Econ Sample test 2

Last year in the country of Nerf imports equaled exports. Nerf's GDP was $500 million, its consumer expenditure was $380

$100 million

13) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the employment-to-population ratio is

) 71.4 percent.

Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million?

14

40) 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

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?

3 percent per year

15) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force participation rate is

78.6 percent

In an economy, 40 million people are employed, 2 million are unemployed, and 8 million are not in the labor force. What is the labor force participation rate?

84 percen

12) In an economy, 43 million people are employed, 3 million are unemployed, and 4 million are not in the labor force. What is the employment-to-population ratio?

86 percent

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?

9.0 percent

Based on the following data for the country of Tiny Town, the unemployment rate equals Population = 100 Labor force = 80 Number of employed persons = 70 Number of discouraged workers = 5

A) 10/80 × 100.

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

A) increases; does not change

1) Gross domestic product is the total ________ produced within a country in a given time period.

A) market value of all final goods and services

part of government expenditure on goods and services in the GDP accounts?

A) new computer hardware for use by the IRS B) gasoline purchases for government car pools D) drapes to brighten up the president's office

49) Because of the choices people make in the pursuit of profit, new growth theory argues that

B) the economy can enjoy persisting economic growth.

18) Suppose the money wage rate and the price level both fall by 5 percent. As a result

B) the quantity of labor demanded does not change because there is no change in the real wage.

38) Real GDP measures the

B) value of total production linked to prices of a single year.

5) Which of the following people would be counted as employed in the Current Population Survey?

C) Rich, who is working 20 hours a week but wants a full-time job

47) The use of purchasing power parity prices

C) accounts for differences in the prices of the same goods in different countries when measuring real GDP.

41) Saving and investment that increase a nation's capital lead to

C) an increase in labor productivity.

42) A higher savings rate that leads to an increase in the capital stock

C) leads to increases in labor productivity.

6) The unemployment rate is the ________ who are unemployed.

C) percentage of people in the labor force

B) Aggregate income, aggregate expenditure and GDP are

all equal.

In the country of Darrowby, net domestic income at factor cost is $2.0 million. Gross domestic product is $3.0 million, and depreciation is $0.5 million. Indirect taxes less subsidies ________.

are $0.5 million

In addition to saving and investment in capital, making an even larger contribution to long-term economic growth in real GDP per person

are technological advances.

45) An increase in education and training

increases labor productivity

During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2013, real GDP per person was

$124.

During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2014, real GDP per person was

$128

29) If real GDP is $800 million and aggregate labor hours are 20 million, labor productivity is ________.

$40 per hour

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

$48 per hour.

Using the Rule of 70, if China's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double?

10 years

4) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force is

1100

During 2013, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2012, real GDP was 105 billion and the population was 0.85 billion. Economia's growth rate of real GDP per person is

3.44 percent.

43) 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

5.8 percen

The population of Tiny Town is 100 people and the labor force is made up of 75 people. If 5 of these people are unemployed, the unemployment rate is

A) 5/75 × 100.

9) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is

A) 9.1 percent

6) Which of the following expenditures is for an intermediate good?

A) General Motors buys new tires to put on the cars it's building.

best describes an individual who is cyclically unemployed?

A) Nicholas was laid-off when orders for General Motors cars fell during a recession.

42) A common definition of a recession is a time with

A) a decrease in real GDP for two or more successive quarters.

21) An increase in a nation's population results in

A) a movement along the production function.

3) If Nike, an American corporation, produces sneakers in Thailand this would

A) add to Thailand's GDP but not to U.S. GDP.

20) Goods that are produced this year, stored in inventories, and then sold to consumers next year

A) count in this year's GDP.

27) Full employment occurs when

A) cyclical unemployment is zero.

16) Net investment equals

A) gross investment - depreciation.

28) Potential GDP per labor hour can increase due to

A) increases in labor productivity.

46) The bias in the CPI typically

A) overstates inflation.

component of the expenditure approach to measuring U.S. GDP?

