MACRO

Assuming that inflation has occurred over​ time, what is the relationship between nominal GDP and real GDP in each of the following​ situations?

1. years after base year, nominal GDP>real GDP 2. base year, nominal GDP=real GDP 3. years prior to base year, nominal GDP<real GDP

What is the GDP in the base year?

100

If the GDP deflator rises from 185 to​ 190, what is the rate of inflation between the two​ years?

2.7%

Suppose that the economy enters into a recession and​ that, as a​ result, Rusty Z. Wrench loses his job as a delivery truck mechanic and remains unemployed. When the economy​ recovers, Rusty's previous employer rehires him. What is the best classification for his time as an unemployed truck​ mechanic?

Cyclically unemployed

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

Structurally unemployed

GDP is not a complete measure of wellbeing.

True

If an increase in crime causes households to spend money on police and security​ systems, GDP will rise.

True

If income is unequally distributed in an​ economy, increases in GDP may not raise wellbeing in an economy.

True

When there are workers that drop out of the labor force​, the official BLS measure of the unemployment rate (.....) the true degree of unemployment.

Understates

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the​ next?

When nominal GDP increases from year to​ year, the increase is due partly to changes in prices and partly to changes in quantities.

Household production and the underground economy

are not accounted for in the Bureau of Economic​ Analysis' estimates of GDP.

Over​ time, prices may change relative to each other. To take this change into​ account, the Bureau of Economic Analysis calculates

real GDP using chain weights.

When compared to the Great​ Depression, the typical length of unemployment in the modern​ (post-Great Depression-era) U.S. economy is

relatively brief.

The unemployment rate

shows the percentage of the labor force that is considered unemployed.

Growth rate

(RGDP2021-RGDP2020)*100 RGDP2020

Consider the following choices. Which one is not​ accurate?

Black teenagers as a group have lower unemployment rates than white teenagers.

How does real GDP deal with the problem inflation causes with nominal​ GDP?

By keeping prices​ constant, we know that changes in real GDP represent changes in the quantity of output produced. B. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years. C. Real GDP separates price changes from quantity changes. D. All of the above. ***

If you were attempting to forecast the level of consumer spending by​ households, which measure of total production or total income might be most helpful in making your​ forecast?

Disposable personal income

Consumption spending is​ $4.5 billion, gross private domestic investment is​ $3 billion, and government purchases are​ $2 billion. If GDP is​ $14 billion, which of the following could be true regarding exports and imports in the​ economy?

Exports are​ $15 billion, and imports are​ $10.5 billion.

In the​ U.S., gross domestic product ​GDP and gross national product ​GNP are close in value. Under what circumstances would GNP be much larger than​ GDP?

Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S. *All of the above* would push GNP above GDP.

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status?

Frictionally unemployed

How is the GDP deflator​ calculated?

GDP deflator= (Nominal/Real)*100

Why is GDP an imperfect measurement of total production in the​ economy?

GDP does not include household production or production from the underground economy.

National income is

GDP minus depreciation.

Which of the following is not a shortcoming of GDP as a measure of​ well-being?

GDP only counts final goods and services and not intermediate goods.

If Americans still worked​ 60-hour weeks, as they did in​ 1890,

GDP would be much higher than it​ is, but the​ well-being of the typical person would not necessarily be higher.

U.S. Gross National Product​ (GNP) differs from U.S. Gross Domestic Product​ (GDP) in which of the following​ ways? ​(Mark all that​ apply.)

GNP considers production that occurs outside the U.S. Your answer is correct.D. GNP is the value of final goods and services produced by residents of the U.S. In the United​ States, the difference between GNP and GDP is smaller than that of many other countries.

How does the size of a​ country's GDP affect the quality of life of the​ country's people?

Generally, the more goods and services people​ have, the better off they are.

Which of the following is a true statement about real and nominal​ GDP?

If real GDP increases from one year to the​ next, we know that production of goods and services has risen.

Based on these​ findings, what can we predict about total production whether or not that production is included in the calculation of GDPin the economy when these workers became​ unemployed?

