Econ 102 exam 2

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2014 is the base year, real GDP in 2014 was:

$445.

(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What is the value of GDP in this economy?

$500

Anna recently moved to Boston with her husband Joe, who has a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is:

) frictionally unemployed.

(Table: The Consumer Price Index (CPI)) Use Table: The Consumer Price Index (CPI). The inflation rate between 2011 and 2012 was _____%.

1.4

. In 2017, 10 million people did not have a job but were actively looking for employment, and 85 million people had either a full-time or a part-time job. The unemployment rate in 2017 was _____%.

10.5

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. The growth rate of nominal GDP from 2013 to 2014 was _____%.

11.25

(Figure: The Labor Market) Use Figure: The Labor Market. What is the size of the labor force at an efficiency wage of $16?

110,000

(Table: The Consumer Price Index (CPI)) Use Table: The Consumer Price Index (CPI). The consumer price index in 2009 was 212.2. In 2010, it was 216.7. What was the rate of inflation from 2009 to 2010?

2.1%

A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%.

20

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. The growth of nominal GDP from 2013 to 2014 was due to approximately a _____% increase in prices and approximately a _____% increase in aggregate output.

6.25; 5

(Table: CPI) Use Table: CPI. Suppose only bread, laptops, and movies are produced in this economy. Calculate the consumer price index of 2012, using 2008 as the base year.

75.8

. (Figure: The Labor Market) Use Figure: The Labor Market. What will be the level of employment if firms decide to pay an efficiency wage of $16?

80,000

. (Table: Employment Data) Use Table: Employment Data. If marginally attached workers are included in the labor force and in the unemployment rate, the unemployment rate is _____%.

9.1

Unemployment rates are usually HIGHEST for

African American teenagers

Suppose that roughly 8 million people in the United States were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the official unemployment rate this month, all other things unchanged?

It will fall because 2 million people are not in the labor force this month and are not counted as unemployed.

Which statement about the producer price index is TRUE?

The producer price index measures the cost of a basket of goods typically purchased by producers

(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decre

a decrease in the nominal GDP

. The Bureau of Labor Statistics calls a person who is out of work, would like to work, but has given up looking for work:

a discouraged worker

The total of the values added at every stage of production for a good leads to the

final value of the good

Structural unemployment CANNOT be caused by:

fluctuations in the business cycle.

People who are changing jobs are counted in _____ unemployment

frictional

Unit-of-account costs refer to the

loss of the reliability of money as a relative unit of measurement

An increase in the value of nominal GDP over time:

may be due to an increase in prices, in the production of goods and services, or both.

When hyperinflation forces Pedro to change the price stickers on the books in his bookstore very frequently to keep up with the aggregate price level, economists say that Pedro has a

menu cost

The GDP deflator for a given year is 100 times _____ GDP for that year _____ GDP for that year

nominal; divided by real

You are a college student and NOT working or looking for work. You are

not part of the labor force.

The labor force is the total

number of people who are employed or unemployed.

Which example is NOT a government transfer?

payments by the Defense Department for a new weapons system

Investment spending is spending on

productive physical capital.

The inflation-adjusted measure of aggregate output typically used by economists is called:

real gross domestic product.

If money income remains the same while the average price level doubles:

real income will fall.

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 work. 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:

rises to 33.3

Which item would NOT be included in this year's GDP?

the purchase of your neighbor's house, which was built in 1994

In a market basket of goods

the quantities stay constant and the prices may change

Which definition BEST describes GDP?

the total value of all final goods and services produced in the economy during a given year

Structural unemployment consists of people who are unemployed because of:

there being more job hunters than there are jobs.

Jim has a part-time job. He would prefer to have a full-time job but has been unable to find one. Jim is classified as:

underemployed.

A recent college graduate with a major in economics attends a job fair but has not yet found a job. This graduate is counted as a _____ unemployed worker.

frictionally

During a recession

unemployment increases and the growth rate of real GDP decreases

Most households derive the bulk of their income from

wages

If deflation occurs and your income is fixed, your real income

will go up.

. Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment.

decrease in frictional

Deflation is a

decreasing aggregate price level.

(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The government has a budget:

deficit of $70.

The circular-flow diagram is important because it shows that the flow of money into each market or sector of the economy is _____ the flow of money coming out of that sector.

equal to

The natural rate of unemployment is:

equal to the sum of frictional and structural unemployment

The national accounts do NOT keep track of:

exchange rates.

If real GDP rises while nominal GDP falls, then prices on average have:

fallen.

