Macroeconomics Test 2 Review

Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations ect... Using the information in the above table, nominal GDP for this simple economy equals

$8,750

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that:

(All of the above) the value of final output in 2015 was around $17.3 trillion. total income in 2015 was around $17.3 trillion. total spending on final goods and services in 2015 was around $17.3 trillion

Which of the following formulas does the bureau of labor statistics use to calculate the unemployment rate?

(Number of unemployed////////Divided by////// Number in the labor fource) time 100

Refer to the table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

1,200

Refer to the table above. Consider he data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

1,600

Given the Information above (Ch 9 Question 5), the unemployment rate is________

10%

What is the real GDP in 2016, using 2011 as the base year?

10,275

What is the real GDP in 2016, using 2016 as the base year?

11,790

if the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?

2.7%

Suppose that a simple economy produces only four goods and services: Shoes, DVD's etc.... Using the information in the above table, nominal GDP for this simple economy equals

6,400

A very Simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2011 and 2016 are shown in the table above. What is nominal GDP in 2016?

7,035

The labor force participation rate for this economy is _______ (HW CH 9 Question 1)

70.3%

What is the GDP deflator in 2011 if 2016 is the base year?

87

GDP deflator

A measure of the overall price level in a period (year) calculated by dividing nominal GDP by real GDP and multiplying by 100 GDP deflator=Nominal GDP/RealGDP X 100

As of August 2015, which of the following demographic groups has the highest unemployment rate?

African Americans

Why is the unemployment rate, as measured by the Bureau of Labor Statistics, and imperfect measure of the extent of joblessness in the economy?

All of the Above (It fails to account for illegal activities. It does not account for inaccurate responses to the Current Population Survey. Discouraged workers are not considered employed.)

Business cycle

Alternating periods of economic expansion and economic recession

Price level (price index)

An average of prices of a group of goods and services in the economy

Price Level (price index)

An average prices for a group of goods and services in the economy.

Which of the following would result in GDP for an economy equal to $10 trillion?

C=$5trillion I=$5trillion G=$2trillion NX=-$2trillion

What are the four major components of expenditures in GDP?

Consumption, Investment, Government Purchases and Net Exports

Exports

Firms sell goods and services to households in other countries

National Income:

GDP minus the consumption of fixed capital; ie GDP minus depreciation

Which of the following equations correctly measures GDP in an economy?

GDP=C+I+G+NX

Which of the following is a true statement about real and nominal GDP?

If real GDP increases from one year to the next, we know that production of goods and services has risen.

Personal Income

Income received by households; includes transfer payments, but excludes firms' retained earnings

Between 2015 and 2016, if an economy's exports rise by $8 billion and its imports fall by $8billion, by how much will GDP change between the two years, all else equal?

Net exports will increase GDP by $16 billion.

Four major categories of expenditures

Personal Consuption Expenditures Gross Private Domestic Invesment Government Consumption and Gross Investment Net exports of Goods and Services

Disposable Personal Income

Personal income minus personal tax payments; this measures the amount that households are able to spend or save

If the GDP deflator is 142, by how much have prices changed since the base year?

Prices have increased by 42%

Gross National Product (GNP)

Production performed by citizens of a nation, including overseas production

Frictional unemployment:

Short-term unemployment that arises from the process of matching workers with jobs

Unemployed definition

Someone who is not currently at work but who is available for work and who has actively looked for work during the previous month

Economic growth

The ability of an economy to produce increasing quantities of goods and services

__________ is the percentage of the working-age population in the labor force.

The labor force participation rate

Which of the following is not true about the composition of GDP in 2014?

The majority of consumer spending is on durable goods.

Inflation rate

The percentage increase in a price level from one year to the next

Expansion

The period of a business cycle during which the total employment are increasing

Recession

The period of a business cycle during which total production and total employment are decreasing

Given the information above, what can we say has happened in the economy from 2015 to 2016?

The price level has risen

Labor Force

The sum of employed and unemployed workers in the economy

How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both (1) discouraged workers and (2) people who work part-time but would prefer to work full-time?

The unemployment rate would increase.

