Econ 110 with al hambdi test 2
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2018, then the value of your grandfather's salary in 2018 dollars is approximately
$84775
Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?
GDP will decrease
To reduce the bias in the consumer price index, the Bureau of Labor Statistics
updates the market basket every two years, rather than every 10 years.
In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA
values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.
If an economy experiences deflation, the real interest rate
will be greater than the nominal interest rate
Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?
younger men are staying in school longer than in the past
Labor unions cause unemployment because the union contract wage is set
above the market wage causing a surplus of labor
Minimum wage laws cause unemployment because the legal minimum wage is set
above the market wage, causing labor demand to be less than labor supply
The labor force equals the number of people
employed plus unemployed
In the circular flow model, the value of total income for an economy ________ the value of total production.
equals
If Gladys sells her 2003 Jeep Cherokee for $3,500 in 2018, the sale of her car contributes $3,500 to 2018 GDP.
false
If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.
false
Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.
false
Nominal GDP measures the value of all final goods and services at base-year prices.
false
Paying efficiency wages are a way for a company to cut costs and become more efficient, and are therefore lower than market wages.
false
The inflation rate measures the average prices of goods and services in the economy.
false
The natural rate of unemployment consists of frictional unemployment plus cyclical unemployment.
false
To obtain real average hourly earnings, nominal average hourly earnings are multiplied by the CPI.
false
Transfer payments are subtracted from national income to get to personal income.
false
The output of Mexican citizens who work in Texas would be included in the
gross national product of Mexico
Nominal GDP will increase
if either the price level or the quantity of goods and services produced rises.
A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will
increase GDP and decrease well-being in the economy.
The cost to firms of changing prices
is called a menu cost
If the GDP deflator is less than 100, then for that year, nominal GDP ________ real GDP.
is less than
The United States has ________ social insurance programs, and generally has a ________ unemployment rate, as compared to Canada and Western Europe.
less generous; lower
capital
manufactured goods used to make other goods and services
The purchase by a household in China of a CD produced in the United States is included in U.S.
net exports
The stated interest rate on a loan is the
nominal interest rate
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as
not in the labor force
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.
not; overstate
Full employment is not considered to be zero unemployment, because
people do not find jobs instantaneously
If the CPI changes from 125 to 120 between 2017 and 2018, how did prices change between 2017 and 2018?
prices decrease by 4%
If the GDP deflator is 142, by how much have prices changed since the base year?
prices will increase by 42%
The producer price index measures the prices that firms
receive for the goods and services they use at all stages of production
If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.
risen; risen
A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket
rose 60% from the cost of the market basket in the base year.
People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering
structural unemployment
The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect
that stock prices are more likely to fall
potential gdp
the level of real GDP attained when all firms are producing at capacity
labor productivity
the quantity of goods and services that can be produced by one worker or by one hour of work
when deflation occurs
the real interest rate is greater than the nominal interest rate.
An example of an intermediate good would be
the rims on a new car
During the month of May, 10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result
the unemployment rate fell
Why might firms pay wages that are above the equilibrium wage in a market?
to increase the productivity of their workers
If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.
true
If inflation expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.
true
The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.
true
Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?
3 percent
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?
475 million
If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is
5%
Which of the following describes the accuracy of the Consumer Price Index?
Changes in the CPI overstate the true rate of inflation.
Which of the following would increase the unemployment rate?
an increase in unemployment insurance payments
When actual inflation is less than expected inflation
borrowers lose and lenders gain
Investment, as defined by economists, would include the purchase of a
computer by an accounting firm
Which of the following price indices comes closest to measuring the cost of living of the typical household?
consumer price index
The underground economy can be described as
economic activity that is hidden from the government to avoid taxes or because the activity is illegal.