ECON 202 MIDTERM #1
Carina, a registered nurse, moved three weeks ago and has not yet found a position at a hospital or clinic in her new city. She is...
Frictionally Unemployed
Jon has been in graduate school for the last four and a half years but is now actively seeking a job. He is...
Frictionally Unemployed
Rosario quit a job that she hated and is replying to job postings she's found on the internet of the last two weeks. She is...
Frictionally Unemployed
The GDP category of this item is... federal government purchases
G (government)
The GDP category of this item is... state and local government purchases
G (government)
Nominal GDP growth in (newest year)=
GDP (2nd year)-GDP (1st year)/ GDP (1st year) x 100
Price level Growth Rate (GDP deflator)=
GDP (2nd year)-GDP (1st year)/ GDP (1st year) x 100
What is Real GDP?
GDP adjusted for changes in prices
Suppose the working age population in Tarazed is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.
Labor Force; 25
What is necessary in order to calculate the rate of unemployment?
the number of unemployed persons and the number of people in the labor force
Define labor force participation rate
the percentage of the population that is in the labor force
Define the natural rate of unemployment
the typical rate of unemployment that occurs when the economy is growing normally.
Define working age population
those ages 15-64
Define discouraged workers
those who are not working, have looked for a job in the past 12 months and are wiling to work, but have not sought employment in the past 4 weeks.
Define underemployed workers
those who have part time jobs but would prefer to work full time.
Define Structural unemployment
unemployment caused by changes in the industrial makeup (structure) of the economy
Define Frictional unemployment
unemployment caused by delays in matching available jobs and workers
Define Cyclical Unemployment
unemployment caused by economic downturns
How can unemployment insurance be a negative issue?
unemployment insurance creates an indirect incentive that can make it more attractive for workers to stay unemployed.
The labor force is defined as people
who have a job or are looking for a job
Lal works nights as a janitor at the university. He is...
Employed
Net Exports (NX)
are exports minus imports of final goods and services
In computing GDP, it is essential to ...
avoid double counting
GDP deflator is...
the measure of the price level that includes prices of the final goods and services included in GDP
Maile started her own business a few years ago and works at home selling math and science themed jewelry online. She is...
Employed
Walter teaches chemistry at a local high school. He is...
Employed
The GDP category of this item is... Exports from the United States
EX (Exports)
What does ceteris paribus mean?
"all other things being equal"
If the value of all imports is $100 million less than the value of all exports, government purchases are $600 million, consumer purchases are $1 billion, and investment purchases (including inventory investment) are $400 million, then the GDP for this economy is...
$2.1 billion
Real GDP growth= % change in real GDP
% change in nominal GDP- % change in price level
% change in nominal GDP=
% change in real GDP+% change in price level
Labor force participation rate=
(labor force / population) x 100 *multiplying by 100 gives you the percentage*
Unemployment rate formula is...
(number unemployed)/(labor force) x 100 *multiplying by 100 gives you the percentage*
Rate of employment + rate of unemployment=
1
If the unemployment rate is 5.8% and the number of unemployed persons is 15 million, the number of people who are employed is approximately:
243 million
In which GDP category does the purchase by a family of a house built many years ago count?
C (consumption)
The GDP category of this item is... new durable goods
C (consumption)
The GDP category of this item is... new non-durable goods
C (consumption)
The GDP category of this item is... new services
C (consumption)
GDP=
C+I+G+(EX-IM)
A UO student pays rent to a local landlord in Eugene is an example of....
Consumption (C)
Gautam has several part-time jobs: consultant, web designer, programmer, and data analyst. He is...
Employed
Reflecting the state of the economy in November 2008 (after the financial crisis caused the existing recession to become much, much worse), the Bureau of Labor Statistics reported in October that over 1000 jobs were lost in the legal services sector. For example, one firm in Chicago stated that it had fired 54 lawyers in 2008. A representative from the firm stated that most had worked in its real estate division. The lawyers that were fired are an example of ________ unemployment.
Cyclical
As a result of a recession, Abdul was laid off from his job as an engineer, and while he is actively looking he hasn't found another job yet. He is...
Cyclically Unemployed
Ian is currently looking for a job as a teacher, but is working as a waiter to pay the bills. He is...
Employed
Shruti is on a temporary leave of absence from her job, as she has just given birth to her first daughter. She is...
Empoyed
Give an example of an intermediate good.
