Macroeconomics Exam 2

In 1970 the CPI was 39, and in 2000 it was 172. A local phone call cost $0.10 in 1970. What is the price of this phone call in 2000 dollars?

$0.44

February 2010, the price of gasoline in the Florida was $2.629 per gallon and the CPI was 202.4 with a base period of 1982 to 1984. What was the real price of gasoline per gallon in base period dollars?

$1.29 per gallon

Consumption expenditure 7,500 Investment 1300 Government expenditure on goods and services 1400 Net exports of goods and services -200 Based on the data in the table above, what does GDP equal?

$10,000 billion

The benefit to the firm of hiring another worker is

the extra output produced by the worker

The following are groups of individuals in the population: 1. Individuals who are under 16 2. Individuals in institutional care 3. Individual in the armed forces 4. Individuals working for pay at a fulltime job 5. Individuals who are employed 6. Individuals not employed but were available for work and were looking for work 7. Individuals not employed and looking for work Using the table above, the Current Population Survey classifies the group of individuals obtained by adding groups 5 and 6 as

the labor force.

During a recession, the unemployment rate

usually increases but not necessarily to 10 percent or 25 percent.

Net exports of goods and services are defined as the

value of exports minus the value of imports.

According to the CPI basket, the largest item in the households' budgets is

housing.

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

i and iii

As measured, GDP omits which of the following?

i, ii, and iii

Nominal GDP increases

if either prices and/or total production increase.

In the United States, between 1961 and 2011, there has been i. a consistent , non-changing growth rate of potential GDP per person. ii. an increase in the standard of living based on real GDP per person. iii. fluctuations in real GDP per person around potential GDP per person.

ii and iii

Which of the following is classified as a final good or service?

iii

Which of the following is included in Germany's GDP?

iii only

If we use GDP to measure our standard of living, then our procedure is

inaccurate because our standard of living does not depend only on goods and services

In measuring the unemployment rate, part-time workers are ________, and discouraged workers are ________.

included as employed; excluded

During 2009, General Motors announced that it would close its Saturn facilities in the United States because of the foreign competition it faced. This corporate move

increased structural unemployment.

The production function shows that as employment increases, real GDP

increases at a decreasing rate

During a recession, cyclical unemployment ________ and real GDP ________.

increases; decreases

The business cycle is defined as

irregular ups and downs in production and jobs.

The CPI overstates inflation because the average consumer buys

less of those goods whose relative price has risen

During 1990, a Hershey candy bar cost $.85. By 2007, the same Hershey candy bar cost $1.25. If the CPI was 130.7 in 1990 and 180.5 in 2007, the price of the 1990 Hershey candy bar in 2007 prices is

less than the price of the 2007 Hershey candy bar.

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

When the economy is at full employment, the

natural unemployment rate equals the unemployment rate.

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.

After the passage of the North American Free Trade Agreement, which made it less expensive to import goods from Mexico, workers in some industries found their factories being relocated to Mexico to take advantage of lower labor costs. These workers experienced what type of unemployment?

structural

Structural unemployment is the result of

technological change or foreign competition.

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, then the real price of

the 1970 soda in 2007 dollars is 52 cents.

Potential GDP is

the amount of real GDP that the economy would produce if it were at full employment of all resources

The Keynesian macroeconomic model states that

the economy is inherently unstable and government intervention is required to maintain continued economic growth.

The growth rate of real GDP per person equals the

growth rate of real GDP minus the growth rate of the population.

During last year, a country produced 20,000 pizzas and 10,000 hamburgers and nothing else. The pizzas sold for $10.00 each and the hamburgers for $3.00 each. Nominal GDP was

$230,000

The table gives data for a nation. What is the amount of the country's GDP?

$6,200 billion

The unemployment rate equals

(number of people unemployed ÷ labor force) × 100.

) If in Switzerland in January, 2009 the CPI was 187.4 and in January, 2010 it was 191.1, then the inflation rate in 2010 was

1.9 percent

Category Number of people Labor force 10,000 Employed 9,000 Under 16 years of age 2,000 Working-age population 12,000 61) In the table above, the unemployment rate is

10 percent

Suppose the CPI last year was 82.3 and this year is 90.9. Based on this information, we can calculate that the inflation rate in 1981 was

10.4 percent.

