Macroeconomics MyEconLab Ch.4 Homework, Macroeconomics MyEconLab Ch.5 Homework, ECON Final, Econ Exam 1 Review, Exam 2 Macroeconomics, ECON Chap 1 Pearson, ECON-2301 Chapter 2
The United Nations' Human Development Index (HDI) is based on real GDP per person, life expectancy at birth, and indicators of the quality and quantity of education. 1)The HDI might be better than real GDP as a measure of economic welfare because the HDI ______. The HDI includes measurements of ______, which are not measured in real GDP. 2) If the HDI is expanded to include items such as pollution, resource depletion, and political freedom ______. 3) Other influences on economic welfare that could be included in a comprehensive measure include all of the following except ______.
1) includes real GDP, but also includes other factors that influence our standard of living; health, life expectancy, and education 2) it would be difficult to measure 3) the beauty of local scenery
1. To keep pace with a growing population, approximately _______ jobs must be created each month. 2. Normally when the pace of job creation exceeds the increase in population, the unemployment rate _______. 3. When the pace of job creation exceeds the increase in population, the unemployment rate sometimes increases because _______. 4. We would expect the labor force participation rate to _______ in response to job creation in excess of population growth. 5. We would expect an increase in the growth rate of real GDP to _______ jobs and _______ unemployment.
137,000 falls discouraged workers return to the labor force increase increase; decrease
You plan to go to school this summer. If you do, you won't be able to take your usual summer job that pays $12,000 for the summer. The cost of tuition is $3,000 and textbooks cost $200. You live with your family, which covers your living expenses of $1,900. What is your opportunity cost of going to school this summer?
15,200
1. From the second quarter of 2013 to the second quarter of 2014, real GDP grew by _______ percent. 2. Comparing the increase in the second quarter with the year-on-year increase shows that the real GDP growth rate is _______. 3. Generally, business inventories and real GDP _______. Inventory changes sometimes lag real GDP changes because _______.
2.4 increasing change in the same direction; inventories increase during recessions, and when an economy moves into expansion it takes some time to move the inventories down to target levels before businesses start producing more inventory
During a year, a firm's depreciation is $1,000 and gross investment is $5,000. The firm's net investment is ______.
4,000
Ivan runs a custom jewelry shop in Sparkle City. He is debating whether he should extend his hours of operation. Ivan figures that his sales revenue will depend on the number of hours the jewelry shop is open as shown in the table to the right. He would have to hire a worker for those hours at a wage rate of $25 per hour. hr total revenue $ 1 $275 2 $375 3 $450 4 $500 5 $530 6 $550 Using marginal analysis, determine how many hours should Ivan extend his hours of operations?
5 hours
Consider the figure showing supply curves for soft drinks. Suppose the economy is at point
A movement to point d would be the result of
________ behavioral assumption about humans was that people usually act in a rational, selfminusinterested way.
Adam Smith's
Which of the following correctly describes how price adjustments eliminate a shortage?
As the price rises, the quantity demanded decreases while the quantity supplied increases.
1. Why does the BEA revises its estimates of GDP? 2. What is the percentage difference between the highest and lowest estimate of real GDP in the second quarter of 2009 trough? 3. How did the revisions change the estimates of the peak, trough, recession, and recovery over the business cycle? 4. Why did the growth rate of consumption expenditure have a bigger effect on real GDP growth than the growth rates of investment and net exports?
As time passes, more accurate data become available and some data that is used to measure GDP is available only with a time lag. 2 percent The 2010 and 2011 estimates of lowered the value of real GDP at the trough while the 2012 estimate raised the value. Consumption expenditure is a larger component of GDP than investment and net exports combined.
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market? A. If peanuts were less expensive, I'd buy them more often. B. At a price of $1 per pack, I plan to buy 2 packs of peanuts per week. Your answer is correct.C. I eat peanuts to complement cola. D. I'll stop eating peanuts when I can afford to buy walnuts.
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Markets A. facilitate trade. B. allow traders to enjoy gains from trade. C. coordinate price information between buyers and sellers. D. All of the above answers are correct.
D. All of the above answers are correct.
Which of the following is an example of a final good or service? A. Dan bought a Toyota Camry. Your answer is correct.B. Dell buys Intel chips. C. PCL construction company buys Lafarge cement. D. GM buys Firestone tires.
Dan bought a Toyota Camry.
If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps, then the difference of $300 is the marginal cost of producing the 5th lamp.
False
The table shows items of income and expenditure in the United States in 2009. Calculate GDP in the United States in 2009.
