MACROECONOMICS MODULE 2
All of the following statements are true, except:
Moderate or high Inflation rarely poses substantial long-term planning problems for businesses.
Which of the following is true about the GDP Deflator?
The representative goods and services in its basket include all final goods and services produced within a country's borders within a given time period.
The unemployment rate for men was higher than the unemployment rate for women between 2008 and 2016.
true
In defined contribution plans, who contributes to the employee's retirement account?
employee and employer
The accumulated skills and education of workers is also known as ______.
human capital
Which of the following refers to the skills and knowledge that make workers productive?
human capital
An employee who is paid higher than her peers is more productive because she realizes that she would likely suffer a decline in salary if she were to leave her position. Which of the following best describes why her situation could cause wage stickiness?
the efficiency wage theory
In order to maintain purchasing power for those wage earners, the federal minimum wage rate should keep up with _________________.
the rate of imflantation
If someone retires with a pension, what effect does inflation have on their income?
they will lose buying power because their income will not be worth as much
All of the following can impact the demand for new workers in the labor market, except:
unemployment benefits
The logging industry has had a very productive thirty years and as a result, the demand for labor has been increasing a little each year and equilibrium wages rose each year. If the logging industry's productivity were to slow down, what is likely to happen to equilibrium wages?
wages would continue to rise despite the demand for labor not rising, causing the natural rate of unemployment to rise
Weston Bank would like to provide a loan to Aaron. Suppose the inflation rate is predicted to be 8%. In order for the bank to protect the real value of the loan repayments they will receive, it should set loan's interest rate to:
11%
Calculate Country A's future GDP 5 years from now if the current GDP is $8,950 and the expected growth rate is 5%. Round your answer to the nearest whole number.
11423
Jane is considering running for president of Country Y and wants to campaign setting realistic goals for the future of her country. Help Jane determine the future GDP of Country Y, 3 years from now if the present GDP is $1,984,520 and the growth rate is 4%. Round your answer to the nearest whole number.
2232315
Which of the following are examples of defined contribution plans?
401(k) plans, 403(b) plans,
Suppose the adult population over the age of 16 is 237.8 million and the labor force is 153.9 million. What is the labor force participation rate? Round your answer to the nearest tenth.
64.7
Comparing the percentage of the labor force population to the total adult working-age population gives you the labor force participation rate. If the the adult working-age population is is 756 million and the labor force is 652 million what is the labor force participation rate? (round your answer to the nearest 10th)
86.2
Suppose there are 325 million working-age adults and 295 million in the labor force. The Bureau of Labor Statistics is interested in this years labor participation rate. (round your answer to the nearest tenth)
90.8
Which of the following is an example of frictional unemployment?
Molly left her job at the packaging science firm and is actively pursing employment at a competitor's firm. Phillip has worked at the same bank for many years. He finally quit his job and is now looking for work at other banks.
Charles volunteers at a local soup kitchen for approximately 15 hours per week. He is currently not seeking paid work. Is Charles considered unemployed?
No
Which of the following statements about government policy and unemployment are true?
The funding for unemployment insurance is a federal tax collected from employers The federal government requires tax collection on the first $7,000 in wages paid to each worker.
Which of the following are examples of property rights?
The owner of a house is the only party that is able to enter into a contract selling that house. If you have money in your pocket, you have the right to use that money any way you want. You trained as an engineer, and you are free to work for any person or group who wants to hire you to work as an engineer.
All of the following are examples of someone who is involuntary unemployed, except:
Tom was let go from his job at The Burger Shack five weeks ago and has yet to search for another job because he wants to earn more than $15/hour.
According to proponents to the "New Economy" theory, advancements in technology and communication generate higher productivity growth in the long run.
True
Some economists argue that during an inflationary period, the erosion of real wages could help reduce the rate of inflation.
True
Which of the following best describes the U.S. inflation rate since the base year of the Consumer Price Index?
