ECON Unit 2 Paul
The consumer price index measures which of the following? A The change over time of the weighted prices of a particular group of goods and services B The change over time of the weighted wholesale price index C The change over time of the difference between the gross domestic product deflator and the wholesale price index D Inflation corrected for changes in the real gross domestic product E Inflation corrected for changes in the wholesale price index
A The change over time of the weighted prices of a particular group of goods and services
The circular flow model illustrates the equality of which of the following? A Total expenditure and total income B Savings and consumption C Total income and government spending D Total expenditure and wages E Exports and imports
A Total expenditure and total income
A nation's unemployment rate is the ratio of the number of unemployed seeking employment to the nation's A labor force B potential gross domestic product C number of employed D working-age population E total population
A labor force
Suppose that in a particular country, nominal gross domestic product (GDP) grew by 8 percent, and the GDP deflator increased by 10 percent. The country's growth rate of real GDP would be approximately equal to A —2% B —0.8% C 0.8% D 2% E 18%
A —2%
Which of the following is an example of frictional unemployment? A A person quits a job to search for another job. B A person lacks the skills to fill any of the available jobs. C A person loses a job because of a recession. D A person retires from the workforce. E An unemployed person stops looking for a job.
A A person quits a job to search for another job.
Which of the following types of unemployment is caused by a recession? A Hidden B Frictional C Seasonal D Structural E Cyclical
E Cyclical
Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation is $500 billion. Disposable income is equal to which of the following? A $1,500 billion B $2,000 billion C $2,500 billion D $3,000 billion E There is not enough information to answer the question.
C $2,500 billion
Labor Market Data for Country X (in millions of persons) Population: 180 Employment: 94 Unemployment: 6 Not in labor force: 80 Based on the information in the table above, what is the unemployment rate for Country X? A 3.3% B 4.0% C 6.0% D 6.38% E 7.5%
C 6.0%
The real value of the United States dollar is determined by A federal regulations regarding purchasing power B the value of the gold backing the dollar C the goods and services it will buy D the money multiplier E the marginal propensity to consume
C the goods and services it will buy
Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that A each person's real income is cut in half B consumer incomes are doubled C the prices in an average consumer's market basket are doubled D all consumer goods prices are doubled E all prices in the economy are doubled
C the prices in an average consumer's market basket are doubled
The table below shows labor market statistics for a nation. Number of Workers Structurally Unemployed: 3 million Number of Workers Cyclically Unemployed: 4 million Number of Workers Frictionally Unemployed: 2 million Number of Workers Officially Classified as Employed: 91 million Working-age Population: 150 million What is the nation's unemployment rate? A 4% B 5% C 6% D 9% E 66.7%
D 9%
Which of the following will happen if the actual inflation rate is greater than the expected inflation rate? A Lenders of fixed interest rate loans will be better off. B Lenders of variable interest rate loans will be worse off. C Borrowers of fixed interest rate loans will be worse off. D Borrowers of fixed interest rate loans will be better off. E Borrowers of variable interest rate loans will be better off.
D Borrowers of fixed interest rate loans will be better off.
If unemployed workers become discouraged and give up trying to find work, the number of workers employed and the unemployment rate would change in which of the following ways? A Number of Workers Employed: Decrease Unemployment Rate: Decrease B Number of Workers Employed: Decrease Unemployment Rate: Increase C Number of Workers Employed: Decrease Unemployment Rate: No change D Number of Workers Employed: No change Unemployment Rate: Decrease E Number of Workers Employed: No change Unemployment Rate: Increase
D Number of Workers Employed: No change Unemployment Rate: Decrease
Which of the following is an example of how the consumer price index (CPI) exhibits bias in its estimates of changes in the cost of living? A Energy prices have a higher impact on inflation than other input costs do. B New products are always overrepresented in the CPI. C The CPI assigns greater weight to measures of welfare than it does to economic activity. D Product improvements are not always fully reflected in the calculation of the CPI. E The CPI adjusts for the substitution of less expensive goods by consumers.
D Product improvements are not always fully reflected in the calculation of the CPI.
As a measure of economic performance, GDP accounts for which of the following? A Used books donated to a local library B Depletion of durable consumer goods C Increased leisure time D Souvenir gifts purchased by tourists domestically E Cash transactions in the underground economy
D Souvenir gifts purchased by tourists domestically
Period: realGDP: nominal GDP: 1 100 billion 70 billion 2 120 billion 120 billion 3 130 billion 150 billion Which of the following can be concluded from the data above? A The base year for the price index was year 1. B The base year for the price index was year 3. C The economy was producing higher-quality goods and services in years 2 and 3 than in year 1. D The economy was experiencing inflation during years 2 and 3. E The economy was experiencing deflation during years 1, 2, and 3.
D The economy was experiencing inflation during years 2 and 3.
