CH 7/8 PRACTICE MACRO ECON

If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about: a) 5.26% b) 5.56% c) 6.5% d) 10%

5.56%

The value of ____ is counted in GDP a) glass for windshields purchased by a car manufacturer b) a new car sold by a dealer c) a used car sold by a dealer d) a short of stock in a car manufacturer

New car sold by dealer

The unemployment rate is the: a) percent of the labor force that is unemployed b) number of people unemployed c) the labor force minus the number of people unemployed d) average length of time someone is unemployed

Percent of the labor force that is unemployed

The real interest rate is the nominal interest rate ____ a) less the rate of inflation b) divided by the rate of inflation c) multiplied by the rate of inflation d) plus the rate of inflation

less the rate of inflation

When the price level increases and incomes remain constant, _____ a) everyone becomes wealthier b) real income decreases c) real wealth increases d) lenders are better off

real wealth increases

An INCREASE in the number of discouraged workers tends to: a) raise the official unemployment rate b) lower the official unemployment rate c) lower the number of people who are frictionally unemployed d) increase the number of people who are structurally unemployed

Lower the official unemployment rate

According to the information presented in the Table, GDP is: a) $94 billion b) $188 billion c) $168 billion d) $139 billion

$188 billion

The total population is ____ million a) 394 b) 163 c) 232 d) 169

232

Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million a) 27 b) 95 c) 46.5 d) 105

27

The approximate rate of inflation in year 3 is: (insert photo) a) 5% b) 10% c) 19% d) 20%

5%

If the price level and nominal GDP both doubled, then real GDP would: a) also double b) increase by half c) remain unchanged d) decrease by half

remain unchanged

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 begin looking for work and that half of the new entrants find a job. The unemployment rate: a) rises to 19.2% b) rises to 21.4% c) rises to 28.6% d) nothing happens to the unemployment rate

Rises to 19.2%

A survey reveals that, on a small island, initially, 40 people have jobs, 10 people are not 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: a) rises to 33.3% b) rises to 50% c) falls to 25% d) nothing happens to the unemployment rate because these people weren't working before, and they aren't working now

Rises to 33.3%

The MOST important use of GDP is a measure of: a) size of the economy b) level of unemployment c) changes in the price level d) rates of return in financial markets

Size of the economy

Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume that the unit prices of these goods are as follows for the years noted and that 2018 is the base year. What is the value of the price index in 2018? a) 100 b) 111 c) 90 d) 0

Value: 100

Which transaction is included in the nation's gross domestic product? a) a college student buys a used textbook from his roommate b) a construction company purchases lumber to build a new house c) a college student buys a pizza and has it delivered to her dorm room d) a group of college students volunteer to rake leaves at an assisted living facility for senior citizens

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

What is the total value added of all stages of production of furniture in this production schedule? a) $800 b) $1,200 c) $1,800 d) $2,000

$1,200

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, is: a) $22,000 b) $24,500 c) $11,000 d) $13,500

$22,000

If the wage rate is $40 per hour, and the price level is 2, then the real wage is _____ per hour a) $20 b) $40 c) $80 d) $2

$40

Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2017? (insert photo) a) $3 b) $40 c) $42 d) $44.50

$40

Assume that an economy produces only lemonade and cookies. If 2019 is the base year, real GDP in 2019 was: a) $400 b) $420 c) $425 d) $445

$445

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: a) $46 billion b) $36 billion c) $26 billion d) $16 billion

$46 billion

Total expenditures on GDP by the household sector are: a) $100 billion b) $1,085 billion c) $500 billion d) $600 billion

$600 billion

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: a) $630 b) $230 c) $200 d) $830

$630

Menu costs of inflation are the: a) Costs associated with money becoming a less reliable unit of measurement b) Costs of transactions associated with avoiding the inflation tax c) Costs associated with businesses changing prices d) Revenue the government gets from printing money

Costs associated with businesses changing prices

Unit of account costs of inflation are the: a) costs associated with money become a less reliable unit of measurement b) costs of transactions associated with avoiding the inflation tax c) costs associated with businesses changing prices d) transfers the government gets from printing money

Costs associated with money become a less reliable unit of measurement

Deflation is a; a) decrease in unemployment b) decreasing aggregate price level c) decline in wages d) recession

Decreasing aggregate price level

The total income of households after taxes and government transfers is called: a) disposable income b) private savings c) aggregate spending d) investment

Disposable Income

Which statement about gross domestic product is FALSE? a) It is aggregate output b) It is the total output of final goods and services c) It grows during an expansion d) is the total production of all final and intermediate goods

is the total production of all final and intermediate (true!)

