Test 2 Guide (Ch7-9)
Which of the following are excluded from core inflation so that it better reflects the general trend in overall prices? Multiple select question. Real estate Electronics Food items Energy products
Food items Energy products
Inflation caused by a rise in the prices of inputs is referred to as cost-push inflation. demand-pull inflation. unanticipated inflation. hyperinflation.
cost-push inflation.
Modern economic growth has significantly increased the standard of living as well as _________, social, and political arrangements. (Enter one word in the blank.)
cultural
Inflation initiated by increases in wages or other resource prices is labeled demand-pull inflation. demand-push inflation. cost-push inflation. cost-pull inflation.
demand-pull inflation.
Environmental pollution is accounted for in GDP. PI. DI. none of these.
none of these.
Full-time homemakers and retirees are classified in the BLS data as employed. unemployed. part of the labor force. not in the labor force.
not in the labor force.
The basic economic cost of unemployment is forgone ______. Multiple choice question. supply labor output inputs
output
Efficient financial institutions foster the flow of Multiple Choice saving and investment. spending and income. resources and products. inventions and ideas.
saving and investment.
Sources of funds for investment spending in plant and equipment are ______. Multiple choice question. directed to their most productive uses by the U.S. government savings by households, governments, and foreigners taxes and transfer payments always equal to U.S. spending on imports
savings by households, governments, and foreigners
Using the expenditure approach, which of the following most closely defines the composition of GDP? Multiple choice question. C + Ig + G + X − M C + Ig + G + M C+ Ig + G + X C+ In + G + Xn
C + Ig + G + X − M
Which of these explain why growth is an important economic goal? Multiple select question. It increases standards of living. It results in deflation or disinflation. It increases a society's ability to resolve socioeconomic problems. It increases real wages and incomes.
It increases standards of living. It increases a society's ability to resolve socioeconomic problems. It increases real wages and incomes.
Which of the following statements are true of a price index? Multiple select question. It selects goods for comparison at random from one year to the next. It is expressed in terms of a base, or reference, year. It measures the price of a set of goods of services in a given year. It measures production efficiency for a base year.
It is expressed in terms of a base, or reference, year. It measures the price of a set of goods of services in a given year.
By ignoring the value of leisure time, how does national income accounting affect our well-being? Multiple choice question. It overstates our well-being. It accurately states our well-being. It understates our well-being. It has no effect on well-being.
It understates our well-being.
What are the two ways to adjust nominal GDP to reflect price changes? Multiple select question. Multiply the base year's output by the current year's price of the output. Divide the price index by nominal GDP. Multiply the current year's output by price of the output in the base year. Divide nominal GDP by the price index.
Multiply the current year's output by price of the output in the base year. Divide nominal GDP by the price index.
What is gross rental income minus depreciation of the rental property? Multiple choice question. Gross rent Interest Net rent Dividends
Net rent
Strong property rights, ______ trade, patents and ______ market systems are all growth-promoting institutional structures. Multiple choice question. restricted; competitive restricted; monopolistic free; monopolistic free; competitive
free; competitive
An economy that is experiencing economic ______ is better able to meet people's wants and resolve socioeconomic problems. Multiple choice question. stagnation inflation growth decline
growth
Those countries which experienced modern economic growth earlier than other countries now have significantly ______. Multiple choice question. higher availability of natural resources higher standard of living lower health standards lower population
higher standard of living
Including the value of ________(one word) goods along with the value of final goods in the calculation of GDP would amount to multiple counting of goods and distort GDP.
intermediate
GDP may be understated because ______. Multiple choice question. leisure time is decreasing nonmarket activities are not included in GDP GDP does not include the value of secondhand sales the environment is not accounted in GDP
nonmarket activities are not included in GDP
The view that GDP is the sum of money spent on buying final goods and services is called the aggregate ______ approach. (Enter one word for the blank.)
output
The term that covers all expenditures by households on goods and services is known as _______ _______ expenditures.
personal consumption
All income received by households, whether earned or unearned, is called _________ income.
personal or private
The main reason to participate in the underground economy is to avoid ______. Multiple choice question. reporting actual income and paying income taxes engaging in illegal activities and paying fines reporting actual revenue and paying interest reporting actual savings and paying interest
reporting actual income and paying income taxes
Value added can be determined by summing the profits of all enterprises in the economy. subtracting the purchase of intermediate products from the value of the sales of final products. calculating the year-to-year changes in real GDP. deflating nominal GDP.
subtracting the purchase of intermediate products from the value of the sales of final products.Correct
The use of money as a common denominator to sum output into a meaningful measure of GDP creates a problem because ______ changes. Multiple choice question. the amount of production the exchange rate the value of money itself the circular flow of money
the value of money itself
Real GDP refers to the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income. GDP data that embody changes in the price level but not changes in physical output. GDP data that do not reflect changes in both physical output and the price level. GDP data that have been adjusted for changes in the price level.
GDP data that have been adjusted for changes in the price level.
What do economists use to calculate GDP under the income approach? Exports minus imports Personal consumption Government spending National income
National income
Aggregate output is the primary measure of the economy's ______. Multiple choice question. total output of goods and services total output of goods and services expressed in real terms marginal output of goods and services total output of goods and services adjusted for inflation
total output of goods and services
One of the flaws of GDP is that it ______. Multiple choice question. accounts for changes in leisure and product quality accounts for environmental effects of pollution ignores transactions that takes place in illegal markets or nonmarkets includes transactions of the underground economy
ignores transactions that takes place in illegal markets or nonmarkets
______ income consists of the money paid by private businesses to the suppliers of loans used to purchase capital. (Enter one word in the blank.)
interest
The _________ (social/opportunity) costs of negative gross domestic by-products reduce a nation's economic well-being
social
The service a homeowner performs when she mows her yard is not included in GDP because this is a nonmarket transaction. this is a nonproduction activity. this is a noninvestment transaction. multiple counting would be involved.
this is a nonmarket transaction.