Unexpected increases in inventories usually precede A increases in inflation B increases in imports C stagflation D decreases in production E decreases in unemployment
D decreases in production
People who have given up looking for jobs are classified as A cyclically unemployed B frictionally unemployed C structurally unemployed D discouraged workers E underemployed workers
D discouraged workers
The measured unemployment rate is often criticized for understating the level of joblessness because A individuals working in the underground economy are counted as employed B individuals working more than one job are counted more than once C discouraged workers are counted as unemployed D discouraged workers are not counted in the labor force E part-time workers are counted as unemployed
D discouraged workers are not counted in the labor force
As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in A the production of military goods B the production of antipollution devices C crime prevention services D household production E legal services
D household production
The official unemployment rate is not an accurate indicator of actual unemployment in the economy because A structural unemployment is greater than cyclical unemployment at the going wage rate B full employment is greater than natural unemployment C the unemployment rate is less than natural unemployment D the official rate does not include persons who have given up looking for work E the official rate does not reflect the number of people receiving unemployment compensation
D the official rate does not include persons who have given up looking for work
(ANNUAL CPI TABLE) The table above shows the consumer price index for selected years. On the basis of these data, how much did it cost in 1995 to buy the same goods and services that cost $50 in 1929 ? A $25 B $100 C $125 D $250 E $300
E $300
Suppose that a typical consumer buys the following quantities of three commodities in 1993 and 1994.Which of the following can be concluded about the consumer price index (CPI) for this individual from 1993 to 1994 ? A It remained unchanged. B It decreased by 25%. C It decreased by 20%. D It increased by 20%. E It increased by 25%.
E It increased by 25%.
An increase in the number of which of the following will lead to an increase in the unemployment rate? A Discouraged workers B Business start-ups C Self-employed persons D Persons working 30 instead of 40 hours per week E Persons quitting part-time jobs to look for full-time ones
E Persons quitting part-time jobs to look for full-time ones
If a nation's actual real GDP is less than potential real GDP, which of the following must be true? A The economy is in expansion B The economy is in recession. C There is no cyclical unemployment. D There is no frictional unemployment. E The actual rate of unemployment exceeds the natural rate of unemployment.
E The actual rate of unemployment exceeds the natural rate of unemployment.
Which of the following best describes an economy at full employment? A The rate of unemployment is zero. B There is only structural and cyclical unemployment. C There is only cyclical unemployment. D There is cyclical, but not structural, unemployment. E There is frictional, but not cyclical, unemployment.
E There is frictional, but not cyclical, unemployment.
The consumer price index (CPI) is designed to measure changes in the A spending patterns of urban consumers only B spending patterns of all consumers C wholesale price of manufactured goods D prices of all goods and services produced in an economy E cost of a select market basket of goods and services
E cost of a select market basket of goods and services
According to the business cycle represented in the diagram above, the actual rate of unemployment equals the natural rate of unemployment when the economy is A in expansion B in contraction C at the peak D at the trough E on the potential line
E on the potential line
A country's real gross domestic product is the annual value of all final goods and services that are A purchased in that country, adjusted for changes in the price level B produced in that country, expressed in current prices C produced in that country, less exports D produced in that country, less depreciation E produced in that country, adjusted for changes in the price level
E produced in that country, adjusted for changes in the price level
If the nominal gross domestic product (GDP) of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007 A both the price level and the real GDP have increased B neither the price level nor the real GDP has increased C the price level increased by a larger percentage than did the real GDP D the price level increased by a smaller percentage than did the real GDP E the price level and/or the real GDP has increased
E the price level and/or the real GDP has increased
In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was A $150 billion B $100 billion C $50 billion D $25 billion E $4 billion
D $25 billion
A country's infrastructure refers to its A natural resources B private financial institutions C proportion of population with postsecondary education D public capital goods such as highways E internal, as opposed to external, debt
D public capital goods such as highways
The natural rate of unemployment is the unemployment rate when A all workers seeking employment have taken jobs B all the unemployed are only structurally unemployed C there is no frictional unemployment D there is no cyclical unemployment E there are no new unemployed individuals
D there is no cyclical unemployment
An increase in the labor force participation rate will A increase investment and decrease savings B increase savings and decrease investment C have no effect on unemployment D make it easier to reduce unemployment E make it more difficult to reduce unemployment
E make it more difficult to reduce unemployment
The table below shows a country's macroeconomic data in 2013. Consumption spending: 175 billion Individual income taxes: 32 billion Private investment spending: 30 billion Corporate taxes: 25 billion Exports: 75 billion Government purchases: 40 billion Imports: 100 billion The country's gross domestic product is A $220 billion B $282 billion C $304 billion D $309 billion E $347 billion
A $220 billion
Melanie quits her job to look for a better one that has opportunity for advancement. Melanie will be classified in which category of unemployment? A Frictional B Hidden C Seasonal D Structural E Cyclical
A Frictional
In the measurement of gross domestic product, investment includes spending by A businesses on capital goods and changes in inventories B businesses on stocks, bonds, and other financial assets C individual households on stocks, bonds, and other financial assets D the federal government to purchase bonds issued by the Federal Reserve E the Federal Reserve to buy government bonds
A businesses on capital goods and changes in inventories
An increase in the number of discouraged workers causes the unemployment rate to A decrease along with the labor-force participation rate B increase while the labor-force participation rate decreases C stay the same because the workers are still unemployed D decrease while the labor-force participation rate stays the same E increase along with the labor-force participation rate
A decrease along with the labor-force participation rate
The consumer price index (CPI) does not measure the true cost of inflation because A improvements in the quality of goods or services are not fully reflected B lenders are better off when actual inflation is less than anticipated inflation C borrowers are better off when actual inflation is greater than anticipated inflation D changes in consumers' real income are not accounted for E consumers may substitute toward more expensive goods without being significantly worse off
A improvements in the quality of goods or services are not fully reflected
Frictional unemployment occurs when which of the following happens? A A worker is replaced by robots on factory assembly lines. B A worker voluntarily quits a job to search for a better one. C A worker is laid off because of a downturn in economic activity. D A worker undergoes on-the-job training. E A worker switches from working full-time to part-time.