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

The reference base period that the BLS uses to measure the CPI is

1982-1984

Discouraged workers 5 Unemployed workers 12 Employed workers 48 Working-age population 100 From the table above, which gives data about the U.S. labor market in 1933, the unemployment rate is

20 percent

The highest unemployment rate in U.S. history was about

25 percent in 1933

Citicorp charges an 11 percent interest rate on all new car loans. If the inflation rate is 6 percent, Citicorp receives a real interest rate of

5 percent.

Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2012 was 152. What is the percentage point increase in the prices of the goods and services since the reference base period?

52 percent

Discouraged workers 5 Unemployed workers 12 Employed workers 48 Working-age population 100 From the table above, which gives data about the U.S. labor market in 1933, the labor force participation rate is

60 percent

Suppose the population is 300 million people, the labor force is 200 million people, the number of people employed is 185 million, and the working-age population is 170 million people. What is the unemployment rate?

7.5 percent

If 160 million people are employed, 15 million people are unemployed, and the population is 280 million people, the unemployment rate is

8.6 percent

Category Number of people Labor force 10,000 Employed 9,000 Under 16 years of age 2,000 Working-age population 12,000 Using the table above, the labor force participation rate is

83.3 percent.

The CPI for 2012 was 121, and for 2013 it was 132. What was the inflation rate between 2012 and 2013?

9.09 percent

Suppose France's real GDP grew from $750 billion in 2010 to $821 billion in 2011. What was the growth rate of France's real GDP?

9.5 percent

Nominal GDP is GDP

using current market values.

If the inflation rate is greater than the nominal interest rate, then the

B) real interest rate will be negative.

Who is cyclically unemployed? 84) A) Kathy, a steelworker who was laid off but has stopped looking for a new job because she can't find a new job B) Samantha, who quit her job to return to college to earn her MBA C) David, a new car salesman who lost his job because the economy went into a recession D) Casey, who lost his job because the technology changed so he was no longer needed E) Katrina, an assistant manager who quit her job to search for a better job closer to home

David, a new car salesman who lost his job because the economy went into a recession

The Consumer Price Index is calculated by the

Department of Commerce.

All of the following can create a bias in the CPI EXCEPT the

GDP price index bias

The relationship between real GDP and potential GDP over the business cycle can be best summarized by which of the following statements?

Real GDP fluctuates around potential GDP

If the economy is fully employed, which of the following is true?

Real and potential GDP are equal.

Which of the following people would be classified as employed in the Current Population Survey?

Rich, who is working 20 hours a week but wants a full-time job

In the 1970s, a period of a high rate of inflation, a news magazine article listed people who were losing from inflation because their real purchasing power was falling. Those who lost the most were university professors. Which of the following explains this?

Their wage rates did not increase as much as the CPI

Based on the figure above, in which quarter or quarters did a recession occur?

between 2013, 2nd quarter to 2014, 2nd quarter

Structural unemployment usually lasts ________ period of time ________ unemployment

a longer ; than frictional

A marginally attached worker is

a worker who does not have a job and is available and wants one but has not made any efforts to find a job within the previous four weeks

To measure the CPI, the BLS economic assistants check the prices of

about 80,000 goods and services each month

The value of used goods ________ counted as part of GDP ________.

are not; because they were counted during the period when they were counted as new goods

The above figure shows a nation's production function. Point B is

attainable if the nation uses resources efficiently

When the unemployment rate is ________ the natural unemployment rate, real GDP is ________ potential GDP.

below; above

The expenditure approach to measuring GDP is done by using data on only

consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services

During the Great Depression of the 1930s when the unemployment rate was exceptionally high due to the Great Depression, the government had employment programs, such as the Civilian Conservation Corps, which built campsites and planted trees. These programs were aimed at reducing which type of unemployment?

cyclical

The type of unemployment that arises from a decrease in real GDP is called

cyclical unemployment

At full employment there is no

cyclical unemployment.