Nominal GDP is less than real GDP in an economy in both year 1 and year 2. In year 3, nominal GDP is equal to real GDP. In year 4, nominal GDP is slightly greater than real GDP. In year 5, nominal GDP is significantly greater than real GDP. Which year is the base year being used to calculate the price index for this economy? 2 3 4 5
3
Which of the following are included in compensation of employees? Multiple select question. Wages and salaries Payments by employers into social insurance for employees Payments by employees into private pension plans Payments by employers into private pension plans for employees
Wages and salaries Payments by employers into social insurance for employees Payments by employers into private pension plans for employees
Which of the following are used by economists to define and measure economic growth? Multiple select question. An increase in real GDP occurring over some time period An increase in nominal GDP occurring over some time period An increase in nominal GDP per capita occurring over some time period An increase in real GDP per capita occurring over some time period
An increase in real GDP occurring over some time period An increase in real GDP per capita occurring over some time period
The formula for a GDP gap is: Multiple choice question. actual GDP plus potential GDP real GDP minus nominal GDP real GDP plus nominal GDP actual GDP minus potential GDP
actual GDP minus potential GDP
Who is least likely to be hurt by unanticipated inflation? a disabled laborer who is living off accumulated savings an owner of a small business a secretary a pensioned steelworker
an owner of a small business
Most economists agree that the immediate cause of most business cycle variation is an unexpected change in the productivity of workers. an unexpected change in the level of total spending. the invention of new products. the growth and subsequent bursting of financial bubbles.
an unexpected change in the level of total spending.
For the purposes of GDP accounting, what do government purchases include? Multiple select question. Unemployment insurance payments The purchase of new military equipment Social security payments Spending on highway construction
The purchase of new military equipment Spending on highway construction
Why do economists pay so much attention to small changes in the rate of economic growth? Multiple choice question. These changes lessen the burden of scarcity. These changes make it impossible to calculate real GDP. These changes reflect a larger failure of economic policy. These changes have large effects on the volume of output.
These changes have large effects on the volume of output.
Cost-of-living adjustments are ______. Multiple choice question. changes in the basket of goods used in calculating the CPI automatic wage changes that happen when the CPI rises averages of neighboring years base prices used in constructing the CPI quality measurements included in the calculation of the CPI
automatic wage changes that happen when the CPI rises
In national income accounting, the personal consumption expenditures category includes purchases of both new and used consumer goods. automobiles for personal use but not houses. consumer durable and nondurable goods but not services. consumer nondurable goods and services but not consumer durable goods.
automobiles for personal use but not houses.
The recurrent ups and downs in the level of economic activity extending over several years are referred to as economic phases. business startups. business cycles. noncyclical fluctuations.
business cycles.`
Social security payments automatically increase when the CPI goes up because of the ______. Multiple choice question. cost of living adjustments years receiving social security marital status age of the recipient
cost of living adjustments
Economists say that the economy is at "full employment" when the ______ unemployment rate is zero. Multiple choice question. total frictional cyclical structural
cyclical
Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the information suggests that the production capacity in economy B is growing more rapidly than that in either economy A or C. A is growing more rapidly than that in either economy B or C. A is growing less rapidly than that in economy B. C is growing more rapidly than that in economy B.
C is growing more rapidly than that in economy B.
National income accountants subdivide corporate profits into which categories? Multiple select question. Interest on savings Rents Corporate income taxes Dividends Undistributed corporate profits
Corporate income taxes Dividends Undistributed corporate profits
The determinants that directly affect economic growth can be grouped into which of the following categories? Multiple select question. Efficiency Supply Demand Spending
Efficiency Supply Demand
Which approach to GDP adds up all the spending on final goods and services that has taken place throughout the year? Multiple choice question. Capital approach Selling approach Expenditures approach Income approach
Expenditures approach
True or false: In general, GDP includes unpaid work. True false question. True False
False
Which of the following are some possible reasons for the slowdown in productivity growth rates starting in 2010? Multiple select question. Increases in technological innovation Overcapacity Accumulation of high debt levels Recent products like Internet apps that are free and do not generate a measurable effect on GDP
Overcapacity Accumulation of high debt levels Recent products like Internet apps that are free and do not generate a measurable effect on GDP
Which of the following are growth-promoting institutional structures? Multiple select question. Patents and copyrights Government control of resources and investment Political instability Free trade Competitive market system. Efficient financial institutions Strong property rights
Patents and copyrights Free trade Competitive market system. Efficient financial institutions Strong property rights
Which of the following are components of the expenditure approach to measuring GDP? Multiple select question. Personal consumption expenditures Personal and business savings Government purchases Gross private domestic investment
Personal consumption expenditures Government purchases Gross private domestic investment
What do antigrowth economists cite as evidence in favor of their argument that growth is undesirable? Multiple select question. Stagnation Pollution Poverty Materialism
Pollution Poverty Materialism
What is the net income of sole proprietorships, partnerships and other unincorporated businesses? Multiple choice question. Compensation of employees Proprietor's income Corporate profits Rent
Proprietor's income
Which of the following are arguments against rapid economic growth? Multiple select question. Rapid economic growth has not solved sociological problems like poverty and homelessness. Rapid economic growth is unsustainable due to the earth's finite resources. Rapid economic growth reduces both the marginal propensity to consume and the marginal propensity to save in an economy. Rapid economic growth results in pollution, global warming and other environmental problems.