The producer price index is often regarded as a warning sign of inflation because: a) prices of inputs will ultimately be reflected in prices of final products b) producers are likely to have monopoly control over prices c) consumers have to pay the prices charged d) commodity producers can sell whatever they want at higher prices

prices of inputs will ultimately be reflected in prices of final products

In the circular flow diagram, firms: a) sell goods and services b) buy goods outside of investment spending c) sell labor d) buy services outside of investment spending

sell goods and services

Which item would NOT be included in this year's GDP? a) the production of a tv show b) purchases of a new hybrid truck c) the hiring of a new school teacher d) the purchases of your neighbors house, which was built in 2019

the purchases of your neighbors house, which was built in 2019

The rate of unemployment is found by dividing the: a) number of people looking for work by the population b) number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed c) labor force by the number of people seeking work d) Unemployed and discouraged workers by the labor force

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

Considering 2018 as the base year, real GDP between 2018 and 2019 grew at a rate of: a) 53.19% b) 39.47% c) -39.47% d) -58.67%

-39.47%

If 99 million people are working, and 1 million are unemployed but actively seeking work, then the unemployment rate is _____% a) 1 b) 5 c) 10 d) 100

1%

Calculate the GDp deflation for 2019 a) 111 b) 104 c) 90 d) 96

104

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: a) 7% b) 10% c) 14.29% d) 4.2%

14.29%

the total population is ______ million a) 486 b) 253 c) 278 d) 283

278 Labor force + Adults + non adults + unemployed adults

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 _____%. a) 6.4 b) 4.32 c) 3.85 d) 2.3

3.85

(Table: Labor Force Distribution) The unemployment rate is _____%. a) 3.85% b) 10% c) 4.55% d) 6.75%

3.85%

If marginally attached workers are included, the number of persons in the labor force in Estill County is: a) 7,400 b) 6,500 c) 6,000 d) 5,500

6,500

Employment Data. If marginally attached workers are included in the labor force and counted as unemployed, the unemployment rate is _____%. a) 4.3 b) 19.2 c) 7.2 d) 12.9

7.2

Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____%, and the real interest rate is _____% a) 6; 9 b) 9; 6 c) 9; 3 d) 6; 12

9%; 6%

A price index: a) always includes a base year b) is used to measure the cost of a market basket across different years c) is normalized so that it equals 100 in the base year d) all of the above are true

All of the Above

Which equation breaks GDP down into the four sources of aggregate spending? a) GDP = C + I + G + X + IM b) GDP = C + I + G - X - IM c) GDP = C - I - G - X + IM d) GDP = C + I + G + X - IM

C + I + G + X - IM

The price measure MOST widely used to determine the inflation rate in the United States is the _____ a) producer price index b) consumer price index c) GDP deflator d) national income account

CPI (Consumer Price Index)

In general, expansions are characterized by: a) increasing unemployment b) falling unemployment c) decreasing unemployment d) constant employment

Falling unemployment

GDP is the total dollar value of all: a) Intermediate goods and services produced in the economy in a given period b) Wages paid to producing workers in a given period c) Final goods and services produced in the economy in a given period d) Government produced in a given period

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

Shoe leather costs are the: a) effect of inflation on the prices of food, clothing and other necessities b) increase cost of transactions due to inflation c) higher price of leather goods d) effect of inflation on transportation costs

Increased cost of transactions due to inflation

In the circular-flow model, households: a) receive transfer payments from the government b) buy resources in the factor markets c) sell products in the market for goods and services d) issue stocks and bonds to raise capital

Receive transfer payments from the government

A nations exports minus its imports: a) equals its private investment b) is net exports c) is always a positive number d) is equal to net transfer payments

Net Exports

In official unemployment statistics, discourage workers are a) counted as employed b) included in the labor force c) not included in the labor force d) counted as underemployed

Not included in the labor force ***

Income divided by the price level is _____ income a) personal b) real c) disposable d) national

Real

The scale MOST often used to compare economic performance in other years is: a) the circular flow diagram b) real gdp c) business cycle d) fiscal policy

Real GDP

Real per capita GDP is: a) real gdp divided by the population b) real gdp divided by the amount of capital available in the economy c) not a useful measure of human welfare d) rarely used as a tool to compare countries' possible resources

Real GDP divided by the population

If the dollar amount of nominal GDP decreases, then it is possible that ____ a) aggregate output decrease by less than prices increase b) aggregate output decreases by more than prices c) aggregate output increases by more than prices d) aggregate output increases and prices decrease

aggregate output decreases by more than prices

When inflation rises unexpectedly, borrowers will ____ and lenders will ____ a) be hurt; benefit b) benefit; be hurt c) be hurt; benefit d) benefit; benefit

benefit; be hurt

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 _________ a) equal to real; 2018 b) equal to nominal; 2017 c) greater than real; 2018 d) greater than nominal; 2019

equal to nominal; 2017

The inflation or deflation rate is: a) the change in a price index divided by the initial value of the index b) the change in a price index divided by the next index number c) the difference between the initial price index number d) computed by divided the old price index number by the new price index

the change in a price index divided by the initial value of the index

The price index in the current year is the cost of the market basket in ____ year divided by the cost of the market basket in ____ year times 100 a) the base; the current b) the current; the base c) a past; a future d) a future; a past

the current; the base

Which statement is TRUE? a) the number of people not working but who have looked for work in the past year is equal to the number of unemployed people b) the labor force is the total number of people working + those who are unemployed c) the unemployment rate is the number of people unemployed expressed as a percentage of the population d) the labor force is the same as the population

the labor force is the total number of people working + those who are unemployed

Which item would NOT be included in GDP for 2019? a) the production of a tv show b) the purchases of a new work truck c) the hiring of a new police officer d) your purchases of your neighbors 2015 Toyota

your purchases of your neighbors 2015 Toyota