ECON Quizlet Test 1

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:

$630.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2018 is the base year, real GDP in 2019 was:

$420.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2019 is the base year, real GDP in 2018 was:

$425.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Nominal GDP in 2019 was:

$445.

Assume that the real GDP of the United States is approximately $21 trillion and that the population of the United States is approximately 350 million. What is real GDP per capita?

$60,000

(Table: Per Capita GDP) Use Table: Per Capita GDP. Per capita nominal GDP in 2016 was:

$600.

If output is growing at 5% annually, how many years will it take for output to quadruple?

28 years

(Figure: Productivity) Use Figure: Productivity. An increase in physical capital per worker, with everything else remaining unchanged, is shown in the diagram as a movement from:

A to B.

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. An increase in physical capital per worker, with all other factors remaining unchanged, is BEST indicated by a move from:

A to B.

Which equation is correct?

GDP = C + I + G + X - IM

Which equation is CORRECT?

GDP = C + I + G + X - IM.

Real GDP is nominal GDP adjusted for:

changes in prices.

A laptop computer purchased by a private individual for personal use is:

consumer spending.

The national income and product accounts keep track of:

consumer spending.

(Figure: An Expanded Circular-Flow Diagram) Figure: An Expanded Circular-Flow Diagram. The government has a budget:

deficit of $70.

The aggregate production function exhibits _____ returns to _____ capital.

diminishing; physical

The idea that relatively poor nations should have higher rates of growth of real GDP per capita than relatively wealthy nations is known as the:

convergence hypothesis.

Consider an economy that produces only smartphones and laptops. If 10 smartphones are sold at $800 each, and 5 laptops are sold at $1,000 each, then nominal GDP is:

$13,000.

Suppose that real GDP per capita in the United States is $32,000, while its annual growth rate is 2%, and that real GDP per capita in China is $4,000, while its annual growth rate is 7%. According to the rule of 70, how large will China's real GDP per capita be in 20 years?

$16,000

Consider an economy that produces only smartphones and laptops. Last year, 10 smartphones were sold at $800 each, and 5 laptops were sold at $1,000 each, while this year, 15 smartphones were sold at $900 each, and 10 laptops were sold at $1,100 each. Real GDP this year, using last year as a base year, is:

$22,000.

In 2019, consumer spending was $15,000, investment spending was $4,000, and net exports were -$500. GDP in 2019 was $22,000, government purchases of goods and services were _____.

$3,500

In 2019, consumer spending was $14,000, government purchases of goods and services were $3,700, and net exports were -$500. If GDP in 2019 was $21,000, investment spending was _____.

$3,700

In 2019, consumer spending was $14,000, government purchases of goods and services were $3,700, and investment spending was $3,700. If GDP in 2019 was $21,000, exports were _____, and imports were _____.

$300; $700

(Table: Kenya's Economy in 2010) Use Table: Kenya's Economy in 2010. Aggregate output at the end of 2010, assuming there are no changes in the price level, was about:

$32,612 billion.

India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. In 14 years, the U.S.'s real GDP per capita will be approximately _____.

$71,000

(Table: Kenya's Economy in 2010) Use Table: Kenya's Economy in 2010. Aggregate output per capita at the end of 2010, assuming no changes in the price level, was:

$795.

(Table: Per Capita GDP) Use Table: Per Capita GDP. Per capita nominal GDP in 2019 was:

$800.

(Figure: An Expanded Circular-Flow Diagram) Figure: An Expanded Circular-Flow Diagram. What is the value of disposable income?

$870

(Figure: An Expanded Circular-Flow Diagram) Use Figure: An Expanded Circular-Flow Diagram. What is the value of net exports?

-$20

If the consumer price index is 160.6 for 2018 and 163.1 for 2019, what was the inflation rate between these two years?

1.56%

If the cost of a market basket is $2,000 in the base year and $2,100 in 2019, the price index for 2019 is:

105

(Table: GDP II) Use Table: GDP II. Calculate the GDP deflator for 2018.

111

If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is:

115

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2017, $140 in 2018, and $160 in 2019. Based on this information, and assuming 2017 is the base year, the price index in 2019 was:

123.07.

