Econ 204
If a farmer grows a head of cabbage with fertilizer costs of $0.10 and seed costs of $0.15 and sells it to a wholesaler for $0.55, the total value added by the farmer is
A. $0.30
f real GDP in 2005 is $8,000 billion and the price level is 125, what is nominal GDP in 2005?
A. $10,000.0 billion
On the basis of Table 5.2, national income is
A. $4,020 billion
On the basis of Table 5.1, personal income is
A. $5,620 billion.
On the basis of Table 5.1, depreciation is
A. $640. billion
On the basis of Table 5.3, the value of the income aggregate that is defined as "after-tax income of consumers" (also known as disposable income) is
A. $8,570 billion.
Refer to the above information. Which individual is frictionally unemployed?
A. 1
You are given the following information about the economy: (1) nominal interest = 8 percent; (2) real rate of interest = 6 percent. The inflation premium is:
A. 2 percent
If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was:
A. 20% higher than the average price in the base period 1982-84
According to the hypothetical economy in Figure 5.1, between 1960 and 1970 real GDP declined but nominal GDP continued to rise. The increase in nominal GDP was due to
A. An increase in the price level greater than the decrease in output, causing the nominal dollar value of output produced to increase.
In Figure 5.2, the fact that real GDP is greater than nominal GDP during the 1960- 1980 periods implies that
A. Average price levels during this period must have been lower than during the base period
a nations GDP is
A. C + I + G (X-M)
Inflation caused by a rise in the prices of inputs is referred to as
A. Cost-push inflation
Suppose there are 4 million people in an economy that are classified as unemployed. After a more thorough investigation, it becomes obvious that 200,000 of these people are actually phantom unemployed. As a result of this discovery, the unemployment rate will
A. Decrease
In periods of rising prices, percentage increases in nominal GDP will
A. Exceed percentage increases in real GDP
In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are:
A. Excluded from the labor force
Gross investment is the
A. Expenditure on new plants, equipment, and residential construction, plus changes in business inventories
For a given amount of nominal income, the real income will:
A. Fall of the price level rises
Real income will rise from one year to the next if nominal income:
A. Falls and the price level falls faster
New college graduates still looking for their first jobs would be classified in the BLS data as
A. Frictionally unemployed
If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income
A. Increases by 3%
. Which of the following is used to measure GDP, according to the income approach?
A. Interest
According to the economy in Figure 5.3, net exports
A. Made a positive contribution to GDP from 1990 to 2000.
Real GDP is more accurate than nominal GDP in making comparisons of output over time because
A. Nominal GDP can increase simply because of price increases over time.
In national income accounting, the two choices for disposable income are
A. Saving and consumption
When we calculate GDP, inputs are
A. Subtracted from total spending because they are part of another country's GDP.
Net domestic product (NDP) is determined by
A. Subtracting depreciation from GDP
Disposable income is
A. The amount households have to spend or to save
Depreciation Represents
A. The consumption of capital in the production process.
Which of the following is directly included in the calculation of GDP?
A. The final sale of a brand new Cadillac
A nation's capital stock will decline, ceteris paribus, for all of the following reasons except
A. The population increases faster than the capital stock
Which of the following statements is true?
A. The production possibilities of the economy define the limits to real income.
Transfer payments are part of personal income but not national income because
A. They are a payment for which no goods or services are exchanged.
In what circumstances would lenders most benefit?
A. When there is an unanticipated decrease in inflation
In Figure 5.1, during the period between the early 1970s and 1980, real GDP grew at a faster rate than nominal GDP. This is an indication that
A. average price levels decreased
exports are
A. goods and services sold to foreigners
GDP Per Capita
A. is equal to a nations GDP divided by the population
Suppose you volunteer to help clean up your neighborhood, and the only payment you receive is the sense of goodwill that develops with your neighbors. Your efforts cause the GDP of the economy to
A. remain Unchanged
The part of disposable income not spent on current consumption is
A. saving
Inflation is a rise in
A. the general level of prices over time
On the basis of Table 5.3, the value of the income aggregate that is defined as "income received by households before payment of personal taxes" (also known as personal income) is