Rapid economic growth has not solved sociological problems like poverty and homelessness. Rapid economic growth is unsustainable due to the earth's finite resources. Rapid economic growth results in pollution, global warming and other environmental problems.
True or false: Growth enables society to improve nations' infrastructure. True false question. True False
True
True or false: Hyperinflation is extraordinarily rapid inflation. True false question. True False
True
Which of the following are the domestic sectors of the U.S. economy? Multiple select question. U.S. households U.S. government U.S. businesses Foreign spending U.S. technology industry
U.S. households U.S. government U.S. businesses
(Consider This) According to the Consider This box on patents and innovation, the cost for U.S. and European drug companies to research, patent, and safety-test a new drug is about $100 million. $750 million. $1 billion. $10 billion.
$1 billion.
Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is $1,200. $500. $2,300. $1,100.
$1,200.
A nation's average annual real GDP growth rate is 2.5 percent. Based on the rule of 70, the approximate number of years that it would take for this nation's real GDP to double is 175 years. 40 years. 28 years. 17.5 years.
28 years.
The annual amount allocated to the wear and tear on private investment is called or termed _______. (Enter one word for the blank.)
depreciation
The estimate of how much of the private capital equipment is being used up each year is called _______.
depreciation
The estimated amount of capital being used each year is called ______. Multiple choice question. depreciation net foreign factor income net investment gross investment foreign factor income net investment gross investment
depreciation
In an economy that is experiencing a shrinking production capacity gross domestic investment is negative. net private domestic investment is zero. depreciation is negative. depreciation exceeds gross investment.
depreciation exceeds gross investment.
The amount of income that households have left over after paying their personal taxes is ______ income. Multiple choice question. national disposable personal gross
disposable
Which of the following is the smallest dollar amount in the United States? disposable income personal income gross domestic product national income
disposable income
Under the income approach to GDP, the wages, salaries, and benefits paid by businesses and government fall under the category of compensation of _______.
employees,
A trough in the business cycle occurs when cyclical unemployment is at a minimum point. employment and output reach their lowest levels. the natural rate of unemployment is at a minimum point. the inflation rate is at its lowest level.
employment and output reach their lowest levels.
Free trade discourages growth by increasing competitive pressures on domestic firms. encourages growth by effectively eliminating all patent and copyright barriers to growth. discourages growth compared to situations where the government strongly controls foreign trade. encourages growth by promoting the rapid spread of new inventions and innovations.
encourages growth by promoting the rapid spread of new inventions and innovations.
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? expansion recession peak trough
expansion
The view of GDP as the sum of money spent on purchases is called the ______ approach. Multiple choice question. capital income-based expenditures buying
expenditures
The two ways of looking at GDP are the output approach and expenditures approach. income approach and saving approach. expenditures approach and income approach. output approach and consumption approach.
expenditures approach and income approach.
True or false: Countries that experienced economic growth earlier than other countries have lower average incomes today. True false question. True False
false
True or false: GDP is a perfect and complete measure of the well-being of a country. True false question. True False
false
A nation's economic growth from one year to the next depends on its ______. Multiple choice question. decrease in labor inputs and decrease in labor productivity decrease in labor inputs and increase in labor productivity increase in labor inputs and increase in labor productivity increase in labor inputs and decrease in labor productivity
increase in labor inputs and increase in labor productivity
The historical reallocation of labor from agriculture to manufacturing in the United States has been inflationary. had no effect on the average productivity of labor. increased the average productivity of labor. reduced the average productivity of labor.
increased the average productivity of labor.
Which of the following is the single most important source of U.S. economic growth? stability of the socio-cultural-political environment improvement in the legal and human environment increases in the quantity of labor increases in labor productivity
increases in labor productivity
Which of the following is a measure of economic growth that is most useful for comparing living standards? growth in nominal GDP decreases in the rate of unemployment increases in real GDP per capita increases in real GDP
increases in real GDP per capita
Economic growth provides society ______. Multiple select question. more goods and services fewer goods and services greater material abundance higher living standards a lower quality of goods
more goods and services greater material abundance higher living standards
Gross ____ income includes all income earned from American-owned resources plus government revenue from taxes on production and imports.
national or domestic
The demand factor involves households, businesses, and government purchasing the economy's expanding output of goods and services so that there will be ______. Multiple choice question. no unplanned increase in inventories and resources will remain fully employed unplanned increases in inventories and resources will be unemployed unplanned decreases in inventories and resources will be overemployed zero increase in inventories and resources will remain constant
no unplanned increase in inventories and resources will remain fully employed
A(n) _______ ________ is a measure of a specified collection of goods and services in a given year as compared to the value of a highly similar collection of goods and services in a reference year.
price index
When considering national income, general sales taxes, business property taxes, license fees, and custom duties are all included in the account called taxes on _______ and imports.
production
Stronger ______ growth and heightened ______ competition allow the economy to achieve a greater rate of economic growth. Multiple choice question. productivity; global supply; domestic population; capital demand; domestic
productivity; global
________ income will be affected if the change in the price level differs from the change in a person's nominal income.
real
In the United States, business cycles have occurred against a backdrop of a long-run trend of declining unemployment. stagnant productivity growth. rising real GDP. rising inflation.
rising real GDP.