B A worker voluntarily quits a job to search for a better one.
An increase in inventories will increase which component of gross domestic product? A Personal consumption expenditures B Investment expenditures C Government purchases D Exports E Imports
B Investment expenditures
Which of the following is true about the real GDP? A It measures aggregate output using current prices. B It measures aggregate output using constant prices. C It is greater than nominal GDP when the GDP deflator is greater than 100. D It is equal to nominal GDP multiplied by the GDP deflator. E It is equal to the GDP deflator divided by nominal GDP.
B It measures aggregate output using constant prices.
GDP does NOT account for which of the following? A The value added by all firms in the economy B The depletion of natural resources C Wages, rent, profit, and interest payments D The value of final goods and services produced domestically E Imports from foreign countries
B The depletion of natural resources
If real gross domestic product is increasing at 3 percent per year and nominal gross domestic product is increasing at 7 percent per year, which of the following is necessarily true? A Unemployment is increasing. B The price level is increasing. C Exports exceed imports. D The economy is in a recession. E The government is running a budget deficit.
B The price level is increasing.
A lender will realize unexpected benefit when the A actual inflation rate is higher than the anticipated inflation rate B actual inflation rate is lower than the anticipated inflation rate C rate of interest is greater than the actual rate of inflation D rate of interest is less than the actual rate of inflation E rate of interest equals the actual rate of inflation
B actual inflation rate is lower than the anticipated inflation rate
The circular-flow model indicates that final goods are produced by A firms and sold in the factor markets B firms and sold in the product markets C firms and sold in the resource markets D households and sold in the factor markets E households and sold in the product markets
B firms and sold in the product markets
The official unemployment rate understates the unemployment level in the economy because the official unemployment rate A ignores the duration of unemployment B ignores underemployed and discouraged workers C includes jobs created by the underground economy D excludes all unemployed teenagers E excludes frictionally unemployed workers
B ignores underemployed and discouraged workers
Olivia volunteers full time at an animal shelter and will not accept any offers for a paid job for the next six months. Olivia is A cyclically unemployed B not in the labor force C employed D structurally unemployed E a seasonal worker
B not in the labor force
Based on the economic figures in the table above, what is the value of gross domestic product, in billions of dollars? A $4,500 B $4,700 C $4,900 D $5,150 E $5,950
A $4,500
Gross private domestic investment includes which of the following? A Changes in business inventories B National defense spending C New durable goods purchased by households D Transfer payments E Depreciation of government goods
A Changes in business inventories
Which type of unemployment would increase if workers lost their jobs because of a recession? A Cyclical B Frictional C Seasonal D Search E Structural
A Cyclical
Which of the following statements about the simple circular flow model of a market economy is correct? A Households are on the demand side of the product market and the supply side of the resource market. B Business firms are on the supply side of both the product market and the resource market. C Households receive income in the form of wages, and business firms receive income in the form of investment. D Exports and investment expenditures are examples of leakage from the circular flow, whereas imports and savings are injections. E Circular flow models are used primarily to explain why money is necessary in any economic system.
A Households are on the demand side of the product market and the supply side of the resource market.
The unemployment rate measures the percentage of A people in the labor force who do not have jobs B people in the labor force who have a part-time job but are looking for a full-time job C people who do not have jobs and have given up looking for work D people in the adult population who do not have jobs E people in the adult population who have temporary jobs
A people in the labor force who do not have jobs
Which of the following groups of people would benefit from unanticipated inflation? I. Savers II. Borrowers III. Lenders A I only B II only C III only D I and II only E I and III only
B II only
Which of the following necessarily occurs during an economic recession? A Cost-push inflation decreases. B Real gross domestic product decreases. C Cyclical unemployment decreases. D Demand-pull inflation increases. E Nominal wages increase.