B. $10,070 billion.
On the basis of Table 5.2, disposable income is
B. $2,805 billion
. If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about:
B. $25,143
A computer manufacturer sells laptops to retail stores for $450 each. If the manufacturer pays $200 for the components in each laptop and $75 in wages, the value added to each computer by manufacturing is
B. $250
Suppose Iphones cost costumers $200 and USB cables cost customers $25 what contribution does the production of 2,000 Iphones and 1,200 USB cables make to GDP
B. $430,000
On the basis of Table 5.1, net domestic product is
B. $6,170 billion.`
If nominal GDP was $11,500 billion in 2003 and the price level in 2003 was 111.6, then real GDP would have been approximately
B. 10, 305 billion
Suppose Blu-Ray players cost consumers $300 and Blu-Ray disks cost consumers $30. What contribution does the production of 250 Blu-Ray players and 3,000 Blu-Ray disks make to the GDP?
B. 165,000
Refer to the above information. Which individual is cyclically unemployed?
B. 2
The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percent of adults who are not in the labor force is:
B. 20. 6 percent
a nation has GDP of $12.500 billion and GDP per capita of $62,500, what is the nation's population?
B. 200 million
f the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation is approximately:
B. 5.9 percent
A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?
B. 6 percent
Suppose the working-age population of Country A is 200 million, the number employed is 130 million, and the number unemployed is 10 million. What is the labor force participation rate?
B. 70 percent
The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is:
B. 9 million
If discouraged workers are included in the labor force, what was the unemployment rate for 1999?
B. 9.7 percent
The unemployed are those people who:
B. Are not employed but are seeking work
The components of GDP are
B. C + I + G + (X - M).
. In calculating the unemployment rate, part-time workers are:
B. Counted as employed because they are receiving payment for work
A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?
B. Cyclical
Unemployment that occurs when there is deficient demand for the goods and services of an economy is called
B. Cyclical unemployment
Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:
B. Demand-pull inflation
the wearing out of plants and equipment is known as
B. Depreciation
Core inflation refers to the inflation picture after stripping away the:
B. Food and energy Prices
The stock of capital in the United States can grow only if
B. Gross investment minus depreciation is positive
Which of the following typically purchases the most goods and services in the U.S. economy?
B. Households
An increase in business inventories during a time period, ceteris paribus, will
B. Increase GDP during that period
Value added is
B. Increase in market value of a product that takes place at each stage of the production process
If for a given year gross investment is $300 billion and depreciation is $75 billion, then, for that year, the capital stock __________ and net investment was ________.
B. Increased by $225 billion; $225 billion
A person's real income will increase by 3% if her nominal income
B. Increases by 5% while the price index rises by 2%
8. What are the primary effects of cost-push inflation?
B. It reduces real output and redistributes a decreased level of real income
The unemployment rate is interpreted as the percentage of the:
B. Labor force that are not employed
national income accounting is defined as the
B. Measurment of agggregate economic activity
Which of the following expenditures are included in consumption?
B. Medical services
The account that gives the most accurate understanding of the economy's potential for growth over the long term is
B. NDP
The national income aggregate calculated by subtracting depreciation from GDP is known
B. Net domestic Product
The value of final output produced in a given period, measured in current prices, is
B. Nominal GDP
Which of the following is not a final good or service?
B. Paper purchased by a textbook company
Social Security payments to retired persons are included in
B. Personal Income and disposable income
. When an individual makes repairs to her own home instead of hiring a company to make the repairs, the activity is
B. Productive but excluded from GDP because it is a nonmarket activity.
Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP. Your friend is`
B. Right. GDP will increase, ceteris paribus.
A worker who loses a job at a call center because business firms switch the call center to another country is an example of:
B. Structural unemployment
Which of the following statements is correct?
B. Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology
Real GDP is the
B. Value of final output produced in a given period measured in constant prices.
According to the economy in Figure 5.3, net exports
B. Were a negative number from 1970 to 1985
. A worker would be hurt least by inflation when the
B. Worker is protected by a cost-of-living adjustment clause in an employment contract
Which of the following is the correct way to calculate the unemployment rate?
