ECO 2305 Exam 3- Rashid Al-Hmoud
Assume the average annual CPI values for 2019 and 2020 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years? a. 3.86 b. 1.04 c. 8.0 d. 0.96
a. 3.86 CPI= new-old/old*100 (215.3-207.3)/207.3*100= 3.86
If the number of employed is 190 million, the working-age population is 230 million, and the number of unemployed is 10 million, then the unemployment rate is a. 5%. b. 5.2%. c. 8%. d. 10%.
a. 5% (10/200=.05= 5%) Unemployment Rate= Unemployed/Labor Force
Which of the following is likely to increase measured GDP? a. Marijuana becomes legal to grow and sell. b. The do−it−yourself craze becomes increasingly popular and more people decide to improve their own homes. c. Tax rates increase and more people attempt to underreport their income for tax purposes. d. A greater number of women decide to stay at home and provide day care for their children under age 5.
a. Marijuana becomes legal to grow and sell.
Which of the following transactions represents the purchase of a final good? a. Your father buys a new John Deere riding lawn mower. b. Apple computer buys computer processors from Intel. c. The purchase of coffee beans by Starbucks. d. Delta buys a new European
a. Your father buys a new John Deere riding lawn mower.
The purchase of a new automobile is included in a. consumption expenditures on durable goods. b. consumption expenditures on nondurable goods. c. consumption expenditures on services. d. investment expenditures.
a. consumption expenditures on durable goods.
If the BLS counted persons that are on active military service in the totals for employment, the labor force, and the working-age population, this would a. decrease the measured unemployment rate. b. decrease the measured labor force participation rate. c. decrease the number of persons in the labor force. d. decrease the number of persons in the working-age population.
a. decrease the measured unemployment rate.
Nominal GDP will increase a. if either the price level or the quantity of goods and services produced rises. b. only if the quantity of final goods and services produced rises. c. only if the price level falls. d. only if the price level rises.
a. if either the price level or the quantity of goods and services produced rises.
Which of the following is not directly counted in GDP? a. intermediate goods b. consumer goods c. investment expenditures d. government purchases
a. intermediate goods
A full-time student who is not working is categorized as a. not in the labor force. b. frictionally unemployed. c. unemployed. d. a discouraged worker.
a. not in the labor force
Full employment is not considered to be zero unemployment, because a. people do not find jobs instantaneously. b. some people do not want a job. c. there are not enough jobs for everyone who wants one. d. some cyclical unemployment always exists.
a. people do not find jobs instantaneously.
A consumer price index of 160 in 1996 with a base year of 1982−1984 would mean that the cost of the market a. rose 60% from the cost of the market basket in the base year. b. rose 160% from the cost of the market basket in the base year. c. equaled $160 in 1996. d. equaled $160 in 1983.
a. rose 60% from the cost of the market basket in the base year. 160-100/100= 60% *use 100 as a base year*
If advances in robotics, automation, and artificial intelligence lead to the elimination of jobs, and the people who held those jobs need to learn new skills to find new jobs, those people would be considered a. structurally unemployed. b. seasonally unemployed. c. cyclically unemployed. d. frictionally unemployed.
a. structurally unemployed.
Suppose that nominal GDP in 2020 was less than real GDP in 2020. Given this information, we know for certain that a. the price level in 2020 was less than the price level in the base year. b. the price level in 2020 was greater than the price level in the base year. c. real GDP in 2020 was less than real GDP in the base year. d. real GDP in 2020 was greater than real GDP in the base year.
a. the price level in 2020 was less than the price level in the base year.
What is outlet bias? a. the tendency for households to spend their money at discount stores as prices rise b. the tendency for households to spend more money over time c. the tendency for consumers to purchase newer, more technologically advanced products even though they have higher prices d. the tendency for the quality of products to improve over time even though the CPI does not measure changes in quality
a. the tendency for households to spend their money at discount stores as prices rise
Jack lost his job six months ago, and he's been actively looking for a new job ever since. The Bureau of Labor Statistics would classify Jack as a. unemployed. b. a discouraged worker. c. out of the labor force. d. all of the above.
a. unemployed.
Nominal GDP is GDP in a given year a. valued in the prices of that year. b. adjusted for anticipated inflation. c. valued in the prices of the base year. d. adjusted for inflation.
a. valued in the prices of that year.
