ECON 2301- EXAM 2
An island economy produces only mangoes and pineapples. The table gives the quantities produced and prices in 2018 and 2019. The base year is 2018. Use the chained-dollar method to calculate real GDP in 2018 and 2019. In terms of what dollars is each of these two real GDPs measured? Real GDP in 2018 using the chained-dollar method is $___. Real GDP in 2019 using the chained-dollar method is $_______. Real GDP in 2018 and real GDP in 2019 are measured in ______ dollars.
$1,156 $1,362 2018
In 2009, U.S. exports of goods and services are $1,587 billion and imports of goods and services are $1,976 billion. What is the value of net exports? The value of net exports in 2009 is ____ billion dollars
-389
The table gives information about the labor force in the economy of Sandy Island. Calculate the change in the unemployment rate from July 2020 to August 2020. The unemployment rate in July 2020 is ___ percent The number of people unemployed at the end of August 2020 is _______ The number of people employed at the end of August 2020 is ___ percent. The unemployment rate at the end of August 2020 is ___ percent.
10.0 1,850 18,030 9.3
The table shows the quantities of the goods Suzie bought and the prices she paid during two consecutive weeks. Suzie's CPI market basket contains the goods she bought in Week 1. Calculate the cost of Suzie's CPI market basket in Week 1 and in Week 2. What percentage of the CPI market basket is gasoline? Calculate the value of Suzie's CPI in Week 2 and her inflation rate in week 2. The cost of Suzie's CPI market basket in Week 1 is $___ The cost of her CPI market basket in Week 2 is $______. Gasoline is _____percent of the CPI market basket. The value of Suzie's CPI in Week 2 is_____. Suzie's inflation rate in Week 2 is ____ percent.
110.00 105.00 40.9 95.5 -4.5
The table shows the CPI in Ecotopia. Calculate the inflation rates in 2017 and 2018. Did the CPI rise in 2018? Did the inflation rate increase in 2018? Ecotopia's inflation rate in 2017 was ______ percent Ecotopia's inflation rate in 2018 was ______ percent. In 2018, Ecotopia's CPI ________ and its inflation rate ____.
133.5 365.3 increased; increased
The table shows some of the items in a country's National Income and Product Accounts in 2017. Use the expenditure approach to calculate GDP in 2017. GDP in 2017 using the expenditure approach is ______ trillion.
14.5
The table shows some of the items in a country's National Income and Product Accounts in 2017. What was GDP as measured by the income approach in 2017? What was net domestic product at factor cost in 2017? Using the income approach, GDP in 2017 was $_____ trillion. In 2017, net domestic product at factor cost was $_______ trillion.
14.5 11.6
A Consumer Expenditure Survey in Sparta shows that people buy only juice and cloth. In 2018, the year of the Consumer Expenditure Survey and also the reference base year, the average household spent $30 on juice and $25 on cloth. The table sets out the prices of juice and cloth in 2018 and 2019. Calculate the CPI in 2019 and the inflation rate between 2018 and 2019. The CPI in 2019 is______ The inflation rate between 2018 and 2019 is ____ percent.
145.5 45.5
An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2020 and 2021. The base year is 2020. Calculate the percentage increase in real GDP in 2021. The percentage increase in real GDP in 2021 is ___ percent.
2.9
CNN agreed to pay its workers $38 an hour in 1999 and $45 an hour in 2001. The CPI in 1999 was 166 and in 2001 was 180. Calculate the real wage rate in each year (to the nearest cent). Did these workers really get a pay raise between 1999 and 2001? The real wage rate in 1999 was $_____. .The real wage rate in 2001 was $_______. The workers ________ really get a raise between 1999 and 2001.
22.89; 25.00 did
The BLS reported that in June 2019, the labor force was 163.0 million, employment was 157.0 million, and the working-age population was 259.1 million. The BLS also reported that 17.3 percent of all employment in June 2019 was part time and that 4.3 million people worked part time for economic reasons. How many people worked part time for noneconomic reasons? The number of people who worked part time for noneconomic reasons is _______ million
22.9
In Brazil, the reference base period for the CPI is 2000. By 2016, prices had risen by 187 percent since the base period. The inflation rate in Brazil in 2017 was 3.4 percent, and in 2018, the inflation rate was 3.7 percent. Calculate the CPI in Brazil in 2017 and 2018. Brazil's CPI in 2019 was 318. Did Brazil's cost of living increase or decrease in 2019? The CPI in Brazil for 2017 is ______ The CPI in Brazil for 2018 is______. Brazil's cost of living _______ in 2019.
