Macro economics Exam# 2

Productivity is the not the key determinant of living standards, but growth in productivity is the key determinant of growth in living standards. key determinant of living standards, but growth in productivity is not the key determinant of growth in living standards. key determinant of living standards, and growth in productivity is the key determinant of growth in living standards. not the key determinant of living standards, and growth in productivity is not the key determinant of growth in living standards.

key determinant of living standards, and growth in productivity is the key determinant of growth in living standards.

Human capital is

knowledge and skills that workers acquire through education, training, and experience

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should impose trade restrictions to protect the interests of domestic producers and consumers. subsidize key industries. lend support to the invisible hand by maintaining property rights and political stability. limit foreign investment to industries that don't already exist in the country.

lend support to the invisible hand by maintaining property rights and political stability

A

level of technology

Gross Domestic Product

measures economic well being, measure the market value of final goods and services produced within a country in a given period of time

Market Value of GDP

more value or something ex. more value for cars than toothpicks

Christopher is an unpaid, stay-at-home father who works as a volunteer at the local Habitat for Humanity chapter. Currently, Christopher is not looking for a paid job. The Bureau of Labor Statistics counts Christopher as

neither in the labor force nor unemployed

Josh is a full time college student who is not working for looking for a job. The BLS counts Josh as

neither in the labor force nor unemployed

Data on the unemployment rate in the U.S, since 1960 show that the unemployment rate is

never zero

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is

never zero.

investment components of GDP

new houses, new factories,

can there be zero unemployment

no because the rate is greater than 0

the labor force equals

number of people employed plus the number of people unemployed

The labor force equals the

number of people employed plus the number of people unemployed.

inflation rate

percentage change in the price level from period to another

The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce furniture are called

physical capital

Which of the following items plays a role in determining productivity?

physical capital natural resources technological knowledge (ALL OF THER ABOVE)

The equipment and structures available to produce goods and services are called technology. the production function. human capital. physical capital.

physical capital.

Sandra uses her sewing machine, thread, and yards of denim to produce jean skirts. The sewing machine is an example of​ physical ​capital. ​natural resources. ​human capital. ​labor.

physical ​capital.

Formula to find Nominal GDP

price x quantity

nominal GDP will increase when

prices increase and output increases

intermediate goods

product utilized to to produce a final good ex. car parts

U.D GDP includes

production of foreigners working in the U.S but excludes production by U.S residents working in foreign countries

Real Interest Rate

purchasing power adjusted interest rate

Efficiency wages

raise the productivity of a firm's workers, so the firm hires fewer workers.

efficiency wages

raises the productivity of a firms workers, so the firm hires fewer workers

Unemployment Rate formula

# of unemployed/ # in labor force

the labor force participation rate is computed as

(Labor force / Adult population) X 100

The natural rate of unemployment (i) is the economy's desirable level of unemployment. (ii) arises from a single problem that has a single solution. (iii) is the amount of unemployment that does not go away on its own.

(iii) only

Which of the following is the correct formula for calculating the labor force participation rate?

(labor force/ adult population) x100

things that prevent you from finding a job

-1st job seeker - sectoral shift - globalization - unemployment insurance

New Good Bias

-When new products are initially introduced they decrease in price -a large variety of products increase the value of the dollar of consumers

employed

-at least 16 years of age -worked at all in the previous week includes: ill, vacation, child care problems, maternity leave, family probs, labor dispute, or bad weather

Indexation

-automatic correction for inflation - social security benefits, tax brackets for federal income tax, long term labor contracts

cyclical

-business cycle fluctuations -insufficient demand for labor

Final goods and services of GDP

-final good is the result product ex. car -to avoid double counting, only could final good -good is included in GDP in the year its produced, not sold -final good counts towards the country its produced in

structural

-long term - minimum wage - unions - efficiency wages

unemployed

-not meet the definition of employed -searched for a job at least once in the past four weeks -temporary laid off who expect to be called back and have not been seeking work

Not in Labor Force

-not sought work in 4 weeks - under 16 - retired -full time student - home maker

Frictional

-short term - voluntary search - change careers

nominal GDP was 10, the real was 4, what was the deflator?