B. [(unemployed)/(labor force)] x 100
Goods and services purchased from international sources
B. imports
A statement that is often used to describe demand-pull inflation is:
C. "Too much money chasing too few goods"
A convenience store pays a farmer $1.25 per pineapple. If it costs the farmer $0.15 in seeds, $0.25 in fertilizer, and $0.25 in forgone output to grow each pineapple, the value added by the farmer to each pineapple is
C. $0.85
On the basis of Table 5.3, the net addition to the capital stock is
C. $1,400 billion.
On the basis of Table 5.3, the value of the income aggregate that is defined as "the part of disposable income not spent on current consumption" (also known as savings) is
C. $370 billion
On the basis of Table 5.1, gross domestic product is
C. $6,810 billion.
On the basis of Table 5.1, net exports are
C. -$85 billion
If the Consumer Price Index was 125 in one year and 120 in the following year, then the rate of inflation is approximately
C. -4.0 percent
. If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inflation is about:
C. 11 percent
The unemployment rate in an economy is 7.5 percent. The total population of the economy is 250 million and the size of the civilian labor force is 180 million. The number of employed workers in this economy is:
C. 166.5 million
If the population of a country is 250,000 people, its labor force consists of 145,000 people, 35,000 people are unemployed, 10,000 are unable to work, and 5,000 are unwilling to work, the unemployment rate is
C. 24. Percent
Refer to the above information. Which individual is structurally unemployed?
C. 3
The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is:
C. 6.4 percent
If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest
C. 7%
. Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is:
C. 8 Percent
To be officially counted as unemployed, one must be
C. Actively seeking employment and currently not working
inflation is
C. An increase in the average level of prices of goods and services
When oil and energy prices rise, the economy tends to experience:
C. Cost-Push inflation
. Inflation caused by an increase in aggregate spending is referred to as:
C. Demand-Pull inflation
Which of the following is a correct statement?
C. Demand-pull inflation will continue so long as there is excess total spending in the economy
National income accounts assist
C. Economic policy makers in formulationg policies and evaluating performance
If the price level increases by 15 percent while nominal income increases by 8 percent, then in percentage terms real income would:
C. Fall by about 7 percent
Which of the following types of government spending is included in the calculation of GDP?
C. Federal, state, and local government spending on goods and services only.
Search and wait unemployment is another way to describe
C. Fractional unemployment
. If GDP grows more rapidly than population for a particular country over a period of time, then we can determine that
C. GDP Per Capita has increased
Ceteris paribus, if imports increase in any given year,
C. GDP will increase
A furniture factory produces dining room sets. The lumber it purchases from the lumberyard is a/an
C. Greater than the GDP
An economy's production possibilities are most likely to expand if
C. Gross investment is greater than depreciation
The best example of a "frictionally unemployed" worker is one who
C. Is in the process of voluntarily switching jobs
. In Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price level was 125 and the average nominal level of income was $32,000. What happened to real income from Year 1 to Year 2?
C. It rose by $600
If depreciation is smaller than gross investment
C. Net investment is positive
Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining. Could the union statement be correct?
C. Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income
A furniture factory produces dining room sets. The lumber it purchases from the lumberyard is a/an
C. intermediate good
the sum of value added
C. is one way to compute the GDP
On the basis of Table 5.3, the value of the income aggregate that is defined as "the amount of output we could consume without reducing our stock of capital" (also known as the net domestic product) is
D. $11,900 billion
On the basis of Table 5.3, the value of the income aggregate that is defined as "total income earned by current factors of production" (also known as national income) is
D. $12,200 billion
On the basis of Table 5.3, the value of the income aggregate that is defined as "the total market value of all final goods and services produced in a given time period" (also known as the GDP) is
D. $12,300 billion.
On the basis of Table 5.2, depreciation is
D. $190 billion
Assume nominal GDP is $10,000 billion in period 1 and $15,000 billion in period 2. If prices in period 2 are twice as high as in period 1, real GDP in period 2 is`
D. $7,500 measured in period 1 prices.
According to Okun's Law, if unemployment rises by 5 percent while imports and exports increase at roughly the same rate, the economy will lose output equal to
D. 10 percent
With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate
D. 10 percent
If discouraged workers are included in the labor force, what was the unemployment rate for 2000?
D. 15.7 percent
If depreciation exceeds gross investment
D. The nation's capital stock is being depleted
The percentage change in one's real income can be approximated by:
D. The percentage change in nominal income minus the percentage change in the price level
When inflation occurs
D. The purchasing power of money decreases
Which of the following would not be included in the calculation of GDP?