U.S. price levels have seen periods of inflation and deflation.
Which of the following best describes cyclical unemployment?
Unemployment is closely tied to the business cycle.
When it comes to economics and the law, which two of the following are considered to be most important to economic growth?
contractual rights property rights
Hyperinflation often occurs when economies shift from a(n) ________________ economy to a ___________________ economy.
controlled; market-oriented
If a person has money in a bank account that pays 4% interest, but inflation rises to 5%, then the real rate of return for the money invested in that bank account is
-1%
The idea of human capital deepening applies to which two of the following?
averages levels of education in the economy, years of experience that workers have
Which of the following statements is true about inflation?
Inflation redistributes purchasing power in the economy.
Which of the following is true about the International Price Index?
It is based on the prices of merchandise that is exported or imported.
John, who has an inflation adjusted wage, would like to borrow a loan from the Bank of Titon. Suppose the inflation rate is predicted to be 8%. In order for the loan payments to be more favorable to John, the interest rate should be:
6%
The Bureau of Labor Statistics is interested in this years labor participation rate. If there are 350 million working-age adults and 300 million in the labor force, what is the labor participation rate? (round your answer to the nearest 10th)
85.7
Which of the following statements about the US unemployment rate is true?
The US unemployment rate has never fallen to zero.
Which of the following best describes how implicit contracts cause wages to be sticky?
an employer will try to keep wages from falling when the economy is weak and the employee will not expect huge salary increases when the economy is strong
Capital deepening is __________.
an increase by society in the average level of physical and/or human capital per person
Which of the following best describes hyperinflation?
an outburst of high inflation
Statisticians calculate the Consumer Price Index by taking the 80,000 prices of individual products and combining them, using ______________ .
weights determined by the quantities bought
In the imaginary country of Xurbia, large corporations typically hire employees for the long-term, often for life. Suppose, the proportion of older workers, relative to younger workers, in the Xurbian economy was relatively high. We would expect the natural rate of unemployment in Xurbia to be high.
false
Which of the following best defines the underemployed?
individuals who are trained or skilled for one type or level of work but are working in a job that does not utilize their skills
In studying economic growth, a country's ___________ framework plays a critical role.
institutional
According to growth accounting studies, which of the following are important contributors to economic growth?
investment in human capital new ways of doing things investment in physical capital
Education for girls is a good investment in low-income countries because __________________.
it has benefits beyond the current generation, it is an investment in economic growth, better educated women are more likely to have fewer, healthier and better-educated children
The inflation rate for a given year can be found by __________
taking the percentage change in the Consumer Price Index (CPI) from the previous year to the given year in question
Consider an individual who borrowed $10,000 to purchase a used car at a fixed interest rate of 7%. If inflation increases from 2% to 5%, how will this impact the real interest rate the individual will be paying?
the car loan must be repaid at a real interest rate of 2%
The use of which of the following during the Industrial Revolution were crucial to the modern economic growth that defines society today.
the steam engine the power loom
Calculate Country B's future GDP 8 years from now if the current GDP is $9,555 and the expected growth rate is 2%. Round your answer to the nearest whole number.
$11195 $9,555×(1+0.02)^8=$11,195 GDP at starting date×(1+growth rate of GDP)^years=GDP at end date
Which of the following statements about productivity shifts and wages is true?
Adjustments of wages to productivity levels are often not quick.
Which of the following statements about productivity shifts and wages is not true?
Adjustments of wages to productivity levels are quick and immediate.
Retirement pension plans, also called "defined benefits" plans, traditionally are set as a fixed income per year at retirement. What are some characteristics of a pension plan?
An inflation rate of just 1% to 2% per year can decrease the buying power on an individual's fixed income. A pension does not keep up with inflation and buying power is lost over time.
Which of the following statements is true?
Countries with controlled economies have historically had low inflation rates.
