Macroeconomics Complete Terms

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Structural unemployment is unemployment resulting from:

changes in the structure of consumer demand or technology

What does structural unemployment result from?

changes in the structure of consumer demand or technology

Which of the following is an example of a capital-intensive commodity?

chemicals

(Last Word) Electronic money is:

closely associated with smart cards.

Wells Fargo, J.P. Morgan Chase, and Citibank, are all primarily:

commercial banks

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

cyclical unemployment

The relationship between the size of the negative GDP gap and the unemployment rate is:

direct.

For a given amount of nominal income, the real income will

fall if the price level rises.

At the full-employment unemployment rate there is only:

frictional and structural unemployment

Search and wait unemployment is another way to describe:

frictional unemployment

Search and wait unemployment is another way to describe

frictional unemployment.

Wait unemployment and search unemployment are both types of:

frictional unemployment.

Refer to the above diagram for the milk market. In this market, the equilibrium price is ____ and equilibrium quantity is ___.

$1.50 per gallon; 28 million gallons

Suppose that new computer software for accounting and analysis at a business has a useful life of only one year and costs $200,000 before it needs to be upgraded to a new version. The revenue generated by this software is expected to be $250,000. The expected rate of return from this new computer software is:

25 percent

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is:

28 years

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is:

28 years 70/2.5=^

Refer to the above table. The multiplier in this economy is:

"Full employment" refers to the situation when there is: A. 100% employment of the labor force B. 0% unemployment rate C. No frictional or structural unemployment D. No cyclical unemployment

In determining real GDP, economists adjust the nominal GDP by using the:

GDP price index

A recession is a decline in:

GDP that lasts six months or longer

A recession is a decline in:

GDP that lasts six months or longer.

In general, the steeper the consumption schedule the:

Larger is the multiplier

In the modern economic growth process, it is typical to find that:

Leader countries continue to grow faster than follower countries

Which of the following financial institutions declared bankruptcy as a result of the financial crisis of 2007 and 2008?

Lehman Brothers

Factors that contributed to the higher U.S. labor productivity growth in 1995-2012 relative to the earlier period include the following, except:

Population growth

The GDP gap measures the amount of which:

Potential GDP exceeds actual GDP

Demand-pull inflation

Price increases which result from an excess of demand over supply.

The aggregate demand curve is the relationship between the total demand for output and the:

Price level

Which of the following is included in the expenditures approach to GDP?

Spending on meals by consumers at restaurants

A worker who loses a job at a call center because business firms switch the call center to another country is an example of:

structural unemployment

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by:

the income effect

The service a homeowner performs when she mows her yard is not included in GDP because:

This is a nonmarket transaction

Which statement is true about supply?

To entice producers to offer more of a good on the market for sale, price must rise

Refer to the above table. If planned investment is $18 billion, then at the $660 billion level of disposable income, there will be an:

Unplanned increase in inventories of $12 billion

In a market system, a firm's employees are typically shielded from business risk by:

Wage contracts

Real gross domestic product

Will increase if there is an increase in the level of output

Cost-push inflation may be caused by:

a negative supply shock

Cost-push ifnlation may be caused by:

a negative supply shock.

A college graduate using the summer following graduation to search for a job would best be classified as:

a part of frictional unemployment

Expansion

a period in which real GDP, income, and employment rise.

The construction of a production possibilities curve assumes:

technology is fixed

Approximately how many commercial banks are now operating in the United States?

about 6,800

A surplus of a product will arise when price is:

above equilibrium with the result that quantity supplied exceeds quantity demanded.

If the GDP gap is positive, then:

actual GDP is greater than potential GDP

If the GDP gap is negative, then:

actual GDP is less than potential GDP

Official unemployment statistics:

understate unemployment because discouraged workers are not counted as unemployed

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will:

increase the quantity supplied and decrease the quantity demanded of X.

Economic historians date the start of the Industrial Revolution around the year 1776, when James Watt:

invented and built a more powerful and efficient steam engine.

Deflation

is a decrease in the general price level of goods and services.

The production possibilities curve:

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced

Refer to the above diagram. All other things equal, curve C

is a more desirable production possibilities curve for an economy than curve A.

Recession

is a period of decline in total output, income, and employment.

Inflation

is a rise in the general level of prices of goods and services in an economy over a period of time.

A peak in the business cycle:

is a temporary maximum point

Consumer Price Index (CPI)

is a time series measure of the price level of consumer goods and services.

Refer to the above diagrams. Curve A:

is an investment demand curve and curve B is an investment schedule.

A normative statement is one that:

is based on value judgments

Frictional unemployment

is caused by those transitioning between jobs or looking for a first job.

Full-employment rate of unemployment

is currently between 4.5 and 5.0 because of frictional and structural unemployment.

The natural rate of unemployment:

is equal to the total of frictional and structural unemployment

The natural rate of unemployment

is equal to the total of frictional and structural unemployment.

Structural unemployment

is joblessness caused not by lack of demand, but by changes in demand patterns or obsolescence of technology,

The amount of money reported as M2:

is larger than the amount reported as M1.

In a private closed economy, when aggregate expenditures equal GDP:

planned investment equals saving.

Which of the following is a fundamental characteristic of the market system?

property rights.

A nation's infrastructure refers to:

public capital goods such as highways and sanitation systems.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

rise by about 15 percent

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

rise by about 15 percent.

Refer to the above data. The MPS is:

3/10

You are given the following information about the economy: (1) nominal interest = 8 percent; (2) real rate of interest = 6 percent. The inflation premium is:

2 percent

Inflation caused by a rise in the prices of inputs is referred to as: A. Cost-push inflation B. Demand-pull inflation C. Unanticipated inflation D. Hyperinflation

"Full employment" refers to the situation when there is

no cyclical unemployment.

Suppose total output (real GDP) is $4000 and labor productivity is $8. We can conclude that:

the number of worker-hours must be 500.

The market system automatically corrects a surplus condition in a competitive market by:

Reducing the price of the commodity in question while increasing the quantity demanded

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?

Reductions in Federal tax rates on personal and corporate income.

Nominal income

Regular income that has not yet been adjusted down to correspond with decreasing purchasing power or up to correspond with inflation.

A characteristic of the market system is:

Reliance on the use of capital goods to expand total output

In the circular flow model, households earn their incomes in the:

Resource markets

Economic growth may be represented by:

Rightward shift of the production possibilities curve

A major effect of the rise in the rate of productivity growth in the United States is a(n):

Rise in the growth of living standards

Between 2007 and 2009, the unemployment rate in the U.S.:

Rose from 4.7% to 10%

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that:

Saving is $90 billion

Which industry or sector of the economy would least likely be affected by the business cycle?

Services.

If product Y is an inferior good, a decrease in consumer incomes will:

Shift the demand curve for product Y to the right

Refer to the above market graph for tickets to a "Final Four" sports event. Given this market, if the event organizers pre-set the price at $20, then this action would result in a:

Shortage of 5,000 units

(Consider This) Since World War II:

South Korea's market economy has significantly outperformed North Korea's command economy.

If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by:

Two percentage points

GDP excludes most nonmarket transactions. Therefore, GDP tends to:

Underestimate the amount of production in the economy

The U.S. Customs Service is a main source of data for:

Business cycles

alternating rises and declines in the level of economic activity, sometime over several years.

Refer to the above table for a fictional economy. The changes in the budget conditions between 2000 and 2001 best reflect:

an expansion of real GDP and an automatic increase in tax revenues.

