Interm Macroeconomics Exam 1

If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals _____ million.

200

Compared with real gross domestic product (GDP) during a recession, real GDP during a depression:

decreases more severely.

An increase in the price of goods bought by firms and the government will show up in:

the GDP deflator but not in the CPI.

An increase in the price of imported goods will show up in:

the consumer price index (CPI) but not in the gross domestic product (GDP) deflator.

Two equivalent ways to view gross domestic product (GDP) are as the: (Carefully read each option)

total income of everyone in the economy or the total expenditure on the economy's output of goods and services

The two MOST important factors of production are:

capital and labor.

Gross national product (GNP) equals gross domestic product (GDP) _____ income earned domestically by foreigners _____ income that nationals earn abroad.

minus; plus

An economy's factors of production and its production function determine the economy's:

output of goods and services.

Wage rigidity:

prevents labor demand and labor supply from reaching the equilibrium level.

Macroeconomics is the study of the:

economy as a whole.

The unemployment rate:

has never been zero in the United States.

Real gross domestic product (GDP) is a better measure of economic well-being than nominal GDP because real GDP:

measures changes in the quantity of goods and services produced by holding prices constant.

When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is likely to be _____ the equilibrium wage.

much greater than

The amount of capital in an economy is a(n) _____, and the amount of investment is a(n) _____.

stock; flow

During the period between 1900 and 2000, the unemployment rate in the United States was highest in the: (Hint: The unemployment rate peaked during the Great Depression.)

1930s.

If nominal gross domestic product (GDP) grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew (inflation rate) by approximately _____ percent. (Hint: Use the percentage changes formula on slide 37.)

2%

. If the consumption function is given by C = 500 + 0.5 (Y - T), and Y is 6,000 and if we assume T is given by T = 200 + 0.2Y, then C equals: (Carefully plug in values into the consumption function)

2,800.

If disposable income is 4,000, consumption is 3,500, government purchases is 1,000, and taxes are 800, national saving is equal to:

300

In Chapter 3's model, the supply and demand for goods and services are balanced by:

the interest rate

All of these EXCEPT _____ are important macroeconomic variables.

the marginal rate of substitution

When the unemployment rate is at a steady state:

the number of unemployed people finding jobs equals the number of employed people losing jobs.

When saving (the supply of loanable funds) increases as the interest rate increases (i.e. we have a upward sloping saving curve), an increase in investment demand results in a _____ real interest rate and _____ in the quantity of investment.

higher; an increase

An example of an imputed value in the gross domestic product (GDP) is the: (Hint: Related to the required reading material "Rules for computing GDP".)

housing services enjoyed by homeowners.

In Chapter 3' model, a decrease in the real interest rate could be the result of a(n):

increase in taxes

A fixed-weight price index like the consumer price index (CPI) _____ the change in the cost of living because it _____ take into account that people can substitute less expensive goods for ones that have become more expensive.

overestimates; does not

Any policy aimed at lowering the natural rate of unemployment must either _____ the rate of job separation or _____ the rate of job finding

reduce; increase

Economists call the changes in the composition of demand among industries and regions:

sectoral shifts.

An assumption of _____ is more plausible for studying the short-run behavior of the economy, while an assumption of _____ is more plausible for studying the long-run, equilibrium behavior of the economy.

sticky prices; flexible prices

The natural rate of unemployment is:

the average rate of unemployment around which the economy fluctuates.

Sectoral shifts:

make frictional unemployment inevitable.

In the U.S. economy today (2022), real gross domestic product (GDP) per person, compared with its level in 1900, is about:

ten times as high.

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately _____ percent.

4.7%

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6Y. Investment (I) is given by the equation I = 2,000 - 100r, where r is the real interest rate, in percent. In addition, assume that G = 0. In this case, the equilibrium real interest rate is:

5 percent

Macroeconomic models are used to explain how _____ variables influence _____ variables.

exogenous; endogenous

To avoid double counting in the computation of gross domestic product (GDP), GDP includes only the value of _____ goods.

final

Short-term unemployment is MOST likely to be _____ unemployment, while long-term unemployment is mostly likely to be _____ unemployment

frictional; structural

In a simple model of the supply and demand for pizza, when buyers' income increases, in the new equilibrium, the price of pizza _____ and the quantity purchased _____.

increases; increases

One reason for unemployment is that:

it takes time to match workers and jobs.

If the gross domestic product (GDP) deflator in 2009 equals 125 and nominal GDP in 2009 equals $15 trillion, what is the value of real GDP in 2009?

$12 trillion

Assume that a firm buys all the parts that it puts into an automobile for $10,000 and sells the automobile for $22,000. In this case, the value added by the automobile company is:

$12,000.

If gross domestic product (GDP) measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and net exports are −$1,910, then government purchases are:

$2,977.

2. Assume that a tire company sells four tires to an automobile company for $400, another company sells a navigation system for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in gross domestic product (GDP) is:

$20,000

When some iPads are produced but unsold this year and put away for the future sale, they are called:

. investment in inventories.

In an economy, suppose we have a fixed typical consumer's basket of goods including 20 units of A and 10 units of B. In the base year, the price of A is 10 and the price of B is 15; in a later year, the price of A is 11 and the price of B doesn't change. CPI for this later year approximately equals_____

105.7

In this economy, quantity produced and price of goods are listed as follows, then the GDP deflator in Later Year should be: Base Year Later Year Price of good A 100 200 Quantity of good A 100 200 Price of good B 100 100 Quantity of good B 100 100

166.7

All of these are reasons for frictional unemployment EXCEPT:

unemployed workers accept the first job offer that they receive.

All of these are causes of structural unemployment EXCEPT:

unemployment insurance

All the followings are the results from permitting a higher minimum wage for teenagers EXCEPT:

a lot more easier for teenagers to get a job.

If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is _____ the equilibrium rate (the natural rate of unemployment), and in the next period it will move _____ the equilibrium rate.

below; toward

In the national income accounts, the purchases of durables, nondurables, and services by households are classified as:

consumption.

A graph of the rate of inflation in the United States over the twentieth century shows:

periods of deflation mixed with positive rates of inflation before 1955 but only positive rates of inflation after 1955.

The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if there is a tax law change that makes investment projects less profitable and decreases the demand for investment goods (but does not change the amount of taxes collected in the economy)?

point A

The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts spending, holding other factors constant?

point B

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases.

productivity