Macroeconomics chapters 21-23 Test
How is the unemployment-population rate calculated?
(number employed) / (working age population) x 100
Unemployment Rate calculation
(number of people unemployed) / (labor force) x 100
the unemployment rate is equal to
(number of unemployed people) / ( labor force) x 100
Which of the following is a bias in the CPI
1) New goods bias 2) Commodity substitution bias
Constructing the CPI involves which of the following stages:
1) conducting the monthly price survey 2) selecting CPI market basket
The value of the CPI for the reference base period is always
100
Assume the U.S. population is 300 million. If 200 million people are of working age, 125 million are employed, and 15 million are unemployed, what is the size of the labor force?
140 million
A country's CPI was 84.5 last year and 100.0 this year. The inflation rate was
18.3 percent
The reference base period that the BLS uses to measure CPI is
1982-1984
What is the difference between real GDP and nominal GDP, and why do economists make this distinction
Real GDP calculates off of a base year and nominal GDP calculates off the prices in the year produced. Inflation changes during the years, so there is a discrepancy between the two, so they use different calculations to better find the GDP.
Define and distinguish between final and intermediate goods and give an example
Final goods- The finished product that is completed and sold. Intermediate goods- Goods used to make final goods EX: tomatoes are a final good if they are sold in a bundle in a store, but an intermediate good if a company buys them to make a pizza (which is the final good)
Can frictional unemployment ever be eliminated? Explain your answer.
No because people are constantly entering and leaving the labor force and jobs are being created or destroyed daily
Are sales and purchases of used goods counted as part of GDP? Why or why not?
No they are not because they are devalued and they were not made that year.
Are marginally attached workers considered a part of the labor force?
No, they are not because they haven't searched for a job in the previous four weeks
What is the meaning of potential GDP
Potential GDP is when all factors are fully employed. It's where we want to be.
Suppose the CPI for this year is 133.7. This number means that
Prices rose 33.7 percent over the base year
At full employment there still exists some unemployment because
The US economy is constantly creating and destroying jobs
In order to measure Gross GDP we can follow two approaches
The expenditure approach and income approach
Define GDP and explain the 4 parts of the definition
The market value of all final goods and services produced within a certain country during a given time period. 1) Market Value= Monetary value. They use currency 2) Final Goods and Services = Doesn't include those goods used to make the final good 3) Certain Country = looks at one country at a time or per graph 4) given time = is usually based off of a given/certain year
Which of the following is a final good or service
The new novel that you purchased from Barnes and Noble
When the cost of the CPI market basket increases from one year to the next, we know that
The prices of goods and services contained in the CPI market basket have increased on the average
How are part time workers treated when calculating the unemployment rate
They are considered employed
How are discouraged workers treated when calculating the unemployment rate
They are out of the labor force totally because they gave up looking for a job, so they are not counted
Which of the following is true?
To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as an unpaid worker in your family business.
Production by Honda, a Japanese firm, in the United States is included in ____ GDP and production by Nike Corporation, a U.S. firm, in Vietnam is included in ____ GDP.
Us; Vietnamese
To calculate GDP it is necessary to
Use the market price to place a dollar value on each good produced
Gross Domestic Product Equals
Y = C + I + G + NX
What is the expenditure approach to measuring GDP and how is it calculated
Y=C + I + G + NX
Is it possible for nominal GDP to increase while real GDP does not change? Why or why not?
Yes because if production stays the same from year to year, but prices go up, the nominal GDP would increase and the real GDP would not.
The calculation of GDP excludes the value of
a family member painting the family home
to measure the CPI, the BLS economic assistants check the prices of
about 80,000 goods and services every month
The working-age population consists of all the people in the population
aged 16 and up who are not in jail, hospital, or an institution or in the US armed forces
A restaurant buys fish to offer as a daily menu special. The purchase of the fish by the restaurant is
an intermediate good
Julie works part-time for economic reasons. She would be considered
an involuntary part-time worker
Spending on financial assets such as stocks and bonds ___ counted as part of GDP ___
are not; because their purchase is not spending on goods or services
The largest expenditure category in the US is
consumption expenditure
Expenditures on US produced steaks, shoes, and DR. visits are most likely classified as
consumption expenditures
Which type of unemployment is the consequence of downturns in the business cycle
cyclical
Jane was fired from her job with Microsoft in the 2008-09 recession because Microsoft's sales dipped. Jane's unemployment would be best classified as
cyclical unemployment
Full employment occurs when
cyclical unemployment is zero
When the price of a package of rice changes, what does the BLS do
determine if the size, quality, weight, or packaging of the rice has changed and adjust the price accordingly
Suppose a 23-year old graduate student is looking for a full-time job , but has to take a part-time job instead. He or she will be categorized in the Current Population Survey as ________ when calculating the unemployment rate.
employed
core inflation
excludes prices of food and energy
When the US economy is experiencing rising output, rising employment, rising incomes, and falling unemployment, these conditions best describe a business cycle
expansion
Real GDP is the value of final goods and services produced in a year
expressed in the prices of a base year
Bill just graduated with his degree in economics. Through Career Services he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered
frictionally unemployed
The items included in the CPI are
goods and services consumed by the typical urban household
For the CPI to provide an accurate measure of the prices paid by urban consumers, it is necessary to
have a market basket that is consistent and corresponds to what normal households actually purchase
According to the CPI basket, the largest category of items in the households' budget is
housing
Which of the following is included in US GDP
i. The production of Toyota Tundras in the manufacturing in its manufacturing plant in San Antontio Texas iii. Tickets sold by U2 for concerts held in the US
Nominal GDP increases
if either prices and/or total production increase.
