MIDTERM #1 MACROECONOMICS

What types of resources do firms buy in factor markets

Labor Capital: Land, Physical capital and human capital

What is the Circular-Flow Diagram?

Model of transactions between different segments of the economy

What is the circular flow Diagram?

Model of transactions between different segments of the economy

In official unemployment statistics, discouraged workers are:

Not included in the labor force

which transaction is included in the nation's gross domestic product?

A college student buys a pizza and has it delivered to her dorm room

Job search refers to the time workers spend looking employment. Job search results in

Frictional Unemployment

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is:

14.29%

Monetary policy attempts to affect the overall level of spending through

Changes in the quantity of money and the interest rate

A grocery store benefits when a new furniture factory moves to town and hires workers because the

New jobs at the factory will increase local incomes, some of which will be spent at the grocery store

If a country has a trade deficit, does it indicate that the country has a serious problem?

No trade deficits occur when a country's investment spending is higher than its level of spending

To be classified as unemployed, a worker must:

Not have a job and must be actively looking for work

The rate of unemployment is found by dividing the:

Number of people not working but seeking work by the sum of the umber of people not working but seeking work and the number of people employed

The point on a business cycle when real GDP stops rising and begins falling is a

Peak

The unemployment rate is the:

Percent of the labor force that is unemployed

Out of Labor Force

Population 15+, that aren't employed or unemployed - not looking for work^

The total income of households after texas and government transfers is called

disposable income

If wages grew at 5% last year and average prices grew at 3%, then the average worker

is better off

A nations exports minus its imports

is net exports

Which statement about GDP is FALSE?

it is aggregate output

A person who has no job but is looking for one is:

unemployed and apart of the labor force

The natural rate of unemployment:

would increase if unemployment benefits were increased

In the circular flow model, Households

receive transfer payments from the government

Two segments of circular flow diagram

Households and Firms

Too little spending in an economy often leads to

A recession

Efficiency wages are:

Above equilibrium to encourage better performance

When does cyclical unemployment rise?

during a recession

Consider an economy that produces only smartphones and laptops. Last year, 10 smartphones were sold at $800 each, and 5 laptops were sold at $1,000 each, while this year, 15 smartphones were sold at $900 each, and 10 laptops were sold at $1,100 each. Real GDP this year, using last year as a base year

$22,000

Deflation is a

Decrease in the average level of prices

The threat of future inflation:

Makes people reluctant to lend money for long periods

If Suzy's leather goods manufactures leather pieces that are sold to manufacturers who use them to produce handbags and wallets included in the calculations of GDP?

No. they will not be

Real per capita GDP is:

Real GDP divided by the population

In the circular-flow diagram, firms

Sell goods and services

The natural rate of unemployment is

Sum of frictional and structural unemployment

TRUE or FALSE Structural unemployment occurs when there is a surplus of labor at the current wage rate

TRUE

The value of _____ is counted in GDP

a new car sold by a dealer

If money income remains the same, while the average price level doubles, then

real income will fall

Efficiency wages encourage:

workers to retain their current job

If, during 2019, the Republic of Sildavia recorded a GDP of $75 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2019 in Sildavia were:

$46 Billion

Use table: The unemployment rate is ___%

3.85%

Economists use the term Long-term growth to indicate:

Growth of the economy over several decades

Frictionally Unemployed

Unemployment due to time workers spend in job search -Choosing to leave job to search for other one

In a particular labor market, the demand for labor is given by W=20-(1/100)L, and the supply of labor is given by W=4+(1/100)L, where W is the wage rate, and L is the number of workers. The equilibrium wage is _____, and the equilibrium number of workers is ______

$12; 800

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:

$630

Considering 2018 as the base year, real GDP between 2018 and 2019 grew at a rate of:

-39.47%

If 99 million people are working, and 1 million are unemployed but actively seeking work, then the unemployment rate is _____%

1%

2 segments of the circular flow diagram

1. Households 2. Firms

During the "Great Recession" of 2007-2009, how much did industrial production drop by?

17%

Great Depression had how many recessions

2 recessions 1) 8/1929 to 3/1933 2) 5/1937 to 6/1938

Which Statement is TRUE? 1) The number of people not working but who have looked for work in the past year is equal to the number of unemployed people 2) The labor force is the total number of people working + those who are unemployed 3) The unemployment rate is the number of people unemployed expressed as a percentage of the population 4) The labor force is the same as the population

2) The labor force is the total number of people working + the number of unemployed people

Use table, labor force distribution. The total population is _____ million

232 Million

Use Table: Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million

27 Million

Use Table: Labor force distribution, The total population is ____ million

278 Million Labor force + Adults + under 16 = answer 208+40+30= 278 Million

Use Table: Population data for Roanoke County. If marginally attached workers are included in the labor force and counted as unemployed the unemployment rate is ____%

3.85

Which statement is FALSE? 1) Both frictional and structural unemployment can occur, even if unemployment is at the natural rate 2) Cyclical unemployment is unemployment in excess of the natural rate of unemployment 3) A new college graduate looking for that first professional job may be frictionally unemployed 4) Efficiency wages may cause frictional unemployment

4) Efficiency wages may cause frictional unemployment

Use Table: If marginally attached workers are included, the number of persons in the labor force in Estill County is:

6,500 Employed +Unemployed and Looking + discouraged = total

Use table: Employment Data. If marginally attached workers are included in the labor force and counted as unemployed, the unemployed rate is _____%

7.2%

(Table: Labor Force Data) Suppose the labor force participation rate is 70%. The number of unemployed adults is ___ million

8 Million

if the dollar amount of nominal GDP decreases, then it is possible that,

Aggregate output decreases by more than prices

Long-run growth is the sustained upward trend in

Aggregate output per person over several decades

"Other things equal"

All other relevant factors remain unchanged

Generous unemployment benefits are likely to have which consequences?

