Macro Exam 1

Purchases of _____ are included in GDP. a. new foreign-produced investment goods b. newly issued stocks c. used goods d. new capital goods

d. new capital goods

A person who is NOT working or looking for work is: a. included in the unemployment rate b. underemployed c. a member of the labor force who is not working d. not counted in the unemployment rate

d. not counted in the unemployment rate

Which item is included in GDP? a. the purchase of 100 shares of Microsoft stock b. the purchase of a 1965 Ford Mustang c. Social Security payments from the US government to retired people d. the purchase of a ticket to a Lady Gaga concernt

d. purchase of a ticket to a Lady Gaga concert (it's a service)

Income divided by the price level is _____ income. a. national b. personal c. disposable d. real

d. real

Periods of recession are likely to be marked by: a. constant unemployment. b. constant employment. c. increasing employment. d. rising unemployment.

d. rising unemployment.

Net exports are calculated by subtracting: a. imports from exports b. exports from imports c. out all intermediate goods d. I, G, and value added from GDP

a. imports from exports

Structural changes in an economy and changes in consumer tastes are reasons for: a. job creation and job destruction b. job searches c. unemployment during recession d. unemployment during expansions

a. job creation and job destruction

If real GDP rises while nominal GDP falls, then prices on average have: a. risen b. fallen c. stayed the same d. decreased and then been offset by an equal increase

b. fallen

For most of U.S. modern economic history, when the unemployment rate is _____, real GDP is _____. a. rising; rising b. falling; rising c. falling; falling d. rising; unchanged

b. falling; rising

Last week Stephanie quit her job as a copywriter at an advertising agency. She has spent the past few days browsing the help wanted ads but hasn't found anything that matches her skills. Stephanie is best classified as: a. structurally unemployed b. frictionally unemployed c. a discouraged worker d. out of the labor force

b. frictionally unemployed

When the economy is at full employment, ___ is zero a. unemployment b. cyclical unemployment c. frictional unemployment d. the natural rate of unemployment

b. cyclical unemployment

If the price level decreases, real income will: a. remain constant. b. decrease. c. increase. d. fluctuate randomly.

c. increase.

Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20 eachand 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD playerswere sold at $50 each. Real GDP this year using last year as the base year is: a. $1,300. b. $300 c. $100. d. $700.

a. $1,300.

Use Table: Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2014? a. $49 b. $62 c. $44.5 d. $42

a. $49

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9each. The value of nominal GDP in years 1 and 2, respectively, is: a. $900 and $1,077.50 b. $1,000 and $1,005 c. $900 and $990. d. $180,000 and $257,400.

a. $900 and $1,077.50

If, during 2010, the Republic of Sildavia recorded investment spending of $3 billion, government purchases of $3 billion, consumer spending of $7 billion, imports of $5 billion, government transfers of $1 billion, and exports of $3 billion, Sildavia's GDP in 2010 was: a. 11 billion b. 12 billion c. 13 billion d. 14 billion

a. 11 billion 3+3+7=13 3-5=-2 13-2=11

A survey reveals that, on a small island, 1,000 people have jobs, 200 people don't have jobs but are looking forjobs, and 200 people are neither working nor looking for work. The unemployment rate on the island is_____%. a. 16.7 b. 20 c. 30 d. 12.5

a. 16.7

Suppose that the real interest rate is 2.1% and the nominal interest rate is 5.4%. The inflation rate is _____%. a. 3.3 b. 7.5 c. -3.3 d. 2.1

a. 3.3

Boeing buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model at $10 million. The value added by Boeing is equal to: a. 3.5 million b. 16.5 million c. 13 million d. 15.5 million

a. 3.5 million 3+2.5+1= 6.5 value of sales= 10-6.5 3.5 million

If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is ___% a. 7.7 b. 8.3 c. 50 d. 92

a. 7.7 10/130*100

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9each. Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is _____%. a. 7.8 b. 8.8 c. 10 d. 19.7

a. 7.8

Which is an example of cyclical unemployment? a. an autoworker is laid off because a recession has caused a decline in sales b. a geologist is permanently laid off from an oil company because of a technological advance c. a worker at a fast food restaurant quits work and attends college d. a real estate agent leaves a job in texas and searches for a similar, higher-paying job in California

a. an autoworker is laid off because a recession has caused a decline in sales

Which item is included in the calculation of GDP? a. expenditure on new construction b. a retiree's monthly Social Security check c. buying a house built 10 years ago d. buying shares of Home Depot stock

a. expenditure on new construction

In general, expansions are characterized by: a. falling unemployment. b. constant employment. c. increasing unemployment. d. decreasing employment.

a. falling unemployment.

