Test 1

Formula to calculate US GDP

(+) Income earned by Americans abroad (-) Income earned by foreigners in the US (-) depreciation (loss in value of capital goods as they wear out in factories)

What makes up investments, I?

1.) Purchases of capital goods by firms (machinery, buildings, ect.) 2.) Construction of new homes and new apartments 3.) Any increase in firms' inventories of unsold goods (that will eventually be sold in a future time period)

Which of these persons is "officially unemployed"? ____An out of work person who has given up looking for work, who is receiving unemployment benefits ____An out of work person who is actively looking for work, who is not receiving unemployment benefits ____A person working only a few hours per week who used to work full time ____A retired person who retired early at age 62 because no one would hire him

An out of work person who is actively looking for work, who is not receiving unemployment benefits

Which of the following is true in 2013 in the U.S.? ____ China's economy is larger than the U.S. economy ____ There are around 740,000 business that employ at least one worker. ____ The total number of WalMart workers exceeds the total amount of public school teachers. ____ Average family income is around $50,000/year

Average family income is around $50,000/year

Calculate inflation rate

CPI this year - CPI last year / CPI last year x 100

Which of these price indexes includes the prices of the smallest number of goods and services? ____Consumer Price Index ____Implicit GDP Deflator ____PCEPI (or PCE) ____MIT billion prices project

Consumer Price Index

The calculation of "core" inflation excludes prices of which type of products? ____Automobiles and energy ____Energy and food ____Energy and automobiles ____Food and clothing

Energy and food

In a standard long run production function ____Full employment of both capital and labor are assumed to exist ____The level of GDP is determined by the amount of labor employed, minus capital income ____The level of national income is determined by the amount of labor employed, minus capital income ____All of the above are true

Full employment of both capital and labor are assumed to exist

Which of these is NOT part of government purchases (when calculating GDP)? ____Purchase of a tank by the government ____Government pays Social Security benefits ____Government pays to build a road ____Government buys hot dogs to serve as school lunches

Government pays Social Security benefits

Which of these is added to national income when calculating disposable personal income? ____ Government transfer payments ____ Depreciation ____ Contributions to retirement accounts ____ Taxes paid by people

Government transfer payments

How can the official unemployment rate rise if the total number of employed persons also rises? ____If full time workers' hours are cut so that they become part time ____If government lays off workers ____If people give up looking for work ____If more out-of-work people begin actively looking for work

If more out-of-work people begin actively looking for work

Calculate inflation rate using GDP

Implicit GDP this year - Implicit GDP last year / Implicit GDP last year x 100

Which of these must be subtracted from U.S. GDP when calculating U.S. national income? ____Income earned by foreigners in the U.S. ____Income earned by Americans abroad ____Imports ____Taxes paid by people

Income earned by foreigners in the U.S.

The unemployment rate understates labor market problems in the U.S. because ____ It does not include people who would like to work but have given up looking for work ____ It doesn't include the value of volunteer workers ____ It counts part time workers as less employed than full time workers ____ It does not count anyone under age 18

It does not include people who would like to work but have given up looking for work

total sales revenue formula

PY= total profit - (RK + WL) RK = capital income WL= labor income)

Which of these is NOT part of investment (when calculating GDP)? ____Purchases of stocks and bonds by households ____ Purchases of machinery by manufacturers ____ Construction of new houses ____ Any increase in firms' unsold inventories of goods

Purchases of stocks and bonds by households

Capital Income Equation

RK

In the United States, the unemployment rate is determined using data from ____The Current Employee Statistics Survey ____The National Association of Business Economists ____A weekly survey of state unemployment offices by the federal government ____The Current Population Survey

The Current Population Survey

Which of these is true? ____ The U.S. is the world's largest exporter of goods ____ China is the world's largest importer of goods ____ The U.S. has a large trade deficit ____ China has a large trade deficit

The U.S. has a large trade deficit

Which of these statements is accurate? ____The U.S. has not experienced high unemployment since the early 1980s ____The U.S. is experiencing both high unemployment and high inflation right now. ____The U.S. is experiencing both low inflation and low unemployment right now. ____The U.S. has not experienced high inflation since the early 1980s.

The U.S. has not experienced high inflation since the early 1980s.

Which of the following is true about U.S. inflation? ____The inflation rate is historically low if it is below 10%/year ____The inflation rate is historically low it is below 5%/year ____The inflation rate is historically low if it is below 2%/year ____The inflation rate is historically low only if it is below 0%/year

The inflation rate is historically low if it is below 2%/year

Y=K+L

Units of Output (Units of capital + Units of labor)

Labor Income Equation

WL

Formula: Real GDP

Y=C+I+G+NX (Exports - Imports)

Which of these is subtracted from GDP when calculating national income? ____ government purchases ____ income earned by residents abroad ____ income earned by foreigners in this country ____ net exports

income earned by foreigners in this country