Consumption expenditures. $800 Investment expenditures. 200 Government purchases. 300 Exports. 100 Imports 200 Wages 800 Refer to the table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals a. $1,200. b. $2,200. c. $1,600. d. $1,400.
a. $1,200 GDP= C+I+G+(exports-imports) 800+200+300+(100-200)= $1200
Which of the following would be a consequence of substitution bias in the CPI? a. Judges would award child support payments that would not adequately keep up with the true cost of inflation. b. Businesses would over-compensate employees for inflation when giving cost of living raises. c. Social Security payments would not adequately compensate retired workers for inflation. d. The inflation rate based on the CPI would under-estimate the true level of inflation.
b. Businesses would over-compensate employees for inflation when giving cost of living raises.
Which of the following goods is directly counted in GDP? a. the lettuce that Subway purchases for its sandwiches b. a 12 inch Subway sandwich purchased by a student c. the plastic bags that Subway purchases to wrap its sandwiches d. the bread that Subway purchases for its sandwiches
b. a 12 inch Subway sandwich purchased by a student
If an American firm opens a production facility in India, the total value of the production will be included in the a. net domestic product of the U.S. b. gross domestic product of India. c. gross domestic product of the U.S. d. consumption of fixed capital for India.
b. gross domestic product of India.
During the Great Depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment a. increased the natural rate of unemployment. b. had no effect on the natural rate of unemployment. c. decreased the natural rate of unemployment. d. could have increased or decreased the natural rate of unemployment.
b. had no effect on the natural rate of unemployment.
Which of the following is not an example of a transfer payment? a. social security payments to retirees b. health insurance payments to an army private c. unemployment insurance payments d. social security payments to disabled persons
b. health insurance payments to an army private
A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will a. decrease GDP and increase well-being in the economy. b. increase GDP and decrease well-being in the economy. c. decrease GDP and decrease well-being in the economy. d. increase GDP and increase well-being in the economy.
b. increase GDP and decrease well-being in the economy.
In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations? a. new product bias b. increase in quality bias c. outlet bias d. substitution bias
b. increase in quality bias
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would a. increase the measured unemployment rate. b. increase the measured labor force participation rate. c. decrease the number of persons in the labor force. d. decrease the number of persons in the working-age population.
b. increase the measured labor force participation rate.
The size of the underground economy would tend to increase if the government of a country a. legalized drugs. b. increased income tax rates. c. legalized prostitution. d. decreased government regulations on businesses.
b. increased income tax rates.
The unemployment rate hit a 50-year low in September 2019, falling to 3.5%, and an unemployment measure that includes discouraged workers and the underemployed also dropped to its lowest level in nearly 19 years. This same month, the jobless rate for Asians fell to 2.5%, and the unemployment rate for Hispanics and African Americans was the lowest ever. While the unemployment rate fell, the labor force participation rate remained steady at 63.2%. Job growth, however, remained lower than in 2018, with new job openings skewing toward full-time positions rather than part-time positions. Refer to the Article Summary. If, as is stated in the article summary, the unemployment rate fell and the labor force participation rate remained unchanged, then the employment-population ratio a. remained the same. b. increased. c. decreased. d. More information is needed to answer the question.
b. increased.
Discouraged workers are classified by the BLS as a. unemployed. b. not in the labor force. c. employed. d. part-time employees.
b. not in the labor force.
Suppose the labor force stays constant, and the working population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will a. decrease. b. remain constant. c. not change in way that can be predicted. d. increase.
b. remain constant.
A lumberjack loses his job because timber cutting restrictions are imposed by the EPA to protect the spotted owl habitat. This lumberjack would be a. seasonally unemployed. b. structurally unemployed. c. frictionally unemployed. d. cyclically unemployed.
b. structurally unemployed.
If the federal government implements programs so that the unemployed are more quickly matched with jobs, then a. the natural rate of unemployment could either increase or decrease. b. the natural rate of unemployment will decrease. c. the natural rate of unemployment will increase. d. the natural rate of unemployment will not change.
b. the natural rate of unemployment will decrease.
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job, a. the working−age population increased. b. the unemployment rate increased. c. the unemployment rate decreased. d. the labor force participation rate decreased.
b. the unemployment rate increased.