(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. What is GDP?

$1,000

According to the information in Table: Calculating GDP, what is GDP?

$12,200

(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of funds into and out of financial markets is:

$300.

(Table: Employment Data) Use Table: Employment Data. The unemployment rate is _____%.

6.25

Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gasoline costs $1 per gallon. In 2011, textbooks cost $80 each and gasoline costs $3 per gallon. The USPI for 2011 is:

200

(Figure: The Labor Market) Use Figure: The Labor Market. What is the unemployment rate at an efficiency wage of $16, assuming all workers without a job are searching?

27%

. (Table: Employment Data) Use Table: Employment Data. The labor force is _____million.

32

(Table: Employment Data) Use Table: Employment Data. If marginally attached workers are included in the labor force, the labor force is _____ million.

33

Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is _____%.

4

. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Assuming that 2014 was the base year, the growth rate of real GDP from 2013 to 2014 was:

4.7%.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2013 is the base year, real GDP in 2014 was:

420

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Assuming 2013 was the base year, the growth rate of real GDP from 2013 to 2014 was _____%.

5

. If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:

5%

A country's GNP

B) is the total factor income earned by residents of a country.

The calculation of GDP does NOT include the value of:

Bridgestone tires purchased by Ford Motor Co.

The national income and product accounts are calculated by the

Bureau of Economic Analysis

Which statement regarding the consumer price index is FALSE?

CPI changes only in the base year, every five to seven years.

Which example is a LIKELY response to inflation?

People tend to make more transactions

Which transaction will be included in the official measurement of GDP?

Sean bought a new truck.

Which example illustrates consumption expenditure?

Stephanie bought a laptop for her brother.

Which statement is TRUE?

The labor force is the total number of people working plus those who are unemployed.

A binding minimum wage in a labor market is set _____ the equilibrium wage and causes a _____ of labor.

above; surplus

Choose the best answer. A price index:

always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in consumer spending, holding everything else constant, which outcome is likely to occur?

an increase in GDP

(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in consumer spending, holding everything else constant, which outcome is likely to occur?

an increase in the unemployment rate

To be counted as unemployed, one must

be out of work and be actively looking for a job.

The consumer price index reflects:

changes in the prices of goods and services typically purchased by consumers.

The _____ is MOST widely used to measure inflation in the United States.

consumer price index

During deflation, the

general price level falls

An example of structural unemployment is a(n):

geologist who is permanently laid off because of an increase in wages won by labor unions.

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's:

gross domestic product.

Unanticipated inflation:

helps borrowers and hurts lenders.

Between 1921 and 1923, Germany underwent

hyperinflation.

GDP counts the dollar value of only final goods and services because:

if we counted the value of all goods, we would count inputs, such as the value of steel in a new automobile, more than once.

Households do NOT derive income from

imports

Which factor causes an outflow of funds from a domestic economy?

imports

. Over the past year, Eli has been working very hard. His employer has taken notice and is giving Eli a 6% raise in salary. During this past year, overall prices in the economy have increased by 4%. Given this information, Eli's real wage has:

increased by 2%.

Shoe-leather costs are the:

increased cost of transactions due to inflation

Increases in the average level of prices are called:

inflation.

The major difference between the producer price index and the consumer price index is that the producer price index _____ and the consumer price index _____.

is based on the cost of a basket typically purchased by producers; is based on the cost of a basket typically purchased by consumers

Firms pay an efficiency wage because

it reduces the risk of losing the best workers.

. A bank makes a loan for one year. The nominal annual interest rate is 7.5%. The real rate is 4%. Over the course of the year, overall prices increase by 4%. This rate of inflation hurt the _____ because the actual rate of inflation was _____ than the anticipated rate.

lender; higher

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily has a:

shoe-leather cost.

The introduction of ATMs reduced the

shoe-leather costs of inflation

. Sam, who is 55 years old and has been a steelworker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is _____ unemployed.

structurally

Government borrowing is:

the amount of funds raised by government in financial markets

Which item would NOT be included in GDP?

the dollar value of a repair job done by your cousin on her own car

The Venezuela example illustrates

the importance of distinguishing between nominal and real GDP.

The circular-flow diagram illustrates

the key concepts in the national accounts.

The rate of unemployment when the economy is at full employment is:

the natural rate.

Which factor is a measure of changes in the cost of a market basket of raw commodities, such as steel, electricity, and coal?

the producer price index

Which factor is NOT included in investment spending in the national income accounts?

the purchase of stocks and bonds by a business