Macro Midterm part 2
How do we calculate the inflation rate and what is its relationship with the CPI? The inflation rate is calculated as _________.
(CPI this year minus CPI last year) divided by CPI last year] times 100
CPI = ______.
(Cost of CPI basket at current-period prices divided by Cost of CPI basket at base-period prices) times 100
During a year, a firm's gross investment is $5,000 and net investment is $4,000. What is the firm's depreciation? The firm's depreciation is ______.
1,000
The CPI in 2016 was 241.4. The CPI in 2017 was 246.8.
2.2
Hyperinflation is an inflation rate of _____ or higher that grinds the economy to a halt and causes a society to collapse.
50 percent a month
An economy produces only digital cameras, chocolate bars, and watches The table gives the quantities produced and prices in 2015 and 2016. The reference base year is 2015. What is real GDP in 2016 in terms of the reference base-year prices? Real GDP in 2016 in terms of reference base-year prices is $ 53.
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Aggregate income in an economy in 2017 is $995 billion. Saving is $20 billion and imports are $25 billion. What is aggregate expenditure in the economy in 2017? Aggregate expenditure in the economy in 2017 is ______.
995 billion
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: Item 1. Your purchase of a new iPhone Item 2. The purchase of a new helicopter for the president Item 3. Cheese bought by Domino's Item 4. New concrete mixers bought by Chicago Concrete Inc Item 1 is ______ and item 2 is ______.
A final good that is consumption expenditure; a final good which is government expenditure
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: Item 1. New cars bought by Hertz comma the car rental firm Item 2. The purchase of new computers for the office of Secretary of State Item 3. Jet engines bought by Boeing Item 4. Upper A textbook bought by a student
A final good that is investment A final good which is government expenditure
Item 3
An intermediate good a final good that is consumption expenditure
Item 3 is ______ and item 4 is ______.
An intermediate good; a final good that is investment
Three Indian firms are producing components for Boeing fighter jets F15 and F18 and for the Chinook heavy-lift helicopter in Bangalore, Hyderabad, and other places in India. Source: The Economics Times, February 17, 2016 Explain how Boeing's activities and its transactions affect U.S. and Indian GDP. The sale of Boeing's fighter jets and heavy-lift helicopters is recorded as _______, and the Boeing's outsourcing of components to India is recorded as _______.
Government expenditure in U.S. GDP; imports in U.S. GDP
When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.
Greater; positive
A person is not in the labor force if they are ______.
In the working-age population but neither employed nor unemployed
In June 2015, the U.S. unemployment rate was 5.2 percent. In June 2017, the unemployment rate was 4.4 percent. Predict what happened to the labor force between June 2015 and June 2017 if unemployment was constant. If unemployment remained constant between June 2015 and June 2017, then the labor force ______.
Increased
If all the newly hired people had previously given up on their job search, the labor force participation rate would have _______ and the unemployment rate would have _______.
Increased; decreased
The firm that printed your textbook bought the paper from XYZ Paper Mills. Was this purchase of paper part of GDP? If not, how does the value of the paper get counted in GDP? This purchase of paper ______ part of GDP because the paper is ______ good.
Is not; An intermediate
The natural unemployment rate _______.
Is the unemployment rate at full employment
When the economy goes into recession, the output gap is _______.
Negative
Jobs and Wages Notch Gains as the Economy Tries to Heal Hiring in recent months has hit a pace last seen during the late 1990s and the labor force participation rate has started to rise but it remains significantly below its pre-recession level of 2007. Source: The New York Times, April 1, 2016 If all the newly hired people had been unemployed, how would the labor force participation rate and unemployment rate have changed? If all the newly hired people had previously given up on their job search, how would the labor force participation rate and unemployment rate have changed? If all the newly hired people had been unemployed, the labor force participation rate would have _______ and the unemployment rate would have
Not changed; decreased
The table gives information reported by the Bureau of Labor Statistics for 2008. Calculate the unemployment rate, the labor force participation rate, and the employment-to-population ratio.