An increase in the unemployment rate

During inflation the ____ price level ____

Average; increases

In the circular flow diagram, the factor market is where

Business buy factors of production

What do firms buy in the CFD?

Buy resources they need - in factor markets // factors of production

Cyclically unemployed

Caused by job losses during downturns or contractions in the economy

When the economy is at full employment:

Cyclical unemployment is zero

A binding minimum wage does all of the following EXECPT?

Decrease the amount of labor supplied

A person who spends time looking for work is:

Engaged in job search

In a circular flow diagram, the flow of money going into each sector or market is _____ the flow of money coming out of that market or sector

Equal to

The town of York produces two goods, good A and good B. The following is information regarding York's production of these two goods and their prices over three years. With 2017 as the base year, real GDP in 2017 was _____ GDP in _____.

Equal to nominal; 2017

The natural rate of unemployment is:

Equal to the sum of frictional and structural unemployment

When labor unions successfully bargain for wage rates that _____ the equilibrium wage rate, they may cause ______

Exceed; Structural Unemployment

At the trough of the business cycle, cyclical unemployment positive and the actual unemployment rate _____ the natural rate of unemployment

Exceeds

When an economy is expanding, unemployment tends to ____ and overall prices tend to _____

Fall; rise

In general, expansions are characterized by:

Falling unemployment

GDP is the total dollar value of all:

Final goods and services produced in the economy in a given period

Unemployment that is due to the time workers spend in job search is considered?

Frictional Unemployment

Andre recently moved to Boston with his partner Deja, who has a new job as an economics professor at Harvard. Andre is an experienced surgeon who is interviewing with several hospitals in Boston. Andre is:

Frictionally Unemployed

Which equation breaks GDP down into the four sources of aggregate spending?

GDP = C + I + G + X -IM

Inflation

Increase in overall level of prices

Discouraged Worker

Individuals who want to work/can but are currently unemployed and not searching

Monetary policy attempts to affect the overall level of spending by making changes in

Interest rates and quantity of money

The economist who's writings in the 1930s argued that the cause of an economic depression is inadequate spending was:

John Maynard Keynes

The natural rate of unemployment changes when:

Labor market institutions change

When inflation rises quickly:

Lenders will be hurt and borrowers will benefit

What is the paradox of thrift?

Lower aggregate spending by households means firms have less money to pay for factors of production

An INCREASE in the number of discouraged workers tends to:

Lower the official unemployment rate

A change in the level of overall spending in the economy due to a change in the interest rate, brought about by a change in the quantity of money, is an example of ______ policy

Monetary Policy

The scale MOST often used to compare economic performance in other years:

Real GDP

A survey reveals that, on a small island, initially, 1,000 people have jobs, 200 people are unemployed but are looking for jobs, and 200 people are neither working nor looking for work. Suppose that 100 of the 200 people who weren't looking for work now being looking for work and that half of the new entrants find a job. The unemployment rate:

Rises to 19.2%

A survey reveals that, on a small island, initially, 40 people have jobs, 10 people aren't working but are looking for jobs, and 30 people are neither working nor looking for jobs. Suppose that 10 of the 30 people who weren't working or looking for work now begin looking for work. There are now 20 people without jobs but looking for work and 40 people working. The unemployment rate:

Rises to 33.3%

Pre 1930's conventional wisdom

Self regulating economy - unemployment problems are resolved relative quickly w/o government intervention through the working of the "invisible Hand"

What do firms sell in the circular flow diagram?

Sell goods and services that they produce to households - in the goods market

The circular flow diagram illustrates how firms ____ goods and services and ____ factors of production

Sell; buy

Last month, Brayton lost his job at the local auto parts factory when the factory relocated. Brayton has subsequently looked for a similar job but has found no openings. Brayton is BEST classified as ____

Structurally Unemployed

Long-run growth is a(n)

Sustained upward trend in the economy's overall output per person, which generates higher incomes and a higher standard of living for its members

The rate of unemployment that exists when the economy is at full employment is:

The natural rate of unemployment

The rate of unemployment that exists when the economy is at full employment is;

The natural rate of unemployment

Which item would NOT be included in this year's GDP?

The purchase of your neighbor's house, which was built in 2010

The MOST important use of GDP is as a measure of:

The size of the economy

Key perspective that macroeconomic analysis relies on is

The whole is greater than the Sum of its parts

When a factory closes, why is it bad news for the local restaurants?

Unemployed factory workers have lower incomes and are less likely to dine out

Structurally Unemployed

Unemployment resulting from when there are more people seeking jobs in certain market then available

A trade surplus occurs:

When the value of imports is less than the value of exports

Which item would NOT be included in GDP for 2019

Your purchase of your neighbors 0215 Toyota

What is aggregate spending

measure of national include - current value of all the finished goods and services in the economy

If the price level and nominal GDP both doubled, then real GDP would:

remain unchanged