Econ Ch 6-8 Exam Review

What is the difference between a discouraged worker and an underemployed worker? Why is it important to understand both of these worker categories in order to fully understand the employment situation in an economy?

A discouraged worker is someone who is unemployed and stopped looking for work. An underemployed worker is someone who is employed but only part-time, yet also wants to work full-time. The difference is that one is considered unemployed while the other is considered employed. It's important to understand both so we can get a better look at the unemployment rate and labor participation rate.

Define inflation. Be specific. Be sure to address whether the prices of all goods are increasing, what is included in determining the basis for changes in the price level, and how the price level is measured.

Inflation is the increase in prices and also a decrease in purchasing power. The prices of all goods are increasing, for example the cost of a movie ticket in the year 2000 was a lot cheaper than the current price of a movie ticket. The consumer price index is included in determining the basis for changes in the price level. The price level is measured with the help of the price index.

Describe three different uses of GDP, or give three different reasons why it might be useful to calculate GDP.

One use of GDP is to measure the growth of the economy. The second use of GDP is to measure the average standard cost of living. And the final use of GDP is to help measure the business cycle.

Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the questions that follow: Assume that the base year is 2012. What was nominal GDP in 2012? If you want to use paper and pencil, show your blank paper to the camera first. a. $3,000 b. $3,600 c. $3,350 d. $3,900 e. $8,550

a. $3,000

If a jobless person has not sought a job in ____________ weeks, that person is not counted in the unemployment statistics. a. 4 b. 5 c. 6 d. 1 e. 52

a. 4

The major components of a country's economy are consumption (C), investment (I), government spending (G), exports, and imports. Which of the following is the correct equation for determining GDP? a. C + I + G + exports - imports b. C + I + G c. C + I - G d. C + I + G - exports - imports e. C + I + G + exports + imports f. C + I + G - exports + imports

a. C + I + G + exports - imports

The root cause of cyclical unemployment is: a. downturns in the business cycle. b. changes in the industrial makeup of the economy. c. labor market regulations. d. unemployment insurance. e. delays in matching available workers with open jobs.

a. downturns in the business cycle.

The sum of the number of unemployed and the number of employed is: a. the labor force. b. the unemployment rate. c. the employment rate. d. the number of discouraged workers. e. the labor force participation rate.

a. the labor force.

Refer to the following table to answer the questions that follow: As presented in the table, the approximate rate of inflation (or deflation) from 2000-2001 was (rounded to the nearest percent): a. 17%. b. 21%. c. 7%. d. 105%. e. 87%.

b. 21%.

Which of the following would not be counted in the calculation of GDP? Select all that apply. a. Buying a brand new car. b. Buying a counterfeit designer purse from a guy in an alley. c. Cleaning your own house. d. Paying for a maid service to come clean your house. e. Government spending on social security. f. Paying for a flight to Las Vegas.

b. Buying a counterfeit designer purse from a guy in an alley. c. Cleaning your own house. e. Government spending on social security.

If your real wage rose but your nominal wage fell, this would imply that: a. housing prices have fallen and because you own a house, it reduces the value of your real wage. b. the overall price level has fallen more than your nominal wage. c. your boss took some of your wages illegally. d. deflation has occurred. e. inflation is positive but less than the rate of increase in your wage.

b. the overall price level has fallen more than your nominal wage.

Inflation can create uncertainty by making: a. the real value of past payments uncertain. b. the real value of future payments uncertain. c. wages unstable. d. the nominal value of past payments uncertain. e. the nominal value of future payments uncertain.

b. the real value of future payments uncertain.

Deflation is best described as: a. when all prices in the economy fall. b. when the overall level of prices of goods falls. c. when the prices of some goods rise and prices of some goods fall, but more goods have price increases than decreases. d. when the prices of some goods rise and prices of some goods fall, but fewer goods have price increases than decreases. e. when the overall level of prices of goods rises.

b. when the overall level of prices of goods falls.

In 2011, Canada's gross domestic product (GDP) was roughly $1.396 trillion. Given that Canada's population was roughly 33.4 million people, per capita GDP in Canada in 2011 was roughly: a. $23,000. b. $417,960. c. $41,796. d. $0.23. e. $4,180.

c. $41,796.