More abundant leisure increases ______, but it ______ real GDP. Multiple choice question. nominal GDP; decreases nominal GDP; leaves unchanged social welfare; decreases economic welfare; decreases
social welfare; decreases
Economists pay attention to small changes in economic growth because small changes in economic growth can make a big difference in the living _________ of a country.
standards
A new firm focused on creating and introducing a particular new product or employing a new production or distribution method is called a(n) ________ firm.
start-up
The labor force is the ______. Multiple choice question. sum of the employed and unemployed employed minus the unemployed total number of employed total population minus the unemployed
sum of the employed and unemployed
Value added refers to any increase in GDP that has been adjusted for adverse environmental effects. the excess of gross investment over net investment. the difference between the value of a firm's output and the value of the inputs it has purchased.Correct the portion of any increase in GDP that is caused by inflation as opposed to an increase in real output.
the difference between the value of a firm's output and the value of the inputs it has purchased.
Historically, real GDP has increased less rapidly than nominal GDP because price indices have not reflected improvements in product quality. the general price level has increased. technological progress has resulted in more efficient production. the general price level has decreased.
the general price level has increased.
In 1933, net private domestic investment was a minus $6.0 billion. This means that gross private domestic investment exceeded depreciation by $6.0 billion. the economy was expanding that year. the production of 1933's GDP used up more capital goods than were produced that year. the economy produced no capital goods at all in 1933.
the production of 1933's GDP used up more capital goods than were produced that year.
total output/worker-hours. nominal GDP minus real GDP. the ratio of real capital to worker-hours. the annual increase in nominal GDP per worker.
total output/worker-hours.
GDP tends to overstate economic well-being because it takes into account all of the illegal activities conducted by organized crime in the economy. spending on intermediate goods that are used to produce final goods. total spending to deal with the adverse health effects of some products. the personal labor time that car owners spend working on car repairs and maintenance of their vehicles.
total spending to deal with the adverse health effects of some products.
Social Security payments, welfare payments, and veterans' payments that the government makes directly to households are called government public ________ payments.
transfer
True or false: GDP reveals nothing about the way output is distributed. True false question. True False
true
True or false: In the United States, inflation reached double-digit rates in the 1970s and early 1980s but has since declined and recently, has been relatively mild. True false question. True False
true
A large underground economy results in an understated GPD. overstated GDP. understated GDP price index. overstated GDP price index.
understated GPD.
Forgone output is a basic economic cost of ______. Multiple choice question. inflation unemployment surpluses hyperinflation
unemployment
Which are examples of negative gross domestic by-products? Multiple select question. Noise The underground economy Congestion Bribery Polluted water
Noise Congestion Polluted water
1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Which set of items in the accompanying list would move an economy from a point inside its production possibilities curve to a point on its production possibilities curve? 1, 2, 5, and 6 only 3 and 4 only 3 only 1, 3, and 4 only
3 and 4 only
GDP is equal to C + Ig +_______ + Xn. (Insert one variable in the blank.)
G
Which of the following explanations is consistent with the decline in productivity growth that followed the Great Recession? High levels of debt incurred prior to the Great Recession have hindered firms' ability to make productivity-enhancing investments. The Federal Reserve kept interest rates too high, stifling investments that would increase productivity. High levels of inflation following the Great Recession created too much uncertainty for firms, discouraging productivity-enhancing investments. Consumer demand following the Great Recession exceeded firms' capacity to satisfy that demand.
High levels of debt incurred prior to the Great Recession have hindered firms' ability to make productivity-enhancing investments.
Identify the supply factors that are "determinants" of economic growth. Multiple select question. Increases in the supply of capital goods Increases in the quantity and quality of natural resources Increases in the quantity and quality of human resources Increases in the real wage rate Improvements in technology Increases in the purchase of goods and services
Increases in the supply of capital goods Increases in the quantity and quality of natural resources Increases in the quantity and quality of human resources Improvements in technology
What creates a problem in using money to value GDP? Multiple choice question. Inflation Nonmarket activities The underground economy Personal income
Inflation
Which of the following is true of GDP as a measure? Multiple choice question. It is qualitative rather than quantitative. It fails to capture any changes in the prices of goods and services produced in an economy. It does not take into account the amount of services produced in an economy. It fails to capture the full value of improvements in product quality.
It fails to capture the full value of improvements in product quality.
The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is structurally unemployed? Mollie George Jeanette Ricardo
Jeanette
Which of the following are consequences of the widespread joblessness of cyclical unemployment? Multiple select question. Increased mental health Lower morale Increased poverty Greater ethnic tensions
Lower morale Increased poverty Greater ethnic tensions
Which of the following could be considered a cost of cyclical unemployment? Multiple select question. Severe psychological costs to the job loser Higher crime, suicide, and divorce rates Political upheaval A higher rate of inflation
Severe psychological costs to the job loser Higher crime, suicide, and divorce rates Political upheaval
In national income accounts, what does value added refer to? Multiple choice question. The value added to the production process by labor only The cost of inputs at the first stage of production The difference in the market value and cost of inputs purchased from other firms The value of all the inputs used by the final producer
The difference in the market value and cost of inputs purchased from other firms
One of the shortcomings of GDP is that it doesn't reveal anything about which of the following? Multiple choice question. Household consumption Government purchases Net exports The distribution of output Investment spending
The distribution of output
Which of the following helps explain why the growth rate in the United States has been positive during the 1900s? Multiple choice question. The increase in labor productivity The reduction in oil prices The increase in the minimum wage The reduction in nominal wages
The increase in labor productivity
Which of the following statements best summarizes how inflation may redistribute real income? Multiple choice question. When a change in the price level is equal to the change in a person's real income When a change in the price level is equal to the change in a person's nominal income When a change in the price level differs from a change in a person's nominal income When a change in the price level differs from a change in a person's real income
When a change in the price level differs from a change in a person's nominal income
Other things equal, which of the following would decrease the rate of economic growth, as measured by changes in real GDP? an increase in the educational attainment of the labor force a permanent decrease in frictional unemployment an increase in the amount of capital per worker a decrease in the labor force participation rate
a decrease in the labor force participation rate
The market value of a firm's output minus the value of the inputs the firm has bought from others is called ______. Multiple choice question. total profit depreciation value added multiple counting
value added
Government transfer payments include all of the following except: Multiple choice question. direct welfare payments to low-income households wage payments to police officers payments to the elderly from Social Security direct payments to veterans
wage payments to police officers
If 40,000 worker-hours produced a total output of $600,000 in an economy, then the labor productivity is $10/worker-hour. $15/worker-hour. $24/worker-hour. $240/worker-hour.