D. Tips earned by a bartender who does not report them to the IRS
Official unemployment rate statistics may:
D. Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment
Suppose the total market value of all the final goods and services produced in the country of Rushya was $8 billion in 2008 (measured in 2008 prices) and $9 billion in 2009 (measured in 2009 prices). Which of the following statements is definitely correct?
D. Whether real GDP increased cannot be determined with the information given.
GDP can be calculated by all of the following except
D. adding up all income and expenses by consumers and businesses
If GDP per capita was $500 in 2002 and the population was 25,000, the GDP would have been approximately
D. none of the choices are correct
If the CPI declines from one year to the next, then the following statements are true, except: A. There is deflation
D. the CPI turns negative in the next city
DVD pute the GDP by layers can be addded to bicycles to compute the GDP by
a. multiplying output by price and adding the resulting dollar values
On the basis of Table 5.1, personal saving is
c. $305 billion
prices are used in national income accounting for all of the following reasons except to
d. Provide an index to measure unemployment
The base year for the calculation of real GDP for the hypothetical economy in Figure 5.2 is closest to
B. 1980
Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?
B. The Consumer Price Index
Which of the following best measures the household sector's contribution to the support of the public sector?
B. The difference between personal income and disposable income.
National income is a measure of
B. The income earned by the factors of production in producing GDP.
To avoid counting the same output more than once, the calculation of GDP includes
B. only the value of final goods
A nations GDP is calculated as
B. the total value added at all stages of production
If real GDP falls from one period to another and the price level stays the same, we can conclude that
C. Nominal GDP Decreased
A nation's production possibilities curve should, ceteris paribus, shift
C. Outward if not investment is positive
Which of the following groups could increase in size and cause a significantly higher unemployment rate?
C. Phantom unemployed
The measure of the part of disposable income that is not consumed is
C. Saving
Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
C. Structural
The addition to the economy's capital stock can be found by
C. Subtracting depreciation from gross investment
Which statement about inflation is correct?
C. The redistributive effects of inflation are arbitrary with respect to people and groups in society
Which of the following is excluded from calculations of GDP
C. The value of lawn mowing provided by a teenager for his own family.
Which of the following is investment, according to an economist?
C. an increase in business inventories
GDP per capita is the most practical way to
C. make international comparisons of the standard of living
Net exports are
C. the value of exports are minus the value of imports
When calculating GDP, consumption makes up approximately
C. two- thirds total output
Which of the following items is definitely part of the underground economy
C. unreported income
real GDP is used most effectively to
D. Analyze the growth rate of the economy over time.
In the U.S. GDP, imports
D. Are goods purchased from foreign sources
The inflation rate measures the percentage growth rate of
D. CPI from one year to the next
Suppose the total market value of all the final goods and services produced in the country of Cannedada was $4 billion in 2008 (measured in 2008 prices) and $5 billion in 2009 (measured in 2009 prices). Which of the following statements is definitely correct?
D. Changes in real GDP cannot be determined without more information.
Disposable income is equal to
D. Consumption + Saving
The measure of what households receive after personal income tax is deducted is
D. Disposable Income
Which of the following statements is correct?
D. For a given real interest rate, the nominal interest must increase if expected inflation increases
An economy's production possibilities curve indicates
D. How much the economy can produce
According to the hypothetical economy in Figure 5.2, real GDP differs from nominal GDP from 1980 to 2000 because
D. Inflation caused the dollar value of output to increase
. Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:
D. Lenders are hurt, but borrowers benefit
The full-time homemakers and retirees are classified in the BLS data as:
D. Not in the labor force
"Income received by households before payment of personal taxes" is known as
D. Personal Income
For a person to keep his real income steady at a certain level from one year to the next, his nominal income must:
D. Rise as fast as the price Index
A mismatch between the geographic location of workers and the location of job openings would result in what type of unemployment?
D. Structural
Net Domestic Product is
D. The market value of all final goods and services produced in the economy after adjusting for depreciation
All of the following count as unreported income except
D. The money you pay a private tutor who works for Tutors Inc
On the basis of Table 5.2, GDP is
B. $4,210 billion
The economic definition of investment includes all of the following except
D. A retirement portfolio of stocks and bonds.
When we calculate GDP, government spending on goods and services makes up approximately
one-fifth of total output