GDP in the United States in 2009 equals $14,060 billion.
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
In 2014, flow D was $2 trillion, flow E was negative $ 1 trillion, flow A was $10 trillion, and flow C was $4 trillion. Calculate consumption expenditure.
In 2014, consumption expenditure is $5 trillion.
The figure shows the circular flow model. In 2017, flow D was $2 trillion, flow E was negative $ 1 trillion, flow A was $10 trillion, and flow C was $4 trillion. Calculate consumption expenditure. Consumption Expenditure = A-(D+C-E)
In 2017, consumption expenditure is $5 trillion.
The figure shows the circular flow model. In 2017, flow A was $572 billion, C was $129 billion, B was $278 billion, and E was $ 39 billion. Calculate investment. Investment = A-(B+C+E)
In 2017, investment is $126 billion.
The BLS reported that in the second quarter of 2016, employment increased by 100,000 to 150,959,000 and the unemployment rate fell from 5 percent to 4.9 percent. About 1.3 million people were marginally attached workers and 0.6 million of them were discouraged. Calculate the change in unemployment in the second quarter of 2016. With 1.3 million marginally attached workers and 0.6 million of them discouraged workers, what are the characteristics of the other 0.7 million marginally attached workers? With 1.3 million marginally attached workers and 0.6 million of them discouraged workers, the other 0.7 million marginally attached workers _______.
In the second quarter of 2016, the number of unemployed changed by -161,828. have stopped looking for work for reasons other than their inability to find a job
U.K. Living Standards Outstrip U.S. Oxford analysts report that living standards in Britain are set to rise above those in America for the first time since the nineteenth century. Real GDP per person in Britain will be pound23,500 this year, compared with pound23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy's record run of growth since 2001. But the Oxford analysts also point out that Americans benefit from lower prices than those in Britain. Source: The Sunday Times, January 6, 2008 If real GDP per person is greater in the United Kingdom than in the United States but Americans pay lower prices, does this comparison of real GDP per person really tell us which country has the higher standard of living?
No. To determine which country has the higher standard of living, we need to use purchasing power parity prices.
An economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices. Calculate nominal GDP in 2015 and 2016. Quantities Apples 2015- 100 2016- 150 Oranges 2015- 90 2016- 200 Prices Apples 2015- $0.50 2016- $1.50 Oranges 2015- $1.00 2016- $2.00
Nominal GDP in 2015 is $140. Nominal GDP in 2016 is $625.
1. Following the 2008-2009 recession, the unemployment rate peaked in ______. 2. Looking at the three unemployment measures U-3, U-4, and U-5 from January 2009 to July 2010, we can conclude all of the following except that ______. 3. Unemployment benefits influence the unemployment rate for all of the following reasons except ______. 4. Unemployment benefits influence cyclical unemployment initially and natural unemployment eventually. 5. The rise in unemployment after mid-2009 is most likely ______ 6. To create more jobs, the U.S. government can do all of the following except ______.
October 2009 the employment-to-population ratio is rising receiving these benefits is a privilege and they encourage people to find jobs as quickly as possible True cyclical increase unemployment benefits
News release In May 2017, real personal consumption expenditures (PCE) was $11,845 billion and the PCE deflator was 112.257. In June 2017, real personal consumption expenditure was $11,850 billion and personal consumption expenditure was $13,305 billion. Source: BEA, July 31, 2017 Calculate personal consumption expenditure in May 2017 and the PCE deflator in June 2017. Was the percentage increase in real personal consumption expenditure greater or smaller than that in personal consumption expenditure?
Personal consumption expenditure in May 2017 was $13,297 billion. The PCE deflator in June 2017 was 112.3. The percentage change in real personal consumption expenditure between May 2017 and June 2017 was 0.04 percent. The percentage change in personal consumption expenditure between May 2017 and June 2017 was 0.06 percent. The percentage change in real personal consumption expenditure is smaller than the percentage change in personal consumption expenditure.
An economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices. Calculate real GDP in 2015 and 2016 expressed in base- year prices. Quantities 2015 2016 Apples 60 80 Oranges 160 220 Prices 2015 2016 Apples $0.50 $0.25 Oranges $1.00 $2.00
Real GDP in 2015 expressed in base-year prices is $50. Real GDP in 2016 expressed in base-year prices is $135.
Which of the following is an example of an intermediate good or service? A. Mike bought Puma shoes. B. United buys Boeing aircrafts. C. Sarah bought a Sony HDTV. D. Samsung buys compressors for manufacturing refrigerators.
Samsung buys compressors for manufacturing refrigerators.