PICTURE
The value of the paper is counted in GDP as ______.
Part of the value of the textbook
A U.S. market research firm deconstructed an Apple iPod and studied the manufacturers, costs, and profits of each of the parts and components. The final results are shown in the table. What is Apple's profit? Where in the national income and product accounts of the United States, Japan, South Korea, and China are these transactions recorded?
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A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $30 on juice and $16 on cloth. In the base year, juice was $3 a bottle and cloth was $4 a length. This year, juice is $2 a bottle and cloth is $7 a length. Calculate a. The CPI basket. b. The CPI in the current year. c. The inflation rate in the current year.
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The figure shows the circular flow model.
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The figure shows the circular flow model. In 2014, flow A was $13.3 trillion, C was $2 trillion, B was $9 trillion, and E was negative $ 0.7 trillion. Calculate investment.
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The figure shows the flows of expenditure and income in the United States. During 2017, B was $9 comma 658 billion, C was $2 comma 147 billion, D was $2 comma 656 billion, and E was negative $ 723 billion.
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The table gives information about the labor market in April and May 2017 in the economy of Sandy Island. Calculate for April 2017 a. The unemployment rate. b. The employment-to-population ratio. And calculate for the end of May 2017 c. The number of people unemployed. d. The number of people employed. e. The unemployment rate.
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The table gives information about the labor market in October and November 2017 in the economy of Sandy Island. Calculate for October 2017 a. The unemployment rate. b. The employment-to-population ratio. And calculate for the end of November 2017 c. The number of people unemployed. d. The number of people employed. e. The unemployment rate.
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The table gives information reported by the Bureau of Labor Statistics for 2009. Calculate the unemployment rate, the labor force participation rate, and the employment-to-population ratio.
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Tropical Republic produces only bananas and coconuts. The base year is 2016, and the tables give the quantities produced and the market prices. Calculate nominal GDP in 2016 and 2017.
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Use the data in the table to calculate aggregate expenditure and imports of goods and services.
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What is the output gap? How does it change when the economy goes into recession? The output gap is the gap between _______.
Real GDP and potential GDP
When is an economy at full employment? An economy is at full employment when ______.
The unemployment rate equals the natural unemployment rate
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Explain where these activities appear in Japan's National Income and Product Accounts.
When the wings are sent to the United States, their value appears as Japanese exports in calculating Japan's GDP.
______ is an example of U.S. consumption expenditure.
Your purchase of a flight on American Airlines
What is the distinction between nominal GDP and real GDP? Nominal GDP is ______. Real GDP is ______.
a more precise name for GDP; the value of final goods and services produced in a given year when valued at the prices of a reference base year
An economy is at full employment when
all unemployment is frictional and structural
A final good is _______. An example of a final good is _______.
an item that is bought by its final user during a specified time period; bread sold to a consumer
An intermediate good is _________. An example of an intermediate good is _______.
an item that is produced by one firm, bought by another firm, and used as a component of a final good or service; wheat sold to a baker to make bread
The reference base period for the CPI is 1982-1984. In April 2017, the CPI was 244.5. Complete the sentence. This CPI in April 2017 tells us that the ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was ______ .
average; 144.5 percent higher in April 2017 than the average of 1982-1984
What are the distinctions between domestic and national, and gross and net? Gross domestic product and gross investment are measured ______. Net domestic product and net investment are measured ______.
before the depreciation ofbe capital; after the depreciation of capital
What are the alternative measures of the price level and how do they address the problem of the bias in the CPI? The four price indexes that are alternatives to the CPI are ______.
chained CPI, personal consumption expenditure deflator, GDP deflator, and core PCE
The income approach to measuring GDP sums together ______, which equals net domestic income at factor cost.
compensation of employees, net interest, rental income, corporate profits, and proprietors' income
What is the expenditure approach to measuring GDP? The expenditure approach to measuring GDP sums together ______, and the largest component is ______.
