ECON: TEST 3
Your family purchased a house in 1983 for $60,000 and sold it in 2014 for $280,000. During this period the CPI rose from 100 in 1983 to 250 in 2014. Given this information, the 1983 purchase price of the house in 2014 dollars would be ______________, and thus your family gained ____________________ on the sale of the house (in constant dollar terms).
$150,000, $130,000
If a country has GDP of $80,000,000,000 and its population is 2,000,000, then its per-capita GDP is
$40,000
Suppose the civilian noninstitutional population equals 12 million persons and there are 8 million persons employed and 2 million persons unemployed. The number of persons in the civilian labor force is ______ million persons and the number of persons not in the labor force is __________ million persons.
10, 2
Based on the data from a hypothetical country presented in the following table (shown in billions), what was the country's economic growth rate in 2012? (Real GDP later year - Real GDP earlier year / Real GDP earlier year) x 100
2.36 percent
If the CPI was 245 in 2013 and 200 in 2000, by what percentage did prices rise during the period 2000-2013?
22.5 percent
The frictional unemployment rate is 3 percent, the structural unemployment rate is 3.3 percent, and the (actual) unemployment rate is 6 percent. It follows that the natural unemployment rate is ___________ percent and the cyclical unemployment rate is ____________ percent.
6.3 percent, -0.3 percent
The CPI was 213 at the beginning of year 1 and 234 at the end of year 1. By how much did prices rise during the year?
9.86 percent
Which of the following items is the best example of a final good?
Apple juice sold in a grocery store.
__________________ is the largest spending component of GDP usually accounting for around _________ percent of U.S. GDP.
Consumption, 70
Suppose that there is an increase in imports from the rest of the world to Country ABC. What impact would this have on the GDP of Country ABC, ceteris paribus?
Country ABC's GDP would fall.
If there is economic growth in a country, then it follows that Real GDP is as large as it ever has been in the country. Is this true or false?
False, because Real GDP could have been larger at an earlier time, then declined, then increased (which would be evidence of economic growth), but still be less than it was than Real GDP at an earlier time.
Net domestic product is equal to
GDP minus the capital consumption allowance
A simple circular flow diagram shows that ______________ equals __________________
GDP, total income
Country X has a higher GDP than country Y. What does this mean?
It means the total market value of all final goods and services produced annually in country X is greater than the total market value of all final goods and services produced annually in country Y.
Which of the following is an example of a nonmarket good or service?
Laura cuts her friend Michelle's hair in exchange for Michelle giving Laura a facial.
Suppose you have data on durable goods, services, inventory investment, government purchases, exports, and imports. Can you compute GDP?
No, you would also need to have data on nondurable goods and fixed investment to compute GDP.
Suppose you have data on national income, undistributed corporate profits, transfer payments, and corporate profits taxes. Can you compute disposable income?
No, you would also need to have data on social insurance taxes and personal taxes to compute disposable income.
The standard definition of "recession" defines a recession as occurring when
Real GDP has declined for two consecutive quarters.
Economic growth has occurred if
Real GDP in one year exceeds the Real GDP in the previous year.
Which of the following is an example of income received but not earned?
Social Security benefits
Which of the following would definitely not be included in GDP?
The exchange of stocks and bonds for money.
Which of the following illustrates double counting?
The total market value of the steel used to produce a car and the total market value of the car itself are summed.
If persons not in the labor force total 4 million and persons in the civilian labor force total 60 million, then how many persons are unemployed?
There is not enough information to answer the question.
Suppose that 1982 is the base year for the Consumer Price Index (CPI) and in 2014 the CPI is 345. What does this "345" mean?
What cost $100 in 1982 will on average cost $245 more in 2014.
Suppose that 1996 is the base year for the Consumer Price Index (CPI) and in 2016 the CPI was 154. What does this "154" mean?
What cost $100 in 1996 would on average cost $154 in 2016.
Suppose that investment is $12.5 billion, purchases of new residential housing is $2.4 billion, and purchases of newly produced capital goods is $8.5 billion. What is the value of inventory investment? a.$1.6 billion b.$23.4 billion c.$10.1 billion d.$4.0 billion
a. $1.6 billion - In this problem, fixed investment equals ($2.4 billion + $8.5 billion) = $10.9 billion, thus inventory investment equals ($12.5 billion - $10.9 billion) = $1.6 billion.
Net domestic product is the total market value of
all final goods and services produced annually within a country's borders minus the capital consumption allowance.
Which of the following would not cause a decrease in a country's GDP, ceteris paribus?
an increase in inventory investment
Given the following data, what is the value of durable goods for this economy? Consumption = $500 billion Nondurable goods = $100 billion Services = $200 billion New residential construction = $50 billion a.$150 billion b.$200 billion c.$400 billion d.$50 billion
b.$200 billion Consumption - nondurable goods - services
In 2016, Leah purchased a house built in the 1950s for $500,000 and paid realtors a commission of $30,000 for the services provided to make the transaction take place. What was the impact of this transaction on GDP in 2016? a.GDP increased by $530,000. b.GDP increased by $30,000. c.GDP decreased by $30,000. d.GDP increased by $500,000.
b.GDP increased by $30,000.
