Macroeconomics Exam 2
The advice to "keep searching, there are plenty of jobs around here is?
frictional unemployment
If cyclical unemployment is eliminated in the economy, then the economy is considered to be at ___________
full employment
Which of the following would decrease the unemployment rate?
government aid
Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation a) less than 7% b) equal to 0 c) equal to 7% d) greater than 7%
greater than 7%
Discouraged workers are workers who?
have been looking for a job more than 4 weeks
An advantage of the household survey over the establishment survey of the labor market is that the household survey a) is based on actual payrolls, rather than on unverified answers b) includes the number of self-employed persons c) includes the number of discouraged workers d) omits persons employed at newly opened firms
includes the number of self-employed persons
Which of the following policies would reduce structural unemployment?
job retraining program
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population? a) unemployment rate b) discouraged-worker ratio c) labor force participation rate d) the ration of minimum wage to inflation labor force participation rate
labor force participation rate
The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as
labor productivity
The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of a) lower; smaller; greater b) lower; greater; greater c) greater; greater; greater d) greater; smaller; greater
lower; greater; greater
Frictional unemployment is the result of the search process of _______________________
matching workers with jobs
The costs to firms of changing prices.
menu cost
If firms pay what are called "efficiency wages," they pay wages that....
motivate workers
12) Refer to Scenario 10-1. Based on the information above, what is the level of public saving? a) 0 b) 1 trillion c) 2 trillion d) negative 1 trillion
negative 1 trillion
7) In a closed economy, which of the following components of GDP is not included? a) government spending b) investment c) net exports d) consumption
net exports
Refer to Figure 10-2. Which of the following is consistent with the graph depicted above?
new government regulations
4) The period between a business cycle peak and a business cycle trough is called
recession
11) Purchases of which of the following goods would be dramatically reduced during a a) gas b) ink pens c) tomatoes d) refrigerators
refrigerators
22) Purchases of Huggies diapers should a) remain fairly constant over the business cycle b) decrease in recessions and increase in expansions c) increase in recessions and decrease in expansions d) increase in recessions and remain constant in expansions
remain fairly constant
If your nominal wage rises faster than the price level, we can say your real wage has _____ and the purchasing power of your income has _______. a) fallen; fallen b) risen; risen c) risen; fallen d) fallen; risen
risen; risen
A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket a) equaled $160 in 1996 b) rose 160% from the cost of the market basket in the base year c) rose 60% from the cost of the market basket in the base year
rose 60%
An example of a seasonally unemployed worker would be
ski lift
6) One difference between stocks and bonds is that a) stocks are financial securities, while bonds are labor market securities b) stocks represent ownership in companies, while bonds represent ownership in banks c) stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond d) stocks are usually issued in electronic form, while bonds are usually issued in paper form
stocks do not involve...
A good measure of the standard of living is
real GDP per capita
Refer to Table 9-1. The labor force participation rate for this simple economy equals
(1,100/15,000) × 100.
Monthly expenditures for a family of 4 in 2015 averaged $1,400. In 2016, the cost of the same purchases was $1,500. If 2015 is the base year, what was the CPI in 2016?
107
Table 9-3. Assume the market basket for the consumer price index has three products - Cokes, hamburgers, and CDs - with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals a) 75 b) 93 c) 108 d) 121
121
Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2013 to 2016?
2%
suppose the working age population of a fictional economy falls into following categories....90 retired or homemakers, 60 full time, 20 part time, 20 no employment...the official unemployment rate as calculated by the U.S. Bureau of Labor would equal
20/100 x 100
11) Refer to Scenario 10-1. Based on the information above, what is the level of private saving in a) 3 trillion b) 4 trillion c) 5 trillion d) 8 trillion
3 trillion
the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest? a) -9.5% b) -3.5% c) 1.5% d) 3.5% e) 9.5%
3.5
If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is a) 3% b) 3.6% c) 3.75% d) cannot be determined
3.75
If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate a) 4.7% b) 10.5% c) 15% d) 21%
4.7
If the number of employed is 190 million, the working-age population is 230 million, and the number of unemployed is 10 million, then the unemployment rate is?
