Macro Exam 1 Ch 8&9

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is _____

125

If the nominal rate of interest is 6.2% and the inflation rate is 3.0%, what is the real rate of interest?

3.2%

Which of the following would increase gross private domestic investment in an economy?

An increase in the level of Apple's inventory

If the CPI changes from 125 to 120 between 2015 and 2016, how did prices change between 2015 and 2016?

Prices decreased by 4%

national income equals gross national product minus

depreciation

The purchase of a new house is included in

investment expenditures.

The stated interest rate on a loan is the

nominal interest rate

If real GDP increases we know for sure that

output has risen

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

structural unemployment

An example of an intermediate good would be

the cream that produces cappuccino sold by Starbucks

When deflation occurs,

the real interest rate is greater than the nominal interest rate

Gross domestic product is calculated by summing up

the total market value of final goods and services produced in the economy during a period of time.

Gross domestic product understates the total production of final goods and services because of the omission of

underground products

If the minimum wage is set above the market wage

unemployment will rise

Nominal GDP is GDP in a given year

valued in the prices of that year

Real GDP is GDP in a given year

valued in the prices of the base year

Which of the following would result in GDP for an economy equal to $10 trillion?

C = $5 trillion I = $5 trillion G = $2 trillion NX = -$2 trillion

Which of the following could cause nominal GDP to increase, but real GDP to decrease?

The price level rises and the quantity of final goods and services produced falls.

When prices are rising, which of the following will be true?

The real interest rate will be lower than the nominal interest rate

Which of the following is not considered part of government purchases?

unemployment insurance payments by the government

In a small economy, gross investment in 2013 is $1,700, consumption spending is $5,000, net investment is $1, 200, government spending is $1,200, exports are $2,200, and imports are $900. What is GDP for this economy in 2013?

$9,200

Monthly expenditures for a family of 4 in 2010 averaged $1,000. In 2011, the cost of the same purchases was $1,500. If 2010 is the base year, what was the CPI in 2011?

150

Which of the following transactions would be included in the official calculation of GDP?

A student buys a new Hubbard and O'Brien textbook at the bookstore.

Which of the following is not a durable good?

Big Mac burger

Which of the following would be the best measure of the cost of living?

CPI

When lumber from Brazilian forests is used by a U.S.-owned company to produce furniture in Canada, the value of the furniture produced will be counted as a final good in ________.

Canada's GDP

Which of the following equations correctly measures GDP in an economy?

GDP = C + I + G + NX

Which of the following statements is true?

GDP accounting rules do not adjust for production that pollutes the economy.

Even if GDP included these types of production, why would it still be an imperfect measure of economic well-being?

GDP is not adjusted for pollution and it does not account for unequal income distribution. GDP is not adjusted for crime or other social problems. The value of leisure is not included in GDP

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

What is the largest component of spending in the United States in 2017?

consumption spending

Between 2011 and 2012, if an economy's exports rise by $4 billion and its imports fall by $4 billion, by how much will GDP change between the two years, all else equal?

Net exports will increase GDP by $8 billion

Which of the following is a positive statement?

The average hourly wage of U.S. workers has grown by 1% in the last quarter.

Which of the following goods is directly counted in GDP?

a 12-inch Subway sandwich purchased by a student

An example of business fixed investment spending is

a purchase of a computer by an accounting firm

Minimum wage laws cause unemployment because the legal minimum wage is set

above the market wage, causing labor demand to be less than labor supply

an example of a final good would be

apples purchased by your mom for the family to eat

Increases in real GDP would overstate the increase in the well-being of a country over time if, over that time period, the

average hours worked per week increased.

if consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then

changes in the CPI overstate the true rate of inflation

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm

The purchase of a Honda Accord is included in

consumption expenditures on durable goods.

In the first half of 2011, automobile sales in the United States were lower than they were in the first half of 2010. The decrease in auto sales impacts GDP because new automobiles are counted as ________ when purchased by households and ________ when purchased by businesses.

consumption; investment

If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would

decrease

The U.S. work week has declined from 60 hours in 1890 to 40 hours today. The impact of the decline in working hours

decreases U.S. GDP and increases the well-being of a typical working person in the U.S.

The best measure of the income households actually have available to spend is

disposable personal income

Assuming that the United States is the domestic economy, ________are goods and services produced by ________ and purchased by _________ .

exports: the United States; South Africa

Amy is an architect who is designing a home for Bob. Bob is paying Amy $150 per hour to design his new home. When Bob and Amy get married, Amy continues to work on designing the home, but she no longer charges Bob for her work. As a result, GDP________ because_________.

falls; Amy's architectural design services are no longer bought by Bob once they're married

Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower

frictional unemployment

If an American firm opens a production facility in India, the total value of the production will be included in the

gross domestic product of India

Which of the following policies would reduce structural unemployment?

job retraining program

The United States has ________ social insurance programs, and generally has a ________ unemployment rate, as compared to Canada and Western Europe.

less generous; lower

Disposable personal income equals personal income

minus personal tax payments

Personal income is defined as

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

In 2016, which component of U.S. GDP had a negative value?

net exports

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

net exports

In an "underground economy," the production of goods and services

not measured or included in GDP

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ________ quality increases. This causes the CPI to ________ the cost of the market basket

not; overstate

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of

output of the economy

The nominal interest rate equals the real interest rate ________ the inflation rate

plus

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on

producer price index

In periods when prices are falling, on average,

real GDP will grow faster than nominal GDP

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

rose 60% from the cost of the market basket in the base year

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause

the labor force participation rate to decrease.

Which of the following is included in both the U.S. GDP and U.S. GNP?

the value of all cars produced by General Motors in the United States

Which of the following is included in the U.S. GDP but not U.S. GNP?

the value of all cars produced by Toyota in the United States

Which of the following are included in gross domestic product for an economy in a given year?

the value of final goods produced in that year