ECON EXAM 2

When the economy is at full employment, _____ is zero.

cyclical unemployment

Starting in 1980, India's economy began _____ that of the United States.

growing faster than

(Table: Labor Force Data) Use Table: Labor Force Data. Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million.

27

(Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of real GDP from 2016 to 2019 was:

33%

Of the following firms, _____ is the best example of a company that offers an efficiency wage.

Costco

The inflation-adjusted measure of aggregate output typically used by economists is called:

real gross domestic product.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2019 is the base year, real GDP in 2019 was:

$445

A minimum wage of $7.25 per hour can cause structural unemployment if the equilibrium wage is:

$6.85

(Table: Pizza Economy III) Use Table: Pizza Economy III. Considering 2018 as the base year, real GDP in 2019 was:

$69,000

Suppose there are only two countries, country A and country B. Country A imports $200 million worth of goods and services from country B. Country B imports $100 million worth of goods and services from country A. Net exports for country _____ equal _____.

A; -$100 million

When a firm buys a new machine for its business, it is considered to be:

investment spending.

Total factor productivity:

is the amount of output produced from a given amount of factor inputs.

Government spending is NOT like investment when it:

is used to monitor environmental restrictions.

The natural rate of unemployment changes when:

labor market institutions change.

Frictional unemployment is NOT described as _____.

large compared to unemployment that arises from a downturn in the business cycle

In a report published in 1972, the Club of Rome argued that:

limited supplies of natural resources made long-run growth unsustainable.

According to the convergence hypothesis, differences in real GDP per capita among countries tend to narrow over time because countries that start with a _____ real GDP per capita tend to have _____ growth rates.

lower; higher

Real per capita GDP is:

real GDP divided by the population.

The total value of all final goods and services produced in a given year, calculated using the prices of a selected base year, is:

real GDP.

Inflation is a(n):

rising aggregate price level.

Suppose a consumer buys a Perfect Pizza frozen cheese pizza at the grocery store for $10. Perfect Pizza purchased the dough and tomato sauce from a food-processing company for $2 and bought the cheese for $1. It sold the pizza to the store for $5. How much has GDP increased?

$10

Table: Per Capita GDP) Use Table: Per Capita GDP. If 2016 is the base year, real GDP in 2016 was:

$3,000

Holding human capital per worker and technology constant, the estimated aggregate production function in Jamaica is Y / L = 40 × K / L, where Y = real output, L = number of workers, and K = quantity of physical capital. If K / L = $80, then real GDP per worker is:

$3,200

One factor that does NOT explain why the average worker in the United States today produces more output than the average worker a century ago is that the modern worker:

works longer hours.

(Table: Per Capita GDP) Use Table: Per Capita GDP. Per capita nominal GDP in 2016 was:

(3,000 / 5) = $600.

According to estimates of the aggregate production function, each 1% increase in physical capital, holding human capital and technology constant, raises labor productivity by _____%.

0.33

Suppose that real GDP per capita in the United States is $32,000, while its annual growth rate is 2%, and that real GDP per capita in China is $4,000, while its annual growth rate is 7%. How long will it take China's real GDP per capita to double?

10 years

(Scenario: Market Basket). Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume that the unit prices of these goods are as follows for the years noted and that 2018 is the base year. What is the value of the price index in 2018?

100

According to the rule of 70, if a country's real GDP per capita grows at an annual rate of 2% instead of 3%, it will take _____ additional years for that country to double its real GDP per capita.

11.67

A typical family in the United States in 1900 had a purchasing power equal to _____% of the real U.S. GDP per capita in 2016.

12

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Assuming year 3 is the base year, real output in year 4 is:

140

$(Table: Price and Output Data) Use Table: Price and Output Data. The value of year 2's output in real dollars is:

15

(Table: Labor Force Data) Use Table: Labor Force Data. Suppose the labor force participation rate is 62%. The labor force is equal to _____ million.

161.2

The Paris Agreement aims to limit the rise of the Earth's temperature to no more than _____ degrees Celsius.

2

(Table: Population Data for Roanoke County) Use Table: Population Data for Roanoke County. What is the unemployment rate?

2.3%

If Jerome's income is $120,000, and the price level is 4, then Jerome's real income is $_____.

30,000

(Table: Employment Data) If marginally attached workers are included in the labor force, the number of persons in the labor force is _____ million.

33

Suppose that real GDP per capita in the United States is $32,000, while its annual growth rate is 2%, and that real GDP per capita in China is $4,000, while its annual growth rate is 7%. If current trends persist, how many years will it take for China's real GDP per capita to surpass the U.S.'s real GDP per capita?

40 to 45 years

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

5.56%

If there are 100 million people in the total population, a labor force of 50 million, and 47 million employed workers, the unemployment rate is _____%.

6

The Republic of Livonia has an adult population of 100 million; 60% of Livonia's population is employed, and 10% of the people are unemployed. The labor force participation rate in Livonia is _____%.

70

(Table: Price and Output Data) Use Table: Price and Output Data. The price index for year 2 is:

80

Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____%, and the real interest rate is _____%.

9; 6

The national income and product accounts are calculated by the:

Bureau of Economic Analysis.

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. Which change in real GDP is MOST likely to have resulted from a gradual deterioration in property rights because of excessive government intervention?