296.8 307.8 decreased
The table sets out information about the economy of Nautica. What is the quantity of labor employed, potential GDP, the real wage rate, and total labor income? The quantity of labor employed is ______ hours a day Potential GDP is $____ a year. The real wage rate is ______ an hour. Total labor income is $____ a day.
30 240 0.60 18
The BLS survey found the numbers in the table for a small community. Calculate the unemployment rate and the labor force participation rate for this community. The unemployment rate is______ percent The labor force participation rate is ______ percent.
33.3 92.3
The interest rate is 14 percent a year in Nigeria and 0.3 percent a year in Germany. The inflation rate is 9 percent a year in Nigeria and 0.1 percent a year in Germany. Calculate the real interest rate in Nigeria and Germany. The real interest rate in Nigeria is ___ percent a year The real interest rate in Germany is ___ percent a year.
5 0.2
The figure shows the flows of expenditure and income on Lotus Island. In 2016, R was $13 billion; W was $40 billion; U was $11 billion; J was $15 billion; and Z was $7 billion. Calculate total expenditure and total income.
73 billion (total expenditure) 73 billion (total income)
The tables set out information about the economy of Athabasca. Calculate the quantity of labor employed, the real wage rate, and potential GDP. The quantity of labor employed is _____ million hours. The real wage rate is $____ an hour Potential GDP is $_____ million.
75 22 1,725
Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries. Part 2 Draw a labor supply curve and a labor demand curve for Mexico. Label the curves LS Subscript 0 and Subscript LD Subscript 0. Draw a point to show the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1. Now suppose the United States returns millions of illegal immigrant workers to their home countries. Draw a curve that shows the effect of this return of workers in Mexico. Label it. Draw a point to show the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2. What is the effect on Mexico's potential GDP? _______ Mexico's production function and _______ in Mexico's potential GDP occurs.
A movement up along; an increase
What is a good that is used as a component of a final good? Is the value of intermediate goods included in the measure of GDP? _______ good is used as a component of a final good. We _______ add the value of intermediate goods produced to the value of final goods to measure GDP.
An intermediate; do not
The figure shows the flows of expenditure and income in an economy. In 2008, J was $1.5 trillion, R was $1.5 trillion, Z was $1 trillion, Q was $13.5 trillion, and U was $4.0 trillion. Calculate saving and consumption expenditure.
Consumption expenditure is $7.0 trillion Saving is $ 5.0 trillion
Use the information in the schedules above to draw this economy's production function. Label it. Draw a point to show equilibrium employment and potential GDP. At the full-employment quantity of labor, what is the real wage rate? The real wage rate is $_____ an hour.
DRAW CURVE; DOTTED LINE; AND DOT. 30
Read Eye on Potential GDP in the eText or click on the icon ... to open a copy. Then work the following exercise. In Korea, real GDP per hour of labor is $22, the real wage rate is $15 per hour, and people work an average of 46 hours per week. In the United States, real GDP per hour of labor is $76, the real wage rate is $50 per hour, and people work an average of 34 hours per week. Explain the difference in the two labor markets In the graph, draw the Korean demand for labor curve (label it LDK) and the Korean supply of labor curve (label it LSK). Now mark the Korean labor market equilibrium. Draw the U.S demand for labor curve (label it LDUS) and the U.S. supply of labor curve (label it LSUS). Now mark the U.S. labor market equilibrium. Use your graph to explain the difference in the two labor market outcomes. The labor market equilibrium occurs at a lower real wage rate and greater hours per worker in Korea than in the United States because Korea's labor is _______ productive and its supply of labor (per worker) is _______ than the U.S. supply.
DRAW LINES less; greater
Which of the following is an example of a final good or service?
Dan bought a Toyota Camry.
Who in the following statements is a discouraged worker?
Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
Who in the following statements is a full-time worker and who is a part-time worker?
Dan works at Subway for 8 hours each day from Monday through Friday. Mary works at Starbucks' for 4 hours each day on weekends.
The national accounts of Parchment Paradise are kept on (you guessed it) parchment. A fire in the statistics office destroys some accounts, leaving only the data on the right. Calculate GDP (expenditure approach) and depreciation.
GDP (expenditure approach) is $ 9,210 Depreciation is $140
The table shows some of the items in a country's National Income and Product Accounts in 2018. Calculate the country's GNP and the country's national income in 2018.
