macro practice quizzes midterm

From 2006 to 2018, the average annual growth rate of total factor productivity in the United States was _____%.

.4

Which is a microeconomic, and not a macroeconomic, question?

Will an increase in the cigarette tax reduce the number of packs sold?

The official unemployment rate is useful but is not _____.

a comprehensive measure of joblessness

Suppose that a country has a progressive income tax code and that taxable income is calculated in nominal terms. If the schedule of income tax rates is NOT indexed to inflation, an individual whose income keeps pace with inflation over time will pay:

a higher percentage of income in taxes over time.

Output per capita in the United States in 2016 was about _____ as high as it was in 1900.

8.5 times

Which transaction is included in the nation's gross domestic product?

A college student buys a pizza and has it delivered to her dorm room.

Productivity is declining when:

population growth exceeds real GDP growth.

Consider an economy that produces only smartphones and laptops. If 10 smartphones are sold at $800 each, and 5 laptops are sold at $1,000 each, then nominal GDP is:

$13,000

(Table: Peanut Butter and Jelly Prices) Use Table: Peanut Butter and Jelly Prices. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2019?

(1) Market basket contains 20 jars of peanut butter and 10 jars of jelly. Cost of market basket at 2012 prices = (20 *$1) + (10*$2) = $40 Cost of market basket at 2013 prices = (20 * $1.10) + (10 * $2.25) = $44.5 Cost of market basket at 2014 prices = (20 *$1.20) + (10*$2.50) = $49 answer: 49

The topics studied in macroeconomics include:

- all of the above: economic growth. inflation. unemployment.

A price index:

- is used to measure the cost of a market basket across different years. - is normalized so that it equals 100 in the base year. - always includes a base year. answer: All of the above are true.

(Figure: An Expanded Circular-Flow Diagram) Figure: An Expanded Circular-Flow Diagram. Funds flow into and then back out of households. The amount of funds flowing through households is:

1,020 (what arrow is pointing INTO households)

Suppose that real GDP per capita in the United States is $32,000, while its annual growth rate is 2%, and that real GDP per capita in China is $4,000, while its annual growth rate is 7%. How long will it take China's real GDP per capita to double?

10 years (70/7)

start ch. 7 (Table: Real and Nominal Output) Use Table: Real and Nominal Output. Assuming year 3 is the base year, real output in year 4 is:

140

In the United States, government spending accounts for approximately _____% of GDP.

17%

Which annual rate of inflation is hyperinflation?

2,000%

starrt chapter 9 A recent estimate put the cost of unmitigated climate change at _____% of world gross domestic product by 2100.

20%

(Table: Price and Output Data) Use Table: Price and Output Data. Real GDP in year 5 is:

35 base year price times current year's output

If real GDP grows at an annual rate of 1%, it will double in approximately _____ years.

70

U.S. real GDP per capita in 2016 was _____% as much per person as it was in 1900.

848

Which of the following illustrates cyclical unemployment?

An autoworker is laid off because of a decline in automobile sales caused by a recession.

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. Significant technological progress, with all other factors remaining unchanged, is BEST indicated by a move from:

B to C

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. Which change in real GDP is MOST likely to have resulted from an increase in the quality (as well as quantity) of government spending on education?

B to C

(Figure: Productivity) Use Figure: Productivity. An improvement in technology, with everything else remaining unchanged, is shown in the diagram as a movement from:

B to C.

Assume an economy has grown by 4% per year over the past 30 years. During the same period, the labor force has grown by 1% per year and the quantity of physical capital has grown by 5% per year. Each 1% increase in physical capital per worker is estimated to increase productivity by 0.4%. Assume that human capital has not changed during the past 30 years. How much has technological progress contributed as a percentage of productivity growth?