D. Are not in the workforce

D. Disguised unemployment

D. The Wholesale Price Index

In economics, the word "shocks" refers to:

Situations where firms' expectations are not met

The so-called wealth effect will result in households:

Spending more and saving less

Refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in billions. The budget will entail a deficit:

at any level of GDP below $400

When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift:

both the consumption and saving schedules downward.

The recurrent ups and downs in the level of economic activity extending over several years are a description of a:

business cycle

The most efficient combination of resources in producing a given output is the combination that:

can be obtained for the smallest money outlay.

Answer the question on the basis of the following information about a hypothetical economy:

cannot be determined from the data.

Refer to the above information. The rate of inflation:

cannot be determined from the data.

Refer to the above diagram. Flow (4) represents:

consumer expenditures

The basic difference between consumer goods and capital goods is that

consumer goods satisfy wants directly while capital goods satisfy wants indirectly

Cost-of-living adjustments (COLAs)

contract provisions that tie wages to changes in the cost of living.

Which of the following is the basic economic policy function of the Federal Reserve Banks?

controlling the supply of money

Inflation caused by a rise in the prices of inputs is referred to as

cost push

Inflation caused by a rise in per-unit production costs is referred to as:

cost-push inflation

Inflation initiated by increases in wages or other resource prices is labeled:

cost-push inflation

The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

creative destruction

One reason that the quantity demanded of a good increases when its price falls is that the:

lower price increases the real incomes of buyers, enabling them to buy more.

The presence of discouraged workers

may cause the official unemployment rate to understate the true amount of unemployment.

The full-employment rate of unemployment is also called the:

natural rate of unemployment

At the equilibrium GDP for a private open economy:

net exports may be either positive or negative.

Core inflation

reports price changes without volatile food and energy prices.

The production of nondurable consumer goods is more stable than:

the production of durable consumer goods

Refer to the above diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD1 to AD2 is consistent with:

an expansionary fiscal policy.

Which one of the following will cause a movement up along an economy's saving schedule?

an increase in disposable income

D. Consumer and government spending

Peak

when business activity has reached a temporary maximum.

Search and wait unemployment is another way to describe:

Frictional unemployment

The natural rate of unemployment

Is equal to the total of fricitonal and structural unemployment

The natural rate of unemployment:

Is equal to the total of frictional and structural unemployment

The best example of a "frictionally unemployed" worker is one who:

Is in the process of voluntarily switching jobs.

Which phase of the business cycle would be most closely associated with an economic contraction?

Recession

New college graduates still looking for their first jobs would be classified in the BLS data as:

Frictionally unemployed

Potential GDP is the output that wold be produced if the economy was experiencing:

Full employment

Refer to the above graph. If this economy was an open economy without a government sector, the level of GDP would be:

$300 billion

If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double?

14 years

Inflation rates in the U.S. reached double-digit rates in the:

1970's

The market system's answer to the fundamental question "How will the system promote progress?" is essentially:

"Through the profit potential that encourages development of new technology."

A statement that is often used to describe demand-pull inflation is:

"Too much money chasing too few goods"

Unanticipated inflation arbitrarily:

"taxes" those who receive fixed money incomes

Which among the following countries had the highest GDP per person in 2011?

Canada

The period the output and living standards decline is referred to as:

A recession

Inflation is a rise in:

the general level of prices over time

Inflation is a rise in

the general level of prices over time.

In an economy it costs $1,500 to produce 2,000 units of output. If the costs increase to $2,500, then the per unit cost of production will have increased from:

$0.75 to $1.25

Refer to the above data. Gross domestic product in this economy is:

$1,079 billion

Refer to the above table. The total change in consumption resulting from the initial change in investment will be:

$15

U.S. GDP in 2012 was about:

$15.7 trillion

A nation's real GDP was $250 billion in 2009 and $265 billion in 2010. Its population was 120 million in 2009 and 125 million in 2010. What is its real GDP per capita in 2010?

$2,120 per person

Refer to the above graph. If the economy was initially in equilibrium at point 3 and a government deficit makes interest rates increase by 4 percentage points, then the crowding-out effect would be:

$20 billion in investment

If the average level of nominal income in a nation is $45,000 and the price level index is 180, the average real income would be about:

$25,000

Refer to the above data. If year 1 is the first year of this nation's existence and year 6 is the present year, this nation's public debt is:

$275 billion.

Refer to the above data. Gross investment is $8 billion, net exports are $4 billion, and government collects a lump-sum tax of $30 billion and spends $30 billion. Assume all taxes are personal taxes and that government spending does not entail shifts in the consumption and investment schedules. The equilibrium GDP will be:

$310 billion

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately:

$4,108 billion

Refer to the above data. NI is:

$402

If the natural rate of unemployment was 6 percent, the current unemployment rate was 12 percent, and the nominal GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed:

$480 billion in potential output.

(Advanced analysis) If S = -60 + .25Y and Ig = 60, where S is saving, Ig is gross investment, and Y is gross domestic product (GDP), then the equilibrium level of GDP is:

$480.

Refer to the above data. Net domestic product is:

$580

The marginal propensity to consume is 0.8. Equilibrium GDP will increase by $30 billion if aggregate expenditures rise by:

$6 billion

Refer to the above data. GDP in this economy is:

$6,230 billion

Refer to the above table. If planned investment is $25 billion, the equilibrium level of GDP will be:

$640 billion

Refer to the above table. Equilibrium GDP is:

$70

Refer to the above data. In year 4, nominal GDP would be:

$90

Which of the following is the correct way to calculate the unemployment rate?

(unemployed/labor force) x 100

What has been the range of the decline in real output during recessions in the U.S. between 1950 and 2009?

-0.2 percent to -3.7 percent

Over a period of time, a nation's GDP increases by 8 percent in constant-price terms, and by 6 percent in current-price terms. Other things being equal, the price level must have changed by about:

-2 percent

If the Consumer Price Index was 125 in one year and 120 in the following year, then the rate of inflation is approximately:

-4.0 percent

The investment schedule shows the:

Amounts business firms collectively intend to invest at each possible level of GDP

A worker would be hurt least by inflation when the: A. Worker anticipates inflation and increases savings at the bank B. Worker is protected by a cost-of-living adjustment clause in an employment contract C. Worker is protected by fixed annual increases in wages and benefits in an employment contract D. Government increases the level of social security retirement benefits to correct for the effects of anticipated inflation

...

D. Actual GDP exceeds national income

...

D. Government increases the level of social security retirement benefits to correct for the effects of anticipated inflation

...

D. Pulled down by the rising unemployment

...

The GDP gap measures the amount by which: A. Nominal GDP exceeds real GDP B. Actual GDP exceeds equilibrium GDP C. Potential GDP exceeds actual GDP D. Actual GDP exceeds national income

...

With mild demand-pull inflation, the economy's output level would tend to be: A. Pulled up by the increase in total spending B. Pulled down by the decrease in total spending C. Pulled up by the rising unemployment D. Pulled down by the rising unemployment

...

The graph above represents a competitive market for a product where the government has set a price ceiling of 0A. What quantity will buyers be able to buy after the imposition of the price ceiling?

Labor productivity in the U.S. in the periods 1973-1995 and 1995-2012 grew at average rates of:

1.5% and 2.4%, respectively

Refer to the above tables. If North Cantina is producing at production alternative B, the opportunity cost of the eleventh unit of consumer goods will be:

1/8 of a unit of capital goods

If the bank's annual interest rate is 6% and the inflation rate is 4%, what would the bank most likely charge as an annual interest rate?

10%

Calculate the percentage change in prices from 2007 to 2009

100

Refer to the above data. If year 2 is chosen as the base year, the price index for year one is:

100

If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inflation is about

If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inflation is about:

11 percent

In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the Consumer Price Index for the economy in year 2?