Cyclical unemployment:

Unemployment causes by a business cycle recession

cyclical unemployment

Unemployment causes by a business cycle recession

Change in unemployment rate

Unemployment rates rise when the economy is faltering, and fall when the economy is doing well

Structural unemployment

Unemployment that arises from a persistent mismatch between the skills and attributes of workers and the requirements of jobs

Full employment

When cyclical unemployment is zero and all unemployment is due to minimal of frictional and structural factors. (There will always be some unemployment within the economy even at full employment.

Natural rate of unemployment

When the economy is at full employment, the unemployment rate is called natural rate of unemployment. The normal rate of unemployment, consisting of only frictional unemployment and structural unemployment

Employed Definition

Worked 1+ hours in reference week (or were temporarily away from their jobs)

Which equation represents the relationship between GDP and the four major expenditure components?

Y=C=I=G=NX

A recession occurs when an economy experiences a period in which there is

a decrease in total production.

Consumer price index

a measure of the average change over time in ghe prices of typical urban family of four pays for the goods and services they purchase

Government purchases

are spending by federal, state, and local governments on goods and services, such as teachers' salaries, highways, and military aircraft carriers

Net exports

are the value of exports minus the value of imports

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm

The purchase of a new automobile is included in

consumption expenditures on durable goods.

What is the largest component of spending in the U.S.?

consumption spending

To calculate GDP by the expenditure method one must add

consumption spending, investment spending, government spending, and net exports.

Nominal GDP is another term for

current-dollar GDP

Deflation

decrease in the price level

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy.

In the circular flow model, the value of total income for an economy__________ the value of total production.

equals

In the circular flow model, the value of total production for an economy _______ the value of total expenditures on final goods and services.

equals

The sum of the value added of every firm involved in producing all final goods and services __________ gross domestic product.

equals

Which of the following is not an example of a transfer pay,went?

health insurance payments to an army private

imports

households buy goods and services from firms in other countries

Not in the labor force

if neither of the above apply

Producer price index

is an average of the prices paid by producers of goods and services at all stages of the production process

Investment

is spending by firms on now factories, office buildings, and additions to inventories, plus spending by households and firms on new houses

Consumption

is spending by households in goodss and services, not including spending on new house

Inflaion rate

is the rate of increase in a price level (price index) from one period to another (one year to another)

Macroeconomics

is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

Disposable personal income equals personal income

minus personal tax payments.

nominal values

monetary values like wages in current-year dollars

In 2014, which component of GDP has a negative value?

net exports

One major component of GDP that can be negative is

net exports

The purchase by a Chinese household of a CD produced in the United States is included in U.S.

net exports

The Bureau of Labor Statistics would categorize a retiree who is not working as ________.

out of the labor force

transfer payments

payments to households for which the government does not receive a good or service in return

Discouraged workers

people who are available for work, but have not looked for a job during the previous four weeks because they believe no jobs are available for them.

The unemployment rate

shows the percentage of the labor force that is considered unemployed.

Alternative method of measuring the GDP

sum up he value added by all economic agents over a period.

Gross Domestic Product

the market value of all final goods and services produced in a country during a period of time, typically one year

real interest rate

the nominal interest rate minus the inflation rate

Inflation rate

the percentage increase in the price level from one year to the next

Unemployment rate

the percentage of the labor force that is unemployed

Labor-force participation rate:

the percentage of the working-age population in the labor force labor force/working-age population X 100+LFPR

Employment-population ratio:

the percentage of the working-age population that is employed: Employment/working-age population X 100=Employment-population ratio

nominal interest rate

the stated interest rate on a loan

Microeconomics

the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

Nominal GDP

the value of a current-year final goods and services evaluated at current-year prices

Real GDP

the value of current-year final goods and services evalueated at constant prices of a base year

Depreciation is

the value of worn-out equipment, machinery, and buildings.

The business cycle exists because

total production experience periods of increases and periods of decreases.

Two ways to measure the GDP

total production or total income

Transfer payments are not included in GDP calculations because

transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.

Base year

you may choose any year's prices to compare real GDP. THe current standard is using 2009 as the base year