(Table: Kenya's Economy in 2010) Use Table: Kenya's Economy in 2010. During 2010, assuming there are no changes in the price level, aggregate output per capita in Kenya grew at a rate of:

2.6%.

(Table: The Consumer Price Index) Use Table: The Consumer Price Index. The approximate rate of inflation in year 5 is:

20%.

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2017, $140 in 2018, and $160 in 2019. Based on this information and considering 2017 as the base year, inflation from 2017 to 2019 was:

23.07%.

If the consumer price index is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:

25%.

An economy initially has 200 units of physical capital per worker. Each year, it increases the amount of physical capital by 10%. According to the aggregate production function, each 1% increase in physical capital per worker, holding human capital and technology constant, increases output per worker by 0.25%. In three years' time, what is the level of physical capital per worker?

266.2 units

(Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of real GDP from 2016 to 2019 was:

33%.

Suppose that real GDP per capita in the United States is $32,000, while its annual growth rate is 2%, and that real GDP per capita in China is $4,000, while its annual growth rate is 7%. How long will it take real GDP per capita in the United States to double?

35 years

In Techland, from 1990 to 2020, holding technology and human capital fixed, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that real GDP per worker actually increased from $40,000 to $320,000. Approximately how much of the annual growth rate of real GDP per capita was attributable to higher total factor productivity?

4.7%

(Table: Kenya's Economy in 2010) Use Table: Kenya's Economy in 2010. Kenya's population at the end of 2010 was about:

41 million.

India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. How long will it take India to double its real GDP per capita?

7.8 years

(Figure: Productivity) Use Figure: Productivity. An improvement in technology, with everything else remaining unchanged, is shown in the diagram as a movement from:

B to C.

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. A significant increase in human capital per worker, with all other factors remaining unchanged, is BEST indicated by a move from:

B to C.

The Smapple Corporation produced 24,000 smartphones in 2019. Only 4,000 smartphones remained unsold at the end of 2019. As a result:

all 24,000 smartphones will be included in GDP in 2011, 20,000 as consumption expenditure and 4,000 as investment expenditure.

Which of the following would shift the aggregate production function upward?

an improvement in technology

Which change will NOT increase the productivity of labor?

an increase in the size of the labor force

Investment in human capital causes _____ the aggregate production function.

an upward shift of

If real GDP grows at an average rate of 3% per year, it will double in _____ years.

approximately 23

Which government policy promotes economic growth?

building infrastructure and providing public goods

The LARGEST component of U.S. GDP is value added in:

business production.

Nominal GDP is:

current-dollar GDP.

Expenditure on domestically produced final goods and services is:

equal to GDP.

Domestically produced goods and services sold to people in other countries are known as:

exports.

In the circular-flow diagram, resources such as capital and labor are bought and sold in:

factor markets.

Goods produced in a particular period but NOT sold in that period:

go into inventories and are included in investment.

In the circular-flow diagram, a person or a group of people who share their income is a:

household.

According to the circular-flow diagram, which economic agents engage in consumer spending?

households

In the circular-flow diagram, goods and services are bought and sold in:

households.

When the government invests resources in a nation's educational system, it is investing in:

human capital.

Human capital refers to:

improvements in labor productivity made possible by education and knowledge.

Which factor is the MOST widely accepted measure of economic growth over time?

increases in real GDP per capita

According to the convergence hypothesis, differences in real GDP per capita among countries tend to narrow over time because countries that start with a _____ real GDP per capita tend to have _____ growth rates.

lower; higher

GDP is the sum of:

personal consumption, investment, government purchases of goods and services, and net exports.

The sources of funds for investment spending are:

savings by households, the government, and foreigners.

The MOST important driver of economic growth appears to be:

technological progress.

GDP is the:

total market value of all final goods and services produced in an economy in one year.

One factor that does NOT explain why the average worker in the United States today produces more output than the average worker a century ago is that the modern worker:

works longer hours.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2018 is the base year, real GDP in 2018 was:

$400.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Nominal GDP in 2018 was:

$400.

If real GDP doubles in 35 years, its average annual growth rate is approximately:

2%.