A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $42 on juice and $15 on cloth. In the base year, juice was $6 a bottle and cloth was $3 a length. This year, juice is $7 a bottle and cloth is $10 a length. Calculate a. The CPI basket. b. The CPI in the current year. c. The inflation rate in the current year.
The CPI basket is 7 bottles of juice and 5 lengths of cloth. The CPI in the current year is 173.7 The inflation rate in the current year is 73.7 percent.
Hardworking Americans Should Not Be Living in Poverty The federal minimum wage has remained frozen for the past three years at $7.25 an hour, while the prices of gas and milk have risen steadily. Over this three-year period, the real value of the minimum wage has fallen to $6.77 per hour. Source: CNN, July 25, 2012 By what percentage did the CPI increase over these three years?
The CPI increased by 6.6 percent over these three years.
Adjusted for Inflation, the Federal Minimum Wage is Worth Less than 50 Years Ago The federal minimum wage was raised to $7.25 an hour from $6.55 nearly seven years ago. Despite periodic increases, its buying power hasn't kept up with inflation. In 1968, the federal minimum was equivalent to $10.90 in 2015 dollars, nearly $4 higher than today's rate. Source: CNN, July 25, 2012 Given the additional information that in 1968 the federal minimum wage was $1.60 an hour, by what percentage did the CPI increase between 1968 and 2015?
The CPI increased by 581 percent between 1968 and 2015.
Choose the statement that is incorrect. A. The Lucas wedge accumulated to $400,000 per person by 2013. B. The Lucas wedge arises from the slowdown of productivity growth that began during the 1970s. C. The Lucas wedge equals real GDP minus potential GDP. Your answer is correct.D. The Lucas wedge is the dollar value of the accumulated gap between what real GDP per person would have been if the 1960s growth rate had persisted and what real GDP per person turned out to be.
The Lucas wedge equals real GDP minus potential GDP.
Read the news clip then answer the following questions. Five Measures of Growth That Are Better Than GDP Speaking at the World Economic Forum, Stewart Wallis, a self-described advocate of a new economic system, suggested five economic indicators that he says are better than GDP. His five are Good jobs, Well-being, Environment, Fairness, and Health. Source: World Economic Forum, April 19, 2016 1. What are the factors that the news clip identifies as limiting the usefulness of GDP as a measure of economic welfare? 2. What are the challenges faced in trying to incorporate measurements of the factors suggested by Mr. Wallis in an effort to better measure economic welfare? 3. Does the United Nations' Human Development Index captures any of the five indicators? The UN Human Development Index captures _______ in its measurement. 4. What factors included in GDP and that increase the likelihood of a high correlation between GDP and Wallis' indicators of economic welfare indirectly?
The failure to include a measurement of good jobs, well-being, environment, fairness, and health An accurate measure and an appropriate weighting of the factors health good jobs, health, and environment
The table shows the data reported by the Bureau of Labor Statistics in 2006. Calculate the labor force, employment, and the unemployment rate. Labor Force = (Labor force participation rate/100)xWorking-age population Emploment = (employment-to-population ratio/100)xWorking-age population Unemployment rate = (number of people unemployed/labor force)x100
The labor force is 154 million. Employment is 146 million. The unemployment rate is 5.3 percent.
Every week, Sally plays guitar for two hours, and her grade on each psych test is 75 percent. Last week, after playing guitar for two hours, Sally considered playing for another hour. She decided to play for another hour and cut her study time by one hour. But last week, her psych grade fell to 70 percent. Given that Sally spent a third hour playing guitar, what can you conclude about the marginal benefit and marginal cost of the second hour of playing guitar?
The marginal benefit of the second hour of playing guitar exceeded its marginal cost.
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand? A. At an average price of $80 per text book, I plan to buy 5 text books per semester. B. I can't afford as many textbooks because my rent has increased. C. The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many. Your answer is correct.D. For me, a good course website is a substitute for a textbook.
The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
Which of the following will hold true if the market for cameras is in equilibrium at a price of $40?
The quantity of cameras produced will equal the quantity of cameras bought in the market.
A firm agreed to pay its workers $24 an hour in 2016 and $46 an hour in 2017. The price level for these years was 241 in 2016 and 245 in 2017. Calculate the real wage rate in each year (to the nearest cent). What is the real wage increase received by these workers in 2017?
The real wage rate in 2016 was $9.96. The real wage rate in 2017 was $18.78. The change in the real wage rate between 2016 and 2017 is 8.82 dollars.
