Economics exam three
--- reduces the purchasing power of those receiving an annuity or any other fixed payment over time such as a pension.
Inflation
---- GDP measures the constant dollar value of all final goods and services produced in a country during a fixed period of time.
Real
Net exports equal ---- minus -----
imports exports
Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX) characterizes:
real GDP expenditures.
The consumer price index (CPI) measures:
the average price of a market basket of goods.
The Consumer Price Index (CPI) is constructed using the goods and services purchased by the ---- household
Average
Economists define----- as a general increase in the prices of goods and services.
Inflation
A quick and easy way to estimate how long it will take for a number or amount to double in size given a constant rate of growth.
The rule of 72
Nominal GDP is a good snapshot of the current value of production in an economy but it cannot be used to make comparisons over time because:
prices change.
Suppose that expenditures by the federal government are $35 billion, expenditures by the state governments are $50 billion, and expenditures by the local governments are $25 billion. Government purchases of goods and services equal--- billion
$110 billion
Suppose that $10 billion in goods and services was exported to other countries; $5 billion in goods and services was imported; expenditures by federal state and local governments on goods and services totaled $35 billion; over the course of the year firms purchased $20 billion worth of new capital; and consumers spent $14 billion on durable goods, $30 billion on nondurable goods, and $25 billion on services. GDP was ---
$129 billion
If an economy exports $12 billion worth of goods and services and imports $8 billion worth the amount of its net exports is ------ billion
$4
Suppose that in the last year consumers spent $10 billion on durable goods, $40 billion on nondurable goods, and $35 billion on services. Consumption equals---
$85 billion
Suppose that last year a total of $15 billion in goods and services was exported to other countries while $6 billion was imported. Net exports equals ---- billion
$9 billion
Suppose that in the last year consumers spent $14 billion on durable goods, $35 billion on non-durable goods, and $46 billion on services. Consumption equals $_____ billion.
$95
Which of the following are the tools of fiscal policy? 1. Taxation 2. Open Market Operations 3. Interest Rate Changes 4. Government Purchases
1 and 4
If the labor force is 150 million and the number of employed is 20 million, the number of unemployed equals --------- million workers.
130 millon
If the labor force is 170 million and the number of employed is 25 million, the number of unemployed equals------- million workers
145 million workers
Suppose that in year 1, real GDP per capita was $30,000 billion and in year 2, real GDP per capita rose to $34,500 billion. The growth rate of real GDP per capita was
15%
Suppose that real GDP per capita equals $25,000 and that the growth rate of real GDP per capita is 4 percent per year. According to the rule of 72, it will take ------ years for real GDP per capita to double to $50,000.
18
If the CPI was 240 in Year 1 and 245.1 in Year 2, what is the inflation rate between year 1 and year 2? To find the inflation rate: ([CPI2−CPI1]/CPI1)×100=([245.1−240]/240)×100
2.13%
Suppose 155.2 million workers are employed and 6.8 million are unemployed in an economy. The unemployment rate equals
4.4%
Suppose the labor force in an economy equals 153 million workers. Out of 153 million workers, 145.2 million workers are employed and 7.8 million are unemployed. Hence, the unemployment rate equals
5.1%
Which of the following policies involves decreasing government purchases and/or increasing taxes? A contractionary monetary policy An expansionary fiscal policy A contractionary fiscal policy An expansionary monetary policy
A contractionary fiscal policy
What is the effect of a successful expansionary fiscal policy on price level and output?
Both increase
Gross domestic product is equal to the total sum of four categories:
C + I + G + NX
By allocating time and resources to schooling instead of another activity, you will have more human ----- in the future, increasing your productivity.
Capital
Which of the following best describes fiscal policy? The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP Changes in government purchases and/or taxes designed to achieve full employment and low inflation The short-term fluctuations experienced in the economy due to changes in levels of economic activity The actions taken by a country's central bank to expand the money supply and lower interest rates
Changes in government purchases and/or taxes designed to achieve full employment and low inflation
An economic indicator used to measure the average price of a market basket of goods and services over time is the:
Consumer Price Index.