All of the following statements are true, except:
Countries with controlled economies in the 1970s, like the Soviet Union and China, historically had very high rates of measured inflation during this period.
Which of the following is true about deflation?
Deflation occurs when the inflation rate becomes negative.
All of the following statements are true, except:
If a firm is currently holding a lot of assets in cash, it would benefit from inflation
The International Price Index is __________________ .
a weighted price index of merchandise that is exported or imported
If the CPI leaves out new higher quality goods, it is overlooking one of the ways in which the standard of living is ____________.
improving
Deflation is a time when the buying power of money in terms of goods and service
increases
Which of the following have traditionally involved setting a fixed nominal dollar amount per year at retirement?
pensions
Economists call pensions "defined benefits" plans, because:
pensions have traditionally been set as a fixed nominal dollar amount per year at retirement
Inflation is a general and ongoing _____________ in the _______________ in an entire economy.
rise; level of prices
In the last few decades, historical data shows that the U.S. price level has been __________________, whereas the inflation rate has been ____________________.
rising; mostly positive
Which two of the following are included in the natural rate of unemployment?
structural unemployment frictional unemployment
All of the following statements are true, except:
In recent decades in the U.S, rising inflation rates have always corresponded to increasing productivity rates.
___ is a common measure of productivity used to track growth of GDP per capita.
Dollar value of output per worker hour
Because low-income economies have less technology, they cannot grow as quickly as high-income economies.
False
Government statisticians at the U.S. Bureau of Labor Statistics calculate the CPI based on the prices in a fixed basket of goods and services that represents the purchases of the average family of two.
False
If the federal minimum wage grows at a slower rate than inflation, the real value of the minimum wage increases.
False
Inflation makes it easier for consumers to understand market conditions.
False
Technology, physical capital deepening, and human capital deepening all contribute equally to GDP growth.
False
The Employment Cost Index measures the cost of hiring new workers.
False
John borrows $50,000 from Bank of Xurbia at a fixed interest rate of 5%. If inflation is 5% at the time the loan is made, then:
The real interest rate on the loan is zero.
All of the following statements are true, except:
When interest rates are fixed, demanders of financial capital typically end up worse off than suppliers of financial capital.
Which of the following components enter the CPI calculation?
all of the above
An increase in the average level of physical and/or human capital per person is also called
capital deepening
Failure to pay an employee who performs services agreed upon is known as a violation of __________.
contractual rights
If the federal minimum wage grows at a slower rate than inflation, the real minimum wage ______________.
decreases
Consider a worker who plans to retire and live on a fixed payment pension. How would an increase in inflation above expectation affect the worker's purchasing power in retirement?
if the same fixed income is earned in 1990 as it was in 1980, inflation will have dramatically increased living expenses and it will be difficult to maintain the same purchasing power as inflation rises, the buying power of the fixed pension plan will not be able to keep up
Suppose that in 2008 the price of chicken relative to fish goes up. As a result, households start to move away from purchasing chicken and move toward purchasing more fish. This is an example of ________________.
substitution behavior
Consider a family buys a new home with a home loan of $125,000 at a fixed interest rate of 7%. If inflation increases from 5% to 7%, how will this impact the real interest rate the individual will be paying?
the home loan must be repaid at a real interest rate of zero The home loan's fixed interest rate of 7% will subtract the new inflation rate of 7% and the loan must be repaid at a real interest rate of zero
Which of the following best describes the real interest rate?
the rate of interest after allowing for inflation
Which of the following best describes those 'not in the labor force'?
those who are out of paid work and not actively looking for a job
Calculate the 25 year growth of a low-income economy with a GDP per capita of $3,500 and a growth rate of 11%. Round your final answer to the nearest whole dollar. Do not round any other values.
$3,500(1+0.11)^25, or $47,549.
Today's GDP in Country B is $78,456. The economy grows at a rate of 2% every year. What will Country B's GDP be in 5 years? Round your answer to the nearest whole number.
