ECON Quiz 4 + Exam 1
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. (Q up + P down)
If an increase in crime causes households to spend money on police and security systems, GDP will rise.
True
If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.
True
If prices rise on average in the U.S. economy, the purchasing power of a dollar declines.
True
The inflation rate measures the percentage increase in the price level from one year to the next.
True
Unemployment caused by a business cycle recession is called cyclical unemployment.
True
In which of the following scenarios will the real interest rate be greater than the nominal interest rate?
When the economy is experiencing deflation.
Which of the following is an example of a worker experiencing cyclical unemployment?
a freight liner employee that got laid off because of the recession of 2007-2009
The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price. The CPI does not reflect this and ________ the cost of the market basket.
change; overestimates
The substitution bias in the consumer price index refers to the idea that consumers ________ the type or quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket.
change; overestimates
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would
decrease
If the BLS counted persons that are on active military service in the totals for employment, the labor force, or the working-age population, this would
decrease the measured unemployment rate
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?
discouraged workers
The purchase of a new house is included in
investment expenditures
When Mr. Peabody decides on the companies to which he will donate his time and money, a ________ issue is being addressed.
microeconomic
The real interest rate equals the nominal interest rate ________ the inflation rate.
minus
The base period for CPI calculations is generally 1982-84. In 2005, 50% of households accessed the Internet through a broadband connection that would not have existed in the 1980s. This potential for bias in the CPI is referred to as ________ bias and results in ________.
new product; the CPI overestimating the true change in the cost of living
The nominal interest rate equals the real interest rate __________ the inflation rate.
plus
The measure of production that values output using base-year prices is called
real GDP
If the price level rose in three consecutive years from 100 to 120 to 144, then the annual inflation rate over those years would
remain the same
When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called
substitution bias
If the economy is experiencing deflation,
the nominal interest rate will be lower than the real interest rate.
The unemployment rate is
the percentage of the labor force that is unemployed
What is the CPI in the year 2016 using 2016 as the base year?
100
A car that is produced in 2016 is not sold until 2017. According to the definition of GDP, in which year's GDP should it be counted?
2016
Which of the following is an example of a worker experiencing frictional unemployment?
A worker quits his job at the Post Office to find more interesting work.
Which of the following would be a consequence of substitution bias in the CPI?
Businesses would overcompensate employees for inflation when giving cost of living raises.
What are the three main kinds of unemployment?
Frictional, Structural, and Cyclical
Which of the following describes the accuracy of the Consumer Price Index?
Changes in the CPI overstate the true rate of inflation
The underground economy can be described as
Economic activity that is hidden from the government to avoid taxes or because the activity is illegal.
Eliminating structural unemployment would be good for the economy.
False
In the circular flow diagram, the value of all the income in the economy is greater than the value of goods and services produced in the economy.
False
Nominal income is equal to real income if the CPI is less than 100.
False
The full-employment rate of unemployment is zero
False
Which of the following is true about the consumer price index?
It assumes that consumers purchase the same amount of each product in the market basket each month.
Which of the following transactions would take place in the "underground economy"?
John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes.
Which of the following are the three biggies in macroeconomics?
Output & production (GDP), Employment, Prices
