Macro Chapter 21-24
The table gives data about Northland's economy in 2015. What is the value of GDP in Northland in 2015? The value of GDP in Northland in 2015 is___
$1,153 Billion
The real wage rate is $10.00 an hour and the CPI is 115. What is the nominal wage rate? The nominal wage rate is $___ an hour Real wage rate = (Nominal wage rate / CPI) x 100 Nominal wage rate = (real wage rate x CPI) / 100
$11.5
GDP deflator = (nominal GDP / real GDP) x 100 in the united states in 2002, the GDP price index was 89.5 and nominal GDP was $10,978 billion. What is the value of real GDP in 2002? the value of real GDP in 2002 is $____ billion
$12,266
In 1982-84 dollars, the real average hourly wage rate in 2002 was $8.25 and in 2003, it was $8.28. In 2002, the CPI was 179.9 and in 2003, the CPI was 184.0. Calculate the nominal wage rate in 2002 and in 2003. The nominal wage rate in 2002 is $14.84 The nominal wage rate in 2003 is $15.23
$14.84 $15.23
The GDP price index in the United States in 2016 was about 106, and real GDP in 2016 was $17.7 trillion (2012 dollars). The GDP price index in the United States in 2017 was about 108, and real GDP in 2017 was $18.1 trillion (2012 dollars). Calculate nominal GDP in 2016 and in 2017 and the percentage increase in nominal GDP between 2016 and 2017. Nominal GDP in 2016 is $_____ Nominal GDP in 2017 is $_____ The percentage increase in the nominal GDP between 2016 and 2017 is ___ percent Nominal GDP = (Real GDP X Price Index) /100
$18.7 Trillion $19.5 Trillion 4.1 Percent
Best Buy Books agreed to pay its workers $8 an hour in 2009 and $12 an hour in 2011. The CPI was 166 in 2009 and 180 in 2011. Calculate the real wage rate in each year. Did these workers really get a pay raise between 2009 and 2011? The real wage rate in 2009 was $ The real wage rate in 2011 was $ The workers ___ get a real raise between 2009 and 2011
$4.81 $6.66 did
A south sea island produces only coconuts. In 2010, the price of a coconut is $1.00 and the quantity produced is 300. In 2015, the price of a coconut is $1.50 and the quantity produced is 400. 2010 is the base year. Real GDP in 2015 is ______
$400
The national accounts of Parchment Paradise are kept on (you guessed it) parchment. A fire in the statistics office destroys some accounts, leaving only the data on the right. Calculate net domestic product at factor cost, the statistical discrepancy, and GNP. GDP (income approach) $6,940 Consumption expenditure $7,000 Indirect taxes less subsidies $700 Interest, rent, and profit $220 Investment $160 Government expenditure $180 Wages $5,900 Net factor income from abroad $0 Net exports: -300 Net domestic product at factor cost is $___ Statistical discrepancy is $____ GNP is $___
$6,120 $100 $7,040
The graph describes the labor market on Sandy Island. In addition, not shown in the graph, a survey tells us that when Sandy Island is at full employment, people spend 1,000 hours a day in job search. What is the full-employment equilibrium real wage rate and quantity of labor employed? What is the natural unemployment rate? The full-employment equilibrium real wage rate is $__ an hour the full-employment equilibrium quantity of labor employed is ___ hours per day. the natural unemployment rate is ___ percent
$7 7000 12.5%
From the second quarter of 2019 to the second quarter of 2020, nominal GDP increased by __ percent. From the second quarter of 2019 to the second quarter of 2020, real GDP increased by __ percent. Which had the faster growth rate, nominal GDP or real GDP? why did real GDP have the faster growth rate?
-8.5 2.2 Real GDP Because prices decreased
In the United States in 2010, nominal GDP was $15 trillion and real GDP was $14.8 trillion. The GDP price index in 2010 was ______.
101.4
Economists in the Statistics Bureau decide to check the CPI substitution bias. To do so, they conduct a Consumer Expenditure Survey in both 2015 and 2016. The table shows the results of the survey. It shows the items that consumers buy and their prices. The Statistics Bureau fixes the reference base year as 2015. Calculate the CPI in 2016 if the CPI basket contains the 2016 quantities. The CPI in 2016 if the CPI basket contains the 2016 quantities is 2015 Pizza 30 $5 Pasta 35 $2 2016 pizza 35 $5 pasta 25 $3
111.1
RTDA: Calculate the Unemployment Rate Employment - 147,563 Unemployment - 12,580 Unemployment X 100 / Unemployment + employment = Rate
12,580 X 100 / 160,143 = 7.9
The tables set out information about the economy of Athabasca. Calculate the quantity of labor employed, the real wage rate, and potential GDP. The quantity of labor employed is __ million hours. The real wage rate is $__ an hour. Potential GDP is $__ million.
