregate demand will - lead to a decrease in the demand for resources. - cause an increase in the general level of prices. - result in higher nominal wage rates. - reduce the rate of unemployment.
lead to a decrease in the demand for resources.
During an economic boom period, the actual rate of unemployment will be - less than the natural rate of unemployment. - greater than the natural rate of unemployment. - equal to the natural rate of unemployment. - unaffected by the economic expansion.
less than the natural rate of unemployment
If a nation's currency depreciates, this will tend to - shift a nation's balance of trade toward a deficit. - cause a deficit in the government's budget (expenditures − revenues). - make foreign goods more expensive for the nation's citizens. - make foreign goods cheaper for the nation's citizens.
make foreign goods more expensive for the nation's citizens.
Other things the same, a decrease in the price level makes the dollars people hold worth - more, so they are willing to spend more. - more, so they are willing to spend less. - less, so they are willing to spend more. - less, so they are willing to spend less.
more, so they are willing to spend more.
If net exports are negative, then - net capital outflow is positive (indicating an inflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. - net capital outflow is positive (indicating an inflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. - net capital outflow is negative (indicating an outflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. - net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans.
net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans.
If borrowers and lenders expect a higher rate of inflation, - nominal interest rates will tend to fall. - real interest rates will tend to fall. - nominal interest rates will tend to rise. - real interest rates will tend to rise.
nominal interest rates will tend to rise.
If the price level in the current period is lower than what buyers and sellers anticipated, - profit margins will be unattractive, and firms will expand output. - profit margins will be unattractive, and firms will reduce output. - profit margins will be attractive, and firms will expand output. - profit margins will be attractive, and firms will reduce output.
profit margins will be unattractive, and firms will reduce output.
Real GDP per person - minus real GDP per person from the previous period equals the growth rate of real GDP per person. - provides more meaningful comparisons across time and countries than real GDP. - provides a less useful measure of the standard of living than nominal GDP per person. - All of the above are correct.
provides more meaningful comparisons across time and countries than real GDP.
If you wanted to compare the quantity of output of a country across time periods, which of the following would you use? - the consumer price index - nominal GDP - the GDP deflator - real GDP
real GDP
If a local shop buys a used motorcycle for $1,000, makes repairs and refurbishes it, then resells it for $2,500, the - shop contributes value added equal to $1,500, but nothing is added to GDP. - shop contributes value added equal to $1,500, and consequently $1,500 is added to GDP. - shop contributes nothing to production because only existing goods are involved. - shop contributes value added equal to $2,500, but only $1,500 is added to GDP.
shop contributes value added equal to $1,500, and consequently $1,500 is added to GDP.
In a dynamic economy under ideal conditions, - the unemployment rate should be near zero. - some unemployment would be present due to workers temporarily being out of work while changing jobs. - unemployment would tend to move upward slightly as prices increased. - unemployment would tend to move slightly downward as unemployment compensation benefits increased.
some unemployment would be present due to workers temporarily being out of work while changing jobs.
If the dollar appreciates relative to the Yen, it can be said that - Japanese citizens respect the United States more. - the dollar increases in value within the United States. - the Yen depreciates relative to the dollar. - it takes more dollars to buy Yen.
the Yen depreciates relative to the dollar.
When an economy is in long run equilibrium, - it will be impossible to sustain the current rate of output in the future. - the interest rate will decline. - the foreign exchange value of the dollar will tend to appreciate. - the actual and natural rates of unemployment will be equal.
the actual and natural rates of unemployment will be equal.
If equilibrium is present in the foreign exchange market and a nation is experiencing a trade surplus, - the nation must be experiencing a net capital inflow. - the nation must be experiencing a net capital outflow. - the nation's inflation rate must increase. - the nation's interest rate must increase.
the nation must be experiencing a net capital outflow.
If there is a surplus of loanable funds - the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. - the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. - the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. - the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.
The economy is considered to be at full employment when - the actual rate of unemployment is less than the natural rate. - the leading economic indicators are unchanged for two consecutive quarters. - structural unemployment is zero. - frictional plus structural unemployment is less than the natural rate. - the rate of cyclical unemployment is zero.
the rate of cyclical unemployment is zero
During a sustained economic expansion, - the rate of unemployment will generally fall and the employment/population ratio will generally rise. - the rate of unemployment will generally rise and the employment/population ratio will generally fall. - both the rate of unemployment and the employment/population ratio will generally decline. - both the rate of unemployment and the employment/population ratio will generally rise.
the rate of unemployment will generally rise and the employment/population ratio will generally fall.
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income? - the supply of loanable funds would shift right and investment would increase. - the supply of loanable funds would shift left and investment would decrease. - the demand for loanable funds would shift right and investment would increase. - the demand for loanable funds would shift left and investment would decrease.
the supply of loanable funds would shift right and investment would increase.
How would the Bureau of Labor Statistics classify a college graduate who is not currently working but recently turned down an offer for employment at $10 an hour in order to keep looking for a better job? - not in the labor force - employed - unemployed - on temporary absence from school
unemployed
The value of money - remains constant during periods of inflation. - varies inversely with the general price level. - varies directly with the general price level. - varies indirectly with output.
varies inversely with the general price level.
The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level - will not alter the economy's maximum sustainable rate of output. - will increase the economy's maximum sustainable rate of output. - will reduce the quantity of goods and services purchasers will demand. - will improve the overall efficiency of resource use.
will not alter the economy's maximum sustainable rate of output.