If the number of unemployed workers is 19 million, the number in the working−age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force? a. 1 million b. 20 million c. 475 million d. 481 million
c. 475 million LF= 19/.04= 475
If the number of unemployed workers is 19 million, the number in the working−age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate? a. 4.75% b. 7.8% c. 95% d. 96.2%
c. 95% LF= 19/.04= 475 LFPR= LF/PW 475/500= 95%
A country in which a significant fraction of domestic production takes place in foreign owned factories and facilities is most likely a country where a. GDP is not comparable to GDP. b. GNP is much larger than GDP. c. GDP is much larger than GNP. d. GDP is equal to GNP.
c. GDP is much larger than GNP.
What impact would including members of the military in employment, labor force, and working-age population statistics have on the unemployment rate and the labor force participation rate? a. Including members of the military would increase the unemployment rate and reduce the labor force participation rate. b. Including the military would reduce both the unemployment rate and the labor force participation rate. c. Including members of the military would reduce the unemployment rate and increase the labor force participation rate. d. Including the military would increase both the unemployment rate and the labor force participation rate.
c. Including members of the military would reduce the unemployment rate and increase the labor force participation rate.
Which of the following is an example of a worker experiencing cyclical unemployment? a. a worker who changes jobs to move closer to her family b. a lifeguard who was hired during the summer season is laid off after summer is over c. a freightliner employee that got laid off because of the recession of 2007−2009 d. an assembly line worker who loses his job because of automation
c. a freightliner employee that got laid off because of the recession of 2007−2009
An example of business fixed investment spending is a. $200 million of unsold cars at a car dealership. b. a purchase of a bond by General Electric Corporation. c. a purchase of a computer by an accounting firm. d. a purchase of a home by a household.
c. a purchase of a computer by an accounting firm.
Investment, as defined by economists, would not include which of the following? Ford a. builds another assembly plant in the United States. b. adds 1,000 new cars to inventories. c. buys U.S. government bonds. d. buys a new robotic machine (from a plant in Ohio) to assemble cars.
c. buys U.S. government bonds.
Which of the following price indices comes closest to measuring the cost of living of the typical household? a. GDP deflator b. household price index c. consumer price index d. producer price index
c. consumer price index
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would a. increase. b. equal 20%. c. decrease. d. remain the same.
c. decrease. (120-100/100)= 20% (140-120/120)= 16% *it decreased from 20% to 16%*
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness? a. people employed in the underground economy b. unemployed persons falsely report themselves to be actively looking for a job c. discouraged workers d. inflation
c. discouraged workers
The Bureau of Labor Statistics would categorize a person as _________ if they were temporarily away from their job because they were ill. a. a discouraged worker b. unemployed c. employed d. out of the labor force
c. employed
A student who just graduated from college but has not found a job would most likely be a. structurally unemployed. b. cyclically unemployed. c. frictionally unemployed. d. seasonally unemployed.
c. frictionally unemployed.
The output of U.S. citizens who work in Canada would be included in the a. gross national product of Canada and the gross national product of the United States. b. gross domestic product of the United States. c. gross domestic product of Canada. d. gross national product of Canada.
c. gross domestic product of Canada.
The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index. Which of the following is not one of the steps taken to reduce the bias? a. using statistical methods to reduce the size of the quality bias b. updating the market basket every two years, rather than every 10 years c. incorporating substitutions by consumers when prices of specific products rise rapidly d. conducting a point−of−purchase survey to track where consumers actually make their purchases
c. incorporating substitutions by consumers when prices of specific products rise rapidly
Gross national product (GNP) of the United States is the market value of all final goods and services a. consumed by residents of the United States anywhere in the world. b. consumed within the United States. c. produced by residents of the United States anywhere in the world. d. produced within the United States.
c. produced by residents of the United States anywhere in the world.
Emma is a road construction worker. During the winter months, Emma finds it more difficult to get work. The unemployment Emma experiences in the winter is a. functional. b. cyclical. c. seasonal. d. structural.
c. seasonal.
When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called a. increase in quality bias. b. outlet bias. c. substitution bias. d. discrimination bias.
c. substitution bias.
