ECON 2105 - Exam 2 Chapters 19-22, and Sample Quiz

Which of the following statements about the composition of the labor force is correct?

Since 1948, the percentage of men participating in the labor force has decreased.

An example of a government transfer is a(n):

Social Security payment.

(Table: Kenya's Economy in 2010) Aggregate output per capita in Kenya at the beginning of 2010 was:

$775.

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.

If the CPI is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:

25%.

According to the table, the relevant population is equal to: given Relevant Population ???, Labor force 179, Not in Labor Force 95, Employed ???, Unemployed 18 (number in millions)

274 million.

(Table: Labor Force Distribution) Based on the accompanying table, the total population is:

278 million

In the United States, consumer spending accounts for approximately what percentage of GDP?

70%

(Table: CPI) Suppose only three goods are produced in this economy: bread, laptops, and movies. Calculate the CPI of 2012, using 2008 as the base year.

75.8

A loan is:

a liability for the borrower and an asset for the lender.

(Figure: Productivity) An increase in physical capital per worker with everything else remaining unchanged is shown on the diag

a movement from A to B.

(Figure: Productivity) An improvement in technology with everything else remaining unchanged is shown on the diagram as:

a movement from B to C.

Asking whether people are unemployed for short spells or whether the duration of joblessness is long term is:

a question that can be answered because the Bureau of Labor Statistics keeps an alternative measure of unemployment that tracks the length of time workers have been unemployed.

It took India more than 40 years to exhibit high economic growth after it gained independence from British rule in 1947. This faster rate of growth resulted from:

a reduction in the burden of corruption.

A stock in a company is:

a share of ownership of a company held by a shareholder.

Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to:

a smaller increase in the marginal product of labor.

From 1960 until 2012, the long-run average rate of inflation in the United States was:

about 4%.

In 1940 you could buy a "nickel Pepsi" for (oddly enough) a nickel. If the price index in 1940 was 14 and the 2011 price index was 221, then the inflation-adjusted price of a Pepsi would be:

about 79 cents ($0.79).

(Figure: Crowding Out) The demand for loanable funds curve DLF1 will shift to DLF2 when there is:

an increase in the government budget deficit.

(Figure: Circular-Flow Model) If the circular-flow model is in equilibrium (the sum of the money flowing into each box is equal to the sum of the money flowing out of that box), which of the following is likely to happen if there is an increase in investment spending?

an increase in the nominal GDP.

A decrease in the demand for loanable funds would most likely be caused by a(n):

decrease in the amount of expected business opportunities.

(Table: Hypothetical Relationship) The accompanying table represents a hypothetical relationship between physical capital per worker and the growth rate of productivity. This economy is experiencing:

diminishing returns to physical capital per worker.

The official unemployment rate ignores:

discouraged workers who have given up looking for a job.

Individuals who are not working but are willing to work and who have looked for a job in the past 12 months but have not sought employment in the past 4 weeks are defined as:

discouraged workers.

The definition of short-term unemployment is unemployment that lasts:

discouraged workers.

Which of the following would accurately characterize the portion of a firm's profit paid to the owner of one share of its stock?

dividend

According to the figure, deflation was occurring:

in none of the years shown.

Inflation doesn't reduce purchasing power if:

nominal wages rise at the same rate as prices.

You are a college student and not working or looking for work. You are:

not part of the labor force.

To be classified as unemployed, a person must be:

not working and actively looking for a job in the last four weeks.

Someone who has to make a choice involving whether to receive $100 now or $100 one year from now will probably choose ________, since there is a(n) ________ in waiting to use money.

now; opportunity cost

The distinction between price confusion problems and menu costs is that:

price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs relate to producers changing prices, typically during inflationary periods.

A share in the ownership of a company held by a shareholder is considered a(n):

stock.

As presented in the figure, [European Union (EU) and US Inflation] one could correctly state that during the period shown:

there was never a time when either the United States or the European Union experienced deflation.

