Econ exam 2 practice questions

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

$1,208,421

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000,government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015?

$3200

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of ayear, the inflation rate is 1.7 percent. At the end of the year, Corey has

$50 more in his account, and his purchasing power has increased by $33.

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate foreducation between 2009 and 2010?

0.9%

Karena was laid off, but she is expecting to be recalled. She has not looked for work since being laid off. Nathanis not employed, nor was he laid off. Who is counted as "unemployed" in the U.S. labor force statistics?

1) Karena and 2) Nathan, if Nathan has looked for work during the previous four weeks

Suppose that the Bureau of Labor Statistics reports that the entire adult population of Mankiwland can becategorized as follows: 25 million people employed, 3 million people unemployed, 1 million discouraged workers,and 1 million people who are either students, homemakers, retirees, or other people not seeking employment. What is the unemployment rate?

10.7%

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected asthe base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket'scost was $55. The value of the CPI in 2016 was

110.0

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPIwas 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

1980 and lowest in 1970.

Industrial machinery is an example of a. a factor of production that in the past was an output from the production process. b. physical capital. c. something that influences productivity. d. All of the above are correct.

All of the above are correct

Changes in nominal GDP reflect

Both changes in prices and changes in the amounts being produced.

The natural unemployment rate includes

Both frictional and structural unemployment.

Some persons are counted as out of the labor force because they have made no serious or recent effort to lookfor work. However, some of these individuals may want to work even though they are too discouraged to make aserious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then

Both the unemployment rate and labor-force participation rate would be higher.

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. Thesepayments count in GDP as

Consumption of services

Which of the following is a correct way to measure productivity?

Divide the quantity of output by the number of hours worked.

Net exports equal

Exports minus imports

Wages set above the equilibrium wage by

Firms to increase productivity are called efficiency wages.

People who are unemployed because they are in search of a job that suits their skills are included within

Frictional unemployment

The labor-force participation rate tells us the fraction of the population that

Has chosen to participate in the labor market.

The real interest rate tells you

How fast the purchasing power of your bank account rises over time.

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. Thischange in behavior, by itself, has

Increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

The consumer price index is used to

Monitor changes in the cost of living over time.

Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are sold at $300 each and 5000pounds of bananas are sold at $3 per pound. In 2009, the base year, iPhones sold at $400 each and bananas soldat $2 per pound. For 2010,

Nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 76.83.

For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must a. have worked no more than 10 hours during the past week. b. have tried to find employment during the previous year. c. not have been laid off. d. None of the above is correct.

None of the above are correct

Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used cardealership or the purchase of an antique rocking chair by a person at a yard sale, are

Not included in current GDP because GDP only measures the value of goods and services produced in the current year.

All else equal, if there are diminishing returns, then which of the following is true if a country increases its capitalby one unit?

Output will rise but by less than it did when the previous unit was added.

Who in the adult population is counted as "employed" in U.S. labor statistics?

People who are temporarily absent from their job and people who work without pay in a family member's business

The inflation rate is defined as the

Percentage change in the price level from the previous period.

Cyclical unemployment is closely associated with

Short-run ups and downs of the economy.

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy largerquantities of goods that have become relatively less expensive and smaller quantities of goods that have becomerelatively more expensive. This problem is called

Substitution bias

A stove is produced by a firm in 2014, added to the firm's inventory in 2014, and sold to a household in 2015. Itfollows that

The value of the good is added to the investment category of 2014 GDP, added to the consumptioncategory of 2015 GDP, and subtracted from the investment category of 2015 GDP.

Indexation refers to

Using a law or contract to automatically correct a dollar amount for the effects of inflation.

GDP is defined as the

Value of all final goods and services produced within a country in a given period of time.

In the equation Y = C + I + G + NX,

Y represents the economy's total expenditure.