Unemployment thats due to the time workers spend in job search is ____ unemployment. a. frictional b. structural c. cyclical d. natural

a. frictional

Anna recently moved to Boston with her husband Joe, who has a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is: a. frictionally unemployed b. structurally unemployed c. cyclically unemployed d. counted as employed since she is likely to receive a job offer soon.

a. frictionally unemployed

Unanticipated inflation: a. helps borrowers and hurts lenders. b. helps those on fixed incomes. c. causes interest rates to decrease. d. hurts borrowers and helps lenders.

a. helps borrowers and hurts lenders.

Which pair of policies is likely to reduce the natural rate of unemployment? a. job training and employment subsides b. high minimum wages and generous unemployment benefits c. Job training and higher minimum wage d. unemployment subsides and policies designed to strengthen the labor union

a. job training and employment subsides

A bank makes a loan for one year. The nominal annual interest rate is 7.5%. The real rate is 4%. Over thecourse of the year, overall prices increase by 4%. This rate of inflation hurt the _____ because the actual rate ofinflation was _____ than the anticipated rate. a. lender; higher b. borrower; lower c. borrower; higher d. lender; lower

a. lender; higher

Alex expects the inflation rate to be 4%. If Alex borrows money at a nominal interest rate of 5%, his realinterest rate is: a. less than the nominal interest rate. b. negative. c. equal to the nominal interest rate. d. greater than the nominal interest rate.

a. less than the nominal interest rate.

Don is a builder and in his free time he has built an addition to his own house. This transaction will: a. not be included in GDP because it's not produced for the marketplace b. be included in GDP because Don is a professional builder c. be included in GDP because its an intermediate good d. be included in GDP because building is Don's hobby

a. not be included in GDP because it's not produced for the marketplace

To be offically unemployed, a person must a. not have a job and must looked for work in the past 4 weeks b. be under 35 c. be working fewer than 30 hours a week d. be working fewer then 20 hours a week

a. not have a job and must looked for work in the past 4 weeks

Cyclical unemployment: a. rises during a recession b. falls during a recession c. rises during an expansion d. is a part of natural unemployment

a. rises during a recession

The labor force is equal to the a. sum of the number of those employed and unemployed b. population minus the number of employed c. sum of the number of those employed and the underemployed d. number of people working

a. sum of the number of those employed and unemployed

Use Table: Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2012? a. $42 b. $40 c. $44.5 d. $30

b. $40

Consider an economy that produces only DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVDplayers are sold at $100 each, then nominal GDP is: a. $100 b. $700 c. $1,100 d. $900

b. $700 20(10)+100(5)

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9each. Using year 1 as the base year, real GDP in year 2 is: a. $900 b. $970 c. $1,000 d. $1,077.50

b. $970

Use Table: Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the value of the price index in2014? a. 81.6 b. 122.5 c. 90 d. 111.25

b. 122.5

If the rate of unemployment is 10% and the labor force is 130 milion, the number of unemplyed workers is ___ million a. 1.3 b. 13 c. 10 d. 8

b. 13 130*.10=130

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9each. The growth rate of nominal GDP from year 1 to year 2 is _____%. a. 7.8 b. 19.7 c. 10 d. 8.8

b. 19.7

A survey reveals that, on a small island, 1,000 people have jobs, 250 people are unemployed and looking forjobs, and 450 people are neither working nor looking for work. The unemployment rate on the island is_____%. a. 15.6 b. 20 c. 25 d. 45

b. 20

A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%. a. 25 b. 20 c.50 d. 12.5

b. 20

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is... a. 2% b. 5% c. 7% d. 9%

b. 5%

A fixed interest rate of _____% with _____% inflation will yield the highest rate of return for a lender. a. 19; 15 b. 8; 1 c. 12; 7 d. 11; 5

b. 8; 1

Economics frequently use GDP per capita to reflect: a. the impact of prices on GDP b. Difference in living standards across countries c. People who are employed d. both people who are employed and unemployed.