Let's say a bottle of Dr. Wells (an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be (rounded to the nearest penny):

$0.95

(Table: Calculating GDP) Using the information in the table provided, which of the following is the correct calculation for GDP?

$12,200

(Table: Pizza Economy II) Based on the accompanying table, GDP in this economy is:

$16,000.

Scenario: Closed Economy S 1 GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $ trillion. (Scenario: Closed Economy S = ) How much is private saving?

$3.5 trillion

(Table: Measuring GDP) In this table, total expenditures on GDP by the household sector are:

$500 billion.

(Table: GDP) GDP in the table is:

$94 billion.

Which of the following equations represents the unemployment rate?

(number of unemployed / labor force) 100

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is:

10%

(Table: GDP II) Using the information in the table provided, calculate the GDP deflator for 2011

104

(Scenario: Market Basket) What is the rate of inflation between 2010 and 2011?

11%

If the relevant population is 268 million people and the number of people in the labor force is 148 million, the number of people NOT in the labor force is equal to:

120 million.

One shortcoming of the official unemployment rate is that:

14 weeks or less

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its labor force is

150 million.

According to the table, the number of employed in this economy is equal to: given Relevant Population ???, Labor force 179, Not in Labor Force 95, Employed ???, Unemployed 18 (number in millions)

161 million.

The 2007-2009 recession lasted for:

19 months.

A survey reveals that on a small island 100 people have jobs, 25 people are looking for jobs, and 45 people are neither working nor looking for work. The unemployment rate on the island is:

20%

If a country has a working-age population of 200 million, 120 million people with jobs, and 30 million people unemployed and see- employment, then its unemployment rate is:

20%.

Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks cost $80 each and gasoline costs $3 per gallon. The USPI for 2011 is:

200

(Table: Market Basket of School Supplies) The accompanying table shows the prices of three common school supplies in 2010 and 2011 and the quantities of each school supply that consumers bought in 2010, the base year. If we were to construct a school supply index (SSI) to measure the rate at which average school supply prices have changed, we would find an inflation rate of:

22%

In the country of Sildavia, a market basket of goods and services cost $130 in 2003, $140 in 2004, and $160 in 2005. Based on this information and considering 2003 as the base year, inflation from 2003 to 2005 was:

23.07%.

(Table: Labor Force Distribution) Based on the accompanying table, the unemployment rate is:

3.85%

If the CPI is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about:

5.56%

If the relevant population is 268 million people and the number of people in the labor force is 148 million, the labor force participation rate is:

55.2%.

Between 1960 and 2012, the average unemployment rate in the United States was about:

6%

If real GDP doubles in 12 years, its average annual growth rate is approximately:

6%

(Figure: The Market for Loanable Funds with Government Borrowing) According to the accompanying figure, after an increase in government borrowing, the new equilibrium interest rate will rise from and the amount of private savings will

6% to 8%; rise

According to the table, the number of people not in the labor force is equal to: given Relevant Population 215, Employed 138, Unemployed 9 (number in millions)

68 million.

According to the table, the labor force participation rate is: given Relevant Population 215, Employed 138, Unemployed 9 (number in millions)

68.4%

(Table: Population Data for Estill County) Use the accompanying table, which summarizes the labor market status of the residents of Estill County. What is the labor force participation rate in the county?

81%

According to the table, the employment rate in this economy is equal to: given Relevant Population 243, Labor force 154, Not in Labor Force 89, Employed 142, Unemployed 12 (number in millions)

92.2%

(Figure: Technological Progress and Productivity Growth) If there is an increase in physical capital per worker (all other factors remaining unchanged), it would be best indicated by a move from:

A to B

(Figure: Technological Progress and Productivity Growth) Which of the following changes in real GDP would be most likely to resu over time from the deterioration of the nation's infrastructure?

B to A

(Figure: Technological Progress and Productivity Growth) Which of the following changes in real GDP would be most likely to result over time from the deterioration of the nation's infrastructure?

B to A

(Figure: Technological Progress and Productivity Growth) If there is significant technological progress (all other factors remaining unchanged), it would be best indicated by a move from:

B to C

Which of the following is an example of frictional unemployment?