$86,622
Which of the following applies to economic growth? Economic growth allows people to buy more goods and services. Economic growth is the expansion of the economy's production possibilities. Economic growth is represented by a movement from a point inside the production possibilities curve to a point on the curve.
1 and 2
Suppose the labor force is 94.4 million people, and the number of those employed is 84.1 million people. What is the unemployment rate? Round your answer to the nearest tenth.
10.9
Suppose the adult population over the age of 16 is 495 million and the labor force is 94.9 million. What is the labor force participation rate? (round your answer to the nearest 10th)
19.2
If the present GDP for Country Q is $523 with a promising annual growth rate of 25%. What is the future GDP for Country Q, 6 years from now? Round your answer to the nearest whole number.
1995
If the size of the labor force is 250.5 million, and 243.5 million people are employed, what is the unemployment rate? Round your answer to the nearest tenth.
2.8
What is the future GDP of a country , 2 years from now if the present GDP is $356,150 and the growth rate is 4%. Please round your answer to the nearest dollar.
385212
Tyler is studying economics in college and was asked to calculate the unemployment rate for Country R. If Country R has 7,895 employed people and 321 unemployed people, what is the unemployment rate of Country R?
4
Assume there are 20.45 million unemployed people and 396.78 million employed people in a country. What is the unemployment rate?
5.1
Calculate the unemployment rate if the number of unemployed people (actively seeking work) is 70.67 million, and the number of employed people is 845.71 million. Round your answer to the nearest tenth.
7.7
Which of the following is an example of cyclical unemployment?
A company has to lay off half of its work force to cut costs in order to make it through the recession.
Which of the following is not true?
Advances in technology are only possible in advanced economies. Advances in technology have no impact on worker productivity
Households are interviewed by the U.S. Bureau of Labor Statistics eight times over two years, for the _______________ before leaving the sample permanently.
Current Population Survey (CPS)
Which of the following could be a reason why the natural rate of unemployment between the US and the EU is different?
Differences in labor laws
Those who classify themselves as underemployed are included in the unemployment rate.
FALSE
Increased international trade has resulted in convergence of incomes between low-income and high-income countries.
False
Unlike the unemployment rate, the natural rate of unemployment cannot change over time,
False
Which of the following is the correct definition of infrastructure?
Infrastructure is a component of physical capital such as roads and rail systems.
Technological change is a combination of which two concepts?
Invention and innovation
Which of the following is true about the Employment Cost Index?
It can be used to measure of wage inflation in the labor market.
Which of the following is true about core inflation?
It is a measure of inflation that excludes the rate of price increases for certain volatile components in price indexes.
Why does the minimum wage cause wages to be sticky?
It is illegal to reduce wages below minimum wage.
Both Karen and Bob are out of work. Karen applies to a few jobs each week, but does not particularly care to be employed. Bob was avidly searching for a job, but a little over a month ago he gave up searching. Who would be counted as unemployed by the Current Population Survey (CPS)?
Karen
Which of the following is cyclical unemployment?
Laura lost her job when her bank closed during the financial crisis.
Which of the following are examples of hidden unemployment?
Lisa cannot find the job she wants so she has stopped looking. Penny has a college degree in nursing, but currently has to work as a store clerk as it is the only available job in her small town.
Which of the following best defines involuntary unemployment?
People are unemployed but willing to work jobs that employ people with similar skills.
An employer can't legally pay an employee less than $7.25 per hour, which is the federal minimum wage in 2018. Why does this lead to wage stickiness?
People getting paid the minimum wage will not see a decline in their wages.
Which of the following is an example of how the U.S. Bureau of Labor Statistics may overstate the unemployment rate?
People may tell the Census Bureau that they are ready to work and looking for a job but, truly, they are not that eager to work and are not looking very hard at all. People may have a job, perhaps doing something like yard work, child care, or cleaning houses, but are not reporting the income earned to the tax authorities.