110

The price level has doubled in 35 years. The approximate annual percentage rate of increase in the price level over this period has been:

2 percent

Refer to the above list. Which of the following are considered to be "near-monies?" 1. Large-denominated ($100,000 and over) time deposits 2. Noncheckable savings deposits 3. Currency (coins and paper money) in circulation 4. Small-denominated (under $100,000) time deposits 5. Stock certificates 6. Checkable deposits 7. Money market deposit accounts 8. Money market mutual fund balances held by individuals 9. Money market mutual fund balances held by businesses 10. Currency held in bank vaults

2, 4, 7, and 8

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

20 percent.

20 years under scenario A, versus 16 years under scenario B

If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was:

20% higher than the average price in the base period 1982-84

A Consumer Price Index of 120 for a certain year means that the average price of consumer items in that year was

20% higher than the average price in the base period 1982-84.

The Consumer Price Index for the year 2009 is

200

Refer to the above data. The direction of fiscal policy became more expansionary from:

2002 to 2003

Nominal GDP is less than real GDP in an economy in both year 1 and year 2. In year 3, nominal GDP is equal to real GDP. In year 4, nominal GDP is slightly greater than real GDP. In year 5, nominal GDP is significantly greater than real GDP. Which year is the base year being used to calculate the price index for this economy?

At what average annual rate has real GDP and real GDP per capita, respectively, grown from 1950 to 2012?

3.1 percent and about 2 percent

If the Consumer Price Index was 166.6 in one year and 172.2 in the next year, then the rate of inflation from one year to the next was:

3.4 percent

If the Consumer Price Index was 166.6 in one year and 172.2 in the next year, then the rate of inflation from one year to the next was:

3.4%

In the periods 1995-2001 and 2001-2007, U.S. real GDP grew at the average annual rates of about:

3.8 % and 2.6%, respectively

In an economy, 35 million workers are employed, the labor force is 50 million, and total population is 70 million. The unemployment rate is:

30 percent

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is:

300

In the above diagram the vertical intercept and slope are:

4 and -11/3 respectively.

If the Consumer Price Index was 115 in one year and 120 in the next year, then the rate of inflation from one year to the next was:

4.3 percent

The Consumer Price Index was 115 one year and 120 the next year. The rate of inflation from one year to the next was approximately:

4.3 percent

The unemployment rate in an economy is 12 percent. The civilian labor force is 50 million. The number of employed workers in the economy is:

44 million

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation from one year to the next was approximately:

5.9 percent

If the Consumer Price Indeex was 170 in one year and 180 in the next year, then the rate of inflation is approximately:

5.9%

In 2009, the general public (excluding Federal agencies) held about how many percent of U.S. Federal debt?

57%

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is

What has been the range for the duration in months of U.S. recessions since 1950?

6 months to 18 months.

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

6 percent

If the Consumer Price Index was 165 in one year and 175 in the next year, then the rate of inflation from one year to the next was approximately:

6.1 percent

The total population of an economy is 175 million, the labor force is 125 million, and the number of unemployed is 8 million. The unemployment rate for this economy is:

6.4 percent

If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest rate is

Over a ten-year period, the Consumer Price Index doubled. On the basis of this information we can say that the average annual rate of inflation over this period was approximately:

7 percent.

Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:

8 percent

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

8 percent unemployment rate = labor force - employed unemployment rate / labor force x 100

Assuming the total population is 200 million, the labor foce is 100 million, and 92 million workers are employed, the unemployment rate is:

8 percent.

If the total population is 200 million. The labor force has 100 million and 92 million are employed, what's the unemployment rate?

Refer to the above data. The marginal propensity to consume is:

Refer to the above data. If plotted on a graph, the slope of the consumption schedule would be:

Between 2009 and 2020, productivity growth is expected to account for about ________ percent of the growth of real GDP in the United States.

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2007):

9th and 11th, respectively

D. Hyperinflation

D. Potential to produce outside the nation's PPC

D. Real GDP over time

D. Stock market price indexes

D. Supply determinant

D. The Employment Cost Index

D. The lower is the level of potential GDP

D. Used to determine the size of the labor force

Adding the market value of all final and intermediate goods and services in an economy in a given year would result in:

An amount greater than GDP for that year

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are: A. Excluded from the labor force B. Included as part of the unemployed C. Treated the same as part-time workers D. Used to determine the size of the labor force

Inflation is a rise in: A. The general level of prices over time B. The standard of living over time C. Unemployment over time D. Real GDP over time

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the: A. Level of total spending B. Rate of unemployment C. Rate of inflation D. Stock market price indexes

The downward-stickiness of wages serves like a _____ in the labor market. A. Price floor B. Price ceiling C. Demand determinant D. Supply determinant

The higher the rate of unemployment: A. The larger is the GDP gap B. The smaller is the GDP gap C. The higher is the level of actual GDP D. The lower is the level of potential GDP

Which measure of inflation would include consumer goods and capital goods? A. The GDP Price Index B. The Consumer Price Index C. The Retail Trade Survey D. The Employment Cost Index

Refer to the above graph. Which of the following factors will shift AS1 to AS2?

A decrease in business taxes

Which of the following factors will decrease the current demand for a product?

A decrease in the current price of a substitute product

The relationship between the aggregate demand curve and the aggregate expenditures model is derived from the fact that:

A decrease in the price level shifts the aggregate expenditures schedule upward and increases equilibrium GDP

Which would be considered an investment according to economists?

A fishing-company owner buys new fishing gear

If prices of goods and services are free to quickly adjust, then:

A negative demand shock would have no short-run effect on unemployment

Cost-push inflation

A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

Proponents of the notion of a "political business cycle" suggest that:

A possible cause of economic fluctuations is due to the use of fiscal policy for political purposes

Refer to the above diagram. If the production possibilities curve of an economy shifts from AB to CD, it is most likely the result of what factor affecting economic growth?

A supply factor

When economists describe "a market," they mean:

A system that allows buyers and sellers to interact with one another

In calculating the unemployment rate, part-time workers are: Question 16 options: A) Counted as employed because they are receiving payment for work B)Used to determine the size of the labor force, but not the unemployment rate C)Treated the same as "discouraged" workers who are not actively seeking employment D)Counted as unemployed because they are not working full-time

A) Counted as employed because they are receiving payment for work ****NOT: B) Used to determine the size of the labor force, but not the unemployment rate

The natural rate of unemployment: Question 24 options: A)Is equal to the total of frictional and structural unemployment B)Means that the economy will always realize its potential output C)Means that the economy will always operate at that rate D)Is a fixed unemployment rate that does not change over time

A) Is equal to the total of frictional and structural unemployment

When the economy goes into a recession and firms require less labor, managers tend to: Question 3 options: A) Lay off workers, and keep wages of remaining workers constant B) Reduce wages, to reflect the lower demand for labor C) Keep all of their workers, by spreading work more thinly D) Avoid cutting wages, for fear of drops in worker-productivity

A) Lay off workers, and keep wages of remaining workers constant

Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are: Question 1 options: A) Lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries B) Higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry C) Higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry D) Lower, because skilled workers tend to be primarily employed by government at the local, state, and Federal levels

A) Lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries

Economic growth can best be portrayed as a: Question 8 options: A) Rightward shift of the production possibilities curve B) Movement from a point inside to a point outside of the production possibilities curve C) Leftward shift of the production possibilities curve D) Movement from a point near the vertical axis to a point near the horizontal axis on the production possibilities curve

A) Rightward shift of the production possibilities curve

The higher the rate of unemployment: Question 15 options: A)The larger is the GDP gap B)The lower is the level of potential GDP C)The higher is the level of actual GDP D)The smaller is the GDP gap

A) The larger is the GDP gap

Modern economic growth often results in the following, except: Question 25 options: A)Less time for ordinary people to enjoy leisure activities because the primary focus is on production and work B)Movement towards democracy and the abolishment of feudalism C) Vast increases in wealth and living standards for many groups in the economy D) Spread of universal education and elimination of ancient social norms

A) Less time for ordinary people to enjoy leisure activities because the primary focus is on production and work ***NOT: B) Movement towards democracy and the abolishment of feudalism

Which event would most likely decrease an economy's exports?