Chad graduates with his master's degree in economics and is searching for an analyst job.

Consider a nation in which the price index was 150 last year and this year it is 130. Which statement is correct?

Deflation was 13.33% this year.

Which of the following is an advantage to the recipient country of foreign investment?

Foreign companies often bring new technology to the recipient country, and this increases productivity.

If your professor wins the lottery:

GDP is not affected

What is the difference between the consumer price index (CPI) and the gross domestic product (GDP) deflator?

If we want to examine how price changes affect the overall economy, the GDP deflator is the better measure.

Suppose that a doctor who lives alone hires the services of a maid and pays her $15,000 a year to clean his house. Suppose that he marries her the following year. Other things equal, which of the following would be true about the reported official GDP the following year?

It would fall.

Which of the following is an example of structural unemployment?

Jasmine loses her job as a newspaper editor because the publication has gone digital.

Which of the following people would be officially considered unemployed?

Jenna, who just graduated college and is searching for a job that fits her graphic-design skills

Which of the following transactions is included in a current year's GDP as investment spending?

Maggie bought a play-gym set for her day-care business.

Michael Chang buys only tennis rackets during a particular year. During the year in question, the price of all goods rises by 10% on average, but the price of tennis rackets remains the same. Which statement is correct?

Michael does not experience inflation because he only buys tennis rackets.

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means:

Nation A is experiencing inflation of less than 9.3% and Nation B is experiencing inflation of less than 8.5%.

During the 1929-1939 period in the United States:

nominal GDP declined but real GDP increased.

(Figure: The Minimum Wage) Look at the accompanying figure on the labor market. The binding minimum wage of P3 leads to unemployment of:

Q4-Q1

(Figure: The Effect of a Minimum Wage) Suppose the labor market is in equilibrium at E when the government imposes a minimum wage of WF. Structural unemployment will equal:

QS - QD.

How do you convert a price of a good from an earlier time into today's price?

Take the earlier price and multiply by the ratio of today's CPI to the earlier CPI.

A budget surplus exist when which of the following occurs?

Taxes are greater than government spending.

What is the consumer price index (CPI)?

The CPI is a measure of the price level based on the consumption patterns of a typical consumer.

Scenario: Closed Economy S= / GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and gr nne spending is $2 trillion. Taxes are $0.5 trillion.

a deficit of $1.5 trillion

Based on the figure, which of the following statements best applies?

Typically Brazil experienced moderate inflation.

If the price index in 1922 was 17 and a unit of Nabisco Oreo cookies cost $0.32, and if the price index today is 220 and a unit of Nabisco Oreo cookies costs $2.99, then the inflation-adjusted price of Oreos is:

a bit higher than today's actual price (1-1.99 times as much).

A supply shock caused by an increase in the price of gasoline causes:

a decrease in output and an increase in prices

(Figure: Circular Flow Model 2) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in exports?

a decrease in the nominal GDP

(Figure: Circular Flow Model 2) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in consumer spending?

an increase in the unemployment rate

(Figure: Circular-Flow Model) If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the money flowing out of that box), which of the following is likely to happen if there is a decrease in consumer spending?

an increase in the unemployment rate

The short-run Phillips curve shows:

an inverse relationship between unemployment and inflation.

Jim has a part-time job and would prefer to have a full-time job but has been unable to find full-time work. Jim is classified as:

an underemployed worker.

Quality changes:

are at least partially adjusted for in the CPI.

The problem of debt deflation deepens during an economic slump because:

borrowers have to reduce spending to pay back burdensome debts.

Who loses when there is unexpected deflation?

borrowers.

The housing crisis has some roots in inflation because:

builders confused inflation with an increase in demand and hence overbuilt—a price confusion problem

(Figure: Circular-Flow Model) How does the government finance its purchases of goods and services?

by taxes

Scenario: Closed Economy S= / trillion. GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5

c) $2 trillion

The CPI reflects:

changes in the prices of goods and services typically purchased by consumers.