Which of the following people is considered to be in the labor force?
Ronald is currently looking for a job in engineering. Nancy is working full-time at her company's corporate office.
Which of the following is an example of cyclical unemployment?
Ronald is laid off by his company as part of company reorganization to cut costs to meet slowing demand in the economy.
An individual who is not working and not actively looking for employment because he is discouraged by the lack of available jobs is not counted as part of the labor force. Why can this impact the unemployment rate?
Since the individual is not considered part of the labor force, he is not included the unemployment rate.
Which of the following accurately explains the "New Economy" controversy?
Some economists argue that strong short term productivity growth does not indicate higher productivity in the long run. Some economists argue that technological advances guarantee higher average productivity growth in the long run.
Which of the following best describes why the elderly workers have extremely low rates of unemployment?
The elderly who do not have jobs often exit the labor force by retiring, and thus are not counted in the unemployment statistics.
Which of the following examples illustrates structural unemployment?
The factory that Annie has worked at for the past three years has decided to relocate to Mexico. Annie actively looks for a new job but there are no industries that can utilize her skill set within 100 miles of her home. Tatyana can no longer find a job as a programmer in her home town as all companies started to hire programmers in India.
The inflation rate for a given year can be found by taking the percentage change in the Consumer Price Index (CPI) from the previous year to the given year in question
True
The loss of construction jobs during the 2008 housing financial crisis is an example of cyclical unemployment.
True
True or False: One can use the Producer Price Index (PPI) to determine price indices for different industries.
True
Wages are considered sticky when they do not fall in response to a decrease in demand.
True
Which of the following is an example of a social value-based regulation that can impose a barrier between some willing workers and other willing employers?
a local government not allowing liquor stores be open on Sundays
Which of the following can lead to cyclical unemployment?
a stock market crash
While low-income countries are able to adapt and use new technology, the society may not have the economic, educational, and public policy institutions to support growth. Therefore, ______________________ .
convergence between high-income and low-income countries may not happen
Labor laws in Europe ______________ laying off or firing current workers compared to labor laws in the U.S. Therefore, the natural rate of unemployment in Europe is likely to be higher than the natural rate of unemployment in the U.S.
discourage
In some countries, the legally required notice before laying off a worker can be more than three months while the required severance package can be as high as a year's salary. Such laws will ____________________.
discourage laying off or firing workers make firms hesitant about hiring workers
A common measure of productivity used to track growth of GDP per capita is ________________
dollar value of output per worker hour
Which of the following best describes sticky wages?
earnings that don't adjust quickly to changes in labor market conditions
Which of the following groups of workers are not included when measuring dollar value per hour contributed to output?
farmers and government workers
The substitution bias __________________.
helps explain why the CPI overestimates inflation
Firms operating in industries where economies of scale are common will likely see ________ levels of labor productivity from their workforce compared to firms in industries where economies of scale aren't obtainable.
higher
Investments in education result in ___________.
increases in technological innovations and inventions, increases in physical capital, increases in human capital
All of the following are steps of how the U.S. Bureau of Labor Statistics calculates the unemployment rate, except:
interview about 50,000 US-owned companies
Which of the following explains the importance of education in economic growth?
investing in education strengthens technology, investing in education strengthens physical capital, investing in education strengthens human capital
Convergence is the idea that ______________________.
low-income countries grow faster than high-income countries
Low-income countries tend to have lower levels of human capital and physical capital, so an investment in capital deepening should have a larger _________ in these countries than in high-income countries, where levels of human and physical capital are already relatively high.
marginal effect
Tina was let go from her job last month and has been collecting unemployment benefits. When not actively looking for a job, she volunteers at the local hospital for approximately 20 hours per week. Is Tina considered to be employed?
no
Suppose that over time, households used flash sale online retailers at an increasing rate. As a result the CPI is likely to be
overestimated because households would buy products at lower prices than those collected by the U.S. Bureau of Labor Statistics