$15/worker-hour.
If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, actual GDP is $300 billion. $30 billion. $360 billion. $630 billion.
$360 billion.
In the periods 1953-73 and 1973-95, U.S. real GDP grew at the average annual rates of about 5.1 percent and 7.4 percent, respectively. 2.8 percent and 3.6 percent, respectively. 7.4 percent and 5.1 percent, respectively. 3.6 percent and 2.8 percent, respectively.
3.6 percent and 2.8 percent, respectively.
1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Use the accompanying list to answer the following question. As distinct from the supply factors and demand factor of economic growth, the efficiency factor(s) of economic growth is (are) 1 only. 4 only. 1 and 3 only. 3 only.
4 only
Which of the following is not an example of a personal consumption expenditure? Multiple choice question. A fighter jet A television set A restaurant meal Clothing
A fighter jet
In the United States, the rate of unemployment is highest for white teenagers. African-American teenagers. married women. unmarried women.
African-American teenagers.
Which statements describe how even low levels of inflation may negatively affect real output? Multiple select question. Households and businesses spend time and effort distinguishing between real and nominal wages and interest rates. Businesses see even mild inflation as a threat and slow or stop production. Businesses incur the costs of changing prices to reflect inflation. People hold more cash and have to spend less time going to the bank or online to transfer money.
Households and businesses spend time and effort distinguishing between real and nominal wages and interest rates. Businesses incur the costs of changing prices to reflect inflation.
As a measurement of economic output and the nation's wealth, GDP fails to account for which of the following? Leisure time Current production Nonmarket activities The underground economy Improved product quality
Leisure time Nonmarket activities The underground economy Improved product quality
Multiple Choice Question Which of the following measures the economy's overall performance? Multiple choice question. Gross state product Private accounting The stock market National income accounting
National income accounting
What are reasons that the underground economy exists? Multiple select question. People do not like to use a price index. People want to avoid taxes. People hope to distort GDP. People are engaged in illegal activities.
People want to avoid taxes. People are engaged in illegal activities.
Which of the following is a final good or service? a haircut purchased by a father for his 12-year-old son fertilizer purchased by a farm supplier diesel fuel bought for a delivery truck Chevrolet windows purchased by a General Motors assembly plant
a haircut purchased by a father for his 12-year-old son
The primary measure of the economy's performance is its annual total output of goods and services, which is called its ______. Multiple choice question. net exports gross investment balance of trade aggregate output
aggregate output
Business cycles are ______. Multiple choice question. alternating increases and decreases in economic activity the transfer of executives between firms increases and decreases in stock prices the time it takes to bring a new product to market
alternating increases and decreases in economic activity
Economists define and measure economic growth as ______. Multiple choice question. an increase in capital stock per capita over some period of time an increase in nominal GDP over some period of time an increase in real GDP per capita over some period of time an increase in nominal GDP per capita over some period of time
an increase in real GDP per capita over some period of time
Which of the following will not increase the average productivity of labor? an increase in the stock of real capital improvements in the quality of the nation's education and training system technological progress an increase in the size of the labor force
an increase in the size of the labor force
National income accountants define investment to include any increase in business inventories. the addition of cash to a savings account. the purchase of common or preferred stock. the purchase of any durable good, for example, an automobile or a refrigerator.
any increase in business inventories.
Firms and industries producing capital goods are affected most by the business cycle and the negative effects of a recession because purchases of capital goods ______. Multiple choice question. are made frequently cannot be postponed are typically unexpected can be postponed
can be postponed
The largest component of national income is compensation of employees. rents. interest. corporate profits.
compensation of employees.
The index most widely used by the government and the private sector to measure changes in the cost of living is the: Multiple choice question. the chain-type price index consumer price index the GDP deflator producer price index
consumer price index
Gross domestic product (GDP) may be calculated as the sum of ______. Multiple choice question. consumer spending, investment spending, government transfer payments, and exports minus imports consumer spending, investment spending, government purchases of goods and services, and net exports consumer spending, investment spending, government purchases of goods and services, and exports exports and imports only
consumer spending, investment spending, government purchases of goods and services, and net exports
National income is the sum of compensation of employees, rents, interest, proprietors' income, taxes on production and imports, and ______. Multiple choice question. taxes on exports corporate profits capital appreciation dividends
corporate profits
Retained earnings are a category of ______. Multiple choice question. rent corporate profits interest proprietors' income
corporate profits
Gross domestic product calculations count only final goods and services because ______. Multiple choice question. one cannot calculate the quantities of intermediate goods produced it is difficult to measure the prices of intermediate goods produced these are the only goods and services that are purchased in an economy counting all intermediate goods and services would lead to double-counting of many activities
counting all intermediate goods and services would lead to double-counting of many activities
Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because cycles include a trough phase, while fluctuations do not. cycles implies regularity, while fluctuations does not. fluctuations include an expansion phase, while cycles do not. fluctuations are relatively predictable events.
cycles implies regularity, while fluctuations does not.