C to B

Which transaction will be included in the official measure of GDP this year?

Sean bought a new truck this year.

Which of the following illustrates consumption expenditure?

Stephanie buys a laptop for her brother.

Which statement is TRUE?

The labor force is the total number of people working plus those who are unemployed.

Domestically produced goods and services sold to people in other countries are known as:

exports

Economic growth in sub-Saharan Africa was poor through 1995. Which of the following is NOT a factor in Africa's poor growth performance?

a low population

Items counted as part of GDP include:

a new car exported during the current year.

High rates of anticipated inflation affect:

all aspects of the economy.

Diminishing returns to physical capital suggest that:

at some point, increasing the amount of physical capital per worker is not worth the cost of the additional capital.

When inflation rises unexpectedly, borrowers will _____, and lenders will _____.

benefit; be hurt

An increase in the capital stock would:

cause a movement to the right along a stationary production function.

A laptop computer purchased by a private individual for personal use is:

consumer spending

A factor that does NOT drive productivity growth is:

convergence of real GDP per capita across nations.

Nominal GDP is:

current-dollar GDP.

It is generally accepted that a binding minimum wage does NOT:

decrease the amount of labor supplied.

(Figure: The Effect of a Minimum Wage) Use Figure: The Effect of a Minimum Wage. Suppose that, after a period in which the minimum wage is WF, the government abolishes the minimum wage. Employment will:

decrease to QE.

The use of online banking _____ the _____ costs of high inflation.

decreases; shoe-leather

Deflation is a:

decreasing aggregate price level.

Economists frequently use GDP per capita to show:

differences in living standards across countries.

The aggregate production function exhibits _____ returns to physical capital.

diminishing but positive

A drop in the inflation rate is called:

disinflation

An above-equilibrium wage offered by an employer as an incentive for increased work effort and better performance is known as a(n) _____ wage.

efficiency

Which item is included in the calculation of GDP?

expenditure on new construction

Gross domestic product is the value of all _____ produced in an economy over a given period.

final goods and services

In the factor markets:

firms buy resources.

People who are changing jobs are counted in _____ unemployment.

frictional

Natural unemployment equals _____ unemployment plus _____ unemployment.

frictional; structural

An example of a structurally unemployed worker is a(n):

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

In 1820, Mexico had a higher real GDP per capita than did Japan. Yet now Japan is one of the richest countries in the world, and Mexico is poor. Japan's high rate of economic growth likely CANNOT be explained by:

heavy government intervention in markets.

Labor productivity growth can be attributed to:

improved technology.

Generous unemployment benefits are likely to cause a(n):

increase in the unemployment rate.

(Figure: The Effect of a Minimum Wage) Use 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. The quantity of labor supplied will _____, resulting in structural unemployment.

increase to QS

(Figure: The Effect of a Minimum Wage) Use 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. The quantity of labor supplied will _____, resulting in structural unemployment.​

increase to QS

Over the past year, Hakeem has been working very hard. His employer has taken notice and given Hakeem a 6% raise. During this past year, overall prices in the economy have increased by 4%. Hakeem's real wage has:

increased by 2%.

(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. From 2018 to 2019, real GDP _____ by _____%.

increased; 12.5

GDP for a given period measures the:

market value of the final goods and services produced within the borders of a country.

When hyperinflation forces Pedro to change the price stickers on the books in his bookstore very frequently to keep up with the aggregate price level, Pedro is facing:

menu costs

An example of investment spending is the purchase of a:

new tractor by a farmer.

A person who is NOT working or looking for work is:

not counted in the unemployment rate.

The rate of unemployment is found by dividing the:

number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed

GDP is the sum of:

personal consumption, investment, government purchases of goods and services, and net exports.

Which factor will NOT increase labor productivity?

population growth

Many economists view resource scarcity as a:

problem resolved fairly well by the market mechanism.

Anong's credit union charges a fee for transferring funds from her money market account to her checking account. The rate of inflation has been 12% lately, so Anong has transferred funds from her money market account to her checking account more often than usual. This cost is an example of the _____ costs of high inflation.

shoe-leather

Using historical growth data, economists have found that the estimated aggregate production function:

shows that, with human capital and the state of technology fixed, successive increases in physical capital per worker lead to smaller increases in productivity.

An example of an intermediate good is:

steel purchased by aircraft manufacturers.

A factor that promotes productivity and therefore economic growth is:

technological progress

The aggregate production function does NOT depend on:

the amount of natural resources available.

The price index in the current year is the cost of the market basket in ____ year divided by the cost of the market basket in ____ year times 100.

the current; the base

Which of the following is likely to increase the natural rate of unemployment?

the entrance of many new people into the labor force

Long-run economic growth depends almost entirely on:

the growth of labor productivity.

Real income is income divided by _____.

the price level

Which price measure indicates changes in the cost of a market basket containing raw commodities such as steel, electricity, and coal?

the producer price index

Real GDP is:

the value of all final goods and services adjusted for price changes.

The unemployment rate is the ratio of all people who are:

unemployed to those in the labor force.

Unemployment rates are usually higher in Europe than in the United States because:

unemployment benefits are more generous in Europe than in the United States.