Econ 110 - Test 2
Consider the data above for a simple economy: Using 2005 as the base year, the real GDP in 2011 is
$34,600
Suppose that a simple economy produces only four goods and services: sweaters, CDs, sugar, and soft drinks. If one half of the sugar is used in making the soft drinks and the other half of the sugar is purchased by households. The nominal GDP for this simple economy is:
$4,900
The labor force participation rate for this simple economy equals
(1,100/15,000) × 100 Employment + Unemployment / Working Age Pop
The equation for GDP using the expenditure approach is
GDP =C+I+G+ (Exports-Imports)
Which of the following statements is true?
GDP accounting rules do not adjust for production that pollutes the economy.
The output of Mexican citizens who work in Texas would be included in the
Gross domestic product of the United States
Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?
Real GDP grows by 2.3% in the second quarter
Which of the following could cause nominal GDP to decrease, but real GDP to increase?
The price level falls and the quantity of final goods and services produced rises
Increases in real GDP would overstate the increase in the well-being of a country over time if, over that time period, the
average hours worked per week increased
Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan contract period, then
borrowers lose 1% of the loan value
Suppose you borrow $1,000 at an interest rate of 10 percent over the next year. If the expected real interest rate at the beginning of the loan contract is 4 percent, then what rate of inflation over the upcoming year would be most beneficial to you as the borrower? An inflation rate
greater than 6 percent
If cyclical unemployment is eliminated in the economy, then
he economy is considered to be at full employment
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would
increase the measured labor force participation rate
An increase in unemployment insurance payments would, in effect, ________ the amount of time spent searching for a job, which would increase ________ unemployment
increase; frictional
The percent increase in the CPI from one year to the next is a measure of the
inflation rate.
If the GDP deflator is less than 100, then for that year nominal GDP ________ real GDP
is less than
If the quantity of goods and services produced in the economy decreases
it may be possible for nominal GDP to increase.
If firms pay what are called "efficiency wages," they pay wages that
motivate workers to increase their productivity
Real GDP will decrease
only if the quantity of final goods and services produced falls
Making the production and sale of alcohol ilegal
reduces GDP and increases the size of the underground economy.
If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________
risen; risen
If prices in the economy rise, then
the purchasing power of a dollar declines
When deflation occurs
the real interest rate is greater than the nominal interest rate
Real GDP is GDP in a given year
valued in the prices of the base year.
Assume the market basket for the consumer price index has three products—Cokes, hamburgers, and CDs—with the following values in 2006 and 2011 for price and quantity: The Consumer Price Index for 2011 equals
121
Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to
2.5 percent
Which of the following would be a consequence of substitution bias in the CPI?
Businesses would over-compensate employees for inflation when giving the cost of living rises.
The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is
5% higher in year 2 than in year 1
If the real rate of interest is 3.0% and the inflation rate is 6.5%, what i s the nominal rate of interest?
9.5%
Consider the data above for a simple economy: Using 2005 as the base year, the GDP deflator in 2011 is
93.3
Which of the following is not directly counted in GDP?
Intermediate goods
Which of the following is true about the consumer price index?
It falis to account for people switching to goods whose prices have fallen
Given the information above, and taking into account the change in prices, which of the following statement is true?
John's wage was higher in 2012 than in 1974
Minimum wage laws cause unemployment because the legal minimum wage is set
above the market wage, causing labor demand to be less than labor supply
Which of the following would be the best measure of the cost of living
consumer price index
If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are
cyclically unemployed