Each 1% increase in physical capital per worker has increased productivity by 0.4%. But quantity of physical capital itself has grown by 5% per year while labor force has grown by 1% per year. Hence physical capital per worker has increased by 5% - 1% = 4% per year. Consequently, total factor productivity is increased by 0.4*4 = 1.6%. Now output grows by 4% and labor force grows by 1% so average labor productivity grows by 4% - 1% = 3%. This implies that the contribution of technology in productivity is 3% - 1.6% = 1.4% As a percentage of growth of productivity, this is equivalent to 1.4%/3.0% = 47% answer: 47%.

(Figure: The Effect of a Minimum Wage) Use Figure: The Effect of a Minimum Wage. Suppose the labor market is in equilibrium at E when the government imposes a minimum wage of WF. Assuming all workers without jobs are seeking work, structural unemployment will equal:

Qs-Qd

(Table: Calculating GDP) According to the information presented in Table: Calculating GDP, what is GDP?

GDP = Consumption + Investment + Government Spending + Exports - Imports GDP = $15,800 + $4,200 + $5,200 + $1,600 - $2,400 GDP = $24,400

Which statement is TRUE?

Inflation means an increase in the overall level of prices.

(Table: Labor Force Data) Use Table: Labor Force Data. Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million.

LFPR = Labour force ÷ working age population 70% = labour force ÷ 260 Labour force = (70 × 260)/ 100 [70% = 70/100] Labour force = 182 million So 182 is the total labour force who can be employed. Now if we subtract the employed people from labour force, we will get the unemployed adults. Unemployed adutls = 182 - 155 = 27 answer: 27

______ are used to reduce the severity of recessions.

Monetary and fiscal policy

(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Nominal GDP in 2018 was:

Nominal GDP in 2018 =Sum of values of output at 2018 price =200*1+100*2=$400 Correct option is 400

Which of the following is a LIKELY response to inflation?

People tend to make more transactions.

_____ refers to spending to develop and implement new technologies.

Research and development

start chapter 8 Which statement is TRUE?

The labor force is the total number of people working plus those who are unemployed.

(Table: Labor Force Distribution) The unemployment rate is _____%.

Unemployment rate= unemployed/labor force uneemployed= labor force - employed =208-200=8 million unemployment rate =8/208=0.0384615385 answer: 3.85%

Which of the following illustrates consumption?

a new car purchased for personal use

A binding minimum wage in a labor market is set _____ the equilibrium wage and causes a _____ of job-seekers.

above; surplus

John Maynard Keynes believed that the government should:

actively try to mitigate the effects of recessions through fiscal and monetary policies.

(Figure: Circular-Flow Model) Use Figure: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it), and there is an increase in government spending, holding everything else constant, which outcome is likely to occur?

an increase in nominal GDP

Goods that are sold in 2020 but produced in 2018:

are included in investment in 2018.

For the past several months, per capita output has grown more and more slowly, and unemployment has fallen, but both trends appear to have leveled off. Where in the business cycle is the economy?

at a peak

During Brazil's hyperinflation of the 1990s, the economy lost real resources when the _____ sector grew very large to cope with the consequences of the high rate of inflation.

banking

To be counted as unemployed, one must:

be out of work and have been actively seeking a job during the past four weeks.

The central mission of modern macroeconomics is to prevent:

deep recessions, like the Great Depression.

Firms _____ resources in the ____ markets.

demand; factor

Intermediate goods are NOT counted in GDP because:

doing so would result in double counting.

An above-equilibrium wage offered by an employer as an incentive for increased work effort and better performance is known as a(n) _____ wage.

efficiency

The national accounts do NOT keep track of:

exchange rates

If real GDP rises while nominal GDP falls, then prices on average have:

fallen

Improvements in labor made possible by education and knowledge that is embodied in the workforce is known as _____ capital.

human

Labor productivity growth can be attributed to:

improved technology.