B Real gross domestic product decreases.
As an indicator of an impending recession, inventories will most likely A decrease as a result of a decrease in consumption B increase as a result of a decrease in consumption C increase as a result of a decrease in aggregate supply D decrease as a result of an increase in aggregate supply E remain constant as a result of economic uncertainty
B increase as a result of a decrease in consumption
In 2016 the nominal GDP for Country X was $330 billion and the GDP deflator was 110. The real GDP for 2016 was A $110 billion B $220 billion C $300 billion D $330 billion E $440 billion
C $300 billion
Total Population: 300 Working age population: 200 Unemployed: 10 Employed: 90 The table above gives population and labor-market data for an economy. The unemployment rate in this economy is A 3.3% B 5% C 10% D 33.3% E 50%
C 10%
The value of which of the following would be included in the United States gross domestic product? A Time spent volunteering at a local hospital B A United States savings bond received as a birthday gift C A movie ticket purchased at a local theater D A new handbag made in Italy by a United States firm E A used car sold at the same price paid for it
C A movie ticket purchased at a local theater
Which of the following is most likely included in gross domestic product? A Matt gives his secondhand bicycle to his brother. B Sal paints his own bicycle. C Ali buys a new bicycle. D Mike buys a share of stock in a bicycle firm. E Daniel bikes to school every day.
C Ali buys a new bicycle.
Which of the following means of reducing military spending would have the greatest positive impact on gross domestic product for the United States? A Combining two domestic military bases into one overseas base B Cutting retirement benefits to military personnel C Closing overseas military bases and relocating those operations to the United States D Closing overseas military bases and laying off military personnel E Canceling contracts with domestic producers for new airplanes
C Closing overseas military bases and relocating those operations to the United States
A short-run increase in national income could be caused by a decrease in which of the following? A Consumption B Investment C Imports D Government spending E Exports
C Imports
Country X produces only apples and bananas. The following table shows prices and quantities of both products in two years. Assuming year 1 is the base year, what is the nominal and real gross domestic product (GDP) for year 2 ? A Nominal GDP: $200; Real GDP: $280 B Nominal GDP:$200; Real GDP: $200 C Nominal GDP: $280; Real GDP: $200 D Nominal GDP: $280; Real GDP: $560 E Nominal GDP:$560; Real GDP: $280
C Nominal GDP: $280; Real GDP: $200
In the circular flow diagram of a market economy, which of the following supplies the factors of production? A The business sector B The government C The household sector D Financial sector E The foreign sector
C The household sector
Which of the following transactions will be included in the calculation of Country X's Gross Domestic Product (GDP) in 2020? A The sale of corporate stocks B The exchange of a used automobile for a used boat C The purchase of new construction equipment D Social Security checks received by retirees E Carrots grown in a household's backyard and consumed by the family
C The purchase of new construction equipment
Gross domestic product is equal to which of the following? A Total consumer spending on final goods B The total value of production of all firms C The sum of income paid to all the factors of production D The total value of production of domestic firms E The sum of values added of all foreign firms located domestically
C The sum of income paid to all the factors of production
Which of the following would most likely benefit from unexpected deflation? A Lenders B Borrowers C Retail shop owners D Governments in debt E Automobile manufacturing firms
A Lenders
Which of the following would best explain a decline in potential gross domestic product? A Negative net investment B The discovery of vast new oil deposits C A lower price level D A decrease in the infant mortality rate E A decrease in wages and profits
A Negative net investment
Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following? A The distribution of income B The value of services C The value of intermediate goods D The value of financial transactions and sales of used items E The value of government services
A The distribution of income
Which of the following statements about inflation is true? A The expected inflation rate is the difference between nominal and real interest rates. B Low expected inflation rates lead to high inflation rates. C Lenders lose from expected inflation. D Lenders gain from unexpected inflation. E Workers lose from expected inflation.
A The expected inflation rate is the difference between nominal and real interest rates.
The table below shows labor market statistics for a nation. Number of Workers Structurally Unemployed: 3 million Number of Workers Cyclically Unemployed: 4 million Number of Workers Frictionally Unemployed: 2 million Number of Workers Officially Classified as Employed: 91 million Working-age Population: 150 million Based on the above table which of the following is most likely correct? A The natural rate of unemployment is 5 percent. B The labor force participation rate is 91 percent. C Discouraged workers are 4 percent of the labor force. D There are 9 million discouraged workers in the nation E There are 95 million people in the labor force
A The natural rate of unemployment is 5 percent.
Public policy that generates an unexpected increase in consumer prices will inflict short-run costs on all of the following EXCEPT A borrowers B workers with fixed incomes C savers holding non-interest-bearing money D taxpayers shifted into higher tax brackets E people whose incomes are not adjusted for inflation
A borrowers
If purchases of education and medical care were counted as investment rather than consumption, gross domestic product would A not change, because there is no change in total expenditures B increase, because investment is included in gross domestic product but consumption is not C increase, because consumption is included in gross domestic product but investment is not D decrease, because investment is weighted more heavily than consumption in calculating gross domestic product E decrease, because consumption is weighted more heavily than investment in calculating gross domestic product.