Frictional unemployment is the result of a. a slowdown in the economy. b. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. c. the search process of matching workers with jobs. d. the ups and downs in inflation.
c. the search process of matching workers with jobs.
Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals Product. Quantity. Price Sweatshirts. 50. $35 Dental examinations 40. 75 Coffee drinks. 1,000. 4 Coffee beans. 2,000. 0.50 a. 3,090 units. b. $7,250. c. $8,750. d. $9,750.
c. $8,750. 50(35) + 40(75) + 1000(4) = 8,750 *coffee beans are used in production of the coffee drinks, don't include in the calculations)
Total Population. 20,000 Working−Age Population. 15,000 Employment. 1,000 Unemployment. 100 Consider the data in the table above for a simple economy. The labor force participation rate for this simple economy equals a. 1,100/20,000 x 100 b. 1,000/15,000 x 100 c. 1,000/1,100 x 100 d. 1,100/15,000 x 100
d. 1,100/15,000 x 100
Total Population. 20,000 Working−Age Population. 15,000 Employment. 1,000 Unemployment. 100 Consider the data in the table above for a simple economy. The unemployment rate for this simple economy equals a. 100/15,000 x 100 b. 100/1,000 x 100 c. 100/20,000 x 100 d. 100/1,100 x 100
d. 100/1,100 x 100
Assume the market basket for the consumer price index has two products—bread and milk—with the following values in 2013 and 2020 for price and quantity: Product: Quantity Base Year (2013) 2020 Price: Price Milk. 50. $1.20. $1.50 Bread. 100. 1.00. 1.10 The Consumer Price Index for 2020 equals a. 85 b. 86 c. 118 d. 116
d. 116 CPI= (cost of basket in current/cost of basket in base)* 100 2013: 1.20(50)+1.00(100)= 160 2020: 1.50(50)+1.10(100)= 185 CPI= (185/160)*100= 115.6= 116
If the number of employed is 190 million, the number of unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is a. 4%. b. 5.2%. c. 60%. d. 80%.
d. 80% LFPR= labor force/potential workers Labor force= employed+unemployed 190+10= 200 LFPR= 200/250= 0.8= 80%
Which of the following is an example of a worker experiencing frictional unemployment? a. An employee is laid off because the economy is suffering a recession. b. A United Airlines pilot loses her job because of lack of demand for air travel. c. A computer programmer loses her job because it is outsourced to India. d. A worker quits his job at the U.S. Post Office to find more interesting work.
d. A worker quits his job at the U.S. Post Office to find more interesting work.
The nominal GDP of the United States in 2019 was approximately $21.7 trillion. This means that a. total income in 2019 was around $21.7 trillion. b. the value of output in 2019 was around $21.7 trillion. c. total spending in 2019 was around $21.7 trillion. d. All of the above are true.
d. All of the above are true.
Which of the following is true about the consumer price index? a. It accounts for people switching to goods whose prices have fallen. b. It frequently updates the price changes of new products added to the market basket, as these have a tendency to fall. c. It filters out the part of price increases that occurs because of quality improvements in products. d. It assumes that consumers purchase the same amount of each product in the market basket each month.
d. It assumes that consumers purchase the same amount of each product in the market basket each month.
Sarah is a full−time student who is not looking for work. What kind of unemployment is Sarah experiencing? a. structural b. cyclical c. frictional d. Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.
d. Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.
Which of the following could cause nominal GDP to decrease next year, but real GDP to increase? a. The price level rises and the quantity of final goods and services produced rises. b. The price level rises and the quantity of final goods and services produced falls. c. The price level falls and the quantity of final goods and services produced falls. d. The price level falls and the quantity of final goods and services produced rises.
d. The price level falls and the quantity of final goods and services produced rises.
Which of the following could cause nominal GDP to increase next year, but real GDP to decrease? a. The price level falls and the quantity of final goods and services produced rises. b. The price level rises and the quantity of final goods and services produced rises. c. The price level falls and the quantity of final goods and services produced falls. d. The price level rises and the quantity of final goods and services produced falls.
d. The price level rises and the quantity of final goods and services produced falls.
When an economy is at its natural rate of unemployment, which of the following will be true? a. Only structural unemployment as a result of technological change will exist in the economy. b. The labor force participation rate will be 100%. c. The unemployment rate will be 0%. d. The unemployment rate will be greater than 0%.
d. The unemployment rate will be greater than 0%.