From the standpoint of economic growth, banks are important to:

channel savings into investment.

The rule of 70 is most useful in:

estimating the doubling time of real GDP for a given growth rate.

GDP tends to understate our economic well being because it:

excludes the value of leisure.

Which of the following two types of unemployment occur even when the economy is healthy and growing?

frictional and structural

Brian Murphy is a political consultant for a candidate in Massachusetts. Mr. Murphy's candidate is defeated in the November election, and as a result, Mr. Murphy finds himself unemployed. Mr. Murphy's unemployment is classified as:

frictional unemployment.

Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is:

frictionally unemployed.

Nina has a part-time job as she finishes her degree in fashion design. After obtaining her degree she decides to quit her part-time job to search for a job that better fits her now-improved skill set. Nina has a few interviews, but it is taking time to find the job that suits her best. Nina would be considered:

frictionally unemployed.

You have to pay costs for your business now but you also have to enter into long-term contracts to repay loans in the future. If inflation occurs, the best term for the problem that occurs in this case is:

future price uncertainty.

An example of structural unemployment is a(n):

geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.

Frictional unemployment is considered to be:

good, since that means people may be seeking for jobs that match their job skills.

If a country runs a trade deficit, its investment spending is probably:

greater than its level of saving.

The government saves when it:

has a budget surplus.

Government policies such as unemployment compensation and government regulations related to hiring and firing employees result in:

higher frictional unemployment.

Inflation is occurring in a nation; the implication(s) of this is/are:

holding nominal wages constant, the real wage would fall.

Deflation is occurring in a nation; the implication(s) of this is/are:

holding nominal wages constant, the real wage would rise.

Typically the largest percentage category in the consumer price index (CPI) is:

housing

Rising high school graduation rates are an example of an increase in:

human capital.

An increase in the price level that is extremely rapid (say 400% per year) is called:

hyperinflation

The reason the dollar value of only final goods and services are counted in GDP is that:

if we counted the value of all goods, we would count inputs, like the value of steel in a new automobile, more than once.

A capital inflow into a country is associated with:

imports exceeding exports.

Labor productivity growth can be attributed to:

improvement in technological process.

All other things unchanged, an increase in loanable funds demand would most likely be caused by a(n):

increase in the amount of government borrowing.

When overall price levels rise over time, it is referred to as:

inflation.

Inventory investment is counted as investment because:

inventory is a source of future sales.

A laptop computer that is purchased by an accounting firm is considered to be:

investment spending.

The natural rate of unemployment:

is composed of structural and frictional unemployment.

If both aggregate output and the aggregate price level increase:

nominal GDP will increase faster than real GDP.

The main reason South Korea has grown so rapidly is that because it was so poor:

it could skip forward, or leapfrog, to use new-generation technology as it developed.

Who gains when there is unexpected deflation?

lenders

Natural resources are:

less reliable indicators of productivity today than they were a century ago.

When it is difficult to hire employees, firms take ____________ to hire, which increases ____________ unemployment.

longer; frictional

Throughout the twentieth century, nations in Latin America experienced disappointing growth rates primarily due to:

low rates of national savings, political instability, and little emphasis on education.

An increase in the number of discouraged workers in the economy tends to:

lower the official unemployment rate

The purpose of indexing Social Security payments to the CPI is to:

maintain the purchasing power of retirees.

Employment data is released ___________ gross domestic product (GDP) data.

more frequently than

A checking account with $500 is

more liquid than a person's new car

In an open economy, total investment is equal to:

national savings plus capital inflow.

Workers in country A have cost-of-living adjustments (COLAs), which adjust wages to offset the effect of inflation, in their wage contracts, and workers in country B do NOT. When the central banks of countries A and B increase the money supply:

prices in country A increase faster than prices in country B.

Economists are optimistic that growth can continue in the face of resource scarcity because:

prices of scarce resources rise and provide incentives to find alternative energy sources.

(Figure: Crowding Out) The supply of loanable funds curve SLF1 shifts to SLF2. This shift implies that:

private savings have increased.