5%
If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge? a) 1% b) 5% c) 6% d) 9%
5%
If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2016, we would say that in the year 2016, the average American could buy ___________ times as many goods and services as the average American in 1950. a) 1/8 b) 4 c) 8 d) 12
8
Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid? a) 16% b) 12% c) 8% d) 6%
8%
If the number employed is 190 million, the number unemployed is 10 million and the working age population is 250 million, then the labor force participation rate is
80%
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2010, then the value of your grandfather's salary in 2010 dollars is approximately a) 84,775 b) 63,830 c) 37,200 d) 26,280
84,775
Refer to Table 9-15. Looking at the table above, real average hourly earnings were equal to ________ in 2015. a) 9 b) 9.52 c) 10 d) 12
9.52
Refer to Figure 10-5. "Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above. a) c to a b) a to b c) b to c d) b to a
B to C
Under which of the following circumstances would the government be running a deficit a) G= 5 trillion T= 7 trillion TR= 1 trillion b) G= 7 trillion T= 7 trillion TR= 0 c) G= 7 trillion T= 10 trillion TR= 3 trillion d) G= 5 trillion T= 5 trillion TR= 1 trillion
G: 5 trillion T: 5 trillion TR: 1 trillion
What impact would including members of the military in employment, labor force, and working-age population statistics have on the unemployment rate and the labor force participation rate? a) Including members of the military would increase the unemployment rate and reduce the labor force participation rate b) Including members of the military would reduce the unemployment rate and increase the labor force participation rate c) Including the military would increase both the unemployment rate and the labor force participation rate d) Including the military would reduce both the unemployment rate and the labor force participation rate
Including members of the military would reduce the unemployment rate and increase the labor force participation rate
14) There is a government budget surplus if a) TR< T b) T-TR>G c) G>TR d) G>T
T-TR>G
The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase in future years, and these higher deficits might "pose a threat to the economy by crowding out business investment and threatening a spike in interest rates." This crowding out of business investment would be represented graphically by
a movement to the left
Structural unemployment is the result of a) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs b) the ups and downs in inflation c) the search process of matching workers with jobs
a persistent mismatch
If consumers decide to be more frugal and save more out of their income, then this will cause a) a movement to the right along the supply curve for loanable funds b) a shift in the supply curve for loanable funds to the left c) a shift in the supply curve for loanable funds to the right d) a movement to the left along the supply curve for loanable funds
a shift in the supply curve to the right
Cyclical unemployment is the result of? a) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. b) the search process of matching workers with jobs. c) the ups and downs in inflation. d) a slowdown in the economy.
a slowdown in the economy
Minimum wage laws cause unemployment because the legal minimum wage is set below the market wage, causing labor demand to be less than labor supply. above the market wage, causing labor demand to be greater than labor supply. above the market wage, causing labor demand to be less than labor supply.
above the market wage, causing labor demand to be less than labor supply
Human capital refers to which of the following? a) the quantity of goods and services that can be produced by one worker or by one hour of work b) physical equipment that is made by human laborers, not machines c) the accumulated knowledge and skills workers acquire from education and training or from their life experiences d) manufactured goods that are used to produce other goods and services
accumulated knowledge
During the expansion phase of the business cycle, which of the following eventually increases? a) employment b) income c) production d) all of the above
all of the above
An increase in the demand for loanable funds will occur if there is a) a decrease in the real interest rate b) an increase in the nominal interest rate accompanied by an equal increase in inflation c) an increase in the real interest rate d) and increase in expected profits from firm investment projects
an increase in expected profits
Which of the following will increase the real interest rate? a) an increase in the budget surplus b) an increase in the supply of loanable funds c) an increase in household saving d) an increase in the demand for loanable funds
an increase in the demand
Suppose that in 2016, all prices in the economy double and that all wages and salaries have also doubled. In 2016 you a) are no better off or worse than you were in 2015 as the purchasing power of your salary has remained the same b) are worse off than you were in 2015 as you can no longer afford to buy as many goods and services c) are better off than you were in 2015 as your salary is higher than it was in 2015 and you can now buy more goods and services
are no better off or worse off than you were in 2015 as the purchasing power
Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan period, then a) lenders gain 1% of the loan value b) borrowers gain 1% of the loan value c) lenders gain 3% of the loan value d) borrowers lose 3% of the loan value
borrowers gain 1%
In comparison to a government that runs a balanced budget, when the government runs a budget deficit, a) the equilibrium interest rate will fall b) household savings will fall c) business investment will fall d) none of the above
business investment will fail
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would.... a) decrease the number of persons in the labor force. b) decrease the number of persons in the working-age population. c) increase the measured labor force participation rate. d) increase the measured unemployment rate.
c
Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause a) the number of discouraged workers to increase. b) the unemployment rate to decrease. c) the labor force participation rate to decrease. d) no change in the unemployment rate.
c
The total amount of physical capital available in a country is known as the country's.....
capital stock
The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and _______ the cost of the market basket. a) change; underestimates b) do not change c) change; overestimates d) do not change; underestimates
change; over-estimates
Which of the following is an example of human capital?
college education
Which of the following price indices comes closest to measuring the cost of living of the typical household?
consumer price index
The response of investment spending to an increase in the government budget deficit is called a) private dissaving b) crowding out c) expansionary investment d) income minus net taxes
crowding out
If you have trouble finding a job because of a slowdown in the overall economy, we would
cyclically unemployed
10) The demand for durable goods a) declines by a smaller percentage than does GDP during a recession b) has decreased over time c) declines by a greater percentage that does GDP during a recession d) rises by a greater percentage that does GDP during a recession
declines by a greater percentage than does GDP during a recession.
