Macro Econ HW set 2 + Practice exam 2
Product Units Produced Market Price Doors 5 $100 Windows 4 $50 Table 9.1 Total Market Value In the Table above, the total market value of the two products is
$700. (5*100)+(4*50)
By 1933, the worst year of the Great Depression, the unemployment rate rose to almost ____%.
25
From 1929 to 1933, GDP fell by almost ____ %.
27
In 2003, the U.S. civilian, non-institutionalized population consisted of about 220 million individuals. About 147 million people were in the labor force, of which almost 138 million were employed. The number of people unemployed was about
9 million 147 - 138 = 9 = 9 million
A country reports the total expenditures on the fixed CPI basket for the past three years. The cost of the CPI basket in 2008 was $23,000, the cost of the CPI basket for the base period, 2009, was $23,805, and the cost of the CPI basket in 2010 was $24,500. The CPI for 2008 is
96.6
The CPI stands for
Consumer Price Index.
The total production within an economy is measured as
Gross Domestic Product.
Which outcomes are consistent with falling aggregate supply?
Rising prices, falling GDP, rising unemployment rate
Which outcomes are consistent with rising aggregate demand?
Rising prices, rising GDP, falling unemployment rate
Which of the following is NOT an assumption of the classical model?
Wages and prices are fixed.
The Dehydrated Water Company produced 500 pounds of output while the Uncombusted Ash Company produced 400 pounds of output.
We cannot tell which company added more product to the economy without knowing the prices at which the products are sold.
The natural unemployment rate occurs
at the full employment level of unemployment.
In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is
a shift to AD2.
In calculating GDP, we must
add the market value of exports and subtract the market value of imports.
People expect their incomes will decrease next year. As a result, the ________ will shift ________.
aggregate demand curve; leftward
Which of the following changes does NOT shift the short-run aggregate supply curve?
an increase in the price level
Which of the following does NOT shift the aggregate demand curve?
an increase in the price level
Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of
an increase in the price level.
The value of used goods ________ counted as part of GDP ________.
are not; because they were counted during the period when they were counted as new goods.
To be counted as employed by the BLS, in the week before the survey the person must have worked for pay ________.
at least 1 hour
The AD curve shows the sum of
consumption expenditure, investment, government expenditures on goods and services, and net exports.
If nominal GDP increases this year, then real GDP
could increase, decrease, or not change.
As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their skills, the economy experiences
frictional unemployment.
A classical model of the economy predicts
full employment in the long run.
Inflation is defined as a
general upward movement of prices.
The expenditure approach values ________ and the income approach values ________.
goods and services at market prices; goods and services at factor prices
The short-run aggregate supply curve
has a positive slope.
Rightly or wrongly, most citizens in the United States expect that presidents
have control over economic outcomes.
An increase in nominal GDP could result from an increase in i. production. ii. prices. iii. taxes and subsidies.
i and ii
After calculating net domestic product at factor cost, to calculate GDP using the income approach, in part we must add
indirect taxes and depreciation.
A general upward movement of prices is called
inflation.
Economists agree that the CPI
is a possibly biased measure of the cost of living.
Real GDP can increase if the i. quantities of goods and services produced decrease and prices fall by a smaller percentage. ii. quantities of goods and services produced decrease and prices fall by a larger percentage. iii. quantities of goods and services produced decrease and prices do not change. iv. quantities of goods and services produced increase.
iv only
The CPI overstates inflation because the average consumer buys
less of those goods whose relative price has risen.
Along a short-run aggregate supply curve, a decrease in the price level means that
less output is produced as firms decrease production.
When the unemployment rate is greater than the natural unemployment rate, real GDP is
less than potential GDP.
In the United States, child labor laws
limit the amount and type of work that children can perform.
When calculating Gross Domestic Product, all output is converted to a common unit by
multiplying the units produced by the market price.
If a person is not working by choice then we can conclude that person is
not in the labor force.
Two years ago, Brenda quit her job to take care of her children. She has not looked for a job since then. According to official U.S. statistics, Brenda is
not in the labor force.
As a result of the oil price hikes and international competition in the 1970s, ________. When governments and businesses downsizing in the 1990s, ________.
structural unemployment increased; structural unemployment increased
How would you best describe a manufacturing employee who has been fired because he was replaced by a robot (new technology) and does not have the skills necessary to help operate the robot?
structurally unemployed
Structural unemployment includes people who become unemployed from
technological changes.
Gross Domestic Product measures
the amount of production in an economy.
The Great Depression challenged
the long-run model that was based on Classical assumptions.
An individual holds $10,000 in a checking account and the price level rises significantly. Hence
the individual's real wealth and consumption expenditure decrease.
Prior to the Great Depression, the predominant economic policy of the U.S. federal government was
to balance the budget and keep expenditures to a minimum.
In a small economy with two businesses, a dentist performed 200 hours worth of cavity filling and a carpenter made 50 chairs. Total GDP is
unknown with the information given because GDP is only an estimate.
For a politician, the question, "Are you better off now than you were four years ago?" implies that
voters care more about where they were rather than where they are today.