An example of investment spending would be:

purchase of a new productive machine

Inflation in Zimbabwe in 2008:

reached the rate of 80 billion percent per month.

If nominal income increases, then:

real income increases if the price index falls

When actual unemployment is less than its natural rate:

resources are employed at levels that are not sustainable in the long run. or the economy is expanding beyond its long-run capabilities.

Since 1948, female labor force participation has __________ and male labor force participation has __________.

risen; fallen

Cyclical unemployment:

rises during a recession.

Which of the following would NOT be considered to be one of the four main types of financial assets?

robots on an assembly line

In a simple closed economy, all investment spending must come from:

savings.

Economists refer to the revenue generated by the government's right to print money as:

seigniorage.

Workers who lose their jobs because the skill set they possess is no longer required in the economy are considered to be:

structurally unemployed.

Three accuracy problems with the consumer price index (CPI) are:

substitution, quality changes, and the availability of new goods and services.

When an economy is in an expansion, unemployment:

tends to fall, and overall prices tend to rise

The Great Depression lasted most of which decade?

the 1930s

The Great Recession was most similar to which of the following downturns?

the 1982 recession

In Bovania, cattle compose 48% of the consumer price index (CPI), housing composes 32%, and entertainment accounts for the remaining 20%. If, in a certain year, the price of cattle rises by 30% and the price of housing rises by 25%, then:

the CPI has increased, even if the entertainment in the next year is free.

Chicken becomes more expensive in 2008 at Wegmans in State College, Pennsylvania. This means:

the CPI might rise or fall and the price of chicken at Wegmans could make a very small difference in the CPI if chicken at Wegmans is included in the index. However, chicken would be a relatively small portion of the entire CPI if it is included at all.

The recession of 2007-2009 has been dubbed:

the Great Recession.

Private saving by households is:

the portion of disposable income not spent on goods and services.

One improvement of the chained consumer price index (CPI) over the traditional CPI is that:

the chained CPI more quickly takes into account new goods.

In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let's say the price of milk rises by 7% and the prices of all other goods fall by 4%. Based on the information given, we can definitely say:

the consumer price index (CPI) in Bovania is greater than in the previous year.

The value of the consumer price index (CPI) is best described as:

the current year prices to base year prices, holding the market basket content constant.

In terms of inflation, the period from the mid-1980s until today in the United States is called the "Great Moderation." This refers to the fact that:

the double-digit inflation of the 1970s and 1980s has been replaced by well-controlled inflation of less than 10%.

Human capital refers to:

the education or training which workers possess.

Zimbabwe's economic instability was caused primarily by:

the government's seizure of the country's farms, which disrupted production.

According to the price confusion problem, if the price of a product increases, then:

the market demand has increased, and the firm's output should increase.

To calculate the labor force participation rate, you only need to know:

the number of employed and the labor force.

Assume the price of salt increased from $0.30 in 1985 to $0.50 in 1995. If we calculate the average rate of price increase for salt over this period, we could accurately say:

the price of salt increased at about a 5% rate per year during this period.

Which of the following is included in GDP?

the purchase of a ticket to a Rolling Stones concert

Which of the following is NOT included in investment spending in the national income accounts?

the purchase of stocks and bonds by a business

Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3% wage increases for a four-year period and inflation is more than 3%, then, based on this information alone:

the quantity demanded of labor will increase, because real wages fell.

The inflation tax refers to:

the reduction in the real value of money when inflation rises.

Natural unemployment is:

the sum of structural and frictional unemployment.

If private savings increase:

the supply of loanable funds will increase, interest rates will decrease, and the amount of borrowing will increase

GDP is:

the total dollar value of the final goods and services produced in the economy in a given period.

The labor force is:

the total of people employed and unemployed

If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117, we could correctly say that:

the typical basket of goods was about 15.4% more expensive in 2013 than in 2012.

The main statistic that is used to monitor unemployment in the economy is:

the unemployment rate

During periods of recession:

the unemployment rate rises.