GNP in 2018 is $11.7 trillion National Income in 2018 is $10.2 trillion
The figure shows the flows of income and expenditure in an economy. In 2008, Q was $1,300 billion, U was $250 billion, W was $650 billion, R was $250 billion, and Z was $75 billion. Calculate investment and saving.
Investment is $325 billion Saving is $400 billion
What type of macroeconomics holds the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth? _______ macroeconomics is the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth. According to Keynes, _______.
Keynesian too little private spending is the cause of depression and recession
An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2020 and 2021. The base year is 2020. Calculate nominal GDP in 2020 and 2021.
Nominal GDP in 2020 is $524 Nominal GDP in 2021 is $636
The table shows some data for an economy. If the base year is 2019, calculate the economy's nominal GDP and real GDP in 2020.
Nominal GDP in 2020 is $600 Real GDP in 2020 is $135
An economy produces only apples and oranges. The table shows the prices and the quantities of apples and oranges produced in 2020 and 2021. If the base year is 2021, calculate the economy's nominal GDP and real GDP in 2020.
Nominal GDP in 2020 is $50 Real GDP in 2020 is $220
Which of the following statements about potential GDP is correct?
On average over the business cycle, real GDP equals potential GDP.
Which of the following statements illustrates structural unemployment?
Outsourcing resulted in many job losses in the mid 2000s.
Which of the following is an example of consumption expenditure?
Rachel buying a TV.
The table shows an economy's total production and the prices of the final goods it produced in 2020 and 2021. The base year is 2020. Calculate real GDP in 2020 and real GDP in 2021.
Real GDP in 2020 is $460 Real GDP in 2021 is $570
Which of the following statements illustrates frictional unemployment?
Robin is quitting his current job to find another that has better prospects.
Which of the following is an example of an intermediate good or service?
Samsung buys compressors for manufacturing refrigerators.
Who in the following statements is a part-time worker for economic reasons?
Sherrie is a graduate who started working at Safeway pharmacy for 4 hours each day, three days a week, as they do not currently have a full-time opening.
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2019. The average household spent $60 on juice and $30 on cloth in 2019 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2020, juice is $4 a bottle and cloth is $6 a yard. Calculate the CPI and the inflation rate in 2020.
The CPI in 2020 is 173.3 The inflation rate in 2020 is 73.3 percent.
Alternative measures of the price level aim to improve on the CPI. Which of the following statements is true?
The PCEPI uses current quantities so it avoids the sources of bias in the CPI.
Which of the following is an example of government expenditure on goods and services?
The White House buying internet services.
The table gives information reported by the Bureau of Labor Statistics for February, 2014. What is the labor force participation rate?
The labor force participation rate is 63.2 percent
The BLS survey reported the numbers in the table for a small community of 280 people. Calculate the unemployment rate and the labor force participation rate in this community.
The unemployment rate is 14.4 percent The labor force participation rate is 81.9 percent.
The table gives information reported by the Bureau of Labor Statistics for June, 2015. What is the unemployment rate in June, 2015? What is the labor force participation rate in June, 2015?
The unemployment rate is 5.2 percent the labor force participation rate is 62.6 percent
The table gives information reported by the Bureau of Labor Statistics for February, 2013. What is the unemployment rate?
The unemployment rate is 7.7 percent
The Bureau of Labor Statistics reported that in June 2002, the labor force was 146.2 million, employment was 137.5 million, and the working-age population was 217.6 million. Calculate the unemployment rate and the labor force participation rate.
The unemployment rate was 6.0 percent The labor force participation rate was 67.2 percent
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Where do these activities appear in the National Income and Product Accounts of Japan?
The value of the wings appear as Japanese exports in the expenditure approach to measuring Japan's GDP and Japan's GNP.
The figure shows the flows of expenditure and income on Big Foot Island. In 2016, W was $55 billion; V was $15 billion; U was $18 billion; J was $22 billion; and Z was $5 billion. Calculate total expenditure and total taxes.
Total income is $100 billion Net taxes equal $30 billion
The figure shows the flows of expenditure and income in an economy. In 2013, U was $3.0 trillion, V was $5.5 trillion, W was $6.0 trillion, J was $2.5 trillion, and Z was $1 trillion. Calculate total income, net taxes, and GDP.