b. Difference in living standards across countries

Which statement is true? a. the number of people not working but who have looked for work in the past year is equal to the number of unemployed people b. The labor force is the total number of people working plus those who are unemployed c. the unemployment rate is the number of people unemployed expressed as a percentage of the population. d. the labor force is the same as the population

b. The labor force is the total number of people working plus those who are unemployed

The value of ____ is counted in GDP a. glass windshields purchased by a car manufacturer b. new car sold by a dealer c. a used car sold by a dealer d. a share of stock in a car manufacturer

b. a new car sold by a dealer

Goods that are produced in a particular period but not sold in that period; a. count as consumption in the next year b. are included in investment c. are treated like exports d. are classified as purely financial transaction

b. are included in investment

Real GDP is nominal GDP adjusted for: a. double counting b. changes in price c. population d. imports

b. changes in price

The real wage is the wage rate _____ the price level. a. minus b. divided by c. multiplied by d. plus

b. divided by

The labor force is considered to be: a. everyone who is employed b. everyone is is employed and unemployed c. the population of the nation d. those not frictionally unemployed plus all others who are employed

b. everyone is is employed and unemployed

Radhika just graduated from college. She recently quit her part time job to focus on finding a full time job that better uses the skills she has acquired in college. Radhika is considered to be: a. structurally unemployed b. frictionally unemployed c. cyclically unemployed d. employed since she is focusing on finding a full time job

b. frictionally unemployed

Unexpected inflation _____ lenders and _____ borrowers. a. benefits; hurts b. hurts; benefits c. does not affect; benefits d. benefits; does not affect

b. hurts; benefits

The threat of future inflation: a. increases the value of money paid back in the future. b. makes people reluctant to lend money for long periods. c. has no effect on lending money. d. makes people eager to lend money for long periods.

b. makes people reluctant to lend money for long periods.

Inflation can be measured by the: a. percentage change in GDP. b. percentage change in the consumer price index. c. absolute change in the GDP deflator. d. absolute change in the consumer price index.

b. percentage change in the consumer price index.

If money income remains the same while the average price level doubles: a. purchasing power will increase. b. real income will fall. c. interest rates will fall. d. nominal income will fall.

b. real income will fall.

If real GDP falls while nominal GDP rises, then prices on average have: a. Real GDP cannot rise when nominal GDP falls. b. risen. c. stayed the same. d. fallen.

b. risen.

A survey reveals that, on a small island, initially 100 people have jobs, 25 people don't have jobs but are lookingfor jobs, and 45 people are neither working nor looking for work. Suppose that 15 of the 45 people who weren'tlooking for work now begin looking for work. There are now 40 people looking for work and 100 peopleworking. The unemployment rate: a. falls to 20%. b. rises to 28.6%. c. rises to 50%. d. Nothing happens to the unemployment rate because these people weren't working before and they aren'tworking now.

b. rises to 28.6%.

An example of an intermediate good is... a. wages paid to an employee b. steel purchased by aircraft manufacturers c. veggies purchased for your dinner d. electric bills for your house

b. steel purchased by aircraft manufacturers

Suppose only two countries existed. Country A imported $200 million worth of goods and services fromcountry B. Country B imported $100 million worth of goods and services from country A. Net exports forcountry _____ equal _____. a) A; $200 million b) B; -$100 million c) A; -$100 million d) B; $200 million

c) A; -$100 million

Suppose a consumer buys a Perfect Pizza frozen cheese pizza at the grocery store for $10. Perfect Pizza purchased the dough and tomato sauce from a food processing company $2 and bought the cheese for $1. It sold the pizza store for $5. How much has the GDP increased? a. $2 b. $5 c. $10 d. $18

c. $10 grocery store->consumer

Use Table: Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2013? a. $33.5 b. $42 c. $44.50 d. $40

c. $44.50

In 2011, consumption spending is $7,000, government purchases of goods and services is $2,000 and investment spending is $1,500. If GDP fro 2011 is $10,300, exports are ____ and imports are ____ a. $400;$200 b.$100;$200 c. $600;$800 d. $500; $300

c. $600;$800

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produceeach dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be: a. $830. b. $200. c. $630. d. $230.

c. $630.

Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20 eachand 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD playerswere sold at $50 each. Nominal GDP this year is: a. $100 b. $700 c. $650 d. $500

c. $650

If a country has a working age population of 200 million, 135 million people with jobs, and 15 million unemployed and seeking employment, then its unemployment rate is: a. 4% b. 7.5% c. 10 % d. 20%

c. 10 % 15/150*100

Which example is a LIKELY response to inflation? a. People choose to carry higher money balances b. People tend to make fewer transactions c. People tend to make more transactions d. People tend to hold on to fewer intrest-bearing assests

c. People tend to make more transactions

The Venezula example illustrates: a. that the difference between nominal ad real GDP is negligible in most cases b. that there is no difference between nominal and real GDP in the real world c. The importance of distinguishing between nominal and real GDP. d. that GNP, rather than GDP, is a better measure of a countries economic activity.

c. The importance of distinguishing between nominal and real GDP.

Which transaction would not be counted in GDP? a. Nike builds a retail store b. your mother buys a pound of Washington grown apples c. Your mother buys 100 shares of Nike stock d. The indiana state government pays for repair of a damaged bridge over the Wabash river

c. Your mother buys 100 shares of Nike stock

Which transaction is included in the nations gross domestic product? a. a college student buys a used textbook from his roommate b. a construction company purchases lumber to build a new house c. a college student buys a pizza and has it delivered to her dorm room d. a group of college students volunteer to rake leaves at an assisted living facility for senior citizen.

c. a college student buys a pizza and has it delivered to her dorm room

Included in GDP is the dollar value of: a. a used car sold during the period b. a new car imported during the period c. a new car exported during the period d. 100 shares of general motors stock bought by a retiree

c. a new car exported during the period

Real GDP per capita is: a. a perfect measure of a countrys standard of living b. the only way to measure living standards among different countries c. an incomplete measure of a countrys standard of living d. used only by the United Nations to compare nations based on measures of welfare

c. an incomplete measure of a countrys standard of living

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment. a. increase in frictional b. increase in cyclical c. decrease in frictional d. decrease in structural

c. decrease in frictional

Deflation is a: a. decline in wages. b. decrease in unemployment. c. decreasing aggregate price level. d. recession.

c. decreasing aggregate price level.

Increase in the average level of prices are called: a. depreciation b. deflation c. inflation d. expectations

c. inflation

The stats and data on unemployment are gathered and reported: a. daily b. weekly c. monthly d. yearly

c. monthly

You are a college student and NOT working or looking for work. You are: a. unemployed b. in the labor force but not employed c. not part of the labor force d. counted in the labor force as underemployed

c. not part of the labor force

The inflation rate is the: a. price level in the current year minus he price level in the pervious year b. price level in the current year plus the price level in the previous year c. percentage change in the price level from one year to the next d. price level in the current year multiplied by the price level in the previous year

c. percentage change in the price level from one year to the next

GDP is the: a. dollar amount of all sales made in the economy in one year. b. volume of all dollar transactions made in an economy in one year. c. total market value of all final goods and services produced in an economy in one year. total accumulated wealth of an economy.

c. total market value of all final goods and services produced in an economy in one year.

During a recession: a. unemployment decreases and the growth rate of real GDP increases. b. there is no relation between unemployment and the growth rate of real GDP. c. unemployment increases and the growth rate of real GDP decreases. d. unemployment and the growth rate of real GDP both decrease.

c. unemployment increases and the growth rate of real GDP decreases.

Peanut Butter and Jelly Economy. In 2011, nominal GDP was ___ and real GDP was ____ a. 450, 400 b. 525, 450 c.525, 400 d. 450, 575

d.