A not change, because there is no change in total expenditures
The consumer price index (CPI) is criticized for A overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change B overstating the true burden of inflation because it recognizes consumers' ability to substitute goods and services as prices change C understating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change D understating the true burden of inflation because it recognizes consumers' ability to substitute goods and services as prices change E overstating the true burden of inflation because it reflects the prices of both intermediate goods and final goods
A overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change
Structural unemployment is best described as unemployment arising from A the elimination of jobs as a result of technological change B an increase in the number of workers searching for better-paying jobs C an increase in the number of jobs demanding unskilled labor D the temporary reduction of jobs during a downturn in the business cycle E the reduction in jobs due to seasonal changes in demand
A the elimination of jobs as a result of technological change
If the consumer price index increases from 200 to 240 in a one-year period, then the inflation rate is A 16.67 percent B 20 percent C 25 percent D 40 percent E 140 percent
B 20 percent
If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic product grew by 4 percent, inflation for this year would be A -7% B 7% C 8% D 11% E 15%
B 7%
Which of the following unemployed individuals represents frictional unemployment? A Marissa, a full-time student who plays on the school's soccer team. B Janet, an accounting graduate who is interviewing with a number of accounting firms. C Sameer, a retired faculty member who volunteers at the local hospital. D Jeremy, a customer service representative who was laid-off after his job was automated. E Elizabeth, a financial analyst who was laid off because of the recession.
B Janet, an accounting graduate who is interviewing with a number of accounting firms.
When the average price level increases by 10 percent in a given year, which of the following must increase by 10 percent for real output to remain constant? A Real national income B Nominal national income C The international value of the currency D Real interest rates E Nominal interest rates
B Nominal national income
Suppose that a country's nominal gross domestic product (GDP) was $1,000 in year 1 and $2,000 in year 2. If year 1 is the base year and real (GDP) in year 2 was $1,000, which of the following is true? A Prices fell by 50% between year 1 and year 2. B Prices doubled between year 1 and year 2. C Prices remained the same between year 1 and year 2. D More goods and services were produced in year 2 than in year 1. E Fewer goods and services were produced in year 2 than in year 1.
B Prices doubled between year 1 and year 2.
Which of the following situations will benefit lenders of fixed interest rate loans? A The actual inflation rate is equal to the natural rate of unemployment. B The actual inflation rate is less than the expected inflation rate. C The actual inflation rate is equal to the fixed interest rate. D The consumer price index is greater than 100. E There is no cyclical unemployment.
B The actual inflation rate is less than the expected inflation rate.
Inflation occurs when there is a sustained increase in which of the following? A Real gross domestic product B The average price level C The price of any commodity D Labor productivity E The unemployment rate
B The average price level
Using 2010 as the base year, the gross domestic product (GDP) deflator in 2011 was 97. Which of the following must be true? A The inflation rate in 2011 was positive. B The inflation rate in 2011 was negative. C The inflation rate in 2011 was zero. D The purchasing power of a dollar decreased by 3 percent. E The real output increased by 3 percent.
B The inflation rate in 2011 was negative.
If nominal gross domestic product fell while real gross domestic product rose, which of the following must be true? A Unemployment increased. B The inflation rate was negative. C Net exports were negative. D The average of stock prices rose while bond prices fell. E Nominal interest rates rose by less than the rate of inflation.
B The inflation rate was negative.
Last year both a borrower and a lender expected an inflation rate of 3 percent when they signed a long-term loan agreement with fixed nominal interest rates of 5 percent. If the actual inflation rate were lower than expected, then which of the following would be true? A The borrower would benefit. B The lender would benefit. C The real interest rate would be lower than expected. D The nominal interest rate would be higher than expected. E The nominal interest rate would increase.
B The lender would benefit.
The table below shows the sales and intermediate purchases of automobile manufacturers, glass manufacturers, and steel manufacturers in a country. Assuming these are the only three manufacturers in the country, which of the following is true? A The total value added of the glass, steel, and automobile manufacturers is $160 million. B The total value added of the glass, steel, and automobile manufacturers is $100 million. C The contribution of the automobile manufacturer to the country's GDPGDP is $100 million. D The contribution of automobile manufacturers to the country's GDPGDP is $60 million. E The contribution of the three manufacturers to the country's GDPGDP is $220 million.
B The total value added of the glass, steel, and automobile manufacturers is $100 million.
If an economy is at the peak of the business cycle, then which of the following is true about the state of the economy? A There is a recessionary gap. B There is an inflationary gap. C The economy is producing at its potential output level. D The economy is producing below its potential output level. E The unemployment rate is higher than the natural rate of unemployment.
B There is an inflationary gap.