An appreciation of a nation's currency relative to foreign currencies

Which two aggregate expenditure schedules AE in the above diagram for a private closed economy have the same MPC, assuming investment is the same at each level of income?

AE1 and AE2

All of the following are true when there is an unplanned decrease in inventories, except:

Actual investment is greater than planned investment

Which of the following is not an adjustment made when comparing standards of living across countries?

Adjusting for different unemployment rates across countries

GDP is the market value of:

All final goods and services produced in an economy in a given year

If an effective ceiling price is placed on hamburgers then:

All of these are likely outcomes.

The slope of a graph that shows a direct relationship is:

Always positive

Which of the following statements is correct?

An increase in the price of C will decrease the demand for complementary product D.

Which of the following would cause a leftward shift in the supply curve for car washes?

An increase in the price of car washing equipment

Refer to the above diagram. Which of the following is the most likely cause for a shift in the production possibilities curve from AB to CD?

An increase in the quantity and quality of labor resources

Which of the following will NOT increase the average productivity of labor?

An increase in the size of the labor force

Which of the following is a demand factor in economic growth?

An increase in total spending in the economy

Which of the following effects best explains the downward slope of the aggregate demand curve?

An interest-rate effect

As disposable income decreases, consumption:

And saving both decrease

Which of the following is the best example of economic investment?

Apple builds a new plant to manufacture iPads

A nation's real GDP will increase by increasing the following, except:

Average price level

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment? A. Structural B. Cyclical C. Frictional D. Natural

A trough in the business cycle occurs when: A. Cyclical unemployment is at a minimum point B. Employment and output reach their lowest levels C. The natural rate of unemployment is at a minimum point D. The inflation rate is at its lowest level

A worker who loses a job at a call center because the company moved the call center operations to another country is an example of: A. Frictional unemployment B. Structural unemployment C. Cyclical unemployment D. Disguised unemployment

Core inflation refers to the inflation picture after stripping away the: A. Capital goods prices B. Food and energy prices C. Government-regulated prices D. Service-sector prices

D. "Benefits" those who save money

D. Frictional rate of unemployment

D. Is a fixed unemployment rate that does not change over time

D. Natural

D. Part of structural unemployment

D. Recovery

D. Service-sector prices

D. The foreign exchange rate

D. The inflation rate is at its lowest level

D. Treated the same as "discouraged" workers who are not actively seeking employment

D. Work force that have been laid off

D. [(labor force)/(unemployed)] × 100

In calculating the unemployment rate, part-time workers are: A. Counted as unemployed because they are not working full-time B. Counted as employed because they are receiving payment for work C. Used to determine the size of the labor force, but not the unemployment rate D. Treated the same as "discouraged" workers who are not actively seeking employment

New college graduates still looking for their first jobs would be classified in the BLS data as: A. Frictionally unemployed B. Not yet in the labor force C. Cyclically unemployed D. Part of structural unemployment

The CPI compiled by the Bureau of Labor Statistics is used in the computations for: A. The unemployment rate B. The inflation rate C. The interest rate D. The foreign exchange rate

The natural rate of unemployment: A. Means that the economy will always operate at that rate B. Means that the economy will always realize its potential output C. Is equal to the total of frictional and structural unemployment D. Is a fixed unemployment rate that does not change over time

The rate of unemployment when the economy is at its potential output is called the: A. Full-employment rate of unemployment B. Natural rate of unemployment C. Structural rate of unemployment D. Frictional rate of unemployment

The unemployed are those people who: A. Do not have jobs B. Are not employed but are seeking work C. Are not working D. Are not in the workforce

The unemployment rate is interpreted as the percentage of the: A. Adult population who are unemployed B. Labor force that are not employed C. Able-bodied population who are not working D. Work force that have been laid off

Unanticipated inflation arbitrarily: A. "Subsidizes" those who receive fixed money incomes B. "Taxes" those who receive fixed money incomes C. "Penalizes" those who borrow money D. "Benefits" those who save money

Which of the following is the correct way to calculate the unemployment rate? A. [(unemployed)/(population)] × 100 B. [(unemployed)/(labor force)] × 100 C. [(labor force)/(population)] × 100 D. [(labor force)/(unemployed)] × 100

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? A. The GDP Price Index B. The Consumer Price Index C. The Retail Trade survey D. The Wholesale Price Index

Which phase of the business cycle would be most closely associated with an economic contraction? A. Peak B. Recession C. Trough D. Recovery

The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percent of adults who are not in the labor force is: Question 20 options: A)30.3 percent B)20.6 percent C)25.3 percent D)13.9 percent

B) 20.6 percent ****NOT: D) 13.9 percent

The recurrent ups and downs in the level of economic activity extending over several years are referred to as: Question 10 options: A) Noncyclical fluctuations B) Business cycles C) Economic phases D) Business startups

B) Business cycles

The following factors tend to make the real GDP growth rate understate the growth of economic well-being, except: Question 18 options: A)More stress-free lifestyle B)Debasement of the environment C)Improved product quality D)Added leisure

B) Debasement of the environment

Which of the following does not correctly characterize modern economic growth? Question 2 options: A) It spread slowly across the globe, with some societies not having experienced it yet B) It has not affected the average lifespan of human beings C) It has occurred only in the last 200 or so years D) It drastically alters the culture and politics of society

B) It has not affected the average lifespan of human beings

Official unemployment rate statistics may: Question 6 options: A) Understate the amount of unemployment by excluding part-time workers in the calculations B) Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment C) Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment D) Overstate the amount of unemployment by including part-time workers in the calculations

B) Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

General sources of shocks that can cause business cycles include the following, except: Question 12 options: A) Monetary factors and financial instability B) Unemployment jumps and production drops C) Political events, either domestic or global D) Irregular occurrence of innovations and productivity changes

B) Unemployment jumps and production drops

The basic policy-making body in the U.S. banking system is the:

Board of Governors of the Federal Reserve.