Use Table: Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the rate of inflation between2013 and 2014? a. 4.9% b. 22.5% c.. 1.25% d. 10.1%

d. 10.1%

Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the value of the price index in2012? a. 111.25 b. 90 c. 0 d. 100

d. 100

Use Table: Peanut Butter and Jelly. Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the rate of inflation between2012 and 2013? a. 44.5% b. 22.5% c. 4.5% d. 11.25%

d. 11.25%

Suppose a market basket consistsof 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the value of the price index in2013? a. 100 b. 0 c. 90 d. 111.25

d. 111.25

If a country has a working age population of 200 million, 135 million people with jobs, and 15 million unemployed and seeking employment, then its labor force is a. 335 million b. 200 million c. 155 million d. 150 million

d. 150 million 135+5

Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is _____%. a. 10 b. 3 c. 7 d. 4

d. 4 Nominal - expected/rate = Real 7% - 3% =

Suppose that nominal GDP is $1,000 in 2009 and $1,500 in 2010. If the overall price level increased by _____%between 2009 and 2010, we could say that real GDP _____. a. more than 50; increased b. 50; increased c. less than 50; decreased d. 50; stayed constant

d. 50; stayed constant

In Feburary 2012, the Bureau of Labor Statictcs calculated the unemployment rate to be 8.3%. If frictional unemployment was 3.1% and the structural unemployment was 3.2%, then the natural rate of unemployment was: a. 4.5% b. 2.0% c. 1% d. 6.3%

d. 6.3% 3.1+3.2

The equation that breaks GDP down by the four sources of aggregate spending is: a. GDP = C + I + G + X + IM. b. GDP = C - I - G - X + IM. c. GDP = C + I + G - X - IM. d. GDP = C + I + G + X - IM.

d. GDP = C + I + G + X - IM.

Generous unemployment benefits are likely to cause a(n): a. increase in employment level b. reduction in job search time c. decrease in the unemployment rate d. Increase in unemployment rate

d. Increase in unemployment rate

Which transaction will be included in the official measurement of GDP? a. Monica illegally downloaded movies to her laptop. b. Stan sold his 2015 Honda to his sister. c. Ben bought a textbook from his friend who took the class last semester. d. Sean bought a new truck.

d. Sean bought a new truck.

The natural. rate of unemployment is: a. composed of frictional, structural, and cyclical unemployment b. equal to zero c. always greater than the actual unemployment rate d. composed of structural and frictional unemployment

d. composed of structural and frictional unemployment

Discouraged workers are: a. unemployed b. do not like their job c.are working part time but are looking for a full time job d. have given up looking for a job

d. have given up looking for a job

In general, for the U.S. economy, the relation between unemployment and economic growth is: a. neutral. b. positive. c. direct. d. negative

d. negative

A survey reveals that, on a small island, initially 40 people have jobs, 10 people are not working but are lookingfor jobs, and 30 people are neither working nor looking for work. Suppose that 10 of the 30 people who weren'tworking or looking for work now begin looking for work. There are now 20 people without jobs but looking forwork and 40 people working. The unemployment rate: a. rises to 50%. b. Nothing happens to the unemployment rate because these people weren't working before and they aren'tworking now. c. falls to 25%. d. rises to 33.3%.

d. rises to 33.3%.

Sam, who is 55 years and has been a steelworker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is ___ unemployed. a. frictionally unemployed b. structurally unemployed c. cyclically unemployed d. structurally unemployed

d. structurally unemployed

GDP does not exclude... a. the value of leisure b. damage to the environment c. the value of housework d. the value of owner-occupied housing

d. the value of owner-occupied housing

Aggregate output is: a. equal to consumer spending ong goods and services b. value of new construction, changes in inventories, and the purchase of physical capital by business c. total quantity of intermediate goods produced by an economy d. total quantity of final goods and services produced by an economy.

d. total quantity of final goods and services produced by an economy.

Unemployment rates are higher in Europe than American because.. a. the minimum wage is higher in the US than it is in Europe b. US economic policy is much more effective than is European economic policy c. there are more unskilled, uneducated workers in Europe than there are in the US d. unemployment benefits are more generous in Europe than they are in the US.

d. unemployment benefits are more generous in Europe than they are in the US.