A) purchases of food made by families B) purchases of U.S.-made movies by Europeans D) purchases of new homes made by families

36) If the economy is at full employment

A) real GDP equals potential GDP.

6) Which of the following is used to calculate the standard of living?

A) real GDP/population

included in the working-age population?

A) retirees under the age of 55 B) discouraged workers D) people waiting to be called back to a job after being laid off

26) An increase in the working-age population results in a

A) rightward shift of the supply of labor curve and an increase in potential GDP.

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

A) shifts rightward; does not shift

48) 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.

increase labor productivity?

A) technological advances B) physical capital growth C) human capital growth

7) The calculation of the final goods and services sold in an economy would include

A) the purchase of a lawnmower by a household. B) the purchase of a service by a household. C) Ford Motor Company's purchase of a new industrial robot to be used to produce cars.

30) Full employment occurs when the

A) unemployment rate equals the natural unemployment rate.

11) The aggregate production function shows that an economy increases its real GDP in the short run by

A) using more labor.

32) An advance in technology that increases productivity and an increase in the working-age population results in

B) a rightward shift of the labor demand curve and of the labor supply curve.

44) In developing nations, microloans

B) have enabled small businesses with limited access to credit to purchase capital and expand, thus allowing greater economic growth.

32) The natural unemployment rate

B) is the unemployment rate at full employment.

2) Full-time students and prisoners are ________.

B) not in the labor force

42) If the CPI is 120, this means that

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

components of the expenditure approach to measuring GDP

B) the army buying new M1 Abram tanks. C) Ford Motor Company buying new Dell computers for use in its marketing department in Dearborn, Michigan. D) Shane's purchase of a meal at the Olive Garden in Atlanta.

9) An aggregate production function shows the relationship between

C) real GDP and the quantity of labor employed.

31) An economy is at full employment when ________.

C) the unemployment rate equals the natural unemployment rate

37) Real GDP is

C) the value of total production of all the nation's farms, factories, shops and offices measured in the prices of a single year.

8) Intermediate goods are excluded from GDP because

C) their inclusion would involve double counting.

28) Full employment means that

C) there is no cyclical unemployment.

24) In the computation of GDP, Social Security payments count as

C) transfer payments and are not included in GDP.

48) Which of the following statements about the comparison between GDP in China and in the United States is CORRECT?

China's GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing China's GDP in dollars.

3) In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million are of working age. How many people are not in the labor force

D) 5 million

29) The economy is at full employment when

D) all unemployment is frictional or structural.

18) Discouraged workers ________ counted as officially unemployed because they ________.

D) are not; are not actively seeking work

13) Gross domestic product can be calculated

D) either by valuing the nation's output of goods and services or by valuing the income generated in the production process.

49) Which of the following would lead GDP to overstate economic welfare?

D) electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution

19) Full employment corresponds to

D) equilibrium in the labor market, with actual GDP being equal to potential GDP.

2) GDP is defined as the market value of all ________ in a given time period.

D) final goods and services produced in a country

41) The business cycle refers to

D) fluctuations in the level of real GDP around potential GDP.

34) Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include

D) indirect taxes and subsidies.

47) An example of the new goods bias in the CPI is the

D) introduction of hybrid automobiles, vehicles that were not made until recently.

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

D) not in the labor force

In 2013, Ozzie purchased a 2010 Ford Escort from his neighbor for his son, purchased a 2009 "one owner" Camry from Larchmont Toyota for his wife, bought a 2013 new Ford for himself, and sold his 2002 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2013?

D) only the purchase of the Ford

21) A new 2015 Honda Civic produced in 2015 and purchased in 2016 is

D) part of GDP in 2015.

A recent survey by India's central bank reported that spending plans by firms on large new projects fell by 46 percent in the year ending March 2012, compared with the prior year. This decrease will most directly impact

D) physical capital growth.

38) Factors that influence labor productivity include ________.

D) physical capital, human capital, and technology

19) Gross private domestic investment is all purchases of newly produced business capital goods and buildings

D) plus the change in business inventories plus residential construction.

