Economics Exam 2 Set

The productivity growth slow down, refers to the

. During the 1970s and for some years afterwards.

Real GDP can be criticized as a measure of economic welfare because it

Does not take account of the degradation of environmental quality, does not include the value of products produced in the household, and does not include leisure time available to a society

According to the new growth theory, technological change is driven by

Firms attempts to increase their profit

Which type of price index theory averages the base year and current years quantities?

Fisher's Mean

Core inflation represents the general change in prices excluding

Food and energy

When a student finish his college and begins looking for work

Frictional unemployment increases

What effect does technological change have?

Increases potential GDP

If the population increases in our growth model, then the potential GDP_____ and employment ____

Increases; decreases

Unpredictable changes in the valley of money, which brings about gains and losses, or a consequence of unpredictable changes in

Inflation

What is not a component of the income approach to measuring US GDP

Investment

The chairman of the federal reserve system is

Jerome Powell

According to new growth theory,

Knowledge is not subject to diminishing returns

Which type of price index theory uses base years quantities

Laspeyres

The CPI uses a_____ type price index while the GDP deflator uses a _______ based chain-type index

Laspeyres, Fishers mean

Because the bias in calculating the CPI, actual inflation is

Less than the measured inflation rate by about 1% per year

In the equation, GDP=C +I + G + X -M, G refers to

Local, state, and federal government expenditure on goods and services, but does not include transfer payments

The _______ is calculated as the number of people ____ divided by the labor force multipled by 100

Unemployment rate; unemployed

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

cyclical unemployment occurs when

a business cycle recession decreases employment.

Deflation represents

a reduction in the aggregate price level.

Economists distinguish real GDP from nominal GDP to

determine whether real production has changed.

Two methods of measuring GDP are

income approach and expenditure approach

According to the classical growth theory of Thomas Malthus:

increases in real GDP per person are only temporary.

The gap between real GDP per person in Africa and real GDP per person in the United States has been

increasing

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

investment

Activities that encourage faster growth are

investment in new capital and human capital

Structural unemployment is the result of

technological change, absolute job skills, or foreign competition.

When calculating GDP, underground, economic activity is

the part of the economy purposely hidden

The term capital, as used in macro economics refers to

the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.

The labor force is defined as

workers with jobs and unemployed workers.

The difference between gross investment and net investment is

depreciation

The producer surplus on a unit output is the difference between the market price in the supply price

True

Hyperinflation is defined as

very high inflation rates

Over the last 100 years, the average US growth rate and real GDP per person was about

2% per year

If the nominal interest rate is 8% and the current inflation rate is 3% approximately what is the real interest rate?

5 %

In June 2022, recent inflation, annualized, as measured by the CPI peaked at

8.9%

Event ceiling creates a shortage as a result, what occurs next

A loss of both consumer and producer surplus

Which theory of economic growth concludes that growth can continue indefinitely

A new theory

Discouraged workers _____ counted as officially unemployed because they____

Are not; are not actively seeking work

The view the population growth occurs when real GDP per person exceeds the amount necessary to sustain life is part of the ______

Classical Growth theory

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.

A minimum wage sent above the equilibrium price will

Create surplus of labor

Unemployment caused by fluctuation of the business cycle is called______ unemployment

Cyclical

The reason the consumer price index has not officially adopted. The fishers mean approach to calculating inflation is because.

Social Security and many pension funds are indexed to inflation

The decrease in slope of production function reflects

Diminishing returns

Gross domestic product is the total_____ produced within a country in a given time period.

Market value of all final goods and services

The biases in the CPI include the

New goods, quality, change, and the substitution bias

Labor, productivity, real GDP per labor hour, increases if

New technologies are continuously discovered, there is an increase in the accumulation of human capital, and savings and investment cause an increase in the quantity of capital per worker

Frictional unemployment comes about because

Normal labor market turnover

Marginally attached workers fall into what population category?