As an economy expands, the number of people who rely on government programs such as Medicaid, food stamps, and housing assistance fall, causing government expenditures to automatically
Decrease
Inflation is caused by increases in aggregate---
Demand
The notion that developing countries can catch up or converge with developed countries is one of the key insights of a branch of economics called ---- economics
Development
Income minus taxes gives us the value for ________ income.
Disposable
If idle resources are put to use and more output is produced in an economy, there will be
Economic growth
This policy involves increasing government purchases and/or decreasing taxes.
Expansionary fiscal policy
Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX) characterizes real GDP-----
Expenditures
For the economy as a whole, we keep track of the output flowing between countries using the concept of net----
Exports
T or F: Encouraging economic growth in developing economies involves just increasing the amount of capital available to workers.
False
T or F: The production possibilities frontier model is a realistic model of economic growth in the real world.
False
Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called
Fiscal Policy
---- unemployment happens all the time as people decide to move to different places, learn new skills, and mature in their careers.
Frictional
Unemployment results from workers searching and waiting for job opportunities.
Frictional
The natural rate of unemployment is equal to the sum of ---- and ----
Frictional Structural
The level of real GDP at the natural rate of unemployment is called ---- real GDP
Full-employment
The path to recovery using fiscal policy involves a jump start of increased ------ spending followed by multiple rounds of increased consumer spending as the economy recovers and incomes rise.
Government
The time it takes for something to double is approximately equal to 72 divided by the ----- rate
Growth
If the CPI and the inflation rate calculated from it do a good job at tracking price changes over time, then the purchasing power of retirees is:
Holding steady over time.
Real GDP is an ------ adjusted measure that reflects the value of all final goods and services produced in a country during a fixed period of time.
Inflation
We distinguish between nominal income and real income because receiving a salary increase is better than not getting one, but the additional dollars may not allow you to buy as many goods and services as last year due to
Inflation
When calculating the --- rate in an economy, the most straightforward approach is to compare the price level in one year with the price level in the next year.
Inflation
In general, an increase in the money supply causes:
Inflation.
Which of the following is true of the formula [(New Real GDP −- Old Real GDP)/Old Real GDP] ×× 100%?
It gives us the economic growth rate.
Which of the following people illustrates a case of frictional unemployment? Joe who has recently been laid off due to a fall in demand Jean who works part-time at an employment agency but would like to work full-time if given the opportunity John who has lost his job because his skills have become obsolete Jane who has resigned following a work dispute and is currently searching for a similar line of employment
Jane who has resigned following a work dispute and is currently searching for a similar line of employment
Because retirees tend to consume more ------- care than the average person, the rate of inflation associated with the cost of providing medical care plays a bigger role for the retirees' cost of living than for the typical consumer.
Medical
The Consumer Price Index (CPI) is calculated
Monthly
The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called the ---- effect
Mutliplier
Which of the following statements is true? NX = X + M. NX = C + I. NX = M - X. NX = X - M.
NX = X - M.
A fully employed economy is one that is operating at what economists call the: average rate of unemployment. usual rate of unemployment. expected rate of unemployment. natural rate of unemployment.
Natural rate of unemployment.
Suppose that last year a total of $12 billion in goods and services was exported to other countries while $8 billion was imported.
Net exports equals $4 billion
---- income is the number of dollars you receive for your labor.
Nominal
Which of the following is not a way in which economic growth can occur? Prices fall. The country obtains additional resources. Existing resources become more productive. New technologies increase productivity.
Prices fall
---- income measures the purchasing power of what you earn every month.
Real
The points on the production possibilities frontier show how we are allocating our ---- to the production of two different goods or services.
Resources
---unemployment is usually the longest type of unemployment.
Structural
Which of the following are tools of fiscal policy? Taxation and open market operations Open market operations and interest rate changes Taxation and government purchases Interest rate changes and government purchases
Taxation and government purchases
Which of the following offers an example of cyclical unemployment? The unemployment associated with workers changing jobs The increase in unemployment during recessions The rise in unemployment among farm workers when they move from processing apples to processing oranges The rise in unemployment for stable workers after the development of gasoline-powered automobiles and the resulting long-term decline in horse-and-buggy transportation
The increase in unemployment during recessions
Which of the following offers an example of frictional unemployment? The unemployment associated with workers changing jobs The increase in unemployment during recessions The rise in unemployment for stable workers after the development of gasoline-powered automobiles and the resulting long-term decline in horse-and-buggy transportation
The unemployment associated with workers changing jobs
T or F: It does not matter which year you use as the base year as long as you are consistent.
