ECON 102 Sample Test 2

In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012?

A) 9.0 percent

The above table shows answers given by people interviewed in the Current Population Survey. Which people are structurally unemployed?

A) B and C.

In the illustration above, which figure shows an aggregate production function?

A) Figure A

A worker's stock of knowledge is known as

A) Human capital

An observer of the economy notices that over the past 12 months the unemployment rate has fallen from 7.0 percent to 6.5 percent. During the same time, the rate of growth in real GDP has been positive. From this information we might conclude that

A) an expansion is occurring in the economy.

If capital per worker rises

A) labor productivity increases.

If the quantity of capital per worker in the economy increases

A) labor productivity increases.

When labor productivity increases, the demand for labor curve ________ and the supply of labor curve ________.

A) shifts rightward; does not shift

In 2016, consumers in Dexter consumed only books and pens. The prices and quantities for 2016 and 2017 are listed in the table above. The reference base period for Dexter's CPI is 2016. What is the cost of the CPI basket in 2017?

A) $540

Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent. Then cyclical unemployment is

A) -1 percent.

If the CPI was 122.3 at the end of last year and 124.5 at the end of this year, the inflation rate over these two years was

A) 1.8 percent.

The information in the table above gives the 2016 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2017 prices. What is the value of the CPI for the reference base period, 2016?

A) 100

Last year's price level was 120 and since then there has been a 5 percent inflation. This year's price level is

A) 126.

The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is

A) 160.

In the table above, what inflation rate belongs in space A?

A) 17.0 percent

If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals

A) 225.

Suppose a nation's population grows by 2 percent and, at the same time, its GDP grows by 5 percent. Approximately how fast will real GDP per person increase?

A) 3 percent per year

Slowdonia's current growth rate of real GDP per person is 2 percent a year. How long will it take to double real GDP per person?

A) 35 years

If the CPI was 132.5 at the end of last year and 140.2 at the end of this year, the inflation rate over these two years was

A) 5.8 percent.

In the table above, what inflation rate belongs in space B?

A) 6.8 percent

If the population is 300 million, with 70 million under the age of 16 and institutionalized, another 70 million not in the labor force, 10 million unemployed, and 150 million employed, the employment-to-population rate is

A) 65.2 percent.

Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double?

A) 7 years

Slowdonia's current growth rate of real GDP per person is 1 percent a year. Approximately how long will it take to double real GDP per person?

A) 70 years

The labor force participation rate is percentage of the ________ who are in the labor force.

A) working-age population

In the above table, the inflation rate between 2013 and 2014 is approximately

B) 10 percent.

In the above table, the working age population is

B) 225 million.

If the Consumer Price Index last year was 110 and 115 this year, the inflation rate is approximately

B) 4.5 percent.

In the above table, the employment-to-population ratio is

B) 44 percent.

In a country with a working-age population of 100 million, 70 million workers are employed and 5 million workers are unemployed. What is the labor force participation rate?

B) 75 percent

If this year the price level is 135 and last year it was 125, the inflation rate is

B) 8 percent.

According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Which of the following is TRUE?

B) India's PPF has been shifting rightward since 1997.

Suppose the CPI last year is 121 and the CPI this year is 137. The CORRECT method to calculate the inflation rate is

B) [(137 - 121)/121] × 100 = 13.2.

An individual who has stopped looking for a job but has looked in the past and still wants a job is referred to as

B) a marginally attached worker.

Which of the following is NOT considered to be in the labor force?

B) a person who is not working and who has not tried to find a job

The aggregate production function is graphed as

B) an upward sloping line that becomes flatter as the quantity of labor increases.

Which of the following does NOT increase labor productivity?

B) increases in aggregate hours

If the price level for the last three months has been 112, 125, and 126, we would say

B) inflation was more rapid between the first and second month than between the second and third month.

An increase in the price level is defined as

B) inflation.

The natural unemployment rate

B) is the unemployment rate at full employment.

A decrease in population shifts the

B) labor supply curve leftward.

The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will

B) move to point such as X.

In the above figure, if the real wage is $10 per hour, a labor

B) shortage will occur and the real wage will rise.

New growth theory proposes that real GDP per person grows because of ________ and that growth ________.

B) the pursuit of profit; can persist indefinitely

The information in the table above gives the 2016 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2017 prices. What is the value of the CPI for 2017?

C) 140

If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals

C) 225.

At the end of last year the Consumer Price Index was equal to 157.5 and at the end of this year it was equal to 163.8. What is the inflation rate over this time period?

C) 4.0 percent

From September 2013 to September 2014, the employment-to-population ratio increased from 58.6 percent to 59.0 percent. This change could have been the result of

C) a decrease in the working-age population.

The cost of inflation to society includes I. the opportunity costs of resources used by people to protect themselves against inflation. II. the diversion of productive resources to forecasting inflation.