In the New Orleans metropolitan area in August 2005, the labor force was 634,512 and 35,222 people were unemployed. In September 2005 following Hurricane Katrina, the labor force fell by 156,518 and the number employed fell by 206,024. Calculate the unemployment rate in August 2005 and in September 2005. Unemployment rate = number of people unemployed/labor force x 100
The unemployment rate in August 2005 was 5.6 percent. The unemployment rate in September 2005 was 17.7 percent.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Choose the correct statement. A. The wings appear as a positive entry in calculating U.S. GDP. B. The wings appear as investment in U.S. GDP. C. The wings appear as imports in U.S. GDP. Your answer is correct.D. The wings appear as exports in U.S. GDP. Choose the statement that is incorrect. A. If any parts for the cars come from Japan, they are U.S. imports. B. Expenditure made by Toyota on building the assembly plant in Kentucky is recorded as investment. C. Household expenditure on the cars is part of consumption expenditure in calculating U.S. GDP. D. If any parts for the cars come from Japan, they are recorded as a positive entry in calculating U.S. GDP.
The wings appear as imports in U.S. GDP. If any parts for the cars come from Japan, they are recorded as a positive entry in calculating U.S. GDP.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Explain where these activities appear in the U.S. National Income and Product Accounts. Choose the correct statement about the wings of the new Boeing 787 Dreamliner. Choose the correct statement about the cars assembled by Toyota in Kentucky.
The wings appear as imports in U.S. GDP. Household expenditure on the cars is part of U.S. consumption expenditure and expenditure made by Toyota on building the assembly plant in Kentucky is recorded as U.S. investment.
Which of the following best describes an assumption economists make about human behavior? A. They assume that individuals act randomly. B. They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. Your answer is correct.C. They assume that people take into account the question of fairness in all decisions they make. D. They assume that individuals act rationally all the time in all circumstances.
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
n economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices. Calculate the chained-dollar real GDP in 2016 expressed in 2015 dollars.
The chained-dollar real GDP in 2016 expressed in 2015 dollars is $285.
Which of the following statements is false? A. Trademinusoffs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale. Your answer is correct.B. Economics is a social science that studies the trademinusoffs we are forced to make because of scarcity. C. Anytime you have to decide which action to take you are facing an economic trademinusoff. D. Every individual, no matter how rich or poor, is faced with making trademinusoffs.
Trademinusoffs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale.
A high unemployment rate tells us that a large percentage of the labor force is unemployed, but it doesn't tell us why the unemployment rate is high. What unemployment measure tells us if (i) people are searching longer than usual to find a job, (ii) more people are economic part-time workers, or (iii) more unemployed people are job losers? The ______ measure of unemployment tells us if people are taking longer than usual to find a job. The ______ measure of unemployment tells us if more people are economic part-time workers. The _______ measure of unemployment tells us if more unemployed people are job losers.
U-1; U-6 - U-5 U-2
The table lists some macroeconomic data for the United States in 2016. Calculate U.S. GDP in 2016. GDP = Consumption expenditure+Investment+Government expenditure+Net exports Items Wages - 9,908 Consumption Expenditure - 12,498 Other factor incomes - 4,567 Investment - 3,037 Government Expenditure - 3,257 Net Exports - -507
U.S. GDP in 2016 equals $18,282 billion.
The IMF World Economic Outlook reports the unemployment rates given in the table. What do these numbers tell us about the relative size of their natural unemployment rates? These numbers tell us that most likely, ______ the highest natural unemployment rate and ______ the lowest natural unemployment rate.
Venezuela and Spain have; Singapore has
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Explain where these activities appear in Japan's National Income and Product Accounts.
When the wings are sent to the United States, their value appears as Japanese exports in calculating Japan's GDP.
Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?
a decrease in the price of orange juice processing
Classify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. Upper A new limousine for the president Item 2. Upper A textbook bought by a student Item 3. Coffee beans bought by Starbucks Item 4. Upper A new car bought by Hertz comma the car rental firm Item 1 is ______ and item 2 is ______. Item 3 is ______ and item 4 is ______.
a final good which is government expenditure; a final good that is consumption expediture an intermediate good; a final good that is investment
Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. The purchase of a new security system for Congress Item 2. Jet engines bought by Boeing Item 3. Upper A new bridge across the creek in the Augusta National Golf Club Item 4. Banking services bought by a student Item 1 is ______ and item 2 is ______. Item 3 is ______ and item 4 is ______.
a final good which is government expenditure; an intermediate good a final good that is investment; a final good that is consumption expenditure
To make total income equal to GDP we ______ indirect taxes less subsidies and ______ depreciation.