Ying has just graduated from college and is now interviewing for jobs. Ying would best be described as A cyclically unemployed B frictionally unemployed C structurally unemployed D not in the labor force E a discouraged worker
B frictionally unemployed
The business cycle diagram below shows the cyclical movement of actual real GDP relative to potential real GDP over time for the nation of Galactica. The economy of Galactica is expanding and the actual unemployment rate exceeds the natural rate of unemployment for which year in the above diagram? A 1992 B 1996 C 2002 D 2007 E 2011
C 2002
If an automobile was manufactured in 2006 and sold to a consumer in 2007, what was the effect on gross domestic product in 2006 and 2007? A 2006:No change; 2007: Increase B 2006: Decrease; 2007: Increase C 2006: Increase; 2007: No change D 2006: Increase; 2007: Decrease E 2006: No change; 2007: No change
C 2006: Increase; 2007: No change
Which of the following is an example of structural unemployment? A A computer programmer who leaves her job to move to Florida B A worker who loses his job during a recession C An autoworker who is replaced by a robot D A construction worker who is always unemployed during the winter months E A worker who is engaged in unproductive work
C An autoworker who is replaced by a robot
Which of the following would cause the official unemployment rate to understate the problem of unemployment? A Workers receiving unemployment compensation B Cyclically unemployed workers C Discouraged workers D Recent college graduates looking for work E Retirees
C Discouraged workers
For an economy consisting of households and businesses only, which of the following is consistent with the circular flow of income and production? A Households are producers of goods and services and consumers of resources. B Households are users of resources, and businesses are sources of saving. C Households are suppliers of resources and consumers of goods and services. D Businesses are users of taxes, and households are sources of taxes. E Businesses are suppliers of resources and consumers of goods and services.
C Households are suppliers of resources and consumers of goods and services.
Which of the following will most likely result from deflation? A Increased nominal interest rates B Increased business profits C Increased real value of fixed incomes D Decreased purchasing power of cash E Decreased real wealth
C Increased real value of fixed incomes
Which of the following individuals is considered officially unemployed? A Chris, who has not worked for more than three years and has given up looking for work B Kim, who is going to school full-time and is waiting until graduation before looking for a job C Pat, who recently left a job to look for a different job in another town D Leslie, who retired after turning 65 only five months ago E Lee, who is working 20 hours per week and is seeking full-time employment
C Pat, who recently left a job to look for a different job in another town
Which of the following describes a typical business cycle in the correct sequence? A Peak, trough, recession, and expansion B Peak, trough, expansion, and recession C Peak, recession, trough, and expansion D Peak, recession, expansion, and trough E Peak, expansion, trough, and recession
C Peak, recession, trough, and expansion
Which of the following will be counted as unemployed by the United States Bureau of Labor Statistics? A Persons who quit their previous jobs to stay at home to care for sick parents B Persons who were laid off from their previous jobs and have not applied for a job in two years C Persons who were fired from their previous jobs and are actively applying for work D Persons who have given up looking for jobs after long searches E Persons who quit their previous jobs to start their own businesses
C Persons who were fired from their previous jobs and are actively applying for work
Which of the following best explains why transfer payments are not included in the calculation of gross domestic product? A Transfer payments are used to pay for intermediate goods, and intermediate goods are excluded from gross domestic product. B Transfer payments are a government expenditure, and government expenditures are excluded from gross domestic product. C Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments. D Recipients of transfer payments are usually children, and income earned by children is excluded in gross domestic product. E Recipients of transfer payments are sometimes not citizens of the United States.
C Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments.
The table below shows the cost of the same representative basket of goods in the base year 2012 and in 2013, and the average weekly nominal wage rate in 2012 and 2013. If 2012 is the base year, which of the following is true? A The inflation rate from 2012 to 2013 is 10%. B The CPI in year 2013 is 110. C The CPI in year 2013 is 120. D Based on the CPI, the average real weekly wage rate increased by 10% from 2012 to 2013. E Based on the CPI, the average real weekly wage rate decreased by 20% from 2012 to 2013
C The CPI in year 2013 is 120.
An increase in which of the following is most likely to increase the long-run growth rate of an economy's real per capita income? A Population growth B The proportion of gross domestic product consumed C The educational attainment of the population D The supply of money in circulation E Personal income taxes
C The educational attainment of the population
Which of the following transactions would represent an addition to a nation's current gross domestic product? A Ms. Smith purchases a share of stock in an automobile company. B A retailer increases her stock of imported shoes. C The government increases its domestic purchases of food for use by the military. D A corporation sells shoes from last year's inventory. E A mother sells her car to her daughter.
C The government increases its domestic purchases of food for use by the military.
Which of the following is true if the economy is producing at the full-employment level of output? A The unemployment rate is zero. B No person is receiving unemployment compensation from the government. C There is frictional unemployment. D The government's budget is balanced. E The balance of trade is in equilibrium.
C There is frictional unemployment.