One of the legacies of Keynesian economics is that
voters expect the President of the United States to address macroeconomic issues.
According to the income approach to measuring GDP, the largest income category is
wages.
Which statement is TRUE? (a) Inflation does not necessarily mean that the cost of living is rising. (b) The affordability of goods and services declines if wages rise faster than prices. (c) Inflation is more selective than unemployment in which people it affects. (d) Inflation always improves living standards because it leads to wage increases. (e) Inflation is to be avoided under all conditions.
(c) Inflation is more selective than unemployment in which people it affects.
Based on the above table, the unemployment rate is
10 percent.
Consumers in a country buy only two goods, sneakers and manicures. The prices and quantities purchased by urban households are in the table above. The reference base year is 2009. The inflation rate between 2009 and 2010 is
10.3 percent.
The reference base period for the CPI has an index number of
100.
There are several reasons why the aggregate demand curve is downward sloping. Which of the following correctly describes one of these explanations?
A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports.
What is a four basic macroeconomic outcome?
All of the above are macroeconomic outcomes.
In the circular flow, how are the "value of production", "income", and "expenditures" related?
Expenditures on GDP equals the value of production which equals income.
Which outcomes are consistent with falling aggregate demand?
Falling prices, falling GDP, rising unemployment rate
Which outcomes are consistent with rising aggregate supply?
Falling prices, rising GDP, falling unemployment rate
In the above figure, which part corresponds to a destruction of part of the nation's capital stock?
Figure A
In the above figure, which point corresponds to an increase in technology?
Figure C
Janet is receiving a 15% pay raise. If the rate of inflation is 12% then
Janet's purchasing power is rising.
Which of the following are NOT among the criteria for inclusion of a person in the civilian labor force?
Must be literate
Which statement best describes inflation?
The price of every commodity in the economy is going up.
In the classical model, what occurs if a wage of $20/hour results in unemployed workers?
The wage rate will drop, more workers will be hired, and the unemployment rate falls.
Which of the following is true?
To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as unpaid workers in your family business.
The CPI market basket is determined by
a consumer survey.
Which of the following increases aggregate demand?
a decrease in taxes
Consumption expenditure includes spending
by households.
The largest expenditure category in the United States is
consumption expenditure.
The expenditure approach to measuring GDP is done by using data on only
consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.
If we compare the CPI to a perfect cost of living index, we find that they are
different because the CPI uses a fixed basket and has some measurement difficulties.
One of the far-reaching effects of the Great Depression was that it
discouraged economists from looking for an alternative to the long-run model.
The working-age population includes
employed and unemployed people over the age of 16.
In calculating the unemployment rate, part-time workers over the age of 16 are counted as
employed.
The purchase of a new Boeing fighter jet by Israel is classified in the U.S. GDP accounts as
export expenditure.
Real GDP is the value of final goods and services produced in a year
expressed in the prices of a base year.
Investment is the expenditure done by
firms
The following are all final goods except
flour used by the baker to make cup cakes.
Which type of unemployment is a permanent and healthy phenomenon in a dynamic economy?
frictional
Which of the following would be considered unemployed as part of normal labor market turnover? i) Juliet, who was fired when the company where she worked went bankrupt in a recession. ii) Hannah, who quit her job to find one that better suited her skills. iii) Charlotte, who started looking for a job upon graduation from high school.
ii and iii.
Which of the following is classified as a final good or service? i. tires bought by GM to put on new Tahoes ii. mustard bought by Subway to put on its sub sandwiches iii. your purchase of online access to the Wall Street Journal
iii only.
Higher unemployment benefits create
incentives for longer job searches and higher frictional unemployment.
In measuring the unemployment rate, part-time workers are ________ and discouraged workers are ________.
included as employed; excluded
Suppose the Bureau of Labor Statistics uses Ballpark Franks as the hot dogs used when calculating the consumer price index. During 2015, Oscar Mayer aggressively reduces prices. Consumers respond by purchasing more Oscar Mayer and less Ballpark Franks. The 2010 CPI is likely to
overstate the average prices paid by consumers.
One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,
people substitute toward more imported goods and services.
The Bureau of Labor Statistics (BLS) compiles information about employment by
performing a monthly survey of 60,000 households.
According to classical theory, total employment and real Gross Domestic Product (GDP) are
positively related.
Gross Domestic Product is equal to the market value of all the final goods and services ________ in a given period of time.
produced within a country
We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run
real GDP equals potential GDP.
Frictional unemployment is the result of
the normal process of jobs being created and destroyed.
An aggregate supply curve depicts the relationship between
the price level and the aggregate quantity supplied.
Investment is defined as
the purchase of new capital goods by firms.
In the macroeconomic long run,
there is full employment and real GDP is equal to potential GDP.
Full employment is the level of unemployment that occurs
when cyclical unemployment is zero.
The formula for the CPI is
(Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices) × 100.
The idea that supply creates its own demand is known as
Say's law.
A decrease in government expenditure shifts the AD curve ________ and a decrease in taxes shifts the AD curve ________.
leftward; rightward
Moving upward along the SRAS results in a ________ in the price level and ________ in real GDP.
rise; an increase