True
T or F: The price of a good is a measure of how much money it takes to buy that good.
True
If discouraged workers see an improvement in economic conditions, they could decide to reenter the labor market start looking for work and be counted as
Unemployed
The natural rate of ----- equals the sum of the frictional and structural unemployment rates.
Unemployment
The size of the ------ rate in an economy is an indicator of how hard it may be for a person to find another job.
Unemployment
If the unemployment rate in a country was ----- there would be no frictional unemployment and no structural unemployment.
Zero
The growth rate of real GDP is calculated as:
[(New GDP - Old GDP)/Old GDP] * 100.
Using a production possibilities curve economic growth resulting from the use of previously idle resources is shown as:
a movement toward the curve.
Using real GDP provides us with a better picture of the economy because it:
allows us to see what is happening to the amount of production over time without price changes skewing our calculation.
Using a production possibilities curve, economic growth resulting from additional resources is shown as:
an outward shift of the curve.
Changes to taxes and spending that occur without direct action by the government are called:
automatic stabilizers.
Real GDP uses prices from a ---- year, also referred to as constant prices.
base
The multiplier effect is/are the:
concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP.
Gross domestic product is equal to the total sum of:
consumption, gross investment, government purchases, and net exports.
Price level and output both decrease from a successful ___________ fiscal policy.
contractionary
The application of fiscal policy to decrease aggregate demand is called a -----
contractionary fiscal policy
In calculating real GDP, we use:
current-year quantities and base-year prices.
Price level and output both increase from a successful __ fiscal policy.
expansionary
The application of fiscal policy to increase aggregate demand is called
expansionary fiscal policy
Price level and output both increase from a successful expansionary
fiscal or monetary policy
The path to recovery using expansionary fiscal policy involves:
increased government spending. multiple rounds of increased consumer spending.
When unemployed workers become discouraged, they: join the labor force and begin looking for a job. leave the labor force and the unemployment rate goes down even though the labor market is worsening. leave the labor force and the unemployment rate goes up. redouble their efforts and the unemployment rate goes down.
leave the labor force and the unemployment rate goes down even though the labor market is worsening.
The expenditures or the dollar value of all the final goods and services that are produced during a fixed period of time are:
nominal gross domestic product.
Once workers in the economy have plenty of capital, adding more capital will:
not be helpful and will not contribute to economic growth.
The unemployment rate equals the:
number of unemployed workers divided by the sum of the employed and unemployed workers and multiplied by 100.
A graph that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:
production possibilities frontier.
The measure of the purchasing power of what you earn every month is:
real income.
If the unemployment rate were zero, there would be neither -------unemployment nor ------- unemployment.
structural frictional
Any salary that is rising slower than the rate of inflation is actually falling, in real terms. This statement refers to
the difference between real and nominal income.
For the average worker in the United States,: the higher the unemployment rate all else held the same the more unemployed people are looking for jobs and the longer someone is likely to be searching for a position. the lower the unemployment rate all else held the same the more unemployed people are looking for jobs and the longer someone is likely to be searching for a position. the higher the unemployment rate all else held the same the more unemployed people are looking for jobs and the less time someone is likely to be searching for a position. the higher the unemployment rate all else held the same the fewer unemployed people are looking for jobs and the less time someone is likely to be searching for a position.
the higher the unemployment rate all else held the same the more unemployed people are looking for jobs and the longer someone is likely to be searching for a position.
Full-employment GDP refers to:
the level of real GDP produced in an economy when it is operating at the natural rate of unemployment.
A percentage change in a value equals the:
value in the later year minus the value in the earlier year divided by the value in the earlier year and multiplied by 100.
The inflation rate equals the:
value of the CPI in the later year minus the value of the CPI in the earlier year divided by the value of the CPI in the earlier year and multiplied by 100.