Gross rental income minus ______ equals net rent. (Use one word per blank.)
depreciation
Net domestic product is gross domestic product less ______. Multiple choice question. depreciation taxes net exports imports
depreciation
The number of years required for real GDP to double can be found by dividing the annual growth rate by 0.07. multiplying the annual growth rate by 70. dividing 70 by the annual growth rate. adding 14 to annual growth rate.
dividing 70 by the annual growth rate.
The business cycle affects output and employment in capital and durable goods industries more severely than in industries producing non-durable goods because, ______. Multiple choice question. during a recession, business investment in new capital goods and consumer spending on new durable goods can be postponed during a recession, business and consumer spending on nondurable goods decline sharply during a boom, business investment in new capital goods and consumer spending on new durable goods decline sharply during a recession, business investment in new capital goods and consumer spending on new durable goods rise sharply
during a recession, business investment in new capital goods and consumer spending on new durable goods can be postponed
Reductions in per-unit production costs that result from increases in output levels lead to _______ of _______ . (Enter one word per blank)
economics scale
The difference between actual and potential GDP is called a GDP _________.
gap
Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will fall by about 20 percent. fall by about 2 percent. rise by about 15 percent. rise by about 25 percent.
rise by about 15 percent.
The percentage of U.S. adults with a high school education has remained constant since the 1960s. risen from 8 percent in 1960 to 35 percent in 2018. risen to 100 percent in the 21st century. risen from 44 percent in 1960 to 90 percent in 2018.
risen from 44 percent in 1960 to 90 percent in 2018.
Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? the GDP Price Index the Consumer Price Index the Retail Trade survey the Wholesale Price Index
the Consumer Price Index
The core element of the productivity speedup between 1995 and 2010 was an explosion of entrepreneurship and innovation based on ______. Multiple choice question. the microchip simultaneous consumption network effects government regulations
the microchip
Cost-push inflation is caused by an increase in ______. Multiple choice question. the per-unit production costs at each level of spending saving by consumers and companies alike total spending beyond the economy's capacity to produce spending by the government on management programs
the per-unit production costs at each level of spending
Frictional unemployment is defined as a type of unemployment that is caused by workers who ______. Multiple choice question. have skills that have become obsolete or are no longer marketable have given up searching for new employment unemployed as they actively search for a new job. are out of work because of a decline in total spending in the economy
unemployed as they actively search for a new job.
The efficiency factor involves both productive and allocative efficiency, which means in order to reach its full production potential an economy must ______. Multiple choice question. use its resources in the most costly way to produce the specific mix of goods that maximizes people's well-being use the most resources to get the most goods and services for the most people use its resources to maximize profits at any cost use its resources in the least costly way to produce the specific mix of goods that maximizes people's well-being
use its resources in the least costly way to produce the specific mix of goods that maximizes people's well-being
In order to construct a reliable price index, government accountants must assign a ______ to each of several categories of goods and services. Multiple choice question. weight monetary value sector price index
weight
The real-world, more complex GDP price index used in the United States is called the _________ annual price index.
weights
When total input costs rise slower than the total units of output produced, then the per-unit production costs will decrease. will increase. will be unaffected. may either increase or decrease.
will decrease.
What are leader countries? Multiple choice question. Countries that experience extremely rapid catch-up growth Countries that experience consistently high growth rates Countries that adopt advanced technologies previously developed by other countries Countries that develop and use the most advanced technologies
Countries that develop and use the most advanced technologies
Output per hour of work is the definition of: Multiple choice question. labor productivity the marginal product of labor increasing returns to labor diminishing returns to labor
labor productivity
The two main supply-side elements that contribute to changes in real GDP are increases in hours worked and increases in ______. Multiple choice question. quantity of natural resources stock of capital labor productivity hourly wages
labor productivity
Modern economic growth often results in the following, except less time for ordinary people to enjoy leisure activities because the primary focus is on production and work. vast increases in wealth and living standards for many groups in the economy. the spread of universal education and elimination of ancient social norms. movement toward democracy and the abolition of feudalism.
less time for ordinary people to enjoy leisure activities because the primary focus is on production and work.
Sources of increasing returns that help raise productivity growth include the following, except more specialized inputs. the spreading of development costs. network effects. low unemployment.
low unemployment.
Why the economy sees business cycle fluctuations rather than slow, smooth growth is a central issue of ______. Multiple choice question. macroeconomics unemployment inflation long-run economic growth microeconomics
macroeconomics
In which industry or sector of the economy is output least likely to be affected by the business cycle? housing construction automobile production medical services capital goods production
medical services
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are not counted. counted as investment spending. counted as government spending. counted as consumption spending.
not counted.
Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is unemployed. employed. not in the labor force. in the labor force.
not in the labor force.
Food and energy prices often complicate the measurement of inflation because supply and demand for these products ______. Multiple choice question. are constant, so equilibrium prices rarely change typically lag behind other goods and services often change, creating temporary changes in prices are stable in the short run and unstable in the long run
often change, creating temporary changes in prices
An example of intermediate goods would be bricks bought by a homeowner for constructing a patio. sacks of groceries bought by a dentist for his family. a new car bought by a recent college graduate. paper and ink bought by a publishing company.
paper and ink bought by a publishing company.
The size of the labor force depends on the size of the working-age population and the participation rate. employment rate. unemployment rate. inflation rate.
participation rate.
The phase of the business cycle when the economy is near or at full employment and the level of real output is at or near capacity is called a: Multiple choice question. peak trough depression plateau
peak
During a period of hyperinflation, creditors gain because their loans are repaid with dollars of higher value. people tend to hold goods rather than money. income is redistributed away from borrowers. the real value of the national currency rises.
people tend to hold goods rather than money.
The unemployment rate is the ratio of unemployed to employed workers. number of employed workers minus the number of workers who are not in the labor force. percentage of the labor force that is unemployed. percentage of the total population that is unemployed.
percentage of the labor force that is unemployed.
