Macro Quiz 1
If an American firm opens a production facility in India, the total value of the production will be included in the
gross domestic product of India.
The measure of production that values production using current prices is called
nominal GDP.
Which of the following is counted in GDP?
the cost of a speed boat purchased by drug smugglers
What are menu costs?
the costs to a firm of changing prices.
Gross domestic product understates the total production of final goods and services because of the omission of
the underground economy.
If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is
4%
What is the largest component of spending in the U.S.?
Consumption Spending
If China decides to enact laws to clean up the environment, what would be the effect on GDP?
GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls.
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 of goods and services has risen.
If a German firm produces cars in the United States, that production should count towards
U.S. GDP
An example of a seasonally unemployed worker would be
a ski lift operator who loses his job when the snow melts in the spring.
Labor unions cause unemployment because the union contract wage is set
above the market wage, causing a surplus of labor.
Gross domestic product is generally ________ national income.
greater than
Investment, as defined by economists, would include the purchase of a
computer by an accounting firm.
The real wage equals the nominal wage ________ the CPI, all times 100.
divided by
The natural rate of unemployment is the amount of unemployment
equal to frictional plus structural unemployment.
The increased generosity of unemployment insurance programs in Canada as compared to the U.S. should
increase the duration of unemployment in Canada as compared to the U.S.
The percent increase in the CPI from one year to the next is a measure of the
inflation rate.
If the quantity of goods and services produced in the economy decreases
it may be possible for nominal GDP to increase.
Jack just received a promotion at work and now works 50 hours per week instead of 35. As a result,
neither the unemployment rate nor the labor force participation rate changed.
If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.
risen; risen
During a deflationary period,
the nominal interest rate is less than the real interest rate.
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,
the unemployment rate increased.
Suppose, in 2016, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for 2016?
the value of the services of the real estate agent
If inflation is positive and is perfectly anticipated,
those that hold paper money lose.
The formula for calculating the CPI is
(Expenditures in the current year/Expenditures in the base year) times × 100.