add; add
Which of the following shifts the demand curve for hot dogs leftward?
an increase in the price of a hot dog bun
U.S. Job Openings Rise but Hiring Slips U.S. job openings increased to 5.8 million in April but the number of workers hired decreased to a bit below 5.1 million. Source: The Globe and Mail, June 9, 2016 Using the information in the news clip, how do you predict the labor force participation rate, employment-to-population ratio, and unemployment rate changed? If the government slashed unemployment benefits, how would the numbers in the news clip change? Why? Given the information in the news clip, the labour force participation rate _______. If the government slashed unemployment benefits, _______.
and the employment-to-population ratio most likely increased and the unemployment rate most likely decreased the number of workers hired would increase
If the marginal cost of producing a television is constant at $200, then a firm should produce this item
as long as the marginal benefit it receives is just equal to or greater than $200.
The law of demand implies that, other things remaining the same,
as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.
Ted quits his $60,000 -a- year job to be a stay-at-home dad. What is the opportunity cost of his decision?
at least $60,000
China's Economy Accelerates as Retail, Investment Pick Up China's real GDP increased 6.9 percent in the first quarter of 2017 from a year earlier. Investment grew by 9.2 percent and retail sales by 10.9 percent. In current prices, GDP increased by 11.8 percent from a year earlier. Source: Bloomberg News, April 17, 2017 Explain why China's real GDP can grow at a 6.9 percent rate when consumption and investment grew faster than 6.9 percent. China's real GDP can grow at a 6.9 percent rate when consumption and investment grew faster than 6.9 percent _______.
because government expenditure on goods and services and net exports grew at a rate slower than 6.9 percent
The total amount spent _____ is called gross investment.
both buying new capital and replacing depreciated capital
A person has a comparative advantage in an activity whenever he or she
can perform the activity at a lower opportunity cost than can anyone else.
Suppose people buy more of good 1 when the price of good 2 falls. These goods are
complements.
The expenditure approach to measuring GDP sums together ______, and the largest component is ______.
consumption expenditure, investment, government expenditure on goods and services, and net exports; consumption expenditure
Some Firms Struggle to Hire Despite High Unemployment With about 15 million Americans looking for work, some employers are swamped with job applicants, but many employers can't hire enough workers. The U.S. jobs market has changed. During the recession, millions of middle-skill, middle-wage jobs disappeared. Now with the recovery, these people can't find the skilled jobs that they seek and have a hard time adjusting to lower-skilled work with less pay. Source: The Wall Street Journal, August 9, 2010 If the government extends the period over which it pays unemployment benefits to 99 weeks, how will the cost of being unemployed changed? Extending the period over which the government is willing to pay unemployment benefits to 99 weeks ______ the cost of being unemployed and ______ the unemployment rate.
decreases; increases
The IMF World Economic Outlook reports the unemployment rates given in the table. Do these numbers tell us anything about the relative size of their labor force participation rates and employment-to-population ratios? These numbers ______.
do not tell us anything about the relative size of the labor force participation rates or the employment- to-population ratios because we don't know the sizes of the working-age populations, employment, or the labor force
A system of property rights
encourages economic growth by creating incentives to invest in capital and to be innovative.
Amazon Will Add 100,000 Jobs as Bricks-and-Mortar Stores Turn to Rubble Amazon says that it will hire 100,000 new employees in the next 18 months. Meanwhile, Macy's, J.C. Penney, and other traditional retailers are closing stores and laying off workers. And the workers that Amazon is hiring aren't the ones being laid off by Macy's and J.C. Penney. Source: The New York Times, January 13, 2017 Why will the decisions reported in the news clip increase unemployment and what type of unemployment will increase? The decisions reported in the news clip will increase unemployment because _______. Choose the correct statement
even if all of Amazon's new employees come directly from unemployment, layoffs from Macy's and J.C. Penney's will exceed 100,000 To the extent that the layoffs at Macy's and J.C. Penney's are normal labor turnover, frictional unemployment will increase, and to the extent that laid-off workers from Macy's and J.C. Penney's do not have the skill set to work at Amazon, structural unemployment will increase.
Gross domestic product can be measured in two ways: By the total ______ or the total ______. Aggregate income earned is equal to the total amount paid for ______ to produce final goods and services. Aggregate expenditure is equal to ______. And because firms pay out as incomes everything they receive from the sale of their output, aggregate income equals aggregate expenditure.
expenditure on goods and services; income earned producing goods and services the factors of production used; C + I + G + (X-M) True
The table lists some macroeconomic data for the United States in 2015. Explain the approach (expenditure or income) that you used to calculate GDP. There is sufficient information given in the table to calculate GDP using the _______ approach because to calculate GDP using the other method you would also need to know _______.
expenditure; indirect taxes less subsidies and depreciation
Allocative efficiency is achieved when
firms produce the goods and services that consumers value most.
