Econ Test 2 (homework)
Which of the following is most likely to lead to sustained long-run growth? A. increases in human capital B. transfer of workers from agricultural to industrial sector C. increase in the labor participation rate D. exploration of natural resources
A. increases in human capital
Which of the following is an example of structural unemployment?
Autoworkers lose jobs due to globalization and must retrain to find new jobs.
Which of the following statements about prices and inflation is not correct? A.The inflation rate shows the percentage change in prices across periods of time. B. Prices generally increase at the same rate across most periods of time. Your answer is correct. C.Inflation represents a general rise in prices over periods of time. D.The price level measures the average prices of goods and services across the economy.
B. Prices generally increase at the same rate across most periods of time.
What are the four major components of expenditures in GDP?
Consumption (C), Investment (I), Government Purchases (G), and Net Exports (NX)
Which of the following transactions is NOT counted in GDP? A. The U.S. government pays for national defense B. A business buys new computers for its workers C. Consumer buys a new house D. Consumer mows he own lawn.
D. Consumer mows his own lawn.
Briefly explain whether you agree or disagree with the following statement: "I don't believe the government price statistics. The CPI for 2012 was 218, but I know that the inflation rate couldn't have been as high as 118 percent in 2012."
Disagree. The inflation rate is the percentage increase in the price level from the previous year, not the base year.
According to Costco's CEO, Jim Sinegal: "Paying good wages and keeping your people working for you is good business...Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you." What is Costco's CEO referring to?
Efficiency wages
In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income?
Every penny spent on a good service must end up as someone's income.
Suppose John Q. Worker is currently unemployed. Each day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. If someone asks John Q. what he does for work, he tells them that he is currently "in-between jobs." Which of the following best classifies John Q.'s unemployment status?
Frictionally unemployed
Which of the following is a true statement about real and nominal GDP?
If real GDP increases from one year to the next, we know that production goods and services has risen.
Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?
It does not account for inaccurate responses to the Current Population Survey, discouraged workers are not considered unemployed, underemployed people are considered employed, and it fails to account for illegal activities.
Suppose a house is built and sold in the year 2006. If the house is resold in the year 2015, is the value of the house included in Gross Domestic Product (GDP) for 2015?
No. GEDP for 2015 includes only production that occurs during 2015.
If the GDP deflator is 142, by how much have prices changed since the base year?
Prices have increased by 42%
Which of the following can give an early warning of future increases in the price level?
Producer price index
Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this argument, which of the following relevant issues is he ignoring?
Structural unemployment will exist in an economy that is innovative.
What is the percentage of the working-age population in the labor force?
The labor force participation rate
What is the difference between the value of a firm's final product and the value added by the firm to the final product?
The value of a firm's final product is the sale price; value added is the difference between the sale price and the price of intermediate goods.
Which equation represents the relationship between GDP and the four major expenditure components?
Y=C+I+G+NX
Would the services of a real estate agent who helped sell (or helped buy) the house be included in GDP for 2015?
Yes. GDP for 2015 includes the market value of final goods and services. This includes real estate services.
If the minimum wage is abolished, then the unemployment rate will...
decrease
Holding all else constant, a federal government budget deficit will
decrease the supply of loanable funds and increase the equilibrium real interest rate.
When an unemployed person drops out of the labor force, it...
does not affect the employment-population ratio.
When an unemployed person drops out of the labor force, it
does not affect the employment-population ratio.
The underground economy can be described as
economic activity that is hidden from the government to avoid taxes or because the activity is illegal.
When the economy is at full employment, which types of unemployment remain?
frictional and structural
Government unemployment insurance tends to
increase the unemployment rate by lowering the opportunity cost of job search
Potential GDP
increases over time as the labor force grows and as technological change occurs
The chapter explains that it is impossible to know whether a particular nominal interest rate is "high" or "low" because
it all depends on the inflation rate
Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?
it fails to account for illegal activities, It does not account for inaccurate responses to the Current Population Survey, Underemployed people are considered employed, Discouraged workers are not considered unemployed.
Lavor Force Participation Rate equation
labor force participation rate = # of people in the labor force/# of working age people X 100
The GDP deflator is equal to
nominal GDP divided by real GDP, multiplied by 100.
What is the difference between a nominal variable and a real variable
nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation
The employment-population ratio measures the
percentage of the working age population that is employed
The payment of government unemployment insurance reduces the severity of recessions by
preventing a huge drop in income and spending for the unemployed.
Gross national product, GNP, of the U.S. is the market value of all final goods and services...
produced by residents of the U.S. anywhere in the world.
If nominal GDP rises we can say that
production has risen or prices have risen or both have risen.
Which of the following is the best measure of the standard of living of the typical person in a country?
real GDP per person
The unemployment rate
shows the percentage of the labor force that is considered unemployed.
In determining whether to borrow funds, firms compare the rate of return they expect to make on an investment with
the interest rate they must pay to borrow the necessary funds
The labor force participation rate
the percentage of the working age population in the labor force
The employment-population ratio measures what?
the percentage of the working age population that is employed.
The "normal" underlying level of unemployment and frictional unemployment is
the same of structural unemployment and frictional unemployment, the natural rate of unemployment, and the full-employment rate of unemployment.
When an unemployed person drops out of the labor force, the unemployment rate
understates the true degree of joblessness in the economy
When an unemployed person drops out of the labor force, the unemployment rate...
understates the true degree of joblessness in the economy.