Which of the following is correct according to the circular flow model of an economy? A Taxes received from the public equal government spending. B Imports equal exports. C Total spending equals total income. D Consumption plus saving equals investment. E Saving plus investment equals imports plus exports.
C Total spending equals total income.
The recent popularity of job search Web sites that enable job seekers and potential employers to more efficiently contact each other is most likely to cause A a reduction in the labor force participation rate B a reduction in structural, but not in frictional, unemployment rates C a reduction in the frictional unemployment rate D an increase in the overall unemployment rate E a reduction in cyclical, but not in frictional, unemployment rates
C a reduction in the frictional unemployment rate
If a worker's nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has A approximately decreased by 10% B approximately decreased by 20% C approximately increased by 10% D approximately increased by 20% E not changed
C approximately increased by 10%
The natural rate of unemployment can be defined as the A unemployment rate consistent with accelerating inflation B unemployment rate of the least-skilled workers C economy's long-run equilibrium rate of unemployment D labor force participation rate plus the unemployment rate E labor force participation rate minus the unemployment rate
C economy's long-run equilibrium rate of unemployment
A continuous increase in the consumer price index (CPI) is A deflation B stagflation C inflation D recession E disinflation
C inflation
The major difference between real and nominal gross domestic product (GDP) is that real GDP A excludes government transfer payments B excludes imports C is adjusted for price-level changes using a price index D measures only the value of final goods and services that are consumed E measures the prices of a market basket of goods purchased by a typical urban consumer
C is adjusted for price-level changes using a price index
In one year, spending on consumption, investment, and government purchases was equal to 103 percent of a country's gross domestic product. This would be possible only if A the money supply increased B net exports were positive C net exports were negative D the government ran a budget surplus E the government had a balanced budget
C net exports were negative
Assume that an economy produces just two goods, X and Y, as shown in the table above. If year 1 is the base year, the consumer price index for year 2 in this economy is A 57.1 B 66.7 C 100 D 175 E 250
D 175
Year: nominal GDP: GDP deflator: 1980 14,000 70 1990 18,000 100 2000 22,000 220 2010 50,000 200 2015 60,000 300 According to the data above, in which year was real gross domestic product (GDP) the largest? A 1980 B 1990 C 2000 D 2010 E 2015
D 2010
The value of which of the following is counted in the United States gross domestic product? A Clean air B Child care a father provides for his child C An automobile produced in Sweden by a United States firm D A car produced in the United States and sold in Europe E Medical services not provided due to preventative health care
D A car produced in the United States and sold in Europe
Which of the following is an example of frictional unemployment? A A former mayor doing volunteer work B A factory worker who loses her job because of recession C A college student working part-time at the campus bookstore D A college graduate interviewing for two available positions E An architect whose job is replaced by computer software that designs buildings
D A college graduate interviewing for two available positions
Which of the following individuals is classified as unemployed? A A fifteen-year-old high school student who is looking for a babysitting job B A laid-off computer programmer who has given up looking for a new job C A parent who works in an after-school day care center for 15 hours a week D A recent college graduate who is looking for her first job E A mayor who lost an election and retired
D A recent college graduate who is looking for her first job
Which of the following allows an individual to gain from unexpected inflation? A Living on a fixed income B Working at the minimum wage C Lending money at a fixed interest rate D Borrowing money at a fixed interest rate E Saving money in a fixed-interest-rate savings account
D Borrowing money at a fixed interest rate
Which of the following explains why the rate of change of the consumer price index (CPI) tends to overstate the actual inflation rate? A Consumers will require more income to buy goods whose prices have increased. B Nominal wages do not always increase by as much as prices do. C When real wages increase, consumers can afford higher-priced goods. D Consumers tend to substitute lower-priced goods that may not be represented in the basket of goods. E The basket of goods in the base year is frequently updated with new products.
D Consumers tend to substitute lower-priced goods that may not be represented in the basket of goods.
The nominal gross domestic product of China in 2010 is a measure of the total value of which of the following in 2010 ? A Financial assets, including stocks, in China B Firms located within the borders of China C Final goods and services consumed in China D Final goods and services produced within the borders of China E Final goods and services exported by China to the rest of the world
D Final goods and services produced within the borders of China
Which of the following will lead to an increase in the United States gross domestic product? A More individuals prepare their own personal income tax forms. B Some citizens begin working abroad as computer programmers. C The government prohibits the sale of alcoholic beverages. D Foreign companies build new assembly plants in the United States. E A million United States households sell their used cars to their children.
D Foreign companies build new assembly plants in the United States.
Which of the following is true according to the circular flow model? A Firms are suppliers in both the product and factor markets. B Firms are demanders in the product markets and suppliers in the factor markets. C Households are demanders in both the product and factor markets. D Households are demanders in the product markets and suppliers in the factor markets. E The government is a demander in the product market only.
D Households are demanders in the product markets and suppliers in the factor markets.
