Macro Test 2

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

structural unemployment

Real GDP is GDP in a given year

valued in the prices of the base year

IF real GDP grows by 3% in 2014, 3.2% in 2015, and 2.5% in 2016, what is the average annual growth rate of real GDP?

2.9%

The demand for loanable funds is determined by the willingness of _____ to borrow money to engage in new investment projects

firms

A student that has just graduated from college but has not found a job would most likely be

frictionally unemployed

Equilibrium is the loanable funds marker determines

the real interest rate

Y = $12 trillion C = $8 trillion I = $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion Based on the information above, what is the level of private saving in the economy?

$3 trillion

Shoes -- 40 -- $60.00 DVDs -- 100 -- $18.00 Tomatoes -- 2,000 -- $1.00 Ketchup -- 300 -- $4.00 Suppose that a simple economy produces only 4 goods and services (listed above). Assume one half of the tomatoes are used in the making of ketchup and the other half is purchased by households. Using the information above, nominal GDP for this simple economy equals

$6,400

produce -- (2011) quantity -- price -- (2016) quantity -- price camera -- 100 -- 10 -- 120 -- 12 Legal services -- 50 -- 15 -- 45 -- 20 Books -- 200 -- 40 -- 210 -- 45 Refer to the table above. What is the GDP deflator in 2016 if 2016 is the base year

100

Product -- Quantity -- Price -- Price Cokes -- 100 -- 0.50 -- 0.75 Hamburgers -- 200 -- 2.00 -- 2.50 CDs -- 10 -- 20.00 -- 21.00 Refer to the table above. Assume the market basket for the consumer price index has three products (listed above) with the following values in 2011 and 2016 for price and quantity. The consumer price index for 2016 equals

121

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is

125

Year -- CPI 1996 -- 157 1997 -- 161 1998 -- 163 Refer to the table above. Consider the following values of the consumer price index for 1996, 1997, and 1998. The inflation rate for 1997 was equal to

2.5%

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?

2.7%

year -- nominal GDP -- real GDP 2013 -- 7,400 -- 7,537 2014 -- 7,813 -- 7,813 2015 -- 8,301 -- 8,165 2016 -- 8,760 -- 8,516 Consider the following data on nominal GDP and real GDP (values are in billions of dollars); the base year used in calculating real GDP is

2014

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?

3%

If the nominal rate of interest is 6.5% and the inflation rate is 3%, what is the real rate of interest?

3.5%

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?

4.7%

If the number of unemployed workers is 19 million, the number in the working age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?

475 million

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

80%

Which of the following describes the accuracy of the consumer price index?

Changes in the CPI overstate the true rate of inflation

You earned $30,000 in 2007, and your salary rose to $80,000 in 2016. If the CPI rose from 82 to 202 between 2007 and 2016, which of the following is true?

The purchasing power of your salary increased between 2007 and 2016

Efficiency wage is another name for the minimum wage T/F

False

Eliminating frictional unemployment would be good for the economy T/F

False

IF nominal GDP I less than real GDP, then the GDP deflator will be greater than 100 T/F

False

Residential investment includes spending by firms on office buildings T/F

False

Transfer payments are subtracted from national income to get to personal income T/F

False

Theo output of Mexican citizens who work in Texas would be included n the

Gross National Product of Mexico

Gross Domestic Product understates the total production of final goods and services because of the omission of

Household production

Your grandfather tells you that he earned $7,00/year in his first job in 1961. You earn $35,000/year in your first job in 2016. You now that average prices have risen steadily since 1961. You earn

Less than 5 times as much as your grandfather in terms of real income

If government saving is negative, then

T - TR < G

What is the name of the organization that defines business cycle peaks and troughs in the United States?

The National Bureau of Economic Research

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that

The value of output in 2017 was around $17.3 trillion Total income in 2015 was around $17.3 trillion Total spending in 2015 was around $17.3 trillion

Developing countries with large informal sectors tend to have firms that invest less in capital equipment T/F

True

The costs to firms of changing prices are called menu costs T/F

True

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate T/F

True

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

Vertical

Which of the following are NOT considered part of government purchases welfare benefits teachers' salaries paid by a local government a tank purchased by the federal government a bridge purchased by the state government

Welfare benefits

Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?

Younger men are remaining in school longer as compared to the past

Which of the following would encourage economic growth through increases in the capital stock?

a change from an income tax to a consumption tax an increase in household savings a decrease in the government deficit

Investment, as defined by economists, would include the purchase of

a computer by an accounting firm

If consumers decide to be more frugal and save more out of their income, then this will cause

a shift in the supply curve to for loanable funds to the right

Which of the following would increase the unemployment rate

an increase in unemployment insurance payments

The consumer price index is the

average of the prices of the goods and services purchased by a typical urban family of 4

The substitution bias in the consumer price index refers to the idea that consumers ______ the quantity of products they buy in response to price, and the CPI does not reflect this and _____ the cost of the market basket

change; overestimate

Which of the following is NOT one of the key services provided by the financial system? decreasing taxes risk sharing liquidity generating information

decreasing taxes

Which of the following causes the unemployment rate to understate the true extent of joblessness? many full time workers really want to be part time workers persons who collect unemployment benefits report themselves to be searching for a job discouraged workers are not counted as unemployed a drug dealer reports herself as unemployed

discouraged workers are not counted as unemployed

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy

IF the CPI falls between 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years T/F

false

If the inflation rate measures the average prices of goods and services in the economy T/F

false

During a business cycle expansion, total production ________ and total employment ________.

increases; increases

The percent increase in the CPI from one year to the next is a measure of the

inflation rate

Which of the following is NOT directly counted in GDP? investment expenditures government purchases intermediate goods consumer goods

intermediate goods

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

is based on actual payrolls, rather than on unverified answers

A firm can fund an expansion of its operations by

issuing bonds

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working age population? unemployment rate discouraged worker ratio labor foce participation rate the ratio of minimum wage to inflation

labor force participation rate

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

labor productivity

________ is the ease with which a financial security can be exchanged for money.

liquidity

If firms pay what are called "efficiency wages" they pay wages that

motivate workers to increase their productivity

The purchase by a foreign government of an airplane produced in the Unites States is included in U.S.

net exports

The Bureau of Labor Statistics would categorize a retiree who is not working as

out of the labor force

Long-run economic growth requires all of the following EXCEPT technological change increases in capital per hour worked government provision of secure property rights political instability

political instability

the only way the standard of living of the average person in a country can increase is if _____ increases faster than _____

production; population

A good measure of the standard of living is

real GDP per capita

The producer price index measure the prices that firms

receive for the good sand services they use at all stages of production

An increase in the real interest rate does which of the following? reduces the demand for loanable funds reduces saving reduces consumption spending increases the demand for loanable funds

reduces consumption spending

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

remain constant

The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect

that stock prices are more likely to fall

If cyclical unemployment is eliminated from the economy, the

the economy is considered to be at full employment

Potential GDP is defined as

the level of GDP attained when all firms are producing at capacity

The unemployment rate is

the percentage of the labor force that is unemployed

The average price of goods and services in the economy is also known as

the price level

Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that

the price level in 2016 was less than the price level in the base year

The nominal interest rate will be less than the real interest rate when

the rate of inflation is negative

Suppose that the labor movement has a revival in the United States and then majority of workers join labor unions. As a result we would expect

the unemployment rate to rise

When the labor market is at full employment

there is no cyclical unemployment in the economy

If inflation is positive and it is perfectly anticipated,

those that hold paper money lose

To reduce the bias in the consumer price index, the Bureau of Labor Statistics

updates the market basket every two years, rather than every 10