Rick lost his job as a logistics and distribution coordinator nearly three years ago. After a long and failed search, Rick finally gives up and stops looking for a new job. Rick's decision to suspend his job search causes the unemployment rate to ________ and the labor force participation rate to ________.

decrease; decrease

The CPI is biased because it

does not always take into account the changes in product quality.

In the Current Population Survey, a person is considered unemployed if the person

does not have a job and is actively looking for a job.

Diminishing returns means that

each additional unit of labor produces successively less real GDP

In calculating the unemployment rate, part-time workers over the age of 16 are counted as

employed.

If consumption was 70 percent of GDP and investment and government expenditure were both 18 percent each, then we see that

exports must be less than imports.

Real GDP is the value of final goods and services produced in a year

expressed in the prices of a base year.

Natural unemployment equals the sum of

frictional and structural unemployment

Jordan recently quit her job as a marketing consultant in Washington, D.C. and is looking for a better-paying job with an advertising agency in New York. Jordan is considered to be

frictionally unemployed.

Phillip is a 22-year old who has no job and is available for work, but has not actively looked for a job in the last month. The Current Population Survey identifies Phillip as ________ , ________ the labor force, and ________ the working-age population.

not unemployed; not part of; part of

When the unemployment rate equals the natural unemployment rate, most likely the economy is producing

on the production possibilities frontier

) If you make dinner for yourself, 4) A) none of what you bought to prepare for dinner is included in GDP. B) the difference between the cost of the ingredients that you purchased this year and the market value of the dinner is added to GDP. C) the market value of your dinner is added to GDP. D) your service in preparing the meal is valued at a cook's wage and added to GDP. E) only the market value of ingredients that you purchased this year is added to GDP

only the market value of ingredients that you purchased this year is added to GDP.

When discussing the CPI, the term "commodity substitution bias" refers to changes in

prices that lead households to change the items they buy.

Gross Domestic Product is equal to the market value of all the final goods and services ________ in a given period of time.

produced within a country

When a good gets better from one year to the next, the CPI has a what is called

quality change bias.

The production function describes the relationship between

real GDP and the quantity of labor employed.

During a recession A) the relationship between real GDP and potential GDP no longer exists. B) real GDP is less than potential GDP. C) real GDP is greater than potential GDP. D) the actual unemployment rate is less than the natural unemployment rate. E) real GDP is equal to potential GDP.

real GDP is less than potential GDP.

If prices have increased since the base period, then

real GDP is smaller than nominal GDP.

In growth theory, the change in a country's standard of living is measured by the change in The growth rate of real GDP per person equals the

real GDP per person

A recession conventionally is defined as a decrease in

real GDP that lasts for at least six months.

Although imperfect, which of the following is used as a measure of the standard of living?

real GDP ÷ population

Economic growth is a sustained expansion of production possibilities, as measured by the increase in ________ over time.

real gdp

During 2008, Swaziland had a real GDP growth rate of 1.8 percent and a real GDP growth rate per person of -1.3 percent. These rates indicate that in Swaziland

the population grew at a faster rate than real GDP

When economists speak of the CPI bias, they are referring to

the tendency for the CPI to overstate price changes.

The following are groups of individuals in the population: 1. Individuals who are under 16 2. Individuals in institutional care 3. Individual in the armed forces 4. Individuals working for pay at a fulltime job 5. Individuals who are employed 6. Individuals not employed but were available for work and were looking for work 7. Individuals not employed and looking for work 54) Using the table above, the Current Population Survey classifies the group of individuals who are left after subtracting from the total population groups 1, 2, and 3 as

the working-age population.

As more labor is hired, moving along the production function, diminishing returns occur because

there are fixed quantities of other resources.

Potential GDP is reached when

there is no cyclical unemployment

The Consumer Price Index measures the average prices paid by

urban consumers for a fixed market basket of goods and services.

To calculate GDP it is necessary to

use the market price to place a dollar value on each good produced.