Macro Q5 and 6

Which of these correctly lists the sequence of stages in the business cycle?

Recession, trough, expansion, peak

Holding other expenditures constant, if imports fall by $20 billion and exports fall by $10 billion, then GDP

Rises by $10 Billion

Which group benefits from an unanticipated rise in the inflation rate?

Homeowners with fixed-rate mortgages

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _____ and its real GDP will _____.

Increase; be unchanged

Which event is LEAST likely to result in inflation?

Increasing imports causing domestic manufacturers that are unable to compete to be displaced.

Which component of GDP includes inventory changes?

Investment

Which is NOT a criticism of the official unemployment rate?

It is not reported frequently enough to provide a good picture of the state of the economy.

T/F: A double-dip recession is a recession that is twice as bad as the one that preceded it.

False

T/F: Current national income and production statistics include the environmental benefits or harm of economic activity.

False

T/F: Discouraged workers are counted in the labor force.

False

T/F: Full employment is defined as zero unemployment.

False

T/F: If the structural unemployment rate is 3%, the frictional unemployment rate is 2%, and the cyclical unemployment rate is 4%, then the natural rate of unemployment is 9%.

False

T/F: In the United States, people are not counted as employed if they have a job but are on maternity or paternity leave.

False

T/F: Leisure time is included in the GDP accounts.

False

T/F: The labor force consists of all adults in the United States.

False

T/F: The existence of discouraged workers tends to cause the official unemployment rate to understate the actual rate.

True

T/F: The personal consumption expenditures price index does a better job in approximating the cost of living than does the consumer price index.

True

With everything else held constant, if society increased the efficiency of matching people to jobs that need their skills, the natural rate of unemployment would likely

decrease

If Chuck gets laid off from a high-paying job and temporarily works as an Uber driver, he is considered

employed

During periods of economic expansion, cyclical unemployment can become _____, causing the unemployment rate to become _____ than the natural rate of unemployment.

negative; lower

The economy is LEAST likely to be heading into a recession when the National Activity Index equals

0.81

Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a local elementary school. She began looking for a full-time job last week and has already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is

Employed

All of these types of wages can cause unemployment EXCEPT

Equilibrium

We should MOST likely expect a recession if the Leading Economic Index _____ months in a row.

Falls for 3

T/F: Danielle worked as a cashier in a restaurant but lost her job when the restaurant installed machines at the tables where customers can now pay for their meals. Danielle is cyclically unemployed.

False

The U.S. gross domestic product is equal to the total market value of all

Final goods and services produced by resources in the US

(Table Macroeconomic Data for Econoland) Look at the table. What stage of the business cycle would the NBER declare Econoland to be in during the fourth quarter of 2014? 4th 2014 GDP- 800 billion unemployment- 5%

Recession

The general purpose of the circular flow diagram is to show that total _____ equal(s) total _____ in an economy.

Spending; Income

During the 1970s, when handheld calculators became popular and replaced slide rules in performing computations, workers in the slide rule industry lost their jobs. These workers' unemployment status is

Structural

A change in the Leading Economic Index is supposed to reflect

how the economy will behave in the near future

Business cycles

vary in duration and magnitude

The national income and product accounts do all of these EXCEPT

Track changes in income distribution

T/F: A disadvantage of using per capita GDP to measure the standard of living in a country is that it does not accurately reflect the differences in wealth between rich citizens and poor citizens in the same country.

True

T/F: Excessive government spending and printing new money are signs that the economy is in danger of hyperinflation.

True

T/F: Marci is 11 years old. She walks her neighbors' dogs for cash. Her income from this service is probably part of the informal economy.

True

T/F: Structural unemployment can be reduced by retraining workers for new industries.

True

T/F: The Weekly Jobs Report is used as a way to estimate trends in layoffs and hiring.

True

Scott, who has a PhD in physics, waits on tables for a living. Scott is categorized as

Underemployed

Zach has been laid off from his job as an aircraft worker. He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is

Unemployed

Suppose that Felicia borrowed $10,000 from Wells Fargo to pay for college expenses and the inflation rate dropped unexpectedly. Who is likely to benefit from this change?