GDP Expands 11.4 Percent, Fastest in 13 Years China's gross domestic product grew 11.4 percent last year and marked a fifth year of double-digit growth. The increase was especially remarkable given that the United States is experiencing a slowdown due to the sub-prime crisis and housing slump. Citigroup estimates that each 1 percent drop in the U.S. economy will shave 1.3 percent off China's growth, because Americans are heavy users of Chinese products. In spite of the uncertainties, China is expected to post its sixth year of double-digit growth next year. Source: The China Daily, January 24, 2008 Why might China's recent GDP growth rates overstate the actual increase in the level of production taking place in China? Explain the complications involved with attempting to compare the economic welfare in China and the United States by using the GDP for each country. China's recent double-digit GDP growth rates might overstate the actual increase in China's production because ______. When we attempt to compare the change in economic welfare in China and the United States by using each country's GDP growth rate, China appears much smaller real GDP per person than United States because ______.
goods and services that were traditionally produced in the home are now bought in the market the relative prices in these two countries are very different
Boeing Doubles Outsourcing From India Three Indian firms are producing components for Boeing fighter jets F15 and F18 and for the Chinook heavy-lift helicopter in Bangalore, Hyderabad, and other places in India. Source: The Economics Times, February 17, 2016 Explain how Boeing's activities and its transactions affect U.S. and Indian GDP. The sale of Boeing's fighter jets and heavy-lift helicopters is recorded as _______, and the Boeing's outsourcing of components to India is recorded as _______.
government expenditure in U.S. GDP; imports in U.S. GDP
The basic economic problem of scarcity
has always existed and will continue to exist.
Boeing Doubles Outsourcing From India Three Indian firms are producing components for Boeing fighter jets F15 and F18 and for the Chinook heavy-lift helicopter in Bangalore, Hyderabad, and other places in India. Source: The Economics Times, February 17, 2016 Explain how the Indian firms' activities and its transactions affect U.S. and Indian GDP. The production of components in India and the sale to Boeing is recorded as an ______ in U.S. GDP and as an ______ in India's GDP.
import; export
The United Nations' Human Development Index (HDI) is based on real GDP per person, life expectancy at birth, and indicators of the quality and quantity of education. Explain why the HDI might be better than real GDP as a measure of economic welfare. Which items in the HDI are part of real GDP and which items are not in real GDP? Do you think the HDI should be expanded to include items such as pollution, resource depletion, and political freedom? Explain. What other items should be included in a comprehensive measure of economic welfare? The HDI might be better than real GDP as a measure of economic welfare because the HDI ______. The HDI includes measurements of ______, which are not measured in real GDP. If the HDI is expanded to include items such as pollution, resource depletion, and political freedom ______. Other influences on economic welfare that could be included in a comprehensive measure include _______.
includes real GDP, but also includes other factors that influence our standard of living; health, life expectancy, and education it would be difficult to measure religious freedom, discrimination, and civil or international conflict
An economy produces at point a on the PPF shown in the figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat ________.
increases
Read the news clip, then answer the following question. Toyota and Honda Shift Production to North America Toyota plans to stop exporting the Lexus RX to North America from Japan, building all of the vehicles in North America. The company will invest $98.3 million to boost its production capacity. Honda Motor Co. will shift a major chunk of its manufacturing to North America and increase its production capacity by as much as 40 percent Source: The Wall Street Journal, August 8, 2012 Assuming that U.S. consumers buy the same number of Lexus RX models and Hondas regardless of where they are built, U.S. GDP ______ when Toyota builds the Lexus RX in the United States and Honda increases production in the United States because ______.
increases; net exports and investment increase
China's Economy Accelerates as Retail, Investment Pick Up China's real GDP increased 6.9 percent in the first quarter of 2017 from a year earlier. Investment grew by 9.2 percent and retail sales by 10.9 percent. In current prices, GDP increased by 11.8 percent from a year earlier. Source: Bloomberg News, April 17, 2017 Explain why the growth rate of GDP in current prices does not provide information about how quickly the economy is really growing. The growth rate of GDP in current prices does not provide information about how quickly the economy is really growing because _______.