Personal income will equal disposable income when corporate profits are zero. personal taxes are zero. transfer payments are zero. Social Security contributions are zero.
personal taxes are zero.
The production of durable goods varies more than the production of nondurable goods because purchases of durable goods are not postponable. purchases of durable goods are postponable. the producers of nondurable goods have monopoly power. producers of durable goods are highly competitive.
purchases of durable goods are postponable.
GDP does not capture the full value of improvements in product quality because GDP is a(n) __________ instead of a qualitative measure. (Enter one word in the blank.)
quantitative or monetary
Dividing nominal GDP by the price index is one way of calculating _______ ________.
real GDP
A recession is a decline in the inflation rate that lasts six months or longer. the unemployment rate that lasts six months or longer. real GDP that lasts six months or longer. potential GDP that lasts six months or longer.
real GDP that lasts six months or longer.
Increasing productivity leads to improved standards of living by increasing ______. Multiple choice question. demand and supply real hourly earnings nominal wages the real population
real hourly earnings
Which of the following formulas is correct? Percentage change in price level approximates percentage change in real income minus percentage change in nominal income. real income approximates percentage change in nominal income minus percentage change in price level. nominal income approximates percentage change in price level minus percentage change in real income. real income approximates percentage change in price level minus percentage change in nominal income.
real income approximates percentage change in nominal income minus percentage change in price level.
The six "determinants" of economic growth are grouped into three categories: one demand factor, four _____ factors, and one efficiency factor.
supply
Inflation is a problem because when it occurs: Multiple choice question. the "purchasing power" of money is increased all prices go up all prices go down the "purchasing power" of money is reduced
the "purchasing power" of money is reduced
Deflation occurs when there is a decline in ______. Multiple choice question. investment unemployment wages the price level
the price level
The following are incomes earned but not received by the nation's households, except Multiple Choice corporate income taxes. Social Security contributions. transfer payments. undistributed corporate profits.
transfer payments.
Official unemployment rate statistics may overstate the amount of unemployment by including part-time workers in the calculations. understate the amount of unemployment by excluding part-time workers in the calculations. overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment. understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment.
understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment.
The number of worker-hours available in an economy is determined by the following, except size of the labor force. length of the average workweek. unemployment rate of the workforce. labor force participation rate.
unemployment rate of the workforce.
In what circumstances would lenders most benefit? when there is an unanticipated decrease in inflation when there is an anticipated increase in inflation when there is an unanticipated increase in inflation when there is an anticipated decrease in inflation
when there is an unanticipated decrease in inflation
GDP in an economy is $11,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports must be +$53 billion. −$47 billion. −$84 billion. −$161 billion.
· -$8411,050= 7,735+1,989+1410+(X-M)
Select from the following those that contributed to the spectacular advancement in information technology. Multiple select question. Global literacy Fiber-optic cable Wireless technology The computer The Internet
Fiber-optic cable Wireless technology The computer The Internet
What are noneconomic sources of well-being that are not considered in a country's GDP? Multiple select question. Government spending on infrastructure Reduction of crime Reduction of drug and alcohol abuse Peaceful international relations
Reduction of crime Reduction of drug and alcohol abuse Peaceful international relations
Which of the following items are calculated as part of national income? Multiple select question. Rents Interest Consumption of fixed capital Taxes on production and imports Compensation of employees Corporate profits Proprietors' income Net receipts from abroad
Rents Interest Taxes on production and imports Compensation of employees Corporate profits Proprietors' income
If real economic growth is 3%, the inflation rate is 5%, and the nominal interest rate is 7%, then the real rate of interest is: Multiple choice question. 8% 2% 10% 3.5%
2% Reason: The real rate of interest is equal to the nominal interest rate minus the rate of inflation. In this case, 7% - 5% equals 2%.
Assume that an economy has 1,500 workers, each working 2,000 hours per year. If the average real output per worker-hour is $20, then total output, or real GDP, will be $3 million. $30 million. $45 million. $60 million.
$60 million.
Suppose nominal GDP in year 1 was $100 billion and in year 2 it was $260 billion. The general price index in year 1 was 100 and in year 2 it was 180. Real GDP in year 2 was $160 billion. $144 billion. $44 billion. $80 billion.
$44 billion.
Real per capita GDP in the United States in 2018 was approximately $18,571. $47,845. $56,793. $18.6 trillion.
$56,793.
If the inflation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is 1 percent. −1 percent. 7 percent. 0.75 percent.
7 percent.
Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percentage of potential GDP is 4 percent. 8 percent. 10 percent. 2 percent.
8 percent.
Suppose the nominal annual interest rate on a two-year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years. The annual real rate of interest is 6 percent. 8 percent. 2 percent. 3 percent.
8 percent.
Between 2018 and 2029, productivity growth is expected to account for about ________ percent of the growth of real GDP in the United States. 62 40 92 87
87
What is potentially the result of overcapacity and the stalling of technological progress? Multiple choice question. The antigrowth movement A decline in productivity growth rates An increase in productivity growth rates Sustainable economic growth
A decline in productivity growth rates
What type of inflation allows people to plan ahead and avoid or lessen the redistribution effects of inflation? Multiple choice question. Anticipated inflation Unlimited inflation Limited inflation Unanticipated inflation
Anticipated inflation
Which statement best describes U.S. inflation since 2000? Multiple choice question. It has been neither very high nor very low. It has been virtually nonexistent. It has been consistently high, often climbing into the double digits. It has been widely variable, swinging from zero to over 10%.
It has been neither very high nor very low.