Wells Fargo benefits because the money being paid back has more purchasing power than expected.

If a country's GDP is $200 million and its total population is 10,000, but only 8,000 of these people work, the country's per capita income is

$20,000

Karl's Keychain Company produces keychains that sell in its stores for $1 each. On January 1, 2015, the company had inventory of 10,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year on December 31, 2015, the company's inventory of keychains was 6,000. How much did Karl's output contribute to GDP in 2015?

$896,000

What is an example of a final good?

Bacon purchased at a grocery store

Which statement is TRUE within the circular flow of economic activity?

Business firms are sellers of products and buyers of production factors

The GDP deflator is an index that includes prices of all of these EXCEPT

Imports

Collegetown's unemployment rate is 5%. After graduation, students who previously did not work actively seek jobs but only 80% find work right away. The rest continue to actively look for jobs. How does Collegetown's labor force participation rate and unemployment rate change?

The labor force participation rate increases and the unemployment rate increases.

Which of these is NOT an example of gross private domestic investment?

a household's purchase of shares of Google stock

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 while the consumer price index the year his dad started work was 110.8, Dave is

incorrect; adjusting for price changes, his salary is less than his dad's salary.

A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. Each guitar that is produced contributes _____ to U.S. GDP.

$300

If C = $4 million, I = $2 million, G = $1 million, X = $1 million, and M = $2 million, the value of GDP in this economy is

$6 million

If the price index is 200, how much did a $12 pizza (today) cost in the base year?

$6.00

The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

Cyclical

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _____ GDP, and its value should be counted in _____.

2013's; Inventory changes

When the economy is operating at full employment _____ unemployment is zero.

Cyclical

When the economy is operating at the natural rate of unemployment _____ unemployment is zero.

Cyclical

The largest component of GDP is

Consumption Expenditure

If the price index in 2019 is 400 and the price index in 2020 is 390, then during this period the economy is undergoing

Deflation

Suppose three years ago a nation's inflation rate was 8%, two years ago it was 5%, and last year it was 2%. This nation is undergoing

Disinflation

Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP

Does not change

With everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered to be structurally unemployed increased by 5%, the natural rate of unemployment

Does not change

Saguna did not work during college. She just obtained a bachelor's degree in marketing, and is now looking for a marketing job in the retail industry. Saguna is considered

Frictionally unemployed

The broadest measure of inflation is the

GDP Deflator

If in the past, you always painted your own house but now you hire a painting contractor to do the work, what effect does this have on GDP?

GDP rises as a result of this change

If LG (a South Korean company) produces televisions in Mexico, the value of these televisions will count toward South Korea's _____ and Mexico's _____.

GNP; GDP

Which expenditure component of GDP tends to be the MOST volatile over time?

Gross Private Domestic Investment

Which action would reduce frictional unemployment?

Holding job fairs

One of the criticisms of the way business cycles are officially dated by the NBER is that

It uses historical data to date phases after they occur

Jennifer received news that she is getting a 5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 7%. Based on the given information, which of these statements is TRUE?

Jennifer's purchasing power will decrease by 2%

The official unemployment rate (U-3) includes which person as unemployed?

Logan, who was laid off from a cybersecurity firm and is actively seeking a similar job

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is

Not in labor force

Most economists believe that the consumer price index _____ the rate of inflation.

Overstates

Which assumption is NOT a problem related to using the consumer price index (CPI) to accurately state the rate of inflation?

The CPI does not deal with producer prices

If 50 workers from a restaurant going out of business lose their jobs and they all immediately begin to work part-time driving for Uber or Lyft while seeking new restaurant jobs, how will this affect the unemployment rate?

The unemployment rate would increase

At the peak of a business cycle, the economy is typically operating

at its capacity

GNP includes output produced _____, but it does NOT include output produced _____.

outside the United States by U.S. citizens; inside the United States by foreign citizens

The business cycle refers to

short run fluctuations in macroeconomic activity

For which situation would the yield curve MOST likely predict that a recession will occur?

short term interest rate= 4%; long term= 3%