The National Income and Product Accounts (NIPA) for the U.S. are compiled by the:

Bureau of Economic Analysis

A peak in the business cycle: A. Occurs when the unemployment rate is its greatest B. Occurs when the inflation rate is its lowest C. Is a temporary maximum point D. Is a temporary minimum point

A recession is a decline in: A. The inflation rate that lasts six months or longer B. The unemployment rate that lasts six months or longer C. Real GDP that lasts six months or longer D. Potential GDP that lasts six months or longer

Cost-push inflation tends to be characterized by all of the following, except: A. Rising general price level B. Falling real output C. Automatically self-limiting D. Falling unemployment

D. Falling unemployment

D. Hyperinflation

D. Is a temporary minimum point

D. Is discouraged and not actively seeking work

D. Natural

D. Natural unemployment

D. Noncyclical fluctuations

D. Political events, either domestic or global

D. Potential GDP that lasts six months or longer

D. The CPI from one year to the next

D. The Committee on Business Cycles of the Council of Economic Advisers

D. Unanticipated inflation

General sources of shocks that can cause business cycles include the following, except: A. Irregular occurrence of innovations and productivity changes B. Monetary factors and financial instability C. Unemployment jumps and production drops D. Political events, either domestic or global

Inflation caused by an increase in aggregate spending is referred to as: A. Cost-push inflation B. Anticipated inflation C. Demand-pull inflation D. Hyperinflation

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is: A. Cyclical B. Frictional C. Structural D. Natural

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors? A. Gold market and stock market B. International trade and foreign exchange markets C. Real estate and financial markets D. Consumer and government spending

The best example of a "frictionally unemployed" worker is one who: A. Reduces productivity by causing friction in a business B. Is laid off during a recessionary period in the economy C. Is in the process of voluntarily switching jobs D. Is discouraged and not actively seeking work

The inflation rate measures the percentage growth rate of: A. Real GDP from the base period 1982-84 to a given year B. Real GDP from one year to the next C. The CPI from the base period 1982-84 to a given year D. The CPI from one year to the next

The recurrent ups and downs in the level of economic activity extending over several years are referred to as: A. Economic phases B. Business startups C. Business cycles D. Noncyclical fluctuations

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called: A. Frictional unemployment B. Cyclical unemployment C. Structural unemployment D. Natural unemployment

When oil and energy prices rise, the economy tends to experience: A. Natural inflation B. Demand-pull inflation C. Cost-push inflation D. Unanticipated inflation

Which of the following groups declares the start and end of recessions in the U.S.? A. The Business Cycle Monitoring Committee of the Federal Reserve System B. The Business Cycle Tracking Agency of the Department of Commerce C. The Business Cycle Dating Committee of the National Bureau of Economic Research D. The Committee on Business Cycles of the Council of Economic Advisers

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment? Question 11 options: A) Natural B) Structural C) Cyclical D) Frictional

C) Cyclical *****NOT: B) Structural

A trough in the business cycle occurs when: Question 21 options: A)The inflation rate is at its lowest level B)The natural rate of unemployment is at a minimum point C)Employment and output reach their lowest levels D)Cyclical unemployment is at a minimum point

C) Employment and output reach their lowest levels

Full-time homemakers and retirees are classified in the BLS data as: Question 7 options: A) Unemployed B) Part of the labor force C) Not in the labor force D) Employed

C) Not in the labor force

A worker who loses a job at a call center because the company moved the call center operations to another country is an example of: Question 17 options: A)Disguised unemployment B)Frictional unemployment C)Structural unemployment D)Cyclical unemployment

C) Structural unemployment

Which of the following statements is correct? Question 14 options: A)Frictional unemployment is the result of friction between labor and management over how best to perform work B)Cyclical unemployment is also called wait unemployment because this unemployment depends on the timing of the business cycle C)Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology D)Search unemployment is the broadest unemployment category because it covers all other types of unemployment

C) Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology

Which statement is correct? Question 23 options: A)Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy B)Real output and employment generally show little variance over the business cycle C)The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle D)All sectors of the economy are affected to similar degrees by business fluctuations

C) The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle

Trends in educational attainment in the U.S. since 1960 indicate that the percentage of adults:

Completing college has been rising, and so has the percentage completing high school

Decisions about saving and investment are:

Complicated by the fact that the future is uncertain

In competitive markets, a surplus or shortage will:

Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage

Refer to the market graph shown above. A black market where the price is $2.00 could result from price:

Ceiling set at $1.50

One major element of the command system is:

Central planning conducted by the government

If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for:

Coke to the left

When the consumption schedule is plotted on a graph:

Consumption is on the vertical axis and disposable income is on the horizontal axis

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement:

Contractionary fiscal policy

Refer to the above data. In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s):

Correct #2 and #4.

Refer to the above data. The domestic equilibrium prices of steel in Alpha and Beta are:

Correct $3 and $2, respectively

Refer to the above diagram for a private closed economy. At the equilibrium level of GDP, investment and saving are both:

Correct $50

Which of the following statements pertains to macroeconomics?

Correct National income grew by 2.7 percent last year.

Refer to the above diagram. Which line(s) show(s) a negative vertical intercept?

Correct both B and C.

On the basis of the above information it can be said that:

Correct no coincidence of wants exists between any two states.

Refer to the above graph. A movement from b to a along C1 might be caused by a:

Correct recession

Inflation caused by a rise in per unit production costs is referred to as:

Cost-push inflation.

The group that often initiates changes in fiscal policy is the:

Council of Economic Advisors

In calculating the unemployment rate, part-time workers are:

Counted as employed full-time because they are receiving payment for work.

GDP does not include which of the following activities? a.) Businesses installing anti-pollution equipment b.) Couples remodeling their own homes d.) Households spending to enhance security in their neighborhoods

Couples remodeling their own homes

Unanticipated inflation

Creditors lose and debtors gain if the lender does not anticipate inflation correctly.

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Cyclical

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

Cyclical unemployment

A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment? A. Wait B. Cyclical C. Frictional D. Structural

After the Great Recession of 2007-09 ended, real GDP increased: A. And unemployment fell in pace with the rising GDP B. But unemployment fell more rapidly than the increase in GDP C. But unemployment fell much slower than the increase in GDP D. But unemployment continued to rise for three more years

Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then: A. Both lenders and borrowers benefit B. Both lenders and borrowers are hurt C. Borrowers are hurt, but lenders benefit D. Lenders are hurt, but borrowers benefit

D. Actual GDP is greater than potential GDP

D. But unemployment continued to rise for three more years

D. Capital goods production

D. Employment and output increase

D. Lenders are hurt, but borrowers benefit

D. Lower, because skilled workers tend to be primarily employed by government at the local, state, and Federal levels

D. Natural rate of unemployment

D. No cyclical unemployment

D. Not in the labor force

D. Rise as the price level rises

D. Significantly exceeded that for women

D. Structural

D. Taxation

D. The production of output continued to decline, so that firms had no real need to increase hiring

D. The purchasing power of money decreases

D. Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

D. White adult males

For a given amount of nominal income, the real income will: A. Fall if the price level rises B. Fall if the price level falls C. Be unaffected if the price level falls D. Rise as the price level rises

Full-time homemakers and retirees are classified in the BLS data as: A. Employed B. Unemployed C. Part of the labor force D. Not in the labor force

If the GDP gap is positive, then: A. The inflation rate is falling B. The unemployment rate is rising C. Potential GDP is greater than actual GDP D. Actual GDP is greater than potential GDP

In the expansion phase of a business cycle: A. The inflation rate decreases, but productive capacity increases B. The inflation rate and productive capacity decrease C. Employment increases, but output decreases D. Employment and output increase

In which industry or sector of the economy is output least likely to be affected by the business cycle? A. Housing construction B. Automobile production C. Agricultural commodities D. Capital goods production

Official unemployment rate statistics may: A. Overstate the amount of unemployment by including part-time workers in the calculations B. Understate the amount of unemployment by excluding part-time workers in the calculations C. Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment D. Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

Possible reasons why the level of employment remained lower than before the Great Recession began, even three years after the recession ended, includes the following, except: A. There was an extension of the period of eligibility for unemployment benefits B. Structural adjustments that were needed were happening very slowly, if at all C. Worries about rising labor costs were dampening the willingness of firms to increase hiring D. The production of output continued to decline, so that firms had no real need to increase hiring

Refer to the above graph. Which point in the graph would allow a simultaneous increase in the production of both investment and consumer goods?