10/4 x 100= 250

in the base year, GDP is always 100

100

Labor participation rate formula

100 X (labor force/ adult population)

Inflation Rate Formula

100 X CPI this year- CPI last year/ CPI last year

CPI formula in any year

100 X Cost of the basket in current year/ cost of basket in the base year

In 2012, the imaginary nation of Kanmiw had a population of 8,044 and real GDP of 36,198,000. In 2013 it had a population of 7,800 and real GDP of 35,880,000. What was the growth rate of real GDP per person in Kanmiw between 2012 and 2013? -0.7 percent -2.2 percent 2.2 percent 4.5 percent

2.2 percent

Hit-It produces 320 baseball bats per day using 2 workers who each work 8 hours per day. What is Hit-It's productivity? 20 baseball bats per hour None of the answers are correct. 320 baseball bats 160 baseball bats per hour

20 baseball bats per hour

In 2016 the BLS reported that there were 23.5 million people over age 25 who has no high school degree or its equivalent. Of these 9.7 million were employed and .75 million were unemployed. Wha are the labor force participation rate and the unemployment rate for this group?

44.5% and 7.2%

Educated people may generate ideas that increase production. These ideas produce a return to society from education that is greater than the return to the individual. could justify government subsides for education. are external benefits of education. All of the answers are correct.

All of the answers are correct.

Which of the following items plays a role in determining productivity? physical capital natural resources technological knowledge All of the answers are correct.

All of the answers are correct.

Amount in Todays $ formula

Ampunt in year T$ X (price level today/ price level in year T)

Consumer Price Index

CPI

COLA

Cost of Living Adjustment

H/L

Human Capital (H) per worker (L)

Purchasing Power Formula

Initial Deposit / Price

Who of the following would be included in the Bureau of Labor Statistics' "unemployed" category?

Kevin, who is on temporary layoff

N/L

Natural resources (N) per worker (L)

Is growth in CPI available at discount stores?

No, places such as outlet malls, TJ Maxx are not included in CPI

Real Interest Rate Formula

Nominal Interest Rate- the expected inflation rate

GDP deflator is the ratio of

Nominal/Real x 100

K/L

Physical Capital (K) per worker (L)

In terms of the Government, what goes towards the GDP and what does not?

Salaries paid to public employees are GDP, but unemployment benefits, S.S payments are not (transfer payments)

the components of GDP

Y= C + I + G + NX

All else equal, which of the following would tend to cause real GDP per person to rise?

an increase in investment in human capital

All else equal, which of the following would tend to cause real GDP per person to rise? a change from outward-oriented policies to inward-oriented policies an increase in investment in human capital a weakening of property rights All of the answers are correct.

an increase in investment in human capital

Matilda just graduated from college. in order to devote all of her efforts to college, she didn't hold a job. She is going to tour country on her motorcycle for a month before looking for work. Other things the same, the unemployment rate

and the labor force participation are both unaffected

Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the same, the unemployment rate

and the labor-force participation rate both increase.

The Bureau of Labor Statistics places people in the "employed" category if they

are temporarily absent from their jobs. are self-employed. work without pay in a family member's business.

For the BLS to place someone in the "unemployed" category, the person must

be available for work

You sell cupcakes. One day you double the time you spend and double all your inputs, and make twice as many cupcakes. Your cupcake production function has

constant returns to scale

Who buy the components of GDP?

consumers (consumption), businesses (investment), and Government

Foreign Sector

consumers and businesses in other countries buy American goods and services

the deviation of unemployment from its natural rate is called

cyclical unemployment

The deviation of unemployment from its natural rate is called

cyclical unemployment.

The curve becomes flatter as the amount of capital per worker increases because of diminishing returns to labor. increasing returns to labor. diminishing returns to capital. increasing returns to capital.

diminishing returns to capital

CPI basket price

does not always reflect what consumers actually pay

If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will double but productivity will not change. more than double and productivity will rise. double and productivity will rise. more then double but productivity will not change.

double but productivity will not change.