C) both I and II

If the inflation rate is negative, the price level in an economy is

C) falling.

The three types of unemployment are

C) frictional, structural, and cyclical.

Potential GDP per labor hour can increase due to

C) increases in labor productivity.

An increase in education and training

C) increases labor productivity.

Unpredictable changes in the value of money, which brings about gains and losses, are a consequence of unpredictable changes in

C) inflation.

If a new and better good replaced an older and less expensive good, then the price level measured by the CPI

C) is higher than the actual price level.

If unemployment equals the natural unemployment rate, then there

C) is only frictional or structural unemployment.

Frictional unemployment is

A) unemployment associated with the changing of jobs in a changing economy.

If real GDP is $13,000 billion and aggregate hours are 270 billion, labor productivity equals

D) $48 per hour.

If the CPI this year is 220 and was 200 in last year, the annual inflation rate between the two years is

D) 10 percent.

Of the following sequences of price levels, which CORRECTLY represents a 5 percent inflation rate?

D) 100, 105, 110.25, 115.76

Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor force participation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed?

D) 20 million people

Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was

D) 20 percent.

Using the data in the above table, the unemployment rate is

D) 4.0 percent.

Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years?

D) 5.4 percent

Using the information in the above table, the labor force participation rate is

D) 67.1 percent.

Inflation is a problem when

D) All of the above answers are correct.

Labor productivity, real GDP per labor hour, increases if

D) All of the above answers are correct.

Which of the following means that the CPI overstates the actual inflation rate?

D) All of the above cause the CPI to overstate inflation.

Using the definition of unemployment, which of the following individuals would be unemployed?

D) All of these individuals are unemployed.

Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and $16 trillion in 2018. Over this time period, the real GDP growth rate is

D) decreasing.

If the nation's capital stock increases so that workers become more productive, the

D) demand for labor will increase.

Classical growth theory states that

A) growth is followed by increases in the population, eventually leaving real GDP per person unchanged.

The official U-3 unemployment rate includes the total number of people who

A) are available and looking for work but unable to find employment.

The consumer price index (CPI)

A) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.

Suppose the country of Quasiland experienced a decrease in real GDP and people were laid off from their jobs. The people would be considered part of

A) cyclical unemployment.

Unemployment that is the result of recessions is called

A) cyclical unemployment.

Cyclical unemployment ________ during expansions and ________ during recessions.

A) decreases; increases

The Rule of 70 is used to

A) estimate how long it will take the level of any variable to double.

Cyclical unemployment

A) fluctuates over the business cycle.

When the economy is operating at full employment, the natural unemployment rate consists of only

A) frictional and structural unemployment.

The official U-3 unemployment rate

A) includes persons without a job who have made efforts in the last week to find a job.

From 1980 to 2000 the employment-to-population ratio generally ________ and from 2000 to 2015 the ratio generally ________.

A) increased; decreased

An increase in saving that leads to more capital accumulation ________ labor productivity.

A) increases

As a result of the rightward shift in the demand curve for labor from LD0 to LD1, the equilibrium level of employment ________ and potential GDP ________.

A) increases; increases

A discouraged worker ________ counted as officially unemployed and ________ counted as in the labor force.

A) is not; is not

Moving along the aggregate production function shows the relationship between ________, holding all else constant.

A) labor input and real GDP

From 1980 to 2000 the labor force participation rate generally ________ and from 2000 to 2015 the rate generally ________.

B) increased; decreased

Full employment occurs

A) only if the unemployment rate is equal to the natural unemployment rate.

All of the following contribute to labor productivity growth EXCEPT

A) population growth.

If the CPI is 120, this means that

A) prices are 20 percent higher than in the reference base period.

In the 2000s, video recordings were made primarily on DVDs. However, in the 2010s streaming movies became increasingly popular, leading to a sharp decline in DVDs. As a result, many people who manufactured DVDs lost their jobs and didn't have the skills necessary to work in jobs required to stream movies. This occurrence is best consider an example of

A) structural unemployment.

Andrew just lost his job as a corkscrew operator since his company has found a machine to perform his work tasks. Andrew did not have the skills needed to operate the machine. Andrew has searched for a new job for 6 months and continues to search. Therefore, Andrew is considered to be

A) structurally unemployed.

Substitution bias in the CPI refers to the fact that the CPI

A) takes no account of the substitution of goods by consumers when relative prices change.

Which of the following measurements of inflation strips out volatile food and fuel prices?

A) the core PCE

If this year's price level exceeds last year's

A) the inflation rate between these years has been positive.

Suppose that the price level was 100 in 2014, 110 in 2015, and 130 in 2016. Over these three years

A) the inflation rate was positive and accelerating.

Assume the inflation rate falls from 4 percent to 2 percent. This means that

A) the price level is increasing more slowly.

