EC 102 Quiz 2

(Table) According to the table, if 50 discouraged workers suddenly decide to start actively seeking employment again, what will be the unemployment rate of this economy? a. 14.3% b. 10% c. 16.67% d. 25%

d. 25%

Cathy works part-time as a bookkeeper but would like to have a full-time position. She has been actively searching for months but so far has not found a job. According to the Bureau of Labor Statistics, Cathy is unemployed.

False

Full employment is defined as zero unemployment.

False

Most frozen foods are considered durable goods.

False

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $65, producer surplus is greater than consumer surplus.

False

The Leading Economic Index fell in July and August, rose in September, and fell again in October. Based on this, we should expect a recession in the near future.

False

The consumer price index measures both private goods and services and public goods and services.

False

The nominal value of wages explains how much a consumer can pay for goods and services.

False

(Figure: Determining Surplus) In the graph, the triangle hik represents consumer surplus.

True

A disadvantage of using per capita GDP to measure the standard of living in a country is that it does not accurately reflect the differences in wealth between rich citizens and poor citizens in the same country.

True

Childcare provided by a nanny is not included in the GDP if the parents pay the nanny "under the table."

True

If nominal GDP is $12.5 trillion for a given year and the GDP deflator for that year is 111, then real GDP is approximately $11.261 trillion.

True

It is possible for the unemployment rate at the beginning of a recession to be lower than the unemployment rate at the beginning of a recovery.

True

Marci is 11 years old. She walks her neighbors' dogs for cash. Her income from this service is probably part of the informal economy.

True

Personal consumption expenditures are goods and services purchased by residents of the United States.

True

Sheila charges $100 to proof term papers for other college students. She does not declare this income on her tax return. Sheila is part of the informal economy.

True

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $68, producer surplus is $4.

True

(Table) According to the table, the net domestic product for 2010 was GDP Expenditures for 2010 a. $13,562.1 billion. b. $738.9 billion. c. $14,592.3 billion. d. $15,622.5 billion.

a. $13,562.1 billion.

(Figure: Determining Surplus 6) Using the graph, we can calculate the maximum possible consumer surplus as a. $20,000. b. $80,000. c. $40,000. d. $10,000.

a. $20,000.

(Figure: Determining Surplus 3) In the graph, consumer surplus is equal to a. $60. b. $14. c. $20. d. $6.

a. $60.

(Table) According to the table, real GDP for 2014 is approximately a. $7,540 billion. b. $8,488 billion. c. $7,894 billion. d. $8,106 billion.

a. $7,540 billion.

If GDP was $10 trillion in 2001 and the GDP deflator was 100 in 2000 and 110 in 2001, what was real GDP? a. $9.09 trillion b. $10 trillion c. $11.1 trillion d. $110.0 trillion

a. $9.09 trillion

Which statement about the weekly jobs report is NOT true? a. It contains an estimate of the total number of people receiving unemployment benefits. b. It is used as a way to estimate trends in hiring. c. It is released by the Department of Labor. d. It is used as a way to estimate trends in layoffs.

a. It contains an estimate of the total number of people receiving unemployment benefits.

Which of these is an example of gross private domestic investment? a. a change in business inventories b. a household purchase of shares of Google stock c. highway construction by a government contractor d. the sale of an existing home

a. a change in business inventories

Which of these will NOT be included in the GDP? a. a cruise on a ship registered in Norway b. college tuition c. the value of a meal eaten at Wendy's in New York City but consumed by a tourist from Norway d. the value of Kansas corn

a. a cruise on a ship registered in Norway

Producer surplus is shown graphically as the area _____ the market price. a. above the supply curve and below b. below the demand curve and above c. below the demand curve and below d. above the supply curve and above

a. above the supply curve and below

When an economy is going through disinflation, prices a. are rising but at a declining rate. b. stop rising. c. are falling. d. fall back to their original levels.

a. are rising but at a declining rate.

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as a. discouraged workers. b. temporary workers. c. the invisible unemployed. d. the disgruntled unemployed.

a. discouraged workers.