How do you find net exports?

exports-imports

Other things equal, relatively poor countries tend to grow slower than relatively rich countries; this is called the poverty trap. slower than relatively rich countries; this is called the fall-behind effect. faster than relatively rich countries; this is called the constant-returns-to-scale effect. faster than relatively rich countries; this is called the catch-up effect.

faster than relatively rich countries; this is called the catch-up effect.

Government purchases include spending on goods and services by

federal, state, and local government

unemployment that results because it takes time for workers to search for the job that best suit their tastes and skills is called

frictional unemployment

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called

frictional unemployment.

What is subtracted from GDP?

good purchased over seas, imports

Productivity is defined as the quantity of

goods and services produced from each unit of labor input.

Megan is a landscaper. Which of the following are included in her physical capital?

her knowledge of landscaping learned in college and her landscaping equipment her knowledge of landscaping learned in college, but not her landscaping equipment her landscaping equipment, but not her knowledge of landscaping learned in college(ANSWER) neither her knowledge of landscaping learned in college nor her landscaping equipment

Greg learns how to bake from his grandmother. This is an example of

human capital, but not technological knowledge.

what is positive in terms of GDP?

if exports exceed imports (sell more than you buy)

what is negative in terms of GDP?

if imports exceed exports (buy more than you sell)

Unemployment insurance tends to

increase frictional unemployment.

discouraged workers

individuals who would like a job but haven given up searching for one

When does nominal GDP increase?

inflation

the natural rate of unemployment

is the amount of unemployment that does not go away on its own

When a minimum wage law forces the wage to remain about the equilibrium level, it

raises the quantity of labor supplied and reduced the quantity of labor demanded compared to the equilibrium level

When a union raises the wage above the equilibrium level, it

raises the quantity of labor supplied and reduces the quantity of labor demanded

When a minimum-wage law forces the wage to remain above the equilibrium level, it

raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level.

When a union raises the wage above the equilibrium level, it

raises the quantity of labor supplied and reduces the quantity of labor demanded.

Business Cycle

recurring fluctuations in economic activity consisting of recession and recovery and growth and decline

Accumulating capital

requires that society sacrifice consumption goods in the present.

Accumulating capital allows society to consume more in the present. requires that society sacrifice consumption goods in the present. involves no tradeoffs. decreases saving rates.

requires that society sacrifice consumption goods in the present.

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment.

underemployment

someone who used to be employed full time but is not part time

Inflation

sustained increase in the average level of price

An understanding of the best ways to produce goods and services is called productivity. physical capital. human capital. technology.

technology.

how to find real gdp

the base year given is the price of that year you will use. Multiply other years quantity by the base years price to find real gdp. nominal and real gdp of the base year will be the same

if total spending rises from one year to the next

the economy producing a larger output of gods and services or goods and services are being sold at higher prices

The BLS defines the unemployed as the percentage of

the labor force that is unemployed

The Bureau of Labor Statistics defines the unemployment rate as the percentage of

the labor force that is unemployed.

The Karmic Deed Restaurant uses all of the following to produce vegetarian meals. Which of them is an example of physical capital?

the tables and chairs

Which of the following is an example of human capital? the comfortable chair in your dorm room where you read economics texts the amount you get paid each week to work at the library the things you have learned this semester any capital goods that require a human to be present to operate

the things you have learned this semester

Differences between CPI and GDP

treatment of imports, treatment of capital goods, and basket of goods

discouraged worker

unemployed and wants work, but got discourgaed and stopped looking for work

3 Categories BLS categorizes citizens

unemployed, employed, not in labor force

Real GDP

volume of goods and services at constant prices

Nominal GDP

volume of goods and services at current prices (now)

full employment =

zero cyclical unemployment

​In order to promote growth in living standards, policymakers must

​encourage the accumulation of factors of production. (this one by its self is incorrect) maintain political stability. ​All of the answers are correct protect property rights.