consumption expenditure, investment, government expenditure on goods and services, and net exports; consumption expenditure
Government funded retraining _______ the natural unemployment rate because _______.
decreases; natural unemployment includes structural unemployment
Why does GDP equal aggregate income and also equal aggregate expenditure? GDP equals aggregate income and also equals aggregate expenditure because _______.
firms pay out as incomes (aggregate income) everything they receive from the sale of their output (aggregate expenditure)
Three Indian firms are producing components for Boeing fighter jets F15 and F18 and for the Chinook heavy-lift helicopter in Bangalore, Hyderabad, and other places in India. Source: The Economics Times, February 17, 2016 Explain how Boeing's activities and its transactions affect U.S. and Indian GDP. The sale of Boeing's fighter jets and heavy-lift helicopters is recorded as _______, and the Boeing's outsourcing of components to India is recorded as _______.
government expenditure in U.S. GDP; imports in U.S. GDP
The bias in the CPI is a problem because ______ .
it distorts wage agreements linked to the CPI
What is the CPI and how is it calculated? The CPI is a _______.
measure of the average of the prices paid by urban consumers for a fixed basket of consumer goods and services
What are the main sources of bias in the CPI? Why is the bias in the CPI a problem? The main sources of bias in the CPI are ______.
new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias
The chained CPI ______.
overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities
Some unemployment is unavoidable because ______.
people are making transitions through the stages of life and businesses are making transitions
Why does unemployment arise and what makes some unemployment unavoidable? Unemployment arises when ______
people leave their jobs and spend time searching for another job that better suits their abilities
The CPI basket is 7 bottles of juice and 7 lengths of cloth.
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Net domestic income at factor cost _______ indirect taxes less subsidies _______ depreciation gives GDP (income approach).
plus; plus
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
Domestic product is _______. National product is _______.
production within a country; the value of goods and services produced anywhere in the world by the residents of a nation
When the CPI _______.
rises slowly, the inflation rate is low
Many people graduate with a bachelor's degree that doesn't open jobs doors. Acquiring a skill provides a way of getting a decent paycheck. But acquiring a skill isn't a one-time event: It is an ongoing process. A skill doesn't last for decades and retraining is required. Government-funded job training is a promising way to help individual workers, employers and the country as a whole. Source: The New York Times, February 26, 2017 What is the main type of unemployment that retraining programs seek to avoid? Explain. How might government funded retraining influence the natural unemployment rate? Explain. Retraining programs seek to avoid _______ unemployment because _______.
structural; the programs aim to give workers the skills needed for the available jobs
How is real GDP calculated? Real GDP is calculated by _______.
summing together the value of the year's production using the prices of the reference base year
Cyclical unemployment is _______. An example of cyclical unemployment is _______.
the higher than normal unemployment at a business cycle trough and the lower the normal unemployment at a business cycle peak; a restaurant worker who loses her job because of a downturn in the economy
Define GDP and distinguish between a final good and an intermediate good. Provide examples. Gross domestic product is ______
the market value of all the final goods and services produced within a country in a given time period
Define frictional unemployment, structural unemployment, and cyclical unemployment. Give examples of each type of unemployment. Frictional unemployment is _______. An example of frictional unemployment is _______
the unemployment that arises from normal labor turnoverlong dashfrom people entering and leaving the labor force and from the ongoing creation and destruction of jobs; new college graduates looking for work
Structural unemployment is _______. An example of structural unemployment is _______
the unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs; coal miners who are unemployed because new technology has made other types of energy cheaper and more accessible
Why is the unemployment rate never zero, even at full employment? The unemployment rate is never zero, even at full employment because _______.
there are always new workers entering the labor market to search for work, workers leaving one job to search for another job, and workers who have been laid off and are searching for another job
What distinguishes an unemployed person from one who is not in the labor force? An unemployed person ______.
wants work, has made specific efforts to find a job within the previous four weeks, or is waiting to be called back to a job from which he or she has been laid off, or is waiting to start a new job within 30 days