Not in the labor force

During a recession, the_____

Number of marginally attached workers increases

Full employment occurs

Only if the unemployment rate is equal to the natural rate of unemployment

Which type of price index theory uses current years quantities

Paasche

The unemployment rate measure is the percentage of

People in the labor force who can't find a job

Some economists that do not like using the consumer price index is a measure of consumer inflation, instead prefer using

Personal consumption expenditure

Expenditures Approach to GDP, the largest component is

Personal consumption expenditures

The largest component of GDP in the expenditures approach is

Personal consumption expenditures

All of the following contribute to labor, productivity growth, except

Population growth

Labor, growth of depends, mainly on______, and labor productivity growth depends mainly on _____

Population growth; technological advances

US investment is finance from

Private, saving, government budget surpluses, and borrowing from the rest of the world

And labor market an increase in labor productivity____ the real wage and _____ the level of employment

Raises ; increases

Labor productivity is

Real GDP per hour of labor or real GDP per worker

An assumption of classical grow theory is that when____ the population growth rate ____

Real GDP per person exceeds the subsistence level; increases

According to the new groove theory, competition

Reduces profit

A price floor

Results in a surplus, if the floor price is higher than the equilibrium price

An increase in the working age population results in a

Rightward shift of the supply of labor curve, and an increase in potential GDP

If new capital or technology increases labor, productivity, the supply of labor______, and the demand for labor ____

Stays the same, increases

Substitution bias in the CPI refers to the fact that the CPI

Takes new account of the substitution of goods by consumers when relative prices change

What policy actions could speed productivity growth?

Tax incentives to encourage saving, encouraging international trade, directing public funds towards financing basic research.

Neoclassical graph theory attributes, economic growth to

Technological change

Pollution is a byproduct of some production processes, so on this count real GDP as measured

Tends to overstate economic welfare

Looking at inflation rates in the US since the 1970s/early 1980s we see that

The 1970s/early 1980s experienced the highest inflation rates

The primary tool for policymakers, and dealing with inflation is

The FED raising interest rates and cutting money supply growth

Is a rich country grows at a faster rate than a poor one then

The gap in their standard of living will widen overtime

Other things remaining the same, the greater than expected profit,

The greater the amount of investment

The primary concern for aggressively, reducing inflation is

The risk of a recession

Potential GDP is

The value of production, when all the nations resources are fully employed

The primary cause of inflation

Too much fiscal spending

The unemployment-to-population ratio is defined as

Total employment, divided by the working age population, then multiplied by 100

A price ceiling is a price

above which a seller cannot legally sell

The use of purchasing power parity prices

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

The largest component of national income is

compensation of employees

Depreciation is defined as

decrease in the stock of capital due to wear and tear.

Three types of unemployment are

frictional, structural, cyclical

Net investment equals

gross investment minus depreciation

We are interested in long-term growth, primarily because it brings

higher standards of living

Workers who pursue an education, directly increase their

human capital

The labor, force, participation rate is calculated as the

labor force divided by the working age population then multiplied by 100.

Deadweight, loss or welfare loss is

made up of a loss of both consumer surplus and producer surplus.

In the US, resources are most often allocated by

market price

Which growth theory models growth as a perpetual motion machine?

new growth theory

Which theory emphasizes the significance of new discoveries that can be used by many people at the same time?

new growth theory

Price indexes can overstate inflation because they

omit some quality improvements

The bias in the CPI typically

overstates inflation

Labor growth depends mainly on ________ and labor productivity growth depends on ________.

population growth; technological advances

What is not included in real GDP?

production in the home

All of the following household expenditures are included in consumption expenditure , except

purchase of corporate stock.

Human capital is

the knowledge and skills a worker gains through education and experience

GDP declines during

the movement from peak to trough

Real GDP decreases during

the movement from peak to trough

A market is allocatively efficient if

the sum of the consumer surplus and the producer surplus has been maximized.

Intermediate goods are excluded from GDP, because

their inclusion would involve double counting