15 $12 $195
In Brazil, the reference base period for the CPI is 2000. By 2005, prices had risen by 51 percent since the base period. The inflation rate in Brazil in 2006 was 10 percent, and in 2007, the inflation rate was 9 percent. Calculate the CPI in Brazil in 2006 and 2007. Brazil's CPI in 2008 was 173. Did Brazil's inflation rate increase or decrease in 2008? The CPI in Brazil for 2006 is? The CPI in Brazil for 2007 is? Brazil's inflation rate ____ in 2008?
166.1 181.05 Decreased
A Consumer Expenditure Survey in the city of Firestorm shows that people buy only firecrackers and bandages. A Consumer Expenditure Survey in 2016 shows that the average household spent $240 on firecrackers and $10 on bandages. In 2016, the reference base year, the price of a firecracker was $6, and the price of bandages was $1 a pack. In the current year, 2017, firecrackers are $8 each and bandages are $3 a pack. Calculate the CPI market basket and the percentage of a household's budget spent on firecrackers in the base year. The CPI market basket is __ firecrackers and __ packs of bandages The percentage of a household's budget spent on firecrackers in the base year is __ percent Solution: 240/6 =40 10/1=10 (240/250)x100=96%
40 firecrackers 10 packs 96 percent
Classify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. 1. Newsprint bought by USA Today from International Paper 2. A New apartment building 3. The purchase of a new aircraft for the vice president 4. A haircut bought by a student
A is an intermediate good, B is a final good that is investment, C is a final good that is government expenditure, and D is a final service that is consumption expenditure
the table to the right show the unemployment rate and the natural unemployment rate from September 2019 to September 2020, and real GDP, and potential GDP from the second quarter of 2019 to the second quarter of 2020. In September 2020, the U.S. the unemployment rate was _____ the natural unemployment rate and in the second quarter of 2020 the output gap was ___.
Above; Negative
______ good is used as a component of a final good. We ______ add the value of intermediate goods produced to the value of final goods to measure GDP.
An intermediate; do not
The table shows some of the items in Northland's National Income and Product Accounts in 2016. Use the expenditure approach to calculate Northland's GDP in 2016.
Consumption expenditure - 885Wages - 815Government expenditure - 350Interest, rent, and profit - 400Indirect taxes less subsidies - 165Depreciation - 200Investment - 300Net exports - 35Northland's GDP in 2013 using the expenditure approach is $1570 billion
The Commerce Department reported that in December 2015, retail sales rose by 0.2, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6 percent. Source: Commerce Department, February 2016 Which component of GDP changed because retail sales increased? Which component of GDP changed because business inventories increased? ______ changed because retail sales increased. ______ changed because business inventories increased.
Consumption expenditure; investment
The Commerce Department report showed total retail sales across the country fell 0.1% in July, although garage sales springing up across the country are proving popular with buyers. Cathy, an unemployed nurse said that she uses the money she makes from her garage sales to pay bills. Source: Reuters, August 14, 2009 Where do items in the news clip appear in the U.S. National Income and Product Accounts and the circular flow of expenditure and income? Choose the correct statement.
Expenditure on goods purchased at garage sales does not appear in the U.S. National Income and Product Accounts and does not appear as a flow in the circular flow of expenditure and income.
Close to 100 percent of Canada's unemployed receive generous benefits compared to 38 percent in the United States. If the United States adopted the level of unemployment benefits that Canada has, we would expect the U.S. natural unemployment rate to ______ and U.S. potential GDP to ______.
Increase decrease
The figure shows the flows of income and expenditure in an economy. In 2008, Q was $1,300 billion, U was $200 billion, W was $500 billion, R was $200 billion, and Z was $50 billion. Calculate investment and saving.
Investment is $550 Billion Saving is $600 Billion
Imagine that you are given $1,000 to spend and told that you must spend it all buying items from a Sears catalog. But you do have a choice of catalog. You may select from the 1903 catalog or from Sears.com today. You will pay the prices quoted in the catalog that you choose. The ______ bias in the CPI is relevant to your choice of catalog.
New goods bias and the quality change
The economy is at full employment when all unemployment is _______.
Structural and frictional
The nominal interest rate is 6 percent a year and the real interest rate is 4 percent a year. What is the inflation rate?