If the workers had been paying other people to perform the household activities prior to​ unemployment, then total production will fall.

Which of the following transactions would take place in the​ "underground economy"?

John makes chainlink belts and necklaces and sells them at a local flea market for cash to avoid paying taxes.

According to most​ economists, is it a serious shortcoming of GDP that it does not count household production or production in the underground​ economy?

Most economists would answer​ "no" because these types of production do not affect the most important use of the GDP​ measure, which is to measure changes in total production over short periods of time.

Suppose the amount the federal government collects in personal income taxes decreases​, while the level of GDP remains the same. What will happen to the values of national​ income, personal​ income, and disposable personal​ income?

National income will remain the same personal income will remain the same Disposable income will increase

If the GDP deflator is​ 142, by how much have prices changed since the base​ year?

Prices have increased by​ 42%.

Which of the following would be included in the gross national product​ (GNP) of the United​ States?

Production from a U.S. firm that operates in Mexico.

Under what circumstances would the GDP deflator be less than 100 after the base​ year?

The GDP deflator will be less than 100 if there has been deflation relative to the base year.

Real GDP per capita is often used as a measure of general​ well-being. While increases in real GDP often do lead to increases in the​ well-being of the​ population, why is real GDP not a perfect measure of​ well-being?

The costs of pollution are not included. B. GDP does not include crime rates or income distribution. C. The value of leisure is not included. D. All of the above. ***

Relative to the household​ survey, which of the following is a strength of the establishment​ survey?

The establishment survey is determined by actual​ payrolls, rather than by the unverified answers of the household survey.

Which one of the following depicts an accurate description of the household survey and the establishment​ survey?

The household survey interviews households and collects data that is used to measure the unemployment rate whereas the establishment survey interviews businesses and measures total employment in the economy.

Today, the typical American works fewer than 40 hours per week. In​ 1890, the typical American worked 60 hours per week. Would the difference between the real GDP per capita in 1890 and the real GDP per capita today understate or overstate the difference in the​ population's economic​ well-being?

The increase in real GDP per capita between 1890 and today understates​ well-being because the value of leisure is not included in GDP.

Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate if homemakers were included in these​ numbers?

The unemployment rate would decrease and the labor force participation rate would increase.

Real GDP

The value of final goods and services evaluated at base-year prices

Which of the following is not one of the conditions someone needs to meet to be counted as​ unemployed?

They had worked only one hour per week during the previous four weeks.

If a country passes a labor law limiting the number of hours of work per​ week, GDP would​ ________ and leisure would​ ________.

decrease; increase

Personal income is

national income minus retained corporate earnings plus government transfer payments and interest on government bonds.

All of the following are problems in measuring the unemployment rate except that

people on active military service are included as unemployed.

Disposable personal income is

personal income minus personal taxes.

If the GDP deflator in 2012 has a value of​ 98.0, then

prices have decreased 2 percent between the base year and 2012.

If nominal GDP rises we can say that

production has risen or prices have risen or both have risen.

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy?

t does not account for inaccurate responses to the Current Population Survey. B. Discouraged workers are not considered unemployed. C. It fails to account for illegal activities. D. Underemployed people are considered employed. E. All of the above.***

Why do economists believe that setting a goal of zero percent unemployment is not feasible or​ desirable? Creating a goal of zero percent unemployment for an economy is not feasible nor is it desirable because

the economy needs some​ short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets.

Many economists prefer

the establishment survey because it is determined by actual payroll records rather than unverified answers.

When the economy is at full​ employment,

the natural rate of unemployment prevails. B. all remaining unemployment is either frictional or structural. C. the unemployment rate is greater than zero. D. All of the above.***

Real GDP is

the value of goods and services evaluated at base year prices.

The largest component of gross domestic income is

wages

An inflation rate of​ 5% between 2017 and 2018 would be implied by a change in the GDP deflator from​ ________ in 2017 to​ ________ in 2018.

​400; 420