Macro Unit 1 Test Review

An increase in labor productivity shifts the

SRAS curve rightward

Real GDP formula

Sum (Q x Pb)

GDP formula

Sum (Q x Pc)

CPI formula

Sum (Q x Pc)/ Sum (Q x Pb) x 100 Pc: current year Pb: base year

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?

Yes, since the country with a relatively large GDP could also have a relatively large population

Individuals' expectations of lower future prices is a

leftward shifter of the AD curve

As the interest rate rises, businesses invest ________ and the AD curve shifts to the __________

less; left

Which of the following goods is an intermediate good?

lettuce that a restaurant buys to put on a sandwich and tires that a car company buys to put on the cars it produces

Increases in import spending ____________, ceteris paribus.

lower GDP

The unemployment due to changes in the types of skills employers require is called ________ unemployment

structural

"Full employment" is said to exist when the unemployment rate equals

the natural unemployment rate

Unemployment Rate formula

unemployed/labor force x 100

Suppose the real exchange rate of 105 Japanese yen to the dollar moves to 115 yen to the dollar. The dollar has _________________, making Japanese goods __________ expensive for Americans.

appreciated; less

Real GDP is always measured in

base-year dollars

As income taxes rise, disposable income __________, causing __________ the AD curve.

decreases; a leftward shift of

Suppose the real exchange rate of 10 Mexican pesos to the dollar moves to 9 pesos to the dollar. The dollar has __________________, making American goods __________ expensive for Mexicans.

depreciated; less

The cyclical unemployment rate is defined as the _______ unemployment rates

difference between the existing (actual) and the natural

If consumption changes because of a change in the price level, then the

economy moves from one point on an AD curve to another point on the same curve

Employment Rate formula

employed/non-Institutionalized x100

A rise in foreign real national income tends to raise U.S. __________, shifting the U.S. AD curve to the __________.

exports; right

If the demand for a good falls by less than the supply of the good rises, then the good's equilibrium price will ______ and its equilibrium quantity will __________

fall; fall

Unemployment that arises as a result of the time it takes for unemployed people to locate a job utilizing their transferable skills is called ________ unemployment

frictional

Suppose there are five goods in the economy, A-E. The current year quantity of each is 10A, 20B, 30C, 40D, and 50E. Current-year prices are $1 for each unit of A, $2 for each unit of B, $3 for each unit of C, $4 for each unit of D, and $5 for each of E. Base-year prices are $1 for each good. Real GDP in the current year equals

$150

Inflation formula

(P2 - P1/ P1) x 100 or (CPI2 - CPI 1/ CPI 1) x 100

Real Income formula

(nominal income/CPI) x 100

Look at the following data: GDP= $11,920 billion; investment= $2100 billion; exports= $500 billion; government purchases= $1450 billion; consumption= $8500 billion. What does import spending equal?

11920- (2100+500+1450+8500)= -630 so imports= $630 billion

Suppose the market basket consists of 100X, 200Y, and 300Z. Current-year prices are $5 for each unit of X, $2 for each unit of Y, and $3 for each unit of Z. Base-year prices are $2 for each unit of X, Y, and Z. What is the approximate CPI for the current year?

150

The CPI was 238 in one year and 244 the following year. How much did prices rise between these two years?

2.52 percent

Look at the following data: durable goods= $200 billion; nondurable goods= $350 billion; services= $600 billion; fixed investment + inventory investment= $200 billion; government purchases= $400 billion; exports= $30 billion; imports= $79 billion

200+350+600+200+400+30-79= $1701 billion

Look at the following data: personal income= $4900 billion; personal taxes= $900 billion; transfer payments= $980 billion. What is disposable income?

4900-900= $4000 billion

Look at the following data: consumption= $915 billion; exports= $40 billion; imports= $33 billion; inventory investment= $123 billion; fixed investment= $500 billion; government purchases= $300 billion. GDP is equal to

915+40-33+123+500+300= $1845 billion

If investment changes because of a change in a factor other than the price level, then the

AD curve shifts

If GDP in year 1 is the same dollar amount as the GDP in year 2, does it follow that Real GDP in year 1 is the same as Real GDP in year 2?

No, since prices may not be the same in the two years

Converting Dollars formula

D2 = D1 x CPI 2/ CPI 1

NDP (net domestic product)

GDP - depreciation

GDP per capita formula

GDP/population

Country A has a higher GDP than country B. What does this mean?

It means that the total market value of the final goods and services produces in country A is greater than the total market value of the final goods and services produced in country B.

Part of the story of the interest rate effect is that a lower price level causes __________ in the demand for credit, which then causes the interest rate to __________.

a decrease; fall

An increase in the price of non labor input such as oil will cause

a leftward shift in the SRAS curve

Suppose a drop in prices in the stock market makes people feel less financially secure. This would cause __________ the economy's AD curve.

a leftward shift of

A rise in wage rates

causes the SRAS curve to shift leftward

Which of the following factors can shift the AD curve?

net exports, government purchases, and consumption

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion. In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion. Which of the following statements is true?

none of the above

Disposable Income formula

personal income - personal taxes

An increase in the interest rate ________ purchases of consumer __________

reduces; durables

If the demand for a good increases by more than the supply of the good increases, then the good's equilibrium price will __________ and its equilibrium quantity will ______________

rise; rise

If the demand for a good rises by more than the supply of the good falls, then the good's equilibrium price will ________ and its equilibrium quantity will __________

rise; rise