Macro Economics Test 2

If the CPI was 207 in 2012 and 225 in 2016, what pay raise would someone who earned $50,000 in income in 2012 have to receive in order to keep his or her purchasing power constant in 2016?

$4,348 (225-207)/207=.08695 (.08695)(50,000)=4,348

The U.S real GDP per person in 2016 was _______

$56,200

Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?

-0.3 percent

The consumer price index is used to determine inflation adjustments for more than __________ percent of government outlays.

30

A person is considered to be a full-time worker if they work __________ hours a week or more.

35

If the inflation rate equals 3 percent and the real interest rate equals 2 percent, then the nominal interest rate rate equals __________.

5 percent

The average U.S. unemployment rate from 1948 to 2019 was about

5.7 percent.

Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

A new house (considered an investment expenditure).

Which of these persons is officially unemployed?

A non-working individual who has looked for a job in the past week

CPI calculation

CPI= Cost of CPI Basket at current prices / Cost of CPI Basket at base prices x 100

Which of these factors can change the natural unemployment rate?

Demographic changes

When the economy is at full employment, which types of unemployment remain?

Frictional and structural

Item Amount ​(trillions of​ dollars) Consumption expenditure 10.2 Government expenditure 3.1 Indirect taxes less subsidies 1.0 Depreciation 1.9 Net factor income from abroad 0.2 Investment 1.7 Net exports −0.5 Statistical discrepancy 0

GDP = 14.5 trillion (10.2)+(3.1)+(1.7)+(-.5)=14.5 trillion

How is GDP measured?

GDP is measured by adding the prices of final goods and services produced domestically in a given time period.

The United Nations compiles the ____________ which combines a country's real GDP, data on life expectancy and health, and education data to provide a better measure of standard of living.

Human Development Index

Which of the following are included in the income approach to measuring​ GDP?

Indirect taxes less subsidies; rent; interest

The _________ GDP is the level of real GDP assuming all of the economy's factors of production were fully employed

Potential

Real GDP

Quantity X Price in Base Year

Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

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

The GDP would be higher than it is but the well-being of the typical person would not necessarily be higher

How to calculate nominal interest rate

The nominal interest rate = real interest rate + inflation rate.

frictional unemployment

The short-term unemployment that arises from the process of matching workers with jobs

Which of the following statements about calculating GDP using the income approach is​ true?

The sum of wages, interest, rent and profit is net domestic product at factor cost

The CPI market basket is determined by

a consumer survey.

Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.

a discouraged worker

Harry works at the video rental store for 20 hours per week. ​ He's asked his boss to allow him to work 40 hours per​ week, but has been told that business is too slow. Harry is considered

an involuntary part-time worker

The CPI is a measure of the

average prices paid by consumers for a fixed basket of goods and services.

To make comparisons of real GDP between two countries we must​ _______.

convert the real GDP of one country into the same currency units as the real GDP of the other​ country, and use the same prices to value the goods and services in the countries being compared

The annual percentage change in the personal consumption expenditures price index that excludes the volatile food and energy sectors is known as the __________.

core inflation rate

During recessions unemployment increases. This type of unemployment is known as __________.

cyclical unemployment

Since the year 2000, the labor force participation rate for men __________ and the labor force participation rate for women __________.

decreased; decreased Overall labor force participation rate has fallen from 67 percent to 65 percent

In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per capita because:

despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time

A weakness that could be noted about the unemployment rate is that it

does not account for the underutilization of workers.

An unpaid worker in a family business is classified as

employed if the person worked at least 15 hours in the previous week.

Suppose that residents of France have seen their real wage rate increase over time. This means that French workers

have increased buying power .

The unemployment rate in the Eurozone is usually __________ than the unemployment rate in the United States, partly because the Eurozone has __________ unemployment benefits and __________ regulated labor markets.

higher, higher, more

Which item has the largest weight in the CPI​ basket?

housing

GDP is a poor measure of economic​ well-being because it​ _______.

includes only production that is traded in markets

The rise in net exports​ _______.

increases GDP

The percentage rate of change in the price level is the definition of the __________.

inflation rate

When the economy is at the natural rate unemployment, the economy __________.

is at full employment

The unemployment rate is defined as the percentage of people in the __________.

labor force who are unemployed

When a significant fraction of the domestic production takes place in foreign-owned facilities, then the country's GDP will be __________ its GNP.

larger than

Since 1976, in the United States the nominal interest rate usually has been ________ the real interest rate.

larger than (cuz inflation is added to real rate)

Because a third of government outlays are linked directly to the​ CPI, as time passes the CPI bias means that the​ government's outlays are

larger than needed to keep pace with the cost of living.

In calculating the CPI, the __________.

market basket does not include large equipment purchased by firms

The consumer price index __________.

measures the cost of an unchanging basket of goods and services

When the economy is at full​ employment, the

natural unemployment rate equals the unemployment rate.

The impact of substituting a new good for an old one, such as a 4K television for an HD television, into the CPI's market basket creates called the __________.

new goods bias

Economic variables that are calculated in current year prices are referred to as __________ variables, while variables that have been corrected to account for the effects of inflation are __________ variables.

nominal, real

Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.

overstates

Total expenditure in the United States is equal to consumption expenditure plus investment​ _______.

plus government expenditure on goods and services plus net exports C+I+G+Nx

The output gap is the difference between __________.

potential GDP and actual GDP

Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:

real GDP per person

Nominal Interest rate

real interest rate + inflation rate

At any given time around one-third of the working-age population is not considered to be in the labor force. Most of these individuals are __________.

retired or full-time students

structual unemployment

skills of job seekers do not match jobs in their area

The total national income actually received by a country's residents is:

smaller than the value of GDP

Deflation is a situation in which

the inflation rate is negative.

Gross national product is​ _______.

the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country

When economists speak of the CPI​ bias, they are referring to

the tendency for the CPI to overstate price changes.

If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:

three times as high as 1979 225/73=3.1

If half of all unemployed individuals suddenly gave up looking for​ work, the unemployment rate would​ ________ and the labor force participation rate would​ ________.

​decrease; decrease

A typical business cycle can be described by the sequence​ _______.

​expansion, peak,​ recession, trough

During a​ recession, cyclical unemployment​ ________ and real GDP​ ________.

​increases; decreases

When the CPI rises​ ________, the inflation rate is​ ________.

​rapidly; high