The more money an average household spends on one specific type of good or service per month, the
larger the relative importance of that item in the CPI market basket
part-time workers are defined as people who are working
less than 35 hours per week
If the CPI decreases from one year to the next, then the inflation rate is
negative
In recent years, which of the following has been negative
net exports of good and services
Investment is defined as the purchase of
new capital goods and additions to inventories
To be considered unemployed, a worker must gave had
no employment during the week before the survey and be actively looking for a job
The difference between nominal and real is
nominal is measured in current dollars and real is measured in dollars of a given year
Frictional unemployment is the result of
normal labor market turnover
The labor force is the
number of employed people plus the number of unemployed people
The measurement of GDP handles underground production by
omitting it because underground production is unreported to the government by the people involved
A business cycle has two turning points, which are the
peak and trough
The inflation rate is the
percentage change in the CPI from one year to the next year
the unemployment rate is the
percentage of the labor force that does not have a job
The Consumer Price Index (CPI) measures the changes of the
prices paid by urban consumers for fixed market basket of consumer goods and services
When discussing CPI, the term commodity substitution bias refers to changes in
prices that lead households to change the items they buy
during a recession the unemployment rate generally _____ and during expansion the unemployment rate generally __
rises; falls
A marginally attached worker is
someone who does not have a job but is available and willing to work but has not made specific efforts to find a job during the past 4 weeks
After 15 years with Ford Motor Corporation, one summer Cameron loses his job. His boss explained that his position has been downsized after the technological advances in automobile production. Cameron is best considered
structurally unemployed
Structural unemployment is the result of
technological change or foreign competition
When measuring GDP -
the expenditures on goods and services by all levels of government are included
A recession is normally defined as a decrease in
the real GDP that lasts for at least 6 months
To compare the real price of gas in 1975 to the real price in 2013, we need to know
the two prices in both years and the CPI in both years
full employment occurs when
the unemployment rate equals the natural unemployment rate
Net exports of goods and services are defined as the
value of exports - value of imports
GDP Includes the goods and services produced
within a country's border by citizens and non citizens
If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,
workers benefit because CPI increases more rapidly than does the true cost of living
Discouraged workers are included in the calculation of the
working-age population
Assume that a small country only produces green peppers and red peppers. Last year it produced 100 green peppers and 50 red peppers and sold them at prices of 2$ per green pepper and 3$ per red pepper. This year it produced 150 green peppers and 60 red peppers and sold them at prices of 2$ per green pepper and 4$ per red pepper. What is the real GDP of this year if the base year is last year?
$480
The base year is 2011 a country only produces blue-ray player. The price for a blue-ray player in 2011 was $100. The price was $90 in 2012. The quantity produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals
$945,000
unemployment rate calculation
( number of people unemployed) / (labor force) x 100
How is the labor force participation rate calculated?
(Labor force) / (Working Age population) x 100
Although imperfect, which of the following is used as a measure of the standard of living?
(Real GDP) / (population)
One bag of coffee beans is sold for 7$ to a cafe that uses it to brew coffee which it sells to customers for a total of 15$. A second bag of coffee is sold directly to Joan for 7$ who uses it to brew coffee for her family every morning. What is the contribution to the GDP from the purchases of coffee beans and coffee
22$
Suppose the working age-population is 500 million, the labor force is 200 million, and the unemployment rate is 15%. The number of unemployed people is
30 million
If the cost of the CPI market basket at current period prices is $1000 and the cost of the CPI market basket at base period prices is $250, the CPI is
400
Look at graphs on chapter 21 test
:)
What does the term natural unemployment rate mean
Natural unemployment is when unemployment is caused by frictional and/or structural unemployment only
Because of the circular flows of expenditure and income in the economy, total ________ equals total ________ equals total ________.
Expenditure; income; value of production
What is the business cycle? What are the two phases and two turning points associated with it?
Business Cycle- Cycle/series of economic expansion and contraction. The "Health" of the economy. phases: Expansion and Recession points: Peak Trough
who is cyclically unemployed
David, a new car salesman who lost his job because the economy went into a recession
Which of the following people are not considered a part of the labor force?
Desire, who just took early retirement
Who are marginally attached workers
Discouraged workers
What are the differences between frictional, structural, and cyclical unemployment?
Frictional ( Natural unemployment) - Arises from people entering and leaving the labor force Structural (natural unemployment) - Arises when technology or skills needed for a job change or when international competition is involved or a job relocation occurs Cyclical - Arises as the business cycle runs its course. Increases during recessions and decreases during expansions
Which of the following formulas is used to calculate the inflation rate?
Inflation rate = 100 x (CPI in current year - CPI in previous year) / (CPI in previous year)
Wobet is a small country that produces only steak and potatoes. Steaks have a price of 10$ each and potatoes have a price of 1$ each. Suppose that Wobet produces 10 steaks and 20 potatoes in 2010. Using ________ Wobet has GDP equal to ______
Market value; 120$
Since 1960, the labor force participation rate in the United States has
increased for women and decreased for men
Which of the following is not part of the business cycle
inflation
deflation is a situation in which
inflation rate is negative
economists agree that the CPI
is a possibly biased measure of the cost of living