The inflation rate is 2 percent a year
The BLS reported that the CPI in July 2010 was 226. This news tells you that _______. So the rise in the price since the base year is [(226−100)÷100]×100, which is 126 percent.
The prices of consumption goods and services have risen, on average, by 126 percent since the base year
Bureau of Economic Analysis data show that with base year 2005 = 100, the GDP price index was 109.7 in the second quarter of 2009. In that same quarter, the PCEPI was 108.8. Given the further information that the prices of capital goods (investment) and foreign traded goods (exports and imports) increased at a slower pace than the prices of consumption goods and services, how would you explain the difference in the GDP price index and PCEPI measures of inflation? Choose the correct statement.
The prices of government goods and services increased at a faster pace than the prices of consumption goods
Which of the following is an example of government expenditure on goods and services?
The purchase of airline tickets by congress to send members to visit overseas troops
Ford says it cut its labor costs by 35 percent between 2006 and 2011. Ford's wage rate, including benefits, was $80 an hour in 2006 and $58 an hour in 2011. The CPI was 202 in 2006 and 218 in 2011. Did the real wage rate fall by more or less than 35 percent?
The real wage rate in 2006 was $39.60 and the real wage rate in 2011 was $26.61 Between 2006 and 2011, the real wage rate fell by ___ than 35 percent. LESS
Consider what is included in the measurement of GDP, and then choose the correct statement.
The underground economy, which is not included in GDP is the part of the economy that is hidden from the view of the government.
n the United States in 2004, the GDP price index was 95.5 and nominal GDP was $12,275 billion. What is the value of real GDP in 2004?
The value of real GDP in 2004 is $12853 billion
Consider U.S. unemployment and choose the correct statement. The type of unemployment that fluctuates one rat busies cycle is ______. The unemployment that raises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is _____.
There is always someone without a job who is searching for one, so there is always some unemployment. Cyclical Unemployment Structural Unemployment
The United Nations Human Development Report gives the following data for real GDP per person in 2002: China, $4,580; Russia, $8,230; Canada, $29,480; United States, $35,750. Life expectancy at birth is 79.3 in Canada, 77.0 in the United States, 70.5 in China, and 66.7 in Russia. Freedom House rates political freedom each year, and its ratings are as follows: Canada and the United States, 1.1 (1.0 is the most free); Russia, 4.5; and China, 7.6 (ratings in the 7+ range are the least free). How do life expectancy at birth and political freedom change the relative ranking of living standards that real GDP per person indicate?
They don't change the relative ranking because they rank countries in a similar way as real GDP per person ranks them
Classify each of the following items as a final good or an intermediate good, and classify the expenditure on each final good as consumption expenditure or investment: item 1: Trucks bought by fedex item 2: a new bridge across the creek in the Augusta national golf club item 3: jet engines bought by boeing item 4: a textbook bought by a student item 1 is ____ and item 2 is ___. item 3 is ___ and item 4 is___.
a final good that is investment; a final good that is investment an intermediate good; a final good that is consumption expenditure
Job search is the activity of looking for _____ job.
an acceptable vacant
An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2016 and 2017. The base year is 2016. Potential GDP in 2016 is $270 and it grew by 1 percent in 2017. The economy is in ______ because ______ between 2016 and 2017.
an expansion; real GDP is increasing
Which of the following events increases the amount of job-rationing unemployment?
an increase in the efficiency wage rate
Unemployment is a normal feature of our economy and the Congressional Budget Office believes the "natural" unemployment rate increased from 5 percent in 2007 to 6 percent in 2012. Source: Wall Street Journal, September 7, 2012 Provide some reasons why the natural unemployment rate might have increased. The natural unemployment rate might have increased because of _______.
an increase in the minimum wage and an increase in the number of firms paying an efficiency wage.
Suppose a huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. As a result, there is ______ in the U.S. production function There is ______ in the U.S. demand for labor and ______ in the U.S. supply of labor.
an upward shift an increase; no change
The Commerce Department reported that retail sales increased 1.3 percent in June. Net exports were up 0.8 percent in the first quarter and inventories held by businesses rose by 0.3 percent in June. Total sales by businesses rose 0.3 percent. Source: Commerce Department, 2013 Does the statement that total sales by businesses were up 0.3 percent mean that GDP increased by 0.3 percent? Explain your answer.
did not change by 0.3 percent; GDP measures production of all final goods and services and "total sales by businesses" includes final and intermediate goods and services
The United Nations HDI is based on GDP per person, life expectancy at birth, and indicators of the quality and quantity of education. The United States _______ have the highest HDI in part because _______. Adding _______ to the current HDI index would not create a better standard of living index.