Examples of intermediate goods include glass screens for smartphones, ingredients used to prepare food at a restaurant or art supplies used for paintings to sell.
While visiting from China a UO student's parents pay for a meal at a local restaurant. This is an example of...
Exports (EX)
True, False or Indeterminate? Due to the discouraged-worker effect, the official unemployment rate during recessionary periods may be an overestimate of the number of people who would like to work but aren't working.
FALSE. Due to the discouraged-worker effect many people who would like to work but aren't working leave the labor force and aren't counted as unemployed. Since both the denominator and the numerator of the official unemployment rate are thereby reduced by the same amount, this serves to reduce the official unemployment rate, causing it to be an underestimate of actual unemployment.
True, False or Indeterminate? Positive statements about economics are always true.
FALSE. Positive statements are testable, meaning they can be objectively evaluated. Some are indeed true (perhaps with appropriate qualifying assumptions), while some are verifiably false. Thus it is not true that positive statements are *always* true.
True, False or Indeterminate? It is impossible for the employment level and the unemployment level to both increase during the same month.
FALSE. While it is impossible for both the unemployment rate and the employment rate to both increase during the same month, it is perfectly plausible for both the unemployment level and the employment level to increase during the same month. This would simply require the labor force to increase.
A pizza sold to a hungry student at Pegasus Pizza. True or false, is an example of an intermediate good
False
True or False? Sales of durable goods (like furniture or major appliances) remain relatively stable whether the economy is doing well or poorly.
False
True or False? When computing gross domestic product (GDP) only the production of goods is counted, not the production of services.
False
Which type of unemployment is reduced by the ability of workers seeking jobs and firms seeking workers to search for each other on the internet?
Frictional Unemployment
Which two types of unemployment make up natural unemployment?
Frictional and Structural unemployment
What are some shortcomings of GDP data?
GDP data does not include the production of non market goods, the underground economy, production effects on the environment or the value placed on leisure time
Define Gross Domestic Product (GDP)
GDP is the total market value of all final goods and services produced within a given period by factors of production located within a country
Define Inflation
Growth in overall level of prices in the economy
In which GDP category does the purchase of a newly constructed house by a family count?
I (investment)
The GDP category of this item is... inventory investment by firms
I (investment)
The GDP category of this item is... purchases of equipment by firms
I (investment)
The GDP category of this item is... Imports to the United States
IM (imports)
True, False or Indeterminate? If the quantities of final goods and services produced in a country increased between 2012 and 2013 while the overall price level in that country went down, then the nominal GDP increased between 2012 and 2013.
INDETERMINATE. Nominal GDP is the market value of the quantities of final goods and services as evaluated in the prices of the year in which they produced. Increased quantities would increase nominal GDP if the overall price level remained the same, but a decreased overall price level would decrease nominal GDP if quantities remained the same. Without knowing more about the magnitudes of the increase in quantities or the decrease in the overall price level we cannot know whether these two changes will have the combined effect of increasing or decreasing nominal GDP (or perhaps leaving it at the same level).
why is the production and sale of advertisements is not included in GDP.
In terms of National Income and Product Accounting, advertisements are an intermediate good; their value is included in the purchase price of the final good. If we counted advertisements in GDP we would end up double counting their value, since consumers do not pay for the goods and their respective advertisement separately.
Assume that in the country of Zavijava the level of employment, e, in a given month is 488,889. If the unemployment rate is 10%, what is the level of unemployment for that month?
In this case, u=e (rate of u)/1-rate of u A=54,321
Which one of these is NOT one of the uses of Gross Domestic Product (GDP) given in the textbook?
Measuring Wealth
Advertising included in GDP? Yes or No?
No
The GDP category of this item is... advertising spending by firms
None
The GDP category of this item is... home production (ex. washing your own dishes)
None
The GDP category of this item is... purchases of stocks and bonds by firm
None
The GDP category of this item is... purchases of stocks and bonds by households
None
The GDP category of this item is... transfer payments (like Social Security)
None
The GDP category of this item is... underground economy (ex. illegal goods and services)
None
The GDP category of this item is... used durable goods
None
For the last few years, Ed has been a stay-at-home dad; he is not working or looking for work. He is...
Not in the labor force
Gene, 90 years old and retired from the Navy many years ago, is not currently working and not looking for work. She is...
Not in the labor force
Luda, age 29, would like to work, but is so discouraged that she has not looked for work in the last two months. She is...