Increasing the amount of consumption spending and reducing the amount of savings ________investment expenditures, and ________ long-run economic growth in the economy. a) increases; decreases b) increases; increases c) decreases; increases d) decreases; decreases
decreases; decreases
Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds. a) suppliers; suppliers b) demanders; suppliers c) suppliers; demanders d) demanders; demanders
demanders; suppliers
Which of the following cause the unemployment rate as measured by the B of LS to understate the true extent of joblessness?
discouraged workers
The real wage equals the nominal wage ____ the CPI, all times 100
divided by
4) Which of the following is most liquid? a) dollar bill b) a mutual fund share c) a corporate bond d) a government bond
dollar bill
The labor force equals the number of people.....
employed plus unemployed
Actual real GDP will be above potential GDP if a) firms are producing below capacity b) firms are producing at capacity c) inflation is rising d) firms are producing above capacity
firms are producing above capacity
An increase in unemployment insurance payments would, in effect, ________ the amount of __________ unemployment a) decrease; frictional b) decrease; cyclical c) increase; frictional d) increase; cyclical
increase; frictional
If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years? a) the cost of living increases by 6% b) the cost of living decreases by 6% c) the cost of living increases by 12.7% d) the cost of living increases by 2.9%
increased by 2.9%
Which of the following increases labor productivity? a) an increase in the aggregate hours of work b) inventions of new machinery, equipment, or software c) decreases in the availability of computers and factory buildings d) a decline in the health of the population
inventions of new machinery
An advantage of the established survey over the household survey of the labor market is that the establishment survey.....
is based on actual payrolls, rather than on unverified answers
A firm can fund an expansion of its operations by
issuing bonds
Which of the following is true about the consumer price index? a) it assumes that consumers purchase the same amount of each product in the market basket each month b) it accounts for people switching to goods whose prices have fallen c) it filters out the part of price increases that occurs because of quality improvements in products
it assumes that consumers
The stated interest rate on a loan is the:
nominal interest rate
Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing
not experiencing
The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ________ quality increases. This causes the CPI to _______ the cost of the market basket. a) not; overstate b) also; overstate c) not; understate d) also; understate
not; overstate
Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about a) one to two percentage points b) one-half to one percentage point c) one and one half-percentage points
one-half to one percentage point
Long-run economic growth requires all of the following except a) increases in capital per hour worked b) technological change c) government provision of secure property rights d) political instability
political instability
The average price of goods and services in the economy is also known as
price level
People who lost their jobs as hand-drawn animators because of the popularity of computer generated 3D animation are examples of people who are suffering
structural unemployment
16) Refer to Figure 10-1. Which of the following is consistent with the graph depicted above? a) technological change increases the profitability of new investment b) the government runs a budget surplus c) households become spendthrifts and begin to save less d) an expected recession decreases the profitability of new investment
technological change
What two factors are the keys to determining labor productivity?
technology and the quantity
7) What is the name of the organization that defines business cycle peaks and troughs in the United States? a) the Bureau of labor statistics b) the national peak and trough committee c) the national bureau of economic research d) the federal reserve
the National Bureau of Economic Research
Liquidity refers to a) the number of times a dollar changes hands in the creation of GDP in an economy b) the ease with a stock can be traded for a bond c) the number of shares of stock a corporation issues d) the ease with which a financial security can be traded for cash
the ease with which a financial security
if we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on
the producer price index
You earned $30,000 in 2007, and your salary rose to $80,000 in 2016. If the CPI rose from 82 to 202 between 2007 and 2016, which of the following is true? a) there was deflation b) the purchasing power of your salary remained constant between 2007 and 2016 c) the purchasing power of your salary fell between 2007 and 2016 d) the purchasing power of your salary increased between 2007 and 2016
the purchasing power of your salary increased
When deflation occurs a) the nominal interest rate is greater than the real interest rate b) the nominal interest rate is equal to the real interest rate and inflation is negative c) the real interest rate is greater than the nominal interest rate d) the nominal interest rate is equal to the real interest rate and inflation is positive
the real interest rate
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job, a. the unemployment rate decreased. b. the unemployment rate increased. c. the working-age population increased. d. the labor force participation rate decreased
the unemployment rate increased
If inflation is positive and is perfectly anticipated, a) those that lend money lose b) no one in the economy loses c) those that hold paper money lose d) those that borrow money lose
those that hold paper money lose
Which of the following cause the unemployment rate as measured by the BLS to overstate the true extent of joblessness?
unemployed persons falsely