The value added is equal to:

the value of sales minus the value of intermediate goods used by a company.

The Rule of 70 applies:

to any growth rate

Intermediate goods are not counted in the calculation of GDP because:

to do so involves double counting.

Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel, California. This means:

tofu, even if included in the CPI in 2008, would make a small difference on the average weighted price of food and beverages. Food and beverages only constitute a small portion of the CPI, and hence, this would be unlikely to affect the overall CPI by any significant amount.

Assume tuition and fees at North Carolina State University cost $4,259 in 2004 and $7,787 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say:

tuition has increased more rapidly than inflation.

Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say:

tuition has increased much more rapidly than inflation.

A person without a job who is actively seeking and available for work is considered:

unemployed

Structural unemployment is:

unemployment caused by changes in the industrial makeup of an economy.

Cyclical unemployment is:

unemployment caused by economic downturns

Frictional unemployment is:

unemployment caused by time delays in matching available jobs and workers

A government program that reduces the hardship of being out of work by guaranteeing that unemployed workers receive a percentage of their former income while they are unemployed is referred to as:

unemployment insurance.

The Human Development Index is:

used by the U.N. to compare nations by measures other than real GDP per capita.

Computers started to become more common in the 1970s in America. From this time until the mid-1990s:

very little happened to productivity.

Calculating GDP via the factor payments approach would include payments such as:

wages, interest payments, rent, and profits.

Diminishing returns to physical capital suggests that:

when the amount of human capital per worker and the state of technology are fixed, successive increases in the amount of physical capital per worker lead to a smaller increase in productivity.

Deflation is best described as:

when the overall level of prices of goods falls.

Inflation occurs:

when the overall level of prices rises.

Crowding out is a phenomenon:

where an increase in the government's budget deficit causes overall investment spending to fall.

Discouraged workers are those individuals:

who have given up looking for a job.

Economists claim that the unemployment rate can understate the true level of unemployment because none of the following groups is included, except:

workers without jobs who have looked for work in the last four weeks.

Let's say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index (CPI) in the sense that the CPI:

would fail to include purchases of the Zorgon for some period of time after the product entered the market.

You are offered two jobs, one in Richmond, Virginia, paying $67,000, and one in San Diego, California, paying $79,000. The price index in Richmond is 104.5, and in San Diego it is 132.3. If real wages are the only consideration, then:

you would definitely take the job in Richmond because the real wage is higher there.

Which of the following would NOT be included in this year's GDP?

your purchase of your neighbor's house, which was built in 1994

(Table: Population Data for Estill County) Use the accompanying table, which summarizes the labor market status of the residents of Estill County. What is the unemployment rate in the county?

17%

(Table: Peanut Butter and Jelly Economy) How much of the increase in nominal GDP between 2010 and 2011 was due to inflation?

18.75%

Scenario: Technological Progress and Productivity Growth in Techland Holding technology and human capital fixed in Techland, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000 during the 1980 to 2010 period. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that the actual increase in real GDP per worker during the 1980 to 2010 period was from $40,000 to $320,000. (Scenario: Technological Progress and Productivity Growth in Techland) What was the growth rate of real GDP per capita in Techland attributable to increasing physical capital per worker during the 1980 to 2010 period?

2.0%

The role of the government can explain growth differences among countries. All of the following are government actions that contribute to differences in growth EXCEPT:

excessive government intervention in business practices and licensing.

Goods that are produced domestically but sold abroad are:

exports.

If the growth rate of GDP is above its historical average, then there is a tendency for the unemployment rate to:

fall.

(Figure: Circular Flow Model 2) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in consumer spending?

an increase in the nominal GDP

GDP per capita is:

an incomplete measure of a country's standard of living.

Holding everything else constant, when the government uses an expansionary policy in the presence of a deficit, it will result in:

an increase in the equilibrium interest rate in the loanable funds market.

(Figure: Crowding Out) If the demand for loanable funds curve shifts to the right, then it will result in:

an increase in the interest rate and the total amount of borrowing in the funds market.