Other things equal, if a recession gets worse, the number of discouraged workers _____, and the number of those in the labor force _____. a. increases; decreases b. decreases; decreases c. decreases; increases d. increases; increases

a. increases; decreases

The unemployment rate is a. the number of unemployed divided by the labor force. b. the number of unemployed divided by the total population. c. the number of employed divided by the labor force. d. 100% minus the labor force participation rate.

a. the number of unemployed divided by the labor force.

Econoland and Macroland are neighboring countries. Which of these would be included in the GNP of Econoland but NOT in Econoland's GDP? a. the value of the output of a factory in Macroland that is owned by a company whose headquarters are located in Econoland b. the value of the output of a factory in Econoland that is owned by a company whose headquarters are located in Macroland c. the value of output sold in Macroland that was produced by a farmer who owns land in Econoland d. the value of output produced in Econoland that remained unsold the year it was produced

a. the value of the output of a factory in Macroland that is owned by a company whose headquarters are located in Econoland

(Table) The associated table provides a hypothetical bundle of goods and their respective prices for three different years. If 2014 is the base year, the cost of the market basket in 2017 would be a. $587.75. b. $640.50. c. $651.75. d. $520.50.

b. $640.50.

(Figure: Determining Surplus) In the graph, what is the formula for consumer surplus? a. 0.5 × (h - j) × (k - i) b. 0.5 × (h - i) × (k - i) c. (i - j) × (k - i) d. (h - j) × (k - i)

b. 0.5 × (h - i) × (k - i)

How many hours does a person have to work for pay to be counted as employed? a. 40 hours a week b. 1 hour a week c. 1 hour a day d. 20 hours a week

b. 1 hour a week

Which statement regarding the types of unemployment is TRUE? a. Structural unemployment is the result of normal labor turnover. b. Frictional unemployment is generally short-term, whereas structural unemployment is often long-term. c. Cyclical unemployment is due to expansions in the business cycle. d. Frictional unemployment is brought about by changes in technology.

b. Frictional unemployment is generally short-term, whereas structural unemployment is often long-term.

Which statement does NOT describe an adjustment to national income to obtain GDP? a. A capital consumption allowance is added to national income. b. Net exports are added to national income. c. Income payments from the rest of the world are added to national income. d. Payments U.S. corporations and residents send to foreign residents are subtracted from national income.

b. Net exports are added to national income.

Which assumption is NOT a problem related to using the consumer price index (CPI) to accurately state the rate of inflation? a. The CPI assumes that people do not substitute goods. b. The CPI does not deal with producer prices. c. The CPI does not include new products. d. The CPI does not account for quality changes.

b. The CPI does not deal with producer prices.

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2% a. debtors gain at the expense of creditors. b. creditors gain at the expense of debtors. c. people on a fixed income see the purchasing power of their incomes rise. d. there is a redistribution of income from creditors to debtors.

b. creditors gain at the expense of debtors.

Suppose an economy has historically grown at a rate of 2.25%. The economy is currently growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle. a. trough b. expansion c. contraction d. recovery

b. expansion

If you hire a lawn service to mow your grass, the money you pay for the service is included in the GDP, whereas if you mow your own lawn, the value of this service is not included in the GDP. This fact represents a criticism of the GDP's focus on a. final values of goods and services. b. market-produced goods and services. c. domestic versus national product. d. avoidance of double counting.

b. market-produced goods and services.

A price ceiling is a _____ which goods or services cannot be sold. a. maximum price below b. maximum price above c. minimum price below d. minimum price above

b. maximum price above

Which of these is included in the consumer price index? a. price of crude oil b. price of gasoline c. price of a hotel room in Beirut, Lebanon d. price of bauxite

b. price of gasoline

The consumer price index does NOT include a. the price of milk. b. property taxes. c. apartment rental rates. d. the price of a haircut.

b. property taxes.