The purchase by a household in China of an automobile produced in the United States is included in a. U.S. consumption expenditures. b. U.S. investment expenditures. c. U.S. government purchases. d. U.S. net exports.
d. U.S. net exports.
Which of the following would reduce the labor force participation rate, all else equal? a. a decrease in the unemployment rate b. an increase in the number of people in the labor force c. an increase in the unemployment rate d. an increase in the working−age population
d. an increase in the working−age population
The consumer price index is the a. cost of a market basket of goods and services typically consumed in the current period. b. average of the prices of new final goods and services produced in the economy over a period of time. c. cost of a market basket of goods and services typically consumed in the base year. d. average of the prices of the goods and services purchased by a typical urban family of four.
d. average of the prices of the goods and services purchased by a typical urban family of four.
If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then a. changes in the CPI are unrelated to the true rate of inflation. b. changes in the CPI accurately reflect the true rate of inflation. c. changes in the CPI understate the true rate of inflation. d. changes in the CPI overstate the true rate of inflation.
d. changes in the CPI overstate the true rate of inflation.
Investment, as defined by economists, would include the purchase of a a. government bond. b. corporate bond. c. share of stock in ExxonMobil. d. computer by an accounting firm.
d. computer by an accounting firm.
Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ________ unemployment in the near future. a. structural b. permanent c. cyclical d. frictional
d. frictional
The unemployment rate equals the number of unemployed divided by the ________ , all times 100. a. total population b. number of employed c. working−age population d. labor force
d. labor force
The "new product bias" in the consumer price index refers to the idea that a. consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. b. consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. c. consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. d. new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.
d. new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.
Real GDP will increase a. only if the price level falls. b. only if the price level rises. c. if either the price level rises or the quantity of final goods and services produced rises. d. only if the quantity of final goods and services produced rises.
d. only if the quantity of final goods and services produced rises.
If real GDP in 2022 (using 2021 prices) is lower than nominal GDP of 2021, then a. nominal GDP in 2022 equals nominal GDP in 2021. b. real GDP in 2022 is larger than real GDP in 2021. c. prices in 2022 are higher than prices in 2021. d. output in 2022 is lower than output in 2021.
d. output in 2022 is lower than output in 2021.
Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause a. the number of discouraged workers to increase. b. no change in the unemployment rate. c. the unemployment rate to decrease. d. the labor force participation rate to decrease.
d. the labor force participation rate to decrease.
All else equal, if technological change results in a permanent increase in structural unemployment, then which of the following would also increase? a. cyclical unemployment b. seasonal unemployment c. frictional unemployment d. the natural rate of unemployment
d. the natural rate of unemployment
Gross domestic product understates the total production of final goods and services because of the omission of a. exports. b. inflation. c. intermediate goods. d. the underground economy.
d. the underground economy.
Suppose in 2020, you purchased a house built in 2014. Which of the following would be included in the gross domestic product for 2020? a. the value of the house in 2020 minus depreciation b. the value of the house in 2014 c. the value of the house in 2020 d. the value of the services of the real estate agent
d. the value of the services of the real estate agent
In 2020, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2020 and unsold cars and trucks were valued at $900,000 on December 31, 2020. What is Kendall Ford's total investment spending in 2020? a. $22,000 b. $1,022,000 c. $322,000 d. $522,000
d. $522,000 Dealership Cost + Repair Expenses+ Closing Stock (Unsold cars and trucks were valued on December 31, 2013) -Opening Cost (Unsold cars and trucks were valued at on January 1, 2013) ($20,000+$2000+$900,000-$400,000= 522,000)
The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ______ quality increases. This causes the CPI to ______ the cost of the market basket. a. not; overstate b. also; overstate c. not; understate d. also; understate
a. not; overstate
During a business cycle expansion, total production ________ and total employment ___________. a. decreases; increases b. increases; increases c. increases; decreases d. decreases; decreases
b. increases; increases
The substitution bias in the consumer price index refers to the idea that consumers ______ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket. a. do not change; under−estimates b. do not change; over−estimates c. change; over−estimates d. change; under−estimates
c. change; over−estimates