it combines price growth and production growth, and price growth does not represent growth in the economy
Comparing Real GDP Per Person The International Monetary Fund reported the following data on gross domestic product per capita, measured in U.S. dollars at market exchange rates in 2016: Canada $42,210, China $8,113, United Kingdom $40,096, and United States $57,436. Source: International Monetary Fund, World Economic Outlook Database, April 2017 Explain why the data reported here might be a poor indicator of the differences in economic welfare among Canada, the United Kingdom, and the United States, but nevertheless provide the correct ranking of the countries. The data reported here might be a poor indicator of the differences in economic welfare among Canada, the United Kingdom, and the United States, but nevertheless provide the correct ranking of the countries because _______.
items such as leisure, home production, and ease of access to health care are not included but if these items were included in real GDP the differences between these items are too small to change the ranking in terms of real GDP per person
A Half-Year of Job Losses Employers trimmed jobs in June for the sixth straight month, with the total for the first six months at 438,000 jobs lost by the U.S. economy. The job losses in June were concentrated in manufacturing and construction, two sectors that have been badly battered in the recession. Source: CNN, July 3, 2008 Based on the news clip, what might be the main source of increased unemployment? Based on the news clip, what might be the main type of increased unemployment? According to the news clip, the main source of increased unemployment might be ______, and the main type of increased unemployment is ______.
losses in manufacturing and construction jobs; cyclical
In the figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources
marginal benefit of a computer exceeds the marginal cost of a computer, so more computers
Why might the unemployment rate underestimate the underutilization of labor resources? The unemployment rate might underestimate the underutilization of labor resources because it does not include ______.
marginally attached workers and part-time workers who want full-time jobs
What is the unemployment rate supposed to measure and why is it an imperfect measure? The unemployment rate is supposed to ______. It is an imperfect measure because ______.
measure underutilized labor; it does not include marginally attached workers and part-time workers who want full-time jobs
Real GDP ______ indicator of the standard of living because ______.
might be an unreliable; the standard of living depends on many factors, some of which are not part of real GDP
Comparing Real GDP Per Person The International Monetary Fund reported the following data on gross domestic product per capita, measured in U.S. dollars at market exchange rates in 2016: Canada $42,210, China $8,113, United Kingdom $40,096, and United States $57,436. Source: International Monetary Fund, World Economic Outlook Database, April 2017 Explain the special complications involved with attempting to compare the economic welfare in China and the United States by using the GDP for each country. Special complications involved with attempting to compare the economic welfare in China and the United States by using the GDP for each country occur because _______.
more household production tasks takes place in the market in the United States, and goods and services are valued at different prices in each country
When the market for a commodity is in equilibrium:
no economic agent will want to change their behavior.
Jobs and Wages Notch Gains as the Economy Tries to Heal Hiring in recent months has hit a pace last seen during the late 1990s and the labor force participation rate has started to rise but it remains significantly below its pre-recession level of 2007. Source: The New York Times, April 1, 2016 If all the newly hired people had been unemployed, how would the labor force participation rate and unemployment rate have changed? If all the newly hired people had previously given up on their job search, how would the labor force participation rate and unemployment rate have changed? If all the newly hired people had been unemployed, the labor force participation rate would have _______ and the unemployment rate would have _______. If all the newly hired people had previously given up on their job search, the labor force participation rate would have _______ and the unemployment rate would have _______.
not changed; decreased increased; decreased
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity
periodic; irregular; production
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
When economic growth occurs, the
production possibilities frontier shifts outward
India to be Home to 437,000 Millionaires by 2018 India, with the world's largest population of poor people, is creating millionaires at a rapid pace and by 2018 is projected to have 437,000 millionaires measured in U.S. dollars. That is 1 millionaire for about 1,600 people living on less than $2 a day. Source: The Times of India, July 18, 2015 Why might real GDP per person misrepresent the standard of living of the average Indian? Why might $2 a day underestimate the standard of living of the poorest Indians? The value of real GDP per person might misrepresent the average Indian's standard of living because ______. The standard of living of those living on $2 a day might be underestimated because ______.
real GDP does not include home production and India's real GDP is calculated with the low prices that prevail in India many of the transactions of the poorest people in India do not occur in markets
If the price of a candy bar is $1 and the price of a fast food meal is $5, then the
relative price of a fast food meal is 5 candy bars.
As output moves from point a to point b to point c along the PPF in the figure, the opportunity cost of one more unit of good X
rises. The opportunity cost of one more unit of good Y falls.