The full-employment rate of unemployment is also called the: A. Potential rate of unemployment B. Cyclical rate of unemployment C. Frictional rate of unemployment D. Natural rate of unemployment

The rate of unemployment tends to be lowest for: A. Black teenagers B. White teenagers C. Black adult males D. White adult males

Unemployment rates for men and women normally are very similar. In the Great Recession of 2007-09, the unemployment rate for men: A. Remained roughly similar to that for women B. Was slightly lower than that for women C. Was much lower than that for women D. Significantly exceeded that for women

Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are: A. Lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries B. Higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry C. Higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry D. Lower, because skilled workers tend to be primarily employed by government at the local, state, and Federal levels

When inflation occurs: A. All prices are rising B. Each dollar of income will buy more output than before C. The purchasing power of money increases D. The purchasing power of money decreases

When the government prints money faster than output is expanding, the inflation that will occur is a form of: A. Subsidy B. Quota C. Production D. Taxation

Consider two scenarios for a nation's economic growth. Scenario A has real GDP growing at an average annual rate of 3.5%; scenario B has an average annual growth of 4.5%. The nation's real GDP would double in about: Question 5 options: A) 20 years under scenario A, versus 30 years under scenario B B) 12 years under scenario A, versus 16 years under scenario B C) 16 years under scenario A, versus 30 years under scenario B D) 20 years under scenario A, versus 16 years under scenario B

D) 20 years under scenario A, versus 16 years under scenario B 70 / 3.5 = 20 70 / 4.5 = 15.5555556 OR 16

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is: Question 19 options: A)17.5 years B)175 years C)40 years D)28 years

D) 28 years 70 / 2.5 = ^

The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is: Question 4 options: A) 5.8 percent B) 3.3 percent C) 7.8 percent D) 6.4 percent

D) 6.4 percent 125 (labor force) - 117 (employed) = 8 8 / 125 (labor force) = .064 .064 x 100 = 6.4%

The reasons why per capita GDP in the U.S. is significantly higher than in some other rich countries like, say, France include the following, except: Question 13 options: A)Differences in the tax structure and the resulting incentive effects of taxes B)Cultural differences between the U.S. and France regarding the right balance between labor and leisure C)U.S. citizens put in substantially more work hours than do citizens of France D)Differences is the communication technology due to language differences

D) Differences is the communication technology due to language differences

Which of the following is a measure of economic growth that is most useful for comparing living standards? Question 22 options: A)Decreases in the rate of unemployment B)Increases in real GDP C)Growth in nominal GDP D)Increases in real GDP per capita

D) Increases in real GDP per capita

If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by: Question 9 options: A) Four percentage points B) One percentage point C) Three percentage points D) Two percentage points

D) Two percentage points

If personal income taxes and business taxes increase, then this will:

Decrease aggregate demand and aggregate supply

Other things being equal, a decrease in an economy's exports will:

Decrease domestic aggregate expenditures and the equilibrium level of GDP

If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms. We refer to that adjustment as:

Deflating GDP

Which of the following would most likely occur during the expansionary phase of the business cycle?

Demand-pull inflation

The amount of consumption in an economy correlates:

Directly with the level of disposable income

In the expenditures approach of national income accounting, C, Ig, and G include expenditures for:

Domestically produced as well as imported goods and services

What economic concept would be most closely associated with a situation where an aluminum plant expands its operations and uses extensive computerization in the production line to reduce per-unit costs of production?

Economies of scale

A through in the business cycle occurs when

Employment and output reach their lowest levels

A trough in the business cycle occurs when:

Employment and output reach their lowest levels.

One of the main arguments against further growth for industrialized nations focuses on the problem of:

Environmental quality

Okun's law indicates that for:

Every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated

Okun's law indicates that for:

Every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated.

The value of corporate stocks and bonds traded in a given year is:

Excluded from the calculation of GDP because they make no contribution to current production of goods and services

In calculating the unemployment rate, the "discouraged" workers who are not seeking employment are:

Excluded from the labor force

Supply factors in economic growth include the following, except: a.) Improvements in technology b.) Expansion of capital stock c.) Better education and training d.) Increases in purchases of output

Expansion of capital stock

Two basic determinants of investment spending are:

Expected returns and real interest rate

GDP tends to overstate economic well-being because it takes into account:

Expenditures undertaken to correct pollution

For a given amount of nominal income, the real income will:

Fall if the price level rises.

If economic profits in a particular industry increase, then we would expect:

Firm to enter that industry thus expanding it

The market system is said to be characterized by "consumer sovereignty." This is because:

Firms must match their production decisions to the consumers' choices

If prices of goods and services quickly adjust to demand shocks, then:

Firms would find it easier to produce at their optimal output rates

Which of the following is a true statement?

Fiscal policy swung from contractionary to expansionary in 2002.

An example of final goods in national income accounts would be:

Flowers and pots purchased by homeowner Joe Smith

Core inflation refers to the inflation picture after stripping away the:

Food and energy prices

When local police and fire departments buy new cars for their operations, these are counted as part of:

Gross domestic private investment, as defined in national income accounts, would include the following, except: a.) Government construction of new highways and dams b.) Changes to business inventories c.) All domestic construction done by the private sector d.) The value of all capital goods bought by business firms

Government construction of new highways and dams

A budget surplus means that:

Government revenues are greater than expenditures in a given year

Select the graph above that best shows the change in the market specified in the following situation: In the market for leather coats, when leather coats become more fashionable among young consumers.

Graph A

Refer to the figure above. A shift from AD2 to AD1 would be consistent with what economic event in U.S. history?

Great Recession of 2007-2009

One of the basic economic defenses of economic growth rests on the conclusion that:

Growth makes the gap between unlimited wants and scarce resources less acute

Cross-country studies that bolster the "zero inflation" view indicate that lower rates of inflation are associated with:

Higher rates of economic growth

GDP estimates account for which of the following items?

Household spending for health and home insurance

In the 1920s, Germany after the First World War experienced an economic condition which can be best described as:

Hyperinflation

Refer to the above information. Which technique is economically most efficient in producing A?

Anticipated inflation

If the inflation rate corresponds to what the majority of people are expecting.

The movement of workers from lower productivity jobs to higher productivity jobs would be an example of a(n):

Improved resource allocation

In calculating the unemployment rate, part-time workers are:

Included because they get paid for work

Real income

Income of an individual, organization, or country, after taking into consideration the effects of inflation on purchasing power.

A decrease in business taxes will tend to:

Increase aggregate demand and increase aggregate supply

Two months ago, the Maryville Shirt company sold 2000 shirts at $30 per shirt. Last month the company raised its price to $35 per shirt and sold 3000 shirts. Evidently the company experienced a(n):

Increase in demand

Assume that if there was no crowding-out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding-out, however, then GDP would have:

Increased by less than $100 billion

An increase in the aggregate expenditures schedule:

Increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier

Which is the single most important source of U.S. economic growth?

Increases in labor productivity

Supply factors in economic growth include the following, except:

Increases in purchases of output

Which of the following is a measure of economic growth that is most useful for comparing living standards?

Increases in real GDP per capita

Increasing returns in production implies the following, except:

Increasing labor-requirements per unit of output

Suppose that an economy is initially operating at a point on its PPC. If it then experiences an expansion in its production capacity, but its total spending does not rise as fast as its capacity, the economy will end up:

Inside its PPC

Patents and copyrights foster the flow of:

Inventions and ideas

A peak in the business cycle:

Is a temporary maximum point

The best example f a "frictionally unemployed" worker is one who:

Is in the process of voluntarily switching jobs

Under modern economic growth, the annual average increase in output per person is:

Often not large, perhaps 2% per year

What is an advantage of mild inflation according to some economists?