An economic expansion in the United States is typically associated with a(n):

increase in output

High unemployment typically leads to political pressure to increase the benefit period for unemployment insurance. In a standard analysis, doing so will:

increase unemployment

If the government increases the length and amount of unemployment benefits, the unemployment rate will most likely _____.

increase, because the benefits of being unemployed will rise

If workers' nominal wages have risen by 50% over 10 years, and prices have increased by 40% during that period, then we can safely conclude that the goods and services workers can buy have:

increased in quantity.

Which factor is the MOST widely accepted measure of economic growth over time?

increases in real GDP per capita

Which factor contributes to economic development?

investment in infrastructure

inflation:

is an increase in the overall level of prices.

If an economy is open:

it trades goods and services with other countries.

An example of human capital is a person's:

job skills

A key insight of macroeconomics is that the combined effect of individual decisions:

may be very different from what any one individual intended.

Sub-Saharan Africa is poor mainly because:

of political instability and civil wars.

The ____ index is likely to respond more quickly to price changes than are the other indexes, so it is regarded as a warning sign of inflation.

producer price index

If nominal GDP increases from one year to the next, _____ must have risen.

real GDP or prices or both

The movement from Point A to Point B on this graph shows a(n):

recession

Efficiency wages are:

set above the equilibrium wage to incentivize better performance.

Recessions tend to be _____, and expansions tend to be _____.

short, long

An effective minimum wage can lead to:

structural employment

Persistent, high _____ has contributed to a lower number of employed prime-aged working men in West Virginia.

structural unemployment

calculate GDP

sum of consumption expenditure, government expenditure, investment expenditure and net exports. GDP = C + I + G + NX - imports (if needed)Firms _____ resources in the ____ markets.

Fiscal policy involves changes in _ ___.

taxes and/or government spending

If the growth rate of GDP is above its historical average, the unemployment rate will:

tend to fall.

The view that the government should take an active role in managing the economy dates from:

the Great Depression.

Macroeconomics focuses on:

the economy as a whole

Which price index is used to measure changes in the prices that firms pay for goods and services?

the producer price index

An open economy:

trades goods and services with other countries.

(Figure: An Expanded Circular-Flow Diagram) Use Figure: An Expanded Circular-Flow Diagram. What is GDP?

1,000

(Figure: The Minimum Wage) Use Figure: The Minimum Wage. What is the quantity of labor supplied at the binding minimum wage of P3?

Q4

In 2019, consumer spending was $15,000, investment spending was $4,000, and net exports were -$500. GDP in 2019 was $22,000, government purchases of goods and services were _____.

We can use this equation to find the value of government expenditure G = GDP - C - I - NX G = 22000 - 15000 - 4000 + 500 G = 3500

In the circular-flow diagram, the value of household income (the sum of wages, dividends, interest, rental income, and transfer payments) equals the sum of:

consumer spending, private saving, and household tax payments.

The consumer price index measures the cost of the _____ of a family of ____ living in a typical U.S. city.

consumption; four

The official unemployment rate reported by the government may tend to understate the amount of unemployment because it:

excludes discouraged workers.

The paradox of thrift implies that:

families may end up worse off by saving than if they had acted more "irresponsibly" by consuming.

The total value of all ____ goods and services produced in the economy in a given year, calculated using the prices current in the year in which the output is produced, is ____ GDP.

final; nominal

Ibraham quit his job in retail management and moved to Florida with his partner, a physician who has now opened a new practice there. He is not successful in his job search in the first four months in his new location. Ibraham's unemployment is:

frictional

People who are changing jobs are counted in _____ unemployment.

frictional

(Table: Employment Data) If marginally attached workers are included in the labor force, the number of persons in the labor force is _____ million.

full time + looking for work + part time + discouraged = 33

Natural resources are:

less reliable indicators of productivity today than they were a century ago.

If a country runs a trade surplus, its investment spending is probably:

low relative to its savings.

The rule of 70 applies:

to any growth rate

Economists observe that the official unemployment rate can understate the true level of unemployment because it ONLY includes:

workers without jobs who have looked for work in the past four weeks.