Macroeconomics

The nominal interest rate tells you

a. how fast the number of dollars in your bank account rises over time.

"Table 11-1 Labor Data for Aridia Year/ 2010/ 2011/ 2012 Adult population/ 2800/ 3000/ 3200 employed /1250 /1300 /1600 unemployed /700/ 600 /200" The unemployment rate of Aridia in 2011 was

31.6% unemployed/(employed + unemployed) (c)

Within the U.S. population, women have higher rates of unemployment than men

False

NX

NX=Net exports - net imports

In a particular production process, if the quantities of all inputs used are increased by 50 percent, then the quantity of output increases by 50 percent as well. This means that the relevant production function has the constant-returns-to-scale property.

True

Increases in both human capital per worker and physical capital per worker increase productivity

True

International data on real GDP per person gives us a sense of how standards of living vary across countries.

True

Which of the following statements is correct?

a. The CPI can be used to compare dollar figures from different points in time

If companies from foreign countries build and operate factories in China, then China's productivity

a. and the wages of Chinese workers increase.

Which of the following provide benefits to society at large and not just to the person(s) who pursues it?

a. both technological knowledge that is a public good and education

The Bureau of Labor Statistics places people in the "employed" category if they

are temporarily absent from their jobs. are self-employed. work without pay in a family member's business. (d)

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

b. $46,666.67

If a country increases its saving rate in the long run

b. K/L and productivity will be higher

The introduction of a new good

b. decreases the cost of maintaining the same level of economic well-being.

Suppose a country increases trade restrictions. This country would be pursing an

b. inward policy, which most economists believe has adverse effects on the economy.

The catch-up effect refers to the idea that

b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Suppose Turkey increases its saving rate. In the long run

b. productivity and real GDP per person increase.

A nation's standard of living is best measured by its

b. real GDP per person.

The inflation rate you are likely to hear on the nightly news is calculated from

b. the CPI.

The consumer price index is used to

b. turn dollar figures into meaningful measures of purchasing power.

Table 24-5 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 10 hamburgers and 15 hotdogs. Year Price of a Hamburgers Price of a Hotdog 2009 $4 $3 2010 $4.5 $3.5 2011 $6 $4 If the base year is 2009, then the economy's inflation rate in 2010 is

c. 14.7 percent.

Over the past century in the United States, average income as measured by real GDP per person has grown about

c. 2 percent per year, which implies a doubling about every 35 years.

Over the last 100 years which of the following had growth rates higher than that of the United States?

c. Mexico

According to 2009 data on the U.S. population, which of the following groups of adults (ages 20 and older) had the highest unemployment rate?

c. black males

If the nominal interest rate is 7.5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

d. 10 percent.

In the United States, real interest rates were

d. low in the 1970s and high in the 1990s.

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

d. one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

The economy's inflation rate is the

d. percentage change in the price level from the previous period.

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

d. standard of living.

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 4 percent. It follows that

d. the dollar value of savings increased at 9 percent, and the purchasing power of savings increased at 1 percent.

To calculate the CPI, the Bureau of Labor Statistics uses

d. the prices of some consumer goods.

If a country has a higher level of productivity than another, then it also has a higher level of real GDP

false

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.

false

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next

false

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a shortage of labor

false

Investment (I),

sometimes called fixed investment, is the purchase of capital goods. It is the sum of nonresidential investment and residential investment.

When a society decides to increase its quantity of physical capital (K), the society is in effect deciding to consume less in the present and save for the investment on physical capital (K).

true

If people who report being unemployed are not, in fact, trying hard to find a job, then the reported unemployment rate will be biased upward.

True

If the number of people unemployed rose but the number of people employed and the adult population stayed the same, then the labor force participation rate would rise

True

Real GDP per person in rich countries, such as Germany, is sometimes more than 10 times that of poor countries like India

True

Studies have shown that the design of the unemployment insurance system reduces the job search effort of the unemployed.

True

The Bureau of Labor Statistics' "unemployed" category includes those who were not employed, were available for work, and had tried to find employment during the previous 4 weeks.

True

2010 Labor Data for Adults (age 16 and older) in Meditor Males not in labor force 45 million Females not in labor force 35 million Males unemployed 5 million Females unemployed 5 million Males employed 85 million Females employed 65 million

What is the adult female unemployment rate in Meditor? a. 4.8 percent

When the consumer price index rises, the typical family

a. has to spend more dollars to maintain the same standard of living.

You sell fruit smoothies. One day you double the time you spend and double all your inputs, and make twice

c. constant returns to scale.

Other things the same, when an economy increases its saving rate

c. consumption falls now and production rises later

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

c. the CPI better reflects the goods and services bought by consumers

Which of the following can be measured by the level of real GDP per person?

c. the standard of living but not productivy

Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

a. substitution bias

When we are calculating the consumer price index and the inflation rate for a certain year,

a. the value of the consumer price index may depend on the choice of a base year, but the inflation rate does not depend on the choice of a base year

Which of the following is considered human capital?

c. the things you have learned this semester

"Table 11-1 Labor Data for Aridia Year/ 2010/ 2011/ 2012 Adult population/ 2800/ 3000/ 3200 employed /1250 /1300 /1600 unemployed /700/ 600 /200" The labor-force participation rate of Aridia in 2011 was?

63.3% (employed +unemployed)/adult population (D)

y=c+i+g+nx

Is the formula to calculate GDP

The Bureau of Labor Statistics is part of the U.S. Department of

Labor (c)

The price index was 150 in the first year, 160 in the second year, and 165 in the third year. Which of the following statements is correct?

The price level was higher in the second year than in the first year, and it was higher in the third year than in the second year. The inflation rate was positive between the first and second years, and it was positive between the second and third years. The inflation rate was lower between the second and third years than it was between the first and second years

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being

false

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

false

Within the U.S., teenagers have similar rates of unemployment as older workers

false

A person who is counted as unemployed by the Bureau of Labor Statistics

is also in the labor force. must have recently looked for work or be on temporary layoff. must be at least 16 years old. (D)

Consumption (C)

refers to the goods and services purchased by consumers.

Government Spending (G)

refers to the purchases of goods and services by the federal, state, and local governments. It does not include government transfers, nor interest payments on the government , nor interest payments on the government debt.

According to some estimates, over the last two decades China has had an annual average growth rate of about 12 percent.

true

Archie has a savings account at a bank. If he earns 6 percent interest on his account and if there is deflation, then his purchasing power rises by more than 6 percent over the course of a year.

true

As capital per worker rises, output per worker rises. However, this increase in output per worker is smaller at larger levels of existing capital per worker.

true

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

true

Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience

true

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

true

In the long run, an increase in the saving rate raises the levels of both productivity and income.

true

Indonesians, for example, have a lower standard of living than Americans because they have a lower level of productivity.

true

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer.

true

Productivity is defined as the quantity of

c. goods and services produced from each unit of labor input

Satchel loses his job and immediately begins looking for another. Other things the same, the unemployment rate

c. increases and the labor-force participation rate is unaffected

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

c. neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year