Total income is $12.5 trillion Net taxes equal $1.0 trillion GDP is $12.5 trillion
U.S. economy in first quarter of 2019 GDP increased at an annual rate of 4.6 percent in the first quarter of 2019. Government expenditure grew at 7 percent, but consumption expenditure grew at a rate of 6.7 percent. Investment and exports shrank. Use the figure to indicte the flows in which the items in the news clip occur. How can GDP increase at a rate of 4.6 percent if consumption expenditure increased at a rate of 6.7 percent? In the figure, _______. It is possible for GDP to increase by only 4.6 percent when consumption expenditure grew at a 6.7 percent rate because _______.
U is government expenditure on goods and services and J is investment the sum of investment and net exports grew at a negative rate
Read Eye on U.S. Potential GDP in the eText or click on the icon ... to open a copy. Then work the following exercises. Explain why U.S. potential GDP per worker per week is greater than that in Europe. What could induce Europeans to work the same hours as Americans and would that close the gap between potential GDP per worker in the two economies? U.S. potential GDP per worker per week is greater than that in Europe because _______. Europeans could be induced to work the same hours as Americans by _______ taxes and _______ unemployment benefits. Everything else remaining the same, if Europeans work the same hours as Americans, the gap between potential GDP per workers in the two economies _______.
U.S. workers are more productive per hour of work and they work longer hours than Europeans lowering; lowering becomes smaller but is not eliminated because U.S. workers are more productive per hour of work
What is an example of U.S. consumption expenditure? _______ is an example of U.S. consumption expenditure.
Your purchase of a model car kit
Which of the following is included in the measure of U.S. GDP?
a 2013 Grand Am produced and sold as a new car in the United States in 2013.
Suppose a major hurricane hits Florida. What is the effect on the production function, the demand for labor, and the supply of labor? In what direction do the changes occur? When a major hurricane hits Florida, there is _______ in the U.S. production function, and _______ in the U.S. demand for labor. There is _______ in the U.S. supply of labor.
a downward shift; a decrease no change
Classify each of the following items as a final good or an intermediate good, and identify whether it is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. Security system bought by the White House. Item 2. A new apartment building. Item 3. Banking services bought by Target. Item 4. Starbuck's grande mocha frappuccino bought by a student. Item 1 is _______ and item 2 is _______. Item 3 is _______ and item 4 is _______.
a final good that is government expenditure; a final good that is investment an intermediate good; a final good that is consumption expenditure
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices.
all the goods and services
Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _____ and decreases during _____.
a recession; an expansion
Net taxes are taxes paid minus _____.
cash benefits received from governments
The tables set out information about the economy of Athabasca. Suppose the labor force participation rate of Athabasca decreases. How do employment, the real wage rate, and potential GDP change? When the labor force participation rate of Athabasca decreases, employment _______. When the labor force participation rate of Athabasca decreases, potential GDP _______, and the real wage rate _______.
decreases decreases; increases
Which of the events in the table raise the real wage rate and which of the events lower the real wage rate? 1 The Middle East cuts supplies of oil to the United States. 2 The New York Yankees win the World Series. 3 U.S. labor unions negotiate wage hikes that affect all workers. 4 A huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. 5 Migration to the United States increases the working-age population. A rise in the real wage rate is a result of _______. A fall in the real wage rate is a result of _______.
events 3 and 4; event 5
Which of the events in the table increase potential GDP and which decrease potential GDP? 1 The Middle East cuts supplies of oil to the United States. 2 The New York Yankees win the World Series. 3 U.S. labor unions negotiate wage hikes that affect all workers. 4 A huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. 5 Migration to the United States increases the working-age population. An increase in potential GDP results from _______. A decrease in potential GDP results from _______
events 4 and 5; events 1 and 3
Which of the events in the table increase the equilibrium quantity of labor and which decrease the equilibrium quantity of labor? An increase in the equilibrium quantity of labor is a result of _______. A decrease in the equilibrium quantity of labor is a result of _______.
event 1; events 2 and 3
What is U.S. gross domestic product? U.S. gross domestic product is the market value of all the _______ produced _______ in a given time period.
final goods and services; within the United States
U.S. unemployment rate lowest since 2008 The Labor Department said that the economy added 146,000 jobs in November, and the unemployment rate fell to 7.7% from 7.9% in October. But it fell mainly because workers dropped out of the labor force. Source: CNN Money, December 7, 2012 Explain how the new jobs change the labor force and the unemployment rate. New jobs _______ the labor force and _______ the unemployment rate.