Not in the labor force
Xiaoyu is currently attending college, not working and is not looking for work. He is...
Not in the labor force
Carlos is serving as an officer in the United States Air Force. He is...
Not in the working age population
Logan, 28, is in prison. He is...
Not in the working age population
Alfred, who just turned 15, had been mowing lawns over the summer but can't find any work with the start of the rains. He is...
Not in the working-age population
Inflation rate (i) =
P(2)-P(1)/P(1) x 100
Define recession
Short term economic downturns that last about 6-18 months.
Define Business Cycles
Short-run fluctuations in economic activity
Which type of unemployment is associated with Joseph's Schumpeter's term creative destruction?
Structural Unemployment
Beth had been working at a textile mill in North Carolina, but the mill closed because of cheaper textiles imported from Bangladesh. She is...
Structurally Unemployed
Marcus lost a job in manufacturing that isn't coming back; while searching for work he is attending school to train for a different career. He is...
Structurally unemployed (because he isn't coming back to work in manufacturing)
True, False or Indeterminate? Structural unemployment usually lasts longer than frictional unemployment.
TRUE. Structural unemployment is a result of the reordering or departure of an industry due to changes in technology or trade, rendering certain jobs and skill sets obsolete. A worker in this situation may need to undergo retraining before being able to find a new job. In a case of frictional unemployment, jobs requiring similar skill sets still exist, so retraining is not usually needed.
If sneakers were produced in Thailand and sold in the United States by Nike, then the GDP would be counted in...
Thailand's GDP but not overall in the United States GDP
Output=Income but why?
The total market value of the output is equal to the amount paid for that output, which is equal to the amount received in income for producing that output.
Which of the following relationships holds between the value of all production in a country and the total income of the country?
The value of all production in a country is equal to the total income of the country.
True or False? A poorer, developing country is more likely to produce a larger share of non-market goods and services (i.e., people are more likely to make a larger proportion of goods and services for themselves rather than purchasing them).
True
How does more illegal drug traffic lead to higher GDP?
While sales of illegal drugs aren't counted in GDP, the purchase of new houses, new cars, or other new goods or services financed by drug sales are counted in GDP.
Define unemployment insurance
a government program that reduces the hardship of joblessness by guaranteeing that unemployed workers receive a percentage of their former income while unemployed
Define depression
a long and deep recession. (though there is no formal definition of this in economics)
Define Consumer Price Index (CPI)
a measure of the price level based on the consumption patterns of a typical consumer
Households are the primary source of saving. This is an example of...
a positive statement
Holding all else constant, if people who had been discouraged workers decide to start looking for jobs again but haven't yet found them, you will see:
an increase in the unemployment rate
Price level is...
an index of the average prices of goods and services throughout the economy
Price index formula=
basket price/basket price in base year x 100
labor force=
e+u
employment rate =
e/e+u
In the calculation and categorization of the GDP of the United States, personal consumption expenditures (i.e., C) include...
expenditures by households on goods and services produced in the United States and the rest of the world.
Gross domestic product is a measure of the total value of all..
final goods and services produced in an economy over time
The state government expenditure on local schools is an example of...
government expenditure component
Growth of nominal GDP=
growth of real GDP+growth of price level
All economic questions are about...
how to cope with scarcity
The value of a new 2013 Honda Civic produced in 2013 and purchased in 2014 is ...
included in the GDP for 2013
Government spending (G)
includes spending by all levels of government on final goods and services. example: government employee receives a salary Not an example: transfer payments to households (welfare payments)
Investment (I)
is private spending on tools, plant and equipment used to produce future output example: firms buying tools to aid in production
Macroeconomics differs from microeconomics in that:
macroeconomics focuses on the national economy and the global economy
Real GDP(t)= formula
nominal GDP(t)/price level (t) x 100
Define creative destruction
occurs when the introduction of new products and technologies lead to the end of other industries and jobs
In macroeconomics...
output and income are essentially identical
The working-age population can be divided into two groups:
people in the labor force and people who are not in the labor force
Define labor force
people who are already employed or actively seeking a job
In the expenditure approach to GDP, the largest component is...
personal consumption expenditures
Positive and normative statements differ in that ...
positive statements can be tested whereas normative statements cannot
The investment spending category of GDP does NOT include:
purchases of stocks and bonds by institutional investors (like pension funds).
Economic models...
simplify reality
An individual is structurally unemployed if...
the individual lacks marketable job skills because technology has changed.