Older American Workers Are Still Struggling to Find Jobs Employers are creating new jobs but older workers are not getting them. In August 2016, 151,000 new jobs were created. But 2.5 million workers over 55 were either unemployed, in part-time jobs but wanting full time, or had given up on seeking work. That's a 12 percent unemployment rate. Age discrimination is illegal but hiring discrimination is hard to prove and economists at the University of California at Irvine and Tulane University say they have found evidence of age discrimination in hiring, particularly for older women Source: Fortune, September 8, 2016 What type of unemployment might older workers be more prone to experience? Explain how the unemployment rate of older workers is influenced by the business cycle. Why might older unemployed workers become marginally attached or discouraged workers? Older workers are more prone to experience ______ unemployment. During a recession, the unemployment rate of older workers ______. Older unemployed workers might become marginally attached workers or discouraged workers because _______
structural; increases older workers often lack resume-writing skills and have a significantly more difficult experience finding a job than younger workers
Retraining Many people graduate with a bachelor's degree that doesn't open jobs doors. Acquiring a skill provides a way of getting a decent paycheck. But acquiring a skill isn't a one-time event: It is an ongoing process. A skill doesn't last for decades and retraining is required. Government-funded job training is a promising way to help individual workers, employers and the country as a whole. Source: The New York Times, February 26, 2017 What is the main type of unemployment that retraining programs seek to avoid? Explain. How might government funded retraining influence the natural unemployment rate? Explain. Retraining programs seek to avoid _______ unemployment because _______. Government funded retraining _______the natural unemployment rate because _______.
structural; the programs aim to give workers the skills needed for the available jobs decreases; natural unemployment includes structural unemployment
1. The two measures of employment are _______. 2. Which of the following categories is included in the Current Population Survey of employment and in the Current Employment Survey? 3. Choose the correct statement. 4. Thinking about the information in the news article and its implications for unemployment, the change in unemployment is most likely a change in _______ unemployment because _______. 5. Data on employment, unemployment, and underemployment imply that the number (and percentage) of people who are not in the labor force has _______.
the Current Employment Survey and the Current Population Survey teachers Since 2000, the broad cycles in the Current Population Survey and the Current Employment Survey measures of employment are similar. cyclical; as the economy moved into expansion unemployment decreased increased
The IMF World Economic Outlook reports the unemployment rates given in the table. What do these numbers tell us about the phase of the business cycle in the four countries in 2016? These numbers tell us that in 2016, ______.
the United States and Singapore are most likely in expansions, Venezuela is entering a recession, and Spain is most likely moving into an expansion
Read the news clip, then answer the following questions. GDP Expands 11.4 percent, Fastest in 13 Years China's gross domestic product grew 11.4 percent last year and marked a fifth year of double-digit growth. The increase was especially remarkable given that the United States is experiencing a slowdown due to the sub-prime crisis and housing slump. Citigroup estimates that each 1 percent drop in the U.S. economy will shave 1.3 percent off China's growth, because Americans are heavy users of Chinese products. In spite of the uncertainties, China is expected to post its sixth year of double-digit growth next year. Source: The China Daily, January 24, 2008 According to the expenditure approach for calculating China's GDP, "each one percent drop in the U.S. economy will shave 1.3 percent off China's growth" because as the U.S. economy shrinks, ______. China's ______ and China's real GDP decreases.
the United States imports less from China; exports decrease
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
Nominal GDP is ______. Real GDP is ______.
the value of the final goods and services produced in a given year valued at the prices of that year; the value of final goods and services produced in a given year when valued at the prices of a reference base year
1. What does Martin Feldstein say is wrong with the growth rate of real GDP per person as a measure of the growth rate of the standard of living? Martin Feldstein says the growth rate of real GDP per person mis-measures the growth rate of the standard of living because it _______. 2. How does the price of a smartphone today compared with the 1991 prices of items it has replaced support Feldstein?s argument? The price of a smartphone today compared with the 1991 prices of items it has replaced supports Feldstein's argument because replacing a $3,000 basket of 13 items in 1991 with a $200 on a smartphone today_______. 3. How does the falling share of household production in total production modify Feldstein?s argument? The falling share of household production in total production modifies Feldstein's argument because it _______. 4. What other reasons not addressed in the news story make the growth rate of real GDP per person an incomplete measure of the standard of living? Among other reasons, the growth rate of real GDP per person is an incomplete measure of the standard of living because it _______.
undervalues quality improvements and benefits from new goods shrinks GDP but improves the standard of living results in real GDP growth overstating the pace of improvement in the standard of living excludes the value of the increase in leisure time
Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways ________ and the marginal cost of additional freeways ________.
decreases; increases
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same