The technique currently used to calculate the CPI implicitly assumes that over time consumers buy

A) the same relative quantities of goods as in a base year.

Which labor market statistic tends rise during recessions and fall during expansions?

C) the unemployment rate

The assumption that population growth will lead to a fall in real GDP per person rate back to subsistence level is

B) associated with Malthusians.

Structural unemployment is

B) associated with changes in technology that change required job skills.

The commodity substitution bias is that

B) consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls.

All of the following would increase the growth rate of the economy EXCEPT

B) discouraging international trade.

The percentage of people employed aged 16 years and older divided by the working-age population is known as the

B) employment-to-population ratio.

The type of unemployment created by the normal rate of reentry and entry into the labor force is

B) frictional unemployment.

Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment. Matt is best be considered as

B) frictionally unemployed.

In 2016, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2017, real GDP was $4.59 billion and population was 2.97 million. From 2016 to 2017, Armenia's standard of living

B) increased.

As labor increases, there is a

B) movement along the aggregate production function and real GDP will increase less with each additional increase in labor.

Which growth theory predicts perpetual growth?

B) new growth theory

The bias in the CPI typically

B) overstates inflation.

The currently used method for calculating the CPI

B) probably overstates inflation.

Which of the following measurements of inflation tracks the rate at which infrequently changed prices are changing?

B) the sticky-price CPI

The cost of inflation to society includes

B) unpredictable changes in the value of money.

An advance in technology increases the productivity of labor. As a result, the nation's production function shifts ________ and the ________ labor curve shifts rightward.

B) upward; demand for

At the end of last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year?

C) 10 percent

In the table above, what price level belongs in space D?

C) 130

A central proposition of the new growth theory is that

C) knowledge is not subject to diminishing returns.

The more education that workers have, the ________ is their human capital and the ________ is their productivity.

C) larger; higher

Because of the biases in calculating the CPI, actual inflation is

C) less than the measured inflation rate.

The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will

C) move to point such as Z.

The biases in the CPI include the

C) new goods, quality change, and substitution biases.

In July 2014, the CPI inflation rate was 0.3 percent while the core CPI inflation rate was 0.1 percent. The difference between these two measurements of inflation indicates

C) prices for food and fuel were increasing more rapidly than prices for other goods.

The quantity of labor supplied depends on the

C) real wage rate not the money wage rate.

Suppose that the unemployment rate equals 4.5 percent and that the natural unemployment rate is 5.5 percent. We can conclude that

C) the output gap is positive.

The natural unemployment rate I. occurs when only there is no cyclical unemployment present. II. is the unemployment rate when the economy is at potential GDP.

D) I and II

Which of the following ideas apply to the neoclassical growth theory?

D) I, II and III

Real GDP grows when

D) I, II, and III

Bob inherits a large sum of money from his dead uncle's estate. Bob decides to retire young, so he quits his job and heads to the Bahamas. Bob is an example of

D) None of the above is correct.

Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town is

D) There is not enough information provided to calculate the unemployment rate.

Catherine quit her job in order to look for a new one; therefore, she is best considered as

D) frictionally unemployed.

The natural unemployment rate

D) has been estimated to range between 4 percent and 6 percent in the United States in recent years.

As currently calculated, the CPI tends to overstate the true inflation rate because

D) it fails to correctly measure quality changes for some products.

The real wage rate will fall if the

D) labor supply curve shifts rightward and the labor demand curve does not shift.

The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a

D) movement from point W to point Z.

Which of the following is NOT associated with the new growth theory?

D) natural resources

The labor force participation rate shows the percentage of

D) non-institutionalized working-age people who are actually working or seeking employment.

Marginally attached workers fall into which of the following population categories?

D) not in the labor force

Human capital is

D) people's knowledge and skills.

In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment.

D) raises; increases

Neoclassical growth theory proposes that

D) real GDP per person grows because technological change increases profit opportunities.

In the United States, the inflation rate has

D) risen and fallen since the 1970s.

An advance in technology will

D) shift the production function upward.

Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially,

D) structural unemployment increases.

The labor force is defined as the

D) sum of employed and unemployed people.

The Industrial Revolution in England in large was the result of

D) technological innovations encouraged by the patent system.

In China, suppose that the price level was 100 in 2014, 110 in 2015, and 120 in 2016. Over these three years

D) the inflation rate was positive.

The unemployment rate is measured as

D) the percentage of people in the labor force who are unemployed.

Which of the following is NOT an important factor affecting growth in labor productivity?

D) the speed with which prices fall

Full employment occurs when

D) there is no cyclical unemployment.

In September 2014, the official U-3 unemployment rate dropped from 6.1 percent to 5.9 percent. This change could have been caused by

D) unemployed workers giving up looking for a job.

Hyperinflation is defined as

D) very high inflation rates.