The circular flow of economic activity between consumers and producers includes which of the following? I. Households buy factor services from firms. II. Households sell factor services to firms. III. Households buy outputs from firms. IV. Households sell outputs to firms. A III only B IV only C I and II only D II and III only E III and IV only
D II and III only
Which of the following groups would most likely gain from unanticipated inflation? A Landlords who own apartments in cities with rent controls B Individuals who have fixed retirement incomes C Individuals who earn high incomes D Individuals who have borrowed money at fixed interest rates E Banks that have loaned all excess reserves at a fixed interest rate
D Individuals who have borrowed money at fixed interest rates
Which of the following statements is true of unanticipated inflation? A It decreases the economic well-being of all members of society proportionately. B It decreases the economic well-being of all members of society equally. C It increases the economic well-being of net creditors. D It increases the economic well-being of net debtors. E It increases the economic well-being of workers with long-term labor contracts.
D It increases the economic well-being of net debtors.
The nation of Turboland produces only two goods, X and Y. The prices and final quantities produced of the two goods in 1993 and the base year of 1992 are shown in the table below. A Nominal GDPGDP is $90, Real GDPGDP is $96 B Nominal GDPGDP is $74, Real GDPGDP is $96 C Nominal GDPGDP is $70, Real GDPGDP is $96 D Nominal GDPGDP is $96, Real GDPGDP is $90 E Nominal GDPGDP is $96, Real GDPGDP is $74
D Nominal GDP is $96, Real GDP is $90
Which of the following would be true if the actual rate of inflation were less than the expected rate of inflation? A Inflation had been underpredicted. B The real interest rate had exceeded the nominal interest rate. C The real interest rate had been negative. D People who borrowed funds at the nominal interest rate during this time period would lose. E The economy would expand because of the increased investment and spending.
D People who borrowed funds at the nominal interest rate during this time period would lose.
The term "value added" for a firm is best defined as which of the following? A The firm's sales B The firm's sales minus depreciation C The firm's sales minus its losses D The firm's sales minus the cost of inputs purchased from other firms E The firm's profits from its sales
D The firm's sales minus the cost of inputs purchased from other firms
The consumer price index (CPI) measures the A value of current gross domestic product in base-year dollars B prices of all consumer goods and services produced in the economy C prices of selected raw materials purchased by firms D prices of a specific group of goods and services purchased by consumers E prices of imports, but not exports
D prices of a specific group of goods and services purchased by consumers
An industry historically used employees with specific skills. If this industry experiences technological advances that require new skills, there will most likely be A cyclical unemployment B frictional unemployment C seasonal unemployment D structural unemployment E no change in unemployment
D structural unemployment
The unemployment rate is calculated as A the number of people not working divided by the population B the number of people not working divided by the number of people working both full-time and part-time C the number of people working part-time but actively seeking full-time employment divided by the number of people in the labor force D the number of people not working but actively seeking employment divided by the number of people in the labor force E the number of people in the labor force divided by the population
D the number of people not working but actively seeking employment divided by the number of people in the labor force
Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product? A Government bonds B Shares of a company stock C Corporate bonds D A new car for personal use E A newly constructed home
E A newly constructed home
Which of the following is included in the computation of gross domestic product? A Government transfer payments, such as unemployment benefits B Purchases of used goods, such as used cars C Child care tasks performed by househusbands D Total value of business inventories E Additions to business inventories
E Additions to business inventories
Which of the following typically occurs during an expansionary phase of a business cycle? A Nominal interest rates decrease. B Income taxes decrease. C The price level decreases. D Government transfer payments increase. E Employment increases.
E Employment increases.
Which of the following represents a leakage from the circular flow in an economy? A Consumption spending B Government spending C Investment spending D Unemployment benefits E Imports
E Imports
In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in 2018 was 2%. How did Sabrina's nominal income and real income change in 2018 compared to 2017? A Nominal income decreased and real income decreased. B Nominal income decreased and real income did not change. C Nominal income increased and real income decreased. D Nominal income increased and real income did not change. E Nominal income increased and real income increased.
E Nominal income increased and real income increased.
Year: Nominal GDP: Price Index: 2012 100,000 200 2013 110,000 220 The table above shows the nominal gross domestic product (GDP) and the price index for an economy during the period 2012 and 2013. Which of the following would have occurred from 2012 to 2013? A Real GDP decreased by 20%. B Real GDP decreased by 10%. C Real GDP increased by 20%. D Real GDP increased by 10%. E Real GDP did not change.
E Real GDP did not change.
Which of the following can be considered a leakage from the circular flow of economic activity? A Investment B Government expenditures C Consumption D Exports E Saving
E Saving
Which of the following statements exemplifies the concept of structural unemployment? A New entrants into the labor force have trouble finding jobs. B Workers leave their current jobs to find better jobs. C Workers are laid off because aggregate demand has declined. D Workers are fired because consumers have reduced their total expenditures. E Workers are fired because their skills are no longer in demand.
E Workers are fired because their skills are no longer in demand.
