econ final

The use of purchasing power parity prices

accounts for differences in the prices of the same goods in different countries when measuring real GDP.

the value of marginal product of labor is the

contribution of an additional unit of labor to a firms revenue

Menu costs refer to the __________.

costs businesses incur when they change prices

Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________.

decreased; increased

The slope of the labor demand curve can be attributed to the law of ______.

diminishing marginal productivity of labor

A worker is said to be unemployed if he ________.

does not have a job, has been actively looking for one in the prior 4 weeks, and is available for work

Employers often end up laying off more workers during a recession because of _________.

downward rigidity of wages

In theory, any object ______ could play the role of fiat money.

in limited supply

if the value of marginal product of a worker is $20 and the market price of the good she produces is $5, her marginal product is_____

4 units

Suppose that the money supply increases by 10 percent while real GDP increases by 6%. What does the quantity theory of money predict the inflation rate will be?

4%

Any change that affects the entire schedule relating the quantity of labor and the value of the marginal product of labor will _________, assuming all else equal.

shift the labor demand curve

According to the quantity theory of money, inflation is caused by

the money supply growing faster than real GDP.

people know that the inflation rate will decrease from 7 percent to 3 percent. as a results

the nominal interest rate falls by 4 percentage points

During a deflationary period,

the nominal interest rate is less than the real interest rate.

If prices in the economy rise, then

the purchasing power of the dollar declines.

when the inflation rate is negative, the

the real interest rate is greater than the nominal interest rate

A profit-maximizing firm will pay a worker __________

the value of the worker's marginal product

The impact of an increase in the wage rate on labor demand is represented by a(an) ________ the demand curve for labor, assuming all else equal.

upward movement aong

Discouraged workers are

workers who have stopped looking for work because they believe there are no jobs for them.

If the marginal product of a worker is 10 units and each unit of the good is sold for $5, the value of the marginal product of the worker is _______.

$50

The labor force participation rate equals the

(labor force divided by working-age population) × 100.

If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is

-3%

Which of the following equations best approximates the growth rate of real GDP, the growth rate of nominal GDP, and the inflation rate?

Growth rate of real GDP = Growth rate of nominal GDP - Inflation rate.

Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP?

It must increase by exactly 20 percent.

Which of the following explains why frictional unemployment exists in an economy?

It takes time for an unemployed worker to find a firm with a well-matched job vacancy.

When Terry retired from Caterpillar, he received a pension: Caterpillar would pay him $50,000 the first year he was retired, with the amount increase by 5 percent each year thereafter. If inflation turned out to be 8 percent each year, what would happen to the real value of Terry's pension?

It would decrease each year by 3 percent.

Which of the following statements correctly highlights a difference between real GDP and nominal GDP?

Real GDP strips out the effect of changing prices on the value of goods and services produces, while nominal GDP does not strip out the effect of changing prices on the value of goods and services produced.

What is the primary difference between modeling expansions and recessions using the labor market model?

Rigid wages are relevant for modeling recessions but not for modeling expansions.

A country's marginal product of labor falls during winter due to excessive cold. Which of the following is likely to happen in this case, assuming all else equal?

The country's labor demand curve will shift to the left in winter.

You agree to lend $1,000 for one year at a nominal interest rate of 10%. You anticipate that inflation will be 4% over that year. If inflation is instead 3% over that year, which of the following is true?

The person who borrowed the $1000 will be worse off as a result of the unanticipated decrease in inflation.

Which of the following could cause nominal GDP to decrease, but real GDP to increase?

The price level falls and the quantity of final goods and services produced rises.

What will happen to the demand curve for tea workers if the price of tea increases, assuming all else equal?

There will be a right shift of the demand curve for tea workers.

Which of the following falls during an economic boom?

Unemployment

The profit-maximizing rule for a competitive firm is to hire labor until __________.

Value of marginal product of labor = Wage

Assuming all else equal, if the price of each unit of capital rises, _______

a firm's labor demand curve will shift to the left

Betsy enters a roadside cafeteria and orders a medium-sized cappuccino and a chicken burger. She hands over $5 at the cash counter and collects the food. In this example, money serves the function of __________.

a medium of exchange

Structural unemployment is the result of

a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.

If the central bank wants to reduce the effects of a recession, it would adopt a(an)

expansionary monetary policy

The paper currency that is currently used in the United States is an example of ________ money.

fiat

Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

greater than 7 percent.

If the quantity of goods and services produces in the economy decreases,

it may be possible for nominal GDP to increase.

recessions are periods of

left shifts in the labor demand curves

An initial leftward shift in labor demand often creates a cascading chain of events, amplifying the impact of the initial shock. This is known as the ________ effect.

multiplier

Real GDP will increase

only if the quantity of final goods and services produced rises.

If prices are rising on average, then

real GDP will be greater than nominal GDP in the years before the base year.

the _______ interest rate approximately equals the _______ interest rate minus ________

real, nominal, inflation rate

Ryan saved $50,000 last year in his bank account so that he could buy a car this year. In this case, money served the function of a ________.

store of value

The cost of inflation will be minimized if ____________.

the growth rate of inflation equals the growth rate of wages

According to the quantity theory of money, the inflation rate equals

the growth rate of the money supply minus the growth rate of real output.

According to the quantity theory of money, when the gap between the growth rate of money supply and the growth rate of real GDP widens, ______.

the inflation rate increases

what is true when wages are above the market-clearing wage?

the larger the gap between the current market wage and the market-clearing wage, the greater will be the amount of unemployment