Which of the following statements is false? a.The actual unemployment rate is equal to the number of persons unemployed divided by the civilian labor force. b.The natural unemployment rate is equal to the structural unemployment rate minus the frictional unemployment rate. c.The CPI in the base year is 100. d.A job leaver is a person who was employed in the civilian labor force and quit his or her job and is now looking for a new job. e.Unemployed persons equal job losers plus job leavers plus re-entrants plus new entrants.
b.The natural unemployment rate is equal to the structural unemployment rate minus the frictional unemployment rate.
Real GDP is computed using
base-year prices.
An economy with $480 million in exports and (- $100) million in net exports has imports equal to a.$380 million b.$680 million c.$580 million d.$280 million
c.) 580 million Exports are the total foreign spending on domestic goods, while imports are the total domestic spending on foreign goods. Net exports are the difference between a country's exports and its imports. In order for net exports to be a negative amount, it must be true that imports are greater than exports.
The capital consumption allowance refers to
capital goods being used up in production through natural wear, obsolescence, and accidental destruction.
National income is the sum of
compensation of employees, rental income, net interest, corporate profits and proprietors' income.
The expenditure approach to measuring GDP sums
consumption, investment, government purchases, imports, and exports.
Retained earnings is part of which component of National Income?
corporate profits
Look at the following data (stated in billions of dollars): consumption = $600; exports = $90; imports = $95; inventory investment = $110; fixed investment = $150; government purchases = $300. GDP is equal to __________________ billion. a.$1,250 b.$1,165 c.$995 d.$1,155 e.$1,055
d.$1,155 GDP is measured in current year prices and can fall because the price level has fallen, output has fallen, or both. Real GDP is measured in base year prices and can only fall when output falls. Real GDP is thus a better measure for tracking changes in the business cycle. A recession occurs in the contraction phase of the business cycle and the standard definition of "recession" states that it occurs when Real GDP has declined for two consecutive quarters.
Which of the following statements is false? a.Durable goods are goods that are expected to last for more than three years. b.Investment is the sum of fixed investment and inventory investment. c.Net exports equals exports minus imports. d.Investment is the largest expenditure component of GDP. e.Personal income is the amount of income that individuals actually receive.
d.Investment is the largest expenditure component of GDP.
To compute the CPI in the current year, you would:
divide the total dollar expenditure on the market basket in the current year by the total dollar expenditure on the market basket in the base year and then multiply by 100.
The three components that make up corporate profits are
dividends, corporate profits taxes, and undistributed corporate profits.
Investment is equal to a.fixed investment plus purchases of new residential housing. b.the purchases of new capital goods plus inventory investment. c.fixed investment plus inventory investment. d.the purchases of new capital goods plus the purchases of new residential housing plus inventory investment. e.c and d
e. c and d / c. .fixed investment plus inventory investment. d. the purchases of new capital goods plus the purchases of new residential housing plus inventory investment.
Ann works 20 hours per week in her family's tire shop, but she is not paid for her work. The Bureau of Labor Statistics (BLS) would count Ann as
employed
All persons in the civilian labor force fall into one of two categories:
employed and unemployed.
Gross Domestic Product (GDP) is the total market value of
final goods and services produced annually within a country's borders.
Real GDP is GDP that has been stated
in base year prices.
Suppose that your nominal income increased by 10% last year while the consumer price index (CPI) increased by 2%. From this information you would be correct in concluding that the purchasing power of your income ______________ this year by ___________.
increased, 8 percent
Margaret is currently categorized by the Bureau of Labor Statistics as a discouraged worker. Margaret would therefore _________________ counted as unemployed because discouraged workers are________________.
not be, not actively looking for work
According to economists, leisure is ______________ in GDP calculations because it is_______________.
not counted, too difficult to measure
The civilian noninstitutional population consists of everyone in the population who is
not in the labor force plus those persons in the civilian labor force.
Real GDP rises when _________________ rises, while GDP rises when ___________________ rises, and so ____________ is the better gauge of an economy's health.
output, output or the price level, Real GDP
National income equals the compensation of employees plus
proprietors' income, corporate profits, rental income, and net interest.
Consumption is equal to the sum of spending on durable goods, nondurable goods, and ______ while investment is equal to fixed investment plus ___________________.
services, inventory investment
Betty lost her job when a computer began doing the tasks that she used to do for her employer. Her skills and training are not transferable to any job market that is currently hiring workers. Under which category of unemployment would Betty be categorized?
structural unemployment
To an economist, the term full employment means that the (actual) unemployment rate is equal to
the natural unemployment rate.
The employment rate equals
the number of employed persons divided by the civilian noninstitutional population.
The term disposable income refers to
the portion of income that can be used for consumption or saving.
Which of the following is omitted from GDP?
the trading of stocks and bonds
The cyclical unemployment rate is equal to the
unemployment rate minus the natural unemployment rate.
Suppose buyers don't buy as many units of output as firms have produced. The unsold units find their way into ____________________ and as a result investment rises and so does GDP.
unplanned inventory investment
Which of the following would definitely not be counted in the measurement of GDP?
value of the services of a person who cooks his or her own food
The expansion phase of the business cycle refers to that part of the business cycle
when Real GDP rises above the previous peak of the business cycle.
When the economy is at its natural unemployment rate, the cyclical unemployment rate is ______________ and the economy is said to be operating at _____________________.
zero, full employment