Refer to the table below. Calculate the labor force participation rate for this economy. Category Institutionalized Full-time workers Less than 16 years of age Armed forces (non-civilian) Part-time workers Population Looking for work Number of people (millions) 14 113 40 20 27 314 14 a. 49.04% b. 5.83% c. 64.17% d. 9.09%

c. 64.17%

Which of the following is true of gross domestic product? a. It is an exact measure of output. b. It only measures output. c. It can give us guidance on the living standards of a nation. d. It only measures income. e. It can be used to measure a firm's output. f. It measures price inflation.

c. It can give us guidance on the living standards of a nation.

Ford produces 100,000 cars this year and only sells 95,000. The 5,000 cars that are not sold _______ listed in ________ category of GDP. a. are; the consumption b. are not; any c. are; the investment d. are; the excess production e. are; the unsold good

c. are; the investment

A shortcoming of real GDP is: a. it does not account for changes in the prices of goods and services. b. it does not measure changes in employment. c. it does not include the underground economy. d. it does not include the value obtained through purchases of stocks and bonds. e. it includes non-market goods.

c. it does not include the underground economy.

An index of the average prices of all goods and services throughout the economy is called: a. nominal GDP. b. the consumer price index. c. the GDP deflator. d. the interest rate. e. the inflation rate.

c. the GDP deflator.

Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the questions that follow: Assume that the base year is 2012. What was the growth rate of real GDP between the two years? If you want to use paper and pencil, show your blank paper to the camera first. a. 1.67% b. 3.2% c. 2.4% d. 0% e. 4.4%

d. 0%

Bonnie Austin, age 30, used to work part time in a local restaurant. This year she quit her job to take care of her five-month-old daughter. She is currently not looking for a job. The survey conducted by the Bureau of Labor Statistics today will count Bonnie as a. unemployed. b. not in the working age population. c. employed. d. not in the labor force. e. a discouraged worker.

d. not in the labor force.

The business cycle measures: a. fluctuations in consumption. b. fluctuations in the long-run trend growth rate of GDP. c. fluctuations in the average tax rate paid by businesses. d. short-run fluctuations in economic activity. e. fluctuations in the profit of businesses.

d. short-run fluctuations in economic activity.

Which of the following best describes the relationship between imports and exports? Import spending is _____________ GDP and export spending is _______________ GDP. a. added to; added to b. added to; subtracted from c. subtracted from; subtracted from d. subtracted from; added to

d. subtracted from; added to

The agency that measures the consumer price index (CPI) in the United States is: a. the Bureau of Economic Analysis. b. the Department of Commerce Price Index Office. c. the Department of Vital Statistics. d. the Bureau of Labor Statistics. e. the Economic Adjustment Agency.

d. the Bureau of Labor Statistics.

Refer to the following table to answer the questions that follow: As presented in the table, the rate of inflation from 1999-2000 (i.e., during the year 2000) was (rounded to two decimal places): a. 87.00%. b. 10.00%. c. 7.00%. d. 80.00%. e. 8.75%.

e. 8.75%.

Which of the following represents frictional unemployment? i. The demand for refrigerators falls when the economy enters a recession and refrigerator manufacturers lay off some of their workers. ii. General Motors decides to close its U.S. factories and relocate its car manufacturing division to Mexico. iii. After quitting your job in Ohio to be closer to your family in California, you are now looking for a new job. iv. Carla's boss recently fired her for doing a poor job and she hasn't yet found a new one. a. ii and iii b. ii, iii, and iv c. i and iv d. only iii e. iii and iv

e. iii and iv

The value of the consumer price index (CPI) is best described as: a. the current year quantity to base year quantity, including changes in the prices of the market basket. b. the current year prices to base year prices, including changes in the content of the market basket. c. the base year prices to current year prices, including changes in the content of the market basket. d. the base year prices to current year prices, holding the market basket content constant. e. the current year prices to base year prices, holding the market basket content constant.

e. the current year prices to base year prices, holding the market basket content constant.

During periods of recession: a. real gross domestic product (GDP) rises. b. output rises. c. the unemployment rate declines. d. household income rises. e. the unemployment rate rises.

e. the unemployment rate rises.

Inflation occurs: a. when all prices in the economy fall. b. when all prices in the economy rise. c. when the prices of some goods rise and prices of some goods fall, but more goods have price increases than decreases. d. when the prices of some goods rise and prices of some goods fall, but fewer goods have price increases than decreases. e. when the overall level of prices rises.

e. when the overall level of prices rises.