Econ Practice Exam 2
If nominal GDP is 10 trillion an the real GDP is 8 trillion then the GDP deflator is
125, and this indicates that the price level has increased by 25 percent since the base year
Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?
28.5 million
which of the following contains natural resources, human capital and physical capital?
For a restaurant: the land the restaurant was built on, the things the Chef learned at Cooking School, the freezers where the chops and steaks are kept.
The steps involved in calculating the consumer price index and the inflation rate, in order are
fix the basket find the prices compute the basket cost choose base year an compute the index compute inflation rate
From time to time, the demand for workers has risen in one region of the US and fallen in another. this illustrates
frictional unemployment created by sectoral shifts
Other things equal, the likelihood that a country will experience a relatively high level of income is greater if the country
has natural seaports
Goods that go into inventory and are not sold during the current period are
included in current period GDP as inventory investment
When the quality of a good improves while its price remains the same, the purchasing power of the dollar
increases ,so the CPI overstates the change in the cost of living if the quality change is not accounted for
In the long run, a higher savings rate
increases the level of productivity
Which of the following is not an explanation for the existence of structural unemployment?
job search
John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.
john is frictionally unemployed and curtis is structurally unemployed
In countries that experience political instability, standards of living tend to be low because of
lack of respect for property rights
If a reform of the tax laws encourages greater saving, the result would be the
lower interest rates and greater investment
If there is a surplus of loanable funds then
neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium
By not taking into consideration the possibility of consumer substitution, the CPI
overstates the cost of living
determining productivity
physical capital natural resources technological knowledge
You observe a closed economy that has a government deficit and positive investment. Which is correct
private saving is positive and public saving is negative
in the long run, an increase in the savings rate
raises the levels of both productivity and income
Cyclical unemployment
refers to the year to year fluctuation in unemployment around an economy's natural rate of unemployment
In the loanable funds model, an increase in investment tax credit would create a
shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate
An important difference between the GDP deflator and the consumer price index is that
the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers
If the price of italian shoes imported to the united states increases, then
the consumer price index will increase, but the GDP deflator will not increase
The inflation rate is
the percentage change in the price level from one period to another
Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also increased?
the total number of hours worked has stayed the same the total number of hours worked fell
GDP does not reflect
the value of leisure the value of goods and services produced at home the quality of the environment
what level does real GDP measure?
total real income
Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that
GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare
Suppose that after the last 25 years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 % and prices rose by 100%. What happen to real GDP per person?
It increased, but less than it doubled
Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain this?
The poor country has poorly developed property rights
A Minnesota farmer buys a new tractor made in Iowa by a German company, as a result
US investment and GDP increase, but german GDP is unaffected
Which of the following statements about real and nominal interest rates is correct?
When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate
Two of the economy's most important financial intermediaries are
banks and mutual fund
In the calculation of the CPI, coffee is given greater weight than tea if
consumers buy more coffee than tea
The consumption component of GDP includes spending on
durable goods, nondurable goods, and services
For an economy as a whole, income must equal expenditure because
every dollar of spending by some buyer is a dollar of income for some seller
Other things equal, relatively poor countries tend to grown
faster than relatively rich countries, this is called the catch up effect