Which of these is NOT an investment in human capital? a. putting more money into the education system b. researching automated production techniques c. starting a job-training program d. launching an employee physical fitness campaign

b. researching automated production techniques

(Table) According to the table, what is this country's GDP? a. $1,305 b. $1,440 c. $1,365 d. $1,225

c. $1,365

Suppose the actual price for good A is $20. John is willing to pay $30, Susie is willing to pay $28, Joseph is willing to pay $25, Jessica is willing to pay $23, and Jeremy is willing to pay $21. What is total consumer surplus? a. $30 b. $23 c. $27 d. $25

c. $27

(Table) According to the table, net exports of goods and services are equal toGDP Expenditures for 2010 a. $505.4 billion. b. -$738.9 billion. c. -$505.4 billion. d. $738.9 billion.

c. -$505.4 billion.

Suppose the equilibrium price of carrots is $1. The price floor instituted by the government is $1.50. Based on this information, which scenario would you expect to take place in the market? a. Farmers would switch from growing carrots to growing potatoes. b. The price floor would have no impact on the market because it is higher than the equilibrium price. c. There would be a surplus of carrots. d. There would be a shortage of carrots.

c. There would be a surplus of carrots.

Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP a. increases by $300 billion. b. increases by $600 billion. c. does not change. d. decreases by $600 billion.

c. does not change.

Which activity is an example of a nonmarket transaction? a. employing a lawn service worker to trim your bushes b. hiring a maid to clean your home c. growing your own food in a vegetable garden d. hiring a nanny to take care of your children

c. growing your own food in a vegetable garden

The twin perils of the modern macro economy are said to be a. government and the trade deficit. b. inflation and the trade deficit. c. inflation and unemployment. d. unemployment and the trade surplus.

c. inflation and unemployment.

An economic recovery that produces too few jobs to significantly reduce the unemployment rate is known as a(n) a. unemployment trap. b. microeconomic problem. c. jobless recovery. d. recession.

c. jobless recovery.

If a price ceiling is set above the equilibrium price a. a shortage occurs in the market. b. quantity supplied exceeds quantity demanded. c. no impact is felt in the market. d. a surplus results in the market.

c. no impact is felt in the market.

Which of these is NOT included in gross private domestic investment? a. construction of residential housing b. an increase in business inventories c. purchases of common stock by investors d. new equipment purchased by businesses

c. purchases of common stock by investors

(Table) When you look at the table, what evidence do you see that suggests which country has the highest savings rate? a. Investment is lower in Econia, suggesting the households are saving rather than investing. b. The smaller amount of consumer spending in Econia suggests that it has a higher savings rate. c. The higher GDP in Macland means that they must have a higher savings rate. d. Consumer spending is a smaller share of total spending in Macland, suggesting that consumers are saving a larger share of their income.

d. Consumer spending is a smaller share of total spending in Macland, suggesting that consumers are saving a larger share of their income.

Which organization determines the beginning and end dates of a recession? a. Council of Economic Advisers b. U.S. Treasury Department c. Federal Reserve Board of Governors d. National Bureau of Economic Research

d. National Bureau of Economic Research

In 2009, a market basket of goods and services cost $100 in Merryland while the same basket cost $200 in Berryland. In 2010, the cost in Merryland was $150 and in Berryland, the cost was $225. Based on the given information, which statement is TRUE? a. Neither country underwent inflation. b. Berryland has more inflation than Merryland. c. The countries have the same rate of inflation. d. The rate of inflation is four times as large in Merryland as in Berryland.

d. The rate of inflation is four times as large in Merryland as in Berryland.

Which phase of the business cycle occurs immediately after a recovery? a. trough b. boom c. recession d. peak

d. peak

Janet is receiving a 5% pay raise. If the rate of inflation is 2%, then Janet's purchasing power is a. impossible to determine without further information. b. falling. c. unaffected by either inflation or the pay raise because they are expressed in nominal and not in real terms. d. rising.

d. rising.

Microfibers in synthetic clothing are shed in the wash cycle and end up polluting rivers, lakes, and oceans. Thus a. the price of synthetic clothing is too high. b. the private market provides the socially desirable output of synthetic clothing. c. too little synthetic clothing is produced. d. too much synthetic clothing is produced.

d. too much synthetic clothing is produced.