(Figure: Circular Flow Model 2) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in imports?

an increase in the nominal GDP

National savings is the sum of:

private savings plus the budget balance.

Investment spending represents spending on:

productive physical capital.

An example of investment spending would be the:

purchase of a new productive machine.

If we add up all of the values added at every stage of production for a good, we will get

the final value of the good

All of the following are reasons the average worker in the United States today produces more than her or his counterpart a century ago EXCEPT that:

the modern worker works longer hours.

The unemployment rate is:

the percent of the labor force that is unemployed

Consider an economy that produces only two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is:

$1,300

Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is:

$1,300.

(Table: Pizza Economy) Considering 2004 as the base year, given that total population was 1,140 in 2004 and 1,300 in 2005, real GDP per capita in 2004 was:

$100

Scenario: Growth Rates in Two Countries India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. (Scenario: Growth Rates in Two Countries) About how much will India's real GDP per capita be in 20 years?

$19,600

Scenario: Closed Economy S = IGDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. (Scenario: Closed Economy S = I) How much is investment spending?

$2 trillion

Scenario: Closed Economy S = IGDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. (Scenario: Closed Economy S = I) How much is national saving?

$2 trillion

Scenario: Open Economy S = IIn an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is national saving?

$2 trillion

Scenario: Open Economy S = IIn an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is the net capital inflow?

$2 trillion

Scenario: Closed Economy S = IGDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. (Scenario: Closed Economy S = I) How much is private saving?

$3.5 trillion

Scenario: Open Economy S = I In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is private saving?

$3.5 trillion

If during 2005, the country of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2005 in Sildavia were:

$36 billion.

Scenario: Open Economy S = IIn an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is investment spending?

$4 trillion

(Table: Peanut Butter and Jelly Economy) A simple economy produces only peanut butter and jelly. Using the data in the attached table, in 2011, nominal GDP was ____ and real GDP was _____.

$525; $450

Consider an economy that produces only two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Nominal GDP this year is:

$650

Exhibit: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. (Exhibit: Real GDP) The value of nominal GDP in years 1 and 2 respectively is:

$900; $1,077.50.

The rate of return on a business project is equal to

(Revenue from project - cost of project)/ Cost of project) × 100

Sweden has a real GDP per capita of $50,000, while Chile has a real GDP per capita of $250,000. If real GDP per capita in Sweden grows at a 2% rate and Chile's real GDP per capita grows at a 4% rate, how long will it take for real GDP per capita in the two nations to converge?

35 years

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

5%.

(Table: Population Data for Estill County) Use the accompanying table, which summarizes the labor market status of the residents of Estill County. How many people are in the labor force in the county?

6,000

Exhibit: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. (Exhibit: Real GDP) Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is:

7.8%.

The convergence hypothesis fits the data only when the factors that affect growth are held equal across countries. These factors include all of the following EXCEPT:

GDP per capita.

(Figure: Circular-Flow Model) If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of that box), which of the following is likely to happen if there is a decrease in exports?

a decrease in the nominal GDP

Scenario: Closed Economy S = IGDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. (Scenario: Closed Economy S = I) What is the government budget balance?

a deficit of $1.5 trillion

(Figure: Circular-Flow Model) If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of that box), which of the following is likely to happen if there is an increase in investment spending?

an increase in the nominal GDP

(Figure: Crowding Out) If the supply of loanable funds curve shifts to the right, then it will result in

an increase in the total amount of borrowing and a fall in the interest rate.

Goods that are produced in a particular period but not sold in that period:

are included in investment

Financial assets:

are paper claims that provide the buyer of the claim future income from the seller of the claim.

The savings-investment spending identity says that:

savings and investment spending are always equal for the economy as a whole.

All other things unchanged, a general increase in the amount of government borrowing will typically:

shift the loanable funds demand curve to the right and increase interest rates.

Investment spending is:

spending on productive physical capital.

Which of the following index includes smaller companies, often in the technology sector?

the NASDAQ

Value added in national income accounts refers to:

the difference in the final price and the value of inputs purchased.