It makes it easier for firms to adjust real wages downward as demand for their products falls

Which of the following is the main problem with the barter system of exchange?

It requires a coincidence of wants

Society can increase its output and income by increasing basically one or both of two factors:

Its resources and the productivity of the resources

Which of the following countries experienced deflation for several years in the period 2002-2012?

Japan

The unemployment rate is interpreted as the percentage of the:

Labor force that are not employed

the unemployment rate is interpreted as the percentage of the:

Labor force that are not employed

Which pitfall to sound economic reasoning is reflected in a person's view that "pharmaceutical and oil companies are price-gouging the consumers"?

Loaded terminology

Sources of increasing returns that help raise productivity growth include the following, except:

Low unemployment

From 1999 to 2009, the unemployment rate in the United States compared with other industrially advanced nations, such as France and Germany, has been:

Lower

Compared with the period from 1973-1995, the annual rate of productivity growth from 1995-2012 was about:

One-and-a-half times faster

In Year 1, the actual budget deficit was $150 billion and the cyclically-adjusted deficit was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically-adjusted deficit was $125 billion. It can be concluded that discretionary fiscal policy from Year 1 to Year 2 was:

More contractionary

Which of the following would best be classified as a complement for new houses/homes?

Mortgage loans

An increase in the price of digital cameras will result in a(n):

Movement up and to the left along the demand curve for digital cameras

The amount by which actual GDP falls short of potential GDP is one measure of the: A. Natural rate of unemployment B. Macroeconomic cost of unemployment C. Difference between real and nominal GDP D. Potential to produce outside the nation's PPC

NOT A.

The amount by which actual GDP falls short of potential GDP is one measure of the:

NOT Natural rate of unemployment

Nation A's real GDP was $520 billion in 2009 and $550 billion in 2010. Its population was 150 million in 2009 and 155 million in 2010. On the other hand, Nation B's real GDP was $200 billion in 2009 and $210 billion in 2010; and its population was 53 million in 2009 and 55 million in 2010. Which of the following statements is true?

Nation A's real GDP growth in 2010 is higher than Nation B's

Nation A's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation B's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is true?

Nation A's real GDP growth in 2014 is higher than Nation B's

Which of the following statements pertains to macroeconomics?

National income grew by 2.7 percent last year.

The full-employment rate of unemployment is also called the:

Natural rate of unemployment

What does research indicate about the effect volatility of stock-price averages on the stability of the macroeconomy?

Neither the wealth nor the investment effects of stock price changes are a major cause of macroeconomic instability

In an economy that has stationary production capacity:

Net investment is zero

"Full employment" refers to the situation when there is:

No cyclical unemployment

Suppose a small economy produces only HD Tv sets. In year 1, 100,000 sets are produced and sold at a price of $1,200 each. In year 2, 100,000 sets are produced and sold at a price of $1,000 each. As a result :

Nominal GDP decreases, while real GDP stays constant

Refer to the graph above. Which of the following statements is correct on the basis of the information shown?

Nominal GDP must be inflated in each year before 2000 to determine real GDP

Under which of the following circumstances would we observe the greatest increase in real income?

Nominal income falls by 2 percent, and the price level falls by 10 percent.

For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as:

Normal goods

Full-time homemakers and retirees are classified in the BLS data as:

Not in the labor force

An example of intermediate goods would be:

Paper and ink bought by a publishing company

The size of the labor force depends on the size of the working-age population and the:

Participation rate

Unanticipated inflation tends to penalize:

People who save money in financial institutions

Which of the following transactions would be included in GDP?

Peter buys a newly constructed house.

Refer to the above graph. An increase in price, other factors constant, would cause a change from:

Point 3 to point 4

Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:

Point 4 to point 1

"GDP price index" measures changes in the:

Prices of the output produced in the nation

What, according to economist Donald Boudreaux in the "Last Word" section of the chapter, best explains why the market system is not a random, chaotic mess?

Private property rights encourage mutual accommodation that leads to an arrangement of resources that is productive

Which of the following is a determinant of supply?

Product taxes and subsidies

The market demand schedule or curve for a product shows the relationship between how much of the product buyers are willing and able to buy and the:

Product's price

Growth-promoting institutional structures include the following, except:

Protection of domestic firms from foreign rivals

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?

Real GDP doesn't change

A recession is a decline in:

Real GDP that lasts six months or longer

The Great Recession in 2007 was triggered by shocks in which of the following economic sectors?

Real estate and financial markets

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Real estate and financial markets

Savings are transferred from savers to borrowers through the following intermediaries, except:

Real estate brokers

Personal income (PI) refers to all income:

Received

A piece of software that benefits many users at the same time would be an example of

Simultaneous consumption

Refer to the above tables. Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods while South Cantina is producing 2 units of capital goods and 21 units of consumer goods. We can conclude that:

South Cantina is fully and efficiently using its resources, but North Cantina is not.

A worker who loses a job at a call center because the company moved the call center operations to another country is an example of: Structural unemployment

Structural unemployment

a worker who loses a job at a call center because the company moved the call center to another country is an example of:

Structural unemployment

Which of the following statements is correct?

Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology

The headline reads: Steel industry suffers slump as import competiion increases; unemployment rises." This type of unemployment can best be characterized in economic terms as:

Structural.

One of the most important views expressed by classical macroeconomists was that:

Supply creates its own demand

Creating a competitive and legal market for human organs for transplant would make the:

Supply curve slope upward to the right for such organs

Fiscal policy is enacted through changes in:

Taxation and government spending

Which measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

The Consumer Price Index

Which of the following best describes the invisible-hand concept?

The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

Economists need different models of the economy because:

The economy behaves differently depending on how much time has passed after a demand shock

Inflation is a rise in:

The general level of prices over time

A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of:

The income effect

Nominal interest rate

The interest rate unadjusted for inflation.

Refer to the above graph. Which of the following factors explains a movement along the AD curve?

The interest-rate effect or real-balances effect

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

The invisible hand

The higher the rate of unemployment:

The larger is the GDP gap

Natural rate of unemployment (NRU)

The level of unemployment characterizing the economy in long-run equilibrium, determined by the levels of frictional, structural, and institutionally induced unemployment. At this rate of unemployment, inflation should be constant, so it is sometimes called the nonaccelerating inflation rate of unemployment, or NAIRU.

One concern regarding educational attainment in the U.S. is that:

There are fewer college graduates in science and engineering

Which of the following markets is most likely to exhibit extremely flexible prices?

The oil market

Which of the following is a microeconomic statement?

The price of personal computers declined last year.

Which statement is correct?

The production of nondurable consumer goods is more stable than the produciton of durable consumer goods over the business cycle.

An antigrowth view would be that there may be a significant tradeoff between productivity and:

The quality of life

Inflation is:

The redistributive effects of inflation are arbitrary with respect to people and groups in society

Okun's law

The relationship between an economy's unemployment rate and its gross national product (GNP).

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:

The substitution effect

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:

The underground economy

The "inverse dependency ratio" is defined as the ratio of:

The working-age population to the number of dependents

Which of the following programs was not designed and implemented by the Federal Reserve?

Troubled Asset Relief Program

Official unemployment rate statistics may:

Understate the amount of unemployed because of the presence of "discouraged" workers who are not actively seeking employment

Official unemployment rate statistics may:

Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment.

The so-called Great Recession in the U.S.:

Was the worst economic downturn since the Great Depression

The term consumer sovereignty means that:

What is produced is ultimately determined by what consumers buy

Which of the following is the fallacy in the fallacy of composition?