does not; Americans do not have access to universal healthcare real GDP
A marginally attached worker is a person who _______.
doesn't work, is available to and willing to work but hasn't look for a job recently
Which of the events in the table increase the equilibrium quantity of labor and which decrease the equilibrium quantity of labor?An increase in the equilibrium quantity of labor is a result of ______.A decrease in the equilibrium quantity of labor is a result of ______.Event1Dell introduces a new supercomputer that everyone can afford.2A major hurricane hits Florida.3More high school graduates go to college.4The CPI rises.5An economic slump in the rest of the world decreases U.S. exports.
event 1 events 2 and 3
If the money wage rate increased from $30.0 to $34.22 an hour and consumer prices rose by 18 percent, we would expect ______ people to try to find a job and employed people to want to work ______ hours. the ____ would ___
fewer; shorter quantity of labor supplied; decrease
Last month, the interest rate on a money fund averaged 0.08% a year and on 5-year CDs it was 2.6% a year. The inflation rate was 0.1% a year. To maintain these real interest rates in the coming months, how will these nominal rates change if the inflation rate increases to 0.2 percent a year? To maintain these real interest rates in the coming months, the nominal interest rate will ______ if the inflation rate increases to 0.2 percent a year. The real interest rate is calculated using the formula Real interest rate = Nominal interest rate−Inflation rate.
increase on both assets by 0.1 percent
A structural boom ______.
lowers the natural unemployment rate because new jobs are found quickly
Robert Kennedy, when seeking the Democratic presidential nomination in 1968, remarked that GDP measures everything except that which makes life worthwhile. Source: The New York Times, September 1, 2008 Which items did Robert Kennedy probably think were missing? Robert Kennedy probably thought that _______ were missing from the measure of GDP.
political freedom and social justice
Canada is the United States' largest trading partner and 25 percent of the goods trade crosses the Detroit River. The NITC bridge, costing $1 billion, will increase capacity, reduce traffic bottlenecks and improve opportunities for businesses in both countries by providing a state-of-the-art, publicly operated border crossing. Source: CNN, June 28, 2013 Explain how this huge project will influence potential GDP in Canada and the United States. this huge project will _____. this huge project will ___.
shift Canada`s production function upward, create a movement up along the production function as the full-employment quantity of labor increases, and increase potential GDP shift the U.S. production function upward, create a movement up along the production function as the full-employment quantity of labor increases, and increase potential GDP
When unemployment benefits increase, the ______.
supply of labor decreases, and potential GDP decreases as a movement occurs down along the production function
A minimum wage ______.
that is above the equilibrium wage rate creates unemployment from job rationing
Households' labor supply decisions are influenced by all of the following except _______.
the number of full time jobs available
Which of the following is an example of investment?
the purchase of new bookshelves by Barnes and Noble
The demand for labor curve shows the relationship between _______.
the quantity of labor businesses are willing to hire and the real wage rate
Full employment is defined as a situation in which _______.
the unemployment rate equals the natural unemployment rate
The United Nations Human Development Report gives the following data for real GDP per person in 2002: China, $4,580; Russia, $8,230; Canada, $29,480; United States, $35,750. Life expectancy at birth is 79.3 in Canada, 77.0 in the United States, 70.5 in China, and 66.7 in Russia. Freedom House rates political freedom each year, and its ratings are as follows: Canada and the United States, 1.1 (1.0 is the most free); Russia, 4.5; and China, 7.6 (ratings in the 7+ range are the least free). How do life expectancy at birth and political freedom change the relative ranking of living standards that real GDP per person indicate?
they don't charge the relative ranking because they rank countries in a similar way as real GDP per person ranks them.
The CPI market basket consists of items that ______ buy and ______.
urban households; the Consumer Expenditure Survey is used to update it frequently
U.S. potential GDP is the value of the goods and services produced in the United States _______.
when the U.S. economy is at full employment
Classical macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, and that government intervention _____ improve the efficiency of the market economy.
works well; a natural consequence of an expanding economy; cannot
The CPI in April 2013 was 233 and 0.4% lower than the March. In April, food prices rose 0.2% while energy prices fell 4.3%. Source: USA Today, June 15, 2011 Distinguish between the price level and the inflation rate and explain why the CPI fell by only 0.4 percent when energy fell by 4.3 percent. The ______ is the price level and the ______ is the inflation rate? Because the CPI fell by only 0.4 percent when energy prices fell 4.3 percent, then _______.
CPI; percentage change in the CPI other prices must have risen by more than 0.4 percent