46) Classical growth theory argues that when real GDP per person rises above the subsistence level

D) population growth increases, driving real GDP per person back to subsistence level.

39) The maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation is called

D) potential GDP.

) 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

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

27) Labor productivity is

D) real GDP per hour of labor.

____ & ____ directly creates growth in labor productivity?

I. Growth in capital per hour of labor II. Technological change

50) Which policy actions could speed productivity growth?

I. Tax incentives to encourage saving II. Encouraging international trade III. Directing public funds toward financing basic research

ideas apply to the neoclassical growth theory?

I. Technological change results from chance. II. Growth in real GDP stops if technology stops advancing

27) A U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE?

I. U.S. net exports decrease. II. U.S. investment increases

22) Which of the following are examples of the gross private domestic investment component of GDP?

I. the purchase of production machinery by IBM II. an increase in the finished goods inventory at Intel

50) Reported GDP increases when, in fact, total production is unchanged when

I. there is a shift from household production to market production. II. a previously illegal activity is legalized.

41) Suppose the Consumer Price Index is 143.6. What does that number mean?

Prices rose 43.6 percent over the reference base period, on average.

26) If Ford sells 200 Explorers for a total of $400,000 to Germany, while the United States imports 100 BMWs for a total of $500,000 from Germany

U.S. GDP decreases because net exports are negative.

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

a marginally attached worker

22) An increase in a nation's population results in

a movement along the nation's production function.

48) Neoclassical growth theory predicts that

advances in technology increase the productivity of capital, which leads to an increase in investment and rising real GDP per person

39) The consumer price index (CPI)

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.

49) The commodity substitution bias is that

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

15) Suppose Mail Boxes Etc. buys a new copier for its store for $1000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, ________ has occurred.

depreciation

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

falling

21) A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of

frictional unemployment

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as

frictionally unemployed

In September 2012 the U.S. unemployment rate was 7.8 percent while the natural unemployment rate was 6 percent. The U.S. economy

had a negative output gap

40) Potential GDP is

he maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.

25) When the population increases with no change in labor productivity, employment ________ and potential GDP ________.

increases; increases

32) The presence of ________ creates a difference in the value between the market price and the factor cost of a product.

indirect taxes and subsidies

23) In the national income accounts, the purchase of a new house counts as

investment

10) Moving along the aggregate production function, all of the following are held constant EXCEPT

labor

33) The sum of compensation to employees, rental income, corporate profits, net interest, and proprietors' income is

net domestic income at factor cost

45) The biases in the CPI include the

new goods, quality change, and substitution biases.

15) The real wage rate measures the

quantity of goods and services that an hour of work will buy.

16) If the price level falls by 5 percent and workers' money wage rates remain constant, firms'

quantity of labor demanded will decrease.

17) If the price level rises by 5 percent and workers' money wage rates remain constant, firms'

quantity of labor demanded will increase.

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

raises; increases

12) The curvature of the production function shows that as employment increases, the productivity of labor

remains positive but decreases.

34) If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________.

stays the same; increases

24) Suppose the country of Tiny Town decided to open its borders to free trade. As a result, a number of its workers lost their jobs to international competition and can't find new jobs because their skills don't match what is required for job openings. The workers who lost their jobs and searched for new ones are best be considered part of

structural unemployment

Suppose that over a period of years the country of Quasiland switched from being an agriculturally-based economy to a technologically-based economy. As a result, many people lost jobs because they lacked the correct skills. As they search for new jobs, these people are part of

structural unemployment.

33) When cyclical unemployment increases and other things remain the same, ________.

the natural unemployment rate does not change

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

the output gap is positive.

A) Glenn, a student who just graduated from college last week and is currently looking for a job

unemployed

37) The cost of inflation to society includes

unpredictable changes in the value of money.

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

upward; demand for

38) The Consumer Price Index is a measure of the average of the prices paid by ________ for a fixed basket of consumer goods and services

urban consumers