How is cost-push inflation unique? Multiple choice question. It reduces the overall quantity of real output. It results in an overall reduction in prices. It negatively impacts companies, not consumers. It redistributes income and output.
It reduces the overall quantity of real output.
In Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price level was 125 and the average nominal level of income was $32,000. What happened to real income from Year 1 to Year 2? It fell by $400. It rose by $400. It rose by $600. It rose by $2,000.
It rose by $600
Which of the following comprise technological advancement? Multiple select question. New managerial methods An increase in the supply of natural resources New forms of business organization Innovative production techniques
New managerial methods New forms of business organization Innovative production techniques
Other things equal, which of the following would increase labor productivity the most? The stock of real capital and inputs of labor increase proportionately. The increase in the stock of real capital exceeds the increase in inputs of labor. The increase in inputs of labor exceeds the increase in the stock of real capital. Inputs of labor increase and the stock of real capital remains constant.
The increase in the stock of real capital exceeds the increase in inputs of labor.
What does the Consumer Price Index (CPI) measure? Multiple choice question. The prices of a fixed "market basket" of goods and services The annual prices of durable goods The cost of capital resources over time The purchasing power of consumers in a given year
The prices of a fixed "market basket" of goods and services
What are the effects of unanticipated deflation? Multiple select question. The real incomes of people with fixed nominal incomes will increase. The purchasing power of savings will increase. Creditors will benefit at the expense of debtors. The real value of fixed-monetary assets will decline.
The real incomes of people with fixed nominal incomes will increase. The purchasing power of savings will increase. Creditors will benefit at the expense of debtors.
What economic concept would be most closely associated with a situation where an aluminum plant expands its operations and uses extensive computerization in the production line to reduce per-unit costs of production? infrastructure human capital network effects economies of scale
economies of scale
An economy is "fully employed" when the unemployment rate _____. Multiple choice question. equals the structural unemployment rate equals 5% or higher equals the frictional unemployment rate equals the structural and frictional unemployment rate is equal to 0
equals the structural and frictional unemployment rate
Which of the following is included in GDP? welfare payments received by some households fees received by stockbrokers cash gifts from relatives during the holidays payments received from selling stocks in one's portfolio
fees received by stockbrokers
When inflation occurs each dollar of income will buy ______ goods and services than before. Multiple choice question. the same amount of more fewer
fewer
In order to determine GDP using the expenditures approach, all spending on ______ goods and services, not intermediate goods, is added up. Multiple choice question. nondurable final nominal real
final
Which of the following group of people are hurt by unanticipated inflation? Multiple select question. fixed-income recipients creditors debtors flexible-income recipients savers
fixed-income recipients creditors savers
Search unemployment is a type of cyclical unemployment. hidden unemployment. frictional unemployment. structural unemployment.
frictional unemployment.
Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as cyclically unemployed. frictionally unemployed. structurally unemployed. employed.
frictionally unemployed.
Efficiency factor is when an economy must achieve economic efficiency as well as _______ _______to reach its full production. (Use one word per blank)
full employment
Potential GDP is the output that would be produced if the economy was experiencing no unemployment. free markets and international trade. no inflation. full employment.
full employment.
The "statistical discrepancy" that the NIPA includes in the data is to account for the following, except equalizing GDP totals produced by the expenditures approach and the income approach. errors due to people misrepresenting their incomes on their tax returns. difficulty in accurately estimating depreciation. household production, or "do-it-yourself" activities of households.
household production, or "do-it-yourself" activities of households.
GDP can be measured using the ______ approach, which adds up all of the items that make up national earnings. Multiple choice question. national income total expenditure
income
National ____________ accounting measures the overall performance of the economy.
income
If both the real interest rate and the nominal interest rate are 3 percent, then the inflation premium is zero. real GDP must exceed the nominal GDP. nominal GDP must exceed the real GDP. inflation premium also is 3 percent.
inflation premium is zero.
Real interest rates are the ______. Multiple choice question. interest rates quoted in the market minus the expected inflation rate interest rates quoted in the market nominal interest rate multiplied by the inflation rate interest rates quoted in the market plus the expected inflation rate
interest rates quoted in the market minus the expected inflation rate
Human capital refers to ______. Multiple choice question. any method of production developed by humans knowledge and skills that make a worker productive the machines workers use in a factory machines that require workers in order to operate most efficiently
knowledge and skills that make a worker productive
Which of the following are part of taxes on production and imports? Multiple select question. Income taxes Customs duties Business property taxes License fees Rental taxes General sales taxes Excise taxes
Customs duties Business property taxes License fees General sales taxes Excise taxes
Which of these are components of government purchases in GDP? Multiple select question. Expenditures and government receipts that consist of transfer payments to households Expenditures for intermediate goods Expenditures for publicly owned capital Expenditures for goods and services that the government consumes in providing public services
Expenditures for publicly owned capital Expenditures for goods and services that the government consumes in providing public services
Other than a higher standard of living and more innovations, which of the following are true of the impacts of modern economic growth in industrialized nations? Multiple select question. Increase in democracies Elimination of archaic social norms Increased leisure time and arts Increase in communist economies Increase in unemployment
Increase in democracies Elimination of archaic social norms Increased leisure time and arts
A distinguishing characteristic of public transfer payments is that they include wages to government workers. they are counted as part of government purchases in the calculation of the gross domestic product. they include the cost of maintaining public parks. they involve no contribution to current production in return.
they involve no contribution to current production in return.
GDP tends to overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives. understate economic welfare because it includes expenditures undertaken to offset or correct pollution. understate economic welfare because it does not take into account increases in leisure.Correct overstate economic welfare because it does not reflect improvements in product quality.
understate economic welfare because it does not take into account increases in leisure.