What is true for the part is necessarily also true for the whole

Suppose a family's income increases by 5% at the same time that inflation is 6%. Then the family's living standar

Will decrease

When total input costs rise slower than the total units of output produced, then the per-unit production costs:

Will decrease

In understanding and analyzing "demand," we focus on how much of a product the buyers are:

Willing and able to buy

A worker would be hurt least by inflation when the:

Worker is protected by a cost-of-living adjustment clause in an employment contract

What is the formula to calculate unemployment rate?

[(Unemployed)/(Labor Force)] x 100

UR%=

[Unemployed/labor force]x100

Which of the following would increase GDP by the greatest amount?

a $20 billion increase in government spending

The recurrent ups and downs in the level of eocnomic activity extending over several years are a descritpion of:

a business cycle.

If unintended increases in business inventories occur, we can expect:

a decline in GDP and rising unemployment.

Cyclical unemployment results from

a deficiency of spending on goods and services.

Microeconomics is concerned with:

a detailed examination of specific economic units that make up the economic system.

Inflation is undesirable because it:

arbitrarily redistributes real income and wealth.

Which of the following is a distinguishing feature of a command system?

central planning

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information we:

cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.

(Last Word) If variables X and Y are positively correlated, this means that:

causation may or may not exist between X and Y.

A burst stock market bubble must adversely affect the economy by:

causing a severe negative wealth effect and engendering pessimism about the economy's future.

The regulatory mechanism of the market system is:

competition

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to:

consume is three-fifths

The relationship between the size of the negative GDP gap and the unemployment rate is:

direct

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would

decline

A decline in disposable income:

decreases consumption by moving downward along a specific consumption schedule.

Countercyclical discretionary fiscal policy calls for:

deficits during recessions and surpluses during periods of demand-pull inflation.

Real income can be determined by:

deflating nominal income for inflation

(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the:

demand for coffee beans has increased.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:

demand has increased and equilibrium price has decreased.

Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:

demand-pull inflation

(Last Word) A market for human organs (rather than the current volunteer-donor system) would be expected to:

eliminate the shortage of organs.

Barter:

entails the exchange of goods for goods.

(Consider This) Ticket scalping implies that:

event sponsors have established ticket prices at below-equilibrium levels.

Which of the following is not a characteristic of cost-push inflation?

falling unemployment

The "coincidence of wants" problem associated with barter refers to the fact that:

for exchange to occur each seller must have a product that some buyer wants.

Refer to the above diagram. Flow (3) represents:

goods and services.

If unemployment is above the natural rate of unemployment, then potential GDP is:

greater than actual GDP

The size of the MPC is assumed to be:

greater than zero, but less than one.

Discouraged workers

have usually given up on searching for a job because they found no suitable employment.

European economists generally agree that:

high European unemployment rates have resulted from government policies and union contracts that increase the costs of hiring and reduce the individual's opportunity cost of being unemployed.

The production possibilities curve illustrates the basic principle that:

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

A market is in equilibrium:

if the amount producers want to sell is equal to the amount consumers want to buy.

Suppose that an individual sees a tremendous opportunity to produce and sell a new product, but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:

incentive problem under communist central planning.

Refer to the above. An increase in income, if X is a normal good, will

increase D, increase P, and increase Q.

Refer to the above. An increase in the price of a product that is a close substitute for X will:

increase D, increase P, and increase Q.

Refer to the above diagram. The most likely cause of a shift from AB to CD would be a(n):

increase in productivity

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n):

increase in the price of complementary good Y.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n):

increase in the wage rates paid to laborers employed in the production of X.

The historical reallocation of labor from agriculture to manufacturing in the United States has:

increased the average productivity of labor.

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets

Hyperinflation

inflation growing at a very high rate in a very short time.

Unlike demand-pull inflation, cost-push inflation:

is self-limiting

Per-unit production costs

is the cost you would physically spend to manufacture a item.

Unemployment rate

is the percentage of the labor force unemployed.

Real interest rate

is the rate of interest an investor expects to receive after allowing for inflation.

Labor force

is the sum of all employed and unemployed adults.

What is the main problem with mild inflation according to some economists?

it diverts productive time towards activities to hedge against inflation

What are the primary effects of cost-push inflation?

it reduces real output and redistributes a decreased level of real income

A high unemployment rate most likely means that there is a:

large GDP gap in the economy

A contractionary fiscal policy is shown as a:

leftward shift in the economy's aggregate demand curve.

If unanticipated inflation occurs, then:

lenders are hurt and borrowers benefit.

The level of total spending is the immediate determinant of the:

level of real output and employment

Time deposits of $100,000 or more are:

not a component of M1 or M2.

The unemployed are those who are:

not employed but is seeking work

Full-time homemakers and retirees are classified in the BLS data as

not in the labor force.

Cyclical unemployment

occurs when the unemployment rate moves in the opposite direction as the GDP growth rate.

Demand-pull inflation

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

The amount by which potential GDP exceeds actual GDP is one measure of the:

opportunity cost of cyclical unemployment

Trough

output and employment "bottom out" at their lowest levels.

Refer to the budget line shown in the diagram above. If the consumer's money income is $20, the:

price of C is $4 and the price of D is $2.

If products were in short or surplus supply in the Soviet Union:

producers would not react because no price or profit signals occurred

Refer to the above graphs. Terryville has a comparative advantage in producing:

product A.

The two basic markets shown by the simple circular flow model are:

product and resource

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

Which of the following formulas is correct? Percentage change in:

real income approximates percentage change in nominal income minus percentage change in price level.

From society's point of view the economic function of profits and losses is to:

reallocate resources from less desired to more desired uses.

Which phase of the business cycle would be most closely associated with an economic contraction?

recession

Potential output

refers to the highest level of real Gross Domestic Product output that can be sustained over the long term.

GDP gap

represents workers who want to work but can't find a job, businesses who are reluctant to hire new employees, land being put to sub-optimal use, and banks and credit institutions who accumulate money instead of lending it out.

Refer to the above diagram. A decrease in demand is depicted by a:

shift from D2 to D1

Other things equal, an increase in a consumer's money income:

shifts her budget line rightward because she can now purchase more of both products.

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry

(Consider This) Capital is a:

stock, whereas gross investment and depreciation are flows

A mismatch between the geographic location of workers and the location of job openings would result in what type of unemployment?

structural

Inflation is a:

sustained rise in the general level of prices

(Last Word) Which of the following is a source of data for the investment component of U.S. GDP?

the Census Bureau's Housing Starts Survey and Housing Sales Survey

Which measure of inflation would include consumer goods and capital goods?

the GDP Price Index

The production possibilities curve tells us:

the combinations of two goods that can be produced with society's available resources.

Which measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

the consumer price index

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:

the development of more efficient machinery for producing this commodity.

At the economy's natural rate of unemployment:

the economy achieves its potential output.

Real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result:

the official unemployment rate will remain unchanged.

By an "increase in demand" economists mean that:

the quantity demanded at each price in a set of prices is greater

What is true about inflation?

the redistributive effects of inflation are arbitrary with respect to people and groups in society

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:

the supply to increase as farmers plant more corn.

The view that labor unions may be a source of inflation would be best associated with the:

wage-push view of inflation

Refer to the above graph. A shift of the consumption schedule from C1 to C2 might be caused by a:

wealth effect of an increase in stock market prices.

The cyclically-adjusted budget tells us:

what the size of the Federal budget deficit or surplus would be if the economy was at full employment.

Built-in stability means that:

with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.

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