increase or do not change; lower
Expansion remains slow The Commerce Department reported that retail sales increased 1.3 percent in June. Net exports were up 0.8 percent in the first quarter and inventories held by businesses rose by 0.3 percent in June. Total sales by businesses rose 0.3 percent. Source: Commerce Department, 2013 What is the effect of the rise in net exports on GDP? The rise in net exports _______.
increases GDP
Which of the following are included in the expenditure approach to measuring GDP?
investment; net exports of goods and services; consumption expenditure
What is the value of the CPI in the base period? The value of the CPI in the base period _______.
is 100 no matter what reference base period is chosen
What is a discouraged worker? A discouraged worker _______.
is a marginally attached worker who has not made specific efforts to find a job within the previous four weeks because previous unsuccessful attempts were discouraging
The unemployment rate is the percentage of the people in the _____ who are unemployed.
labor force
What are the main sources of bias in the CPI? Why is CPI bias a problem? The main sources of bias in the CPI are _______. CPI bias is a problem because it _______.
new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias distorts wage agreements linked to the CPI
Suppose the Middle East cuts supplies of oil to the United States. What is the effect on the production function, the demand for labor, and the supply of labor? In what direction do the changes occur? When the Middle East cuts supplies of oil to the United States, there is ______ in the U.S. production function. There is _______ in the U.S. demand for labor and _______ in the U.S. supply of labor.
no downward shift a decrease; no change
What is the view of classical macroeconomics? According to classical macroeconomics, _______. Classical macroeconomics predicted that the Great Depression _______.
no remedy by government can improve on the performance of the market would eventually end but offered no method for ending it more quickly
Suppose migration into the United States increases the working-age population. What is the effect on the production function, the demand for labor, and the supply of labor? In what direction do the changes occur? When migration into the United States increases the working-age population, there is ______ in the U.S. production function. There is _______ in the U.S. demand for labor and _______ in the U.S. supply of labor.
no shift no change; an increase
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
The labor force is the number of people employed plus the _____.
number unemployed
How is total expenditure in the United States calculated? Total expenditure in the United States is equal to consumption expenditure plus investment _______.
plus government expenditure on goods and services plus net exports
What is the CPI? What is the value of the CPI in the reference base period? The CPI tells us the _______ in the reference base period. The CPI in the reference base period is by definition equal to _______.
price level in a given period expressed as a percentage of the price level; 100
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
A cost of living index is a measure of the change in the amount of money that people need to spend to achieve a given _____.
standard of living
The economy is at full employment when all unemployment is _______.
structural and frictional
What is the effect of an increase in unemployment benefits on the labor market and potential GDP? When unemployment benefits increase, the _______.
supply of labor decreases, and potential GDP decreases as a movement occurs down along the production function
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
The PCE price index is an average of the current prices of _____ included in the consumption expenditure component of GDP, expressed as a percentage of _____ year prices.
the goods and services; base
What is gross national product? Gross national product is _______.
the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country
Which of the following is an example of investment?
the purchase of a new assembly line by Ford
Which of the following is an example of government expenditure on goods and services?
the purchases of wireless services for the House of Representatives
Potential GDP is the value of real GDP when _______.
the unemployment rate equals the natural unemployment rate
The tables show the quantities of the goods that Harry bought and the prices he paid during two consecutive weeks. Harry's CPI market basket contains the goods he bought in Week 1. Calculate Harry's CPI in Week 2. What was his inflation rate in Week 2?
Harry's CPI in Week 2 is 128.1 Harry's inflation rate in Week 2 is 28.1
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
Describe two examples of people who work part time for economic reasons and two examples of people who work part time for noneconomic reasons. Marla is an associate at JCPenney who wants to work 40 hours week but works 25 hours a week because sales at JC Penney are slow. Marla works part time for _______ reasons. Joe is a server at Olive Garden who wants to work 40 hours a week but works 15 hours a week because the number of patrons at Olive Garden has decreased. Joe works part time for _______ reasons. Michelle is a student who wants to work 20 hours a week at Cost Cutters so she can attend school. Cost Cutters schedules her for 20 hours a week. Michelle works part time for _______ reasons. Florence is semi-retired and wants to work 15 hours a week at Walgreens so she can spend time with her grandchildren. Walgreens schedules her for 15 hours a week. Florence works part time for _______ reasons.
economic; economic noneconomic; noneconomic
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
What is the effect of the bias in the CPI? The bias in the CPI leads to _______ in government outlays and to _______ in taxes.
increases; decreases
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
The labor force participation rate is the percentage of the _____ who are members of the labor force.
working-age population
