Quiz 1 Econ

b. an above-equilibrium wage offered by a firm to attract a more talented pool of job applicants is an example of what?

Efficiency wage

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

250 to gdp

Ryan lives in an apartment where he pays $7,000 a year in rent. Sarah lives in a house that could be rented for $21,000 a year. How much do these housing services contribute to GDP?

28,000

If the real interest rate is 6 percent and the inflation rate is -2 percent, what is the nominal interest rate?

4%

bond is defined as

A certificate of indebtedness

Olga owns her own business. Sven is an unpaid worker in his family's business. Who is included in the Bureau of Labor Statistics' "employed" category? a. only Olga

Both olga and sven

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services.

10. Which of the following is the primary cause of inflation?

a. an increase in the quantity of money

Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the same, the unemployment rate

a. and the labor-force participation rate both increase.

8. Unemployment would cause an economy to

a. produce inside its production possibilities frontier.

10. Unemployment insurance

a. reduces search effort which raises unemployment.

Which of the following domestically produced items is not included in GDP? a. a bottle of shampoo b. a hairdryer c. a haircut

all

Alexis is a lawyer. She bills her clients $100 an hour for her services. She can also mow her lawn in 30 minutes. She can hire someone to mow her lawn who takes an hour. Of the following prices, which is the highest Alexis would pay someone to mow her lawn?

b. $49

16. An economy's natural rate of unemployment is the

b. amount of unemployment that the economy normally experiences.

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because

b. measuring them is so difficult.

24. Which of the following is included in the consumption component of U.S. GDP?

b. purchases of natural gas by U.S. households

27. Cyclical unemployment refers to

b. short-run fluctuations around the natural rate of unemployment.

2. The economy's two most important financial markets are

b. the bond market and the stock market.

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that

c. Traci has an absolute advantage in chairs.

28. Other things the same, when the interest rate rises,

c. people would want to lend more, making the quantity of loanable funds supplied increase.

6. If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

c. there is a shortage so interest rates will rise.

1. If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then iowa has a

comparative advantage in the production of corn.

26. The identity that shows that total income and total expenditure are equal is

d. Y = C + I + G +NX.

The invention of the telegraph led to the loss of jobs for those who had delivered mail by horse but created jobs for telegraph operators and delivery persons. This is an example of

d. frictional unemployment created by sectoral shifts.

Suppose that roofers are not unionized. If roofers unionize, then the supply of labor in other sectors of the economy will

d. increase, reducing wages in industries that are not unionized.

2. When two countries trade with one another, it is most likely because

d. the two countries wish to take advantage of the principle of comparative advantage.

T/F: d. Purchases of capital goods are excluded from GDP.

false

Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called

inflation