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Bob's assembly line job has been replaced by robots, and Bob lacks abilities and skills required to attain other jobs. He is considered
structurally unemployed.
How many U.S. dollars does a U.S. importer need to pay for an invoice of 1 million yen when the price of 1 yen is $0.006?
$6,000
Price Index Formula
(Cost of Basket this Year/Cost of Basket in Base Year) x 100
The real rate of interest equals 8%, and the expected rate of inflation equals 2%. The nominal rate of interest is
10
If 2010 is the base year in the table shown above, what is the price index for the year 2010?
100.0
Assume that there was a 10 percent increase in the price of all goods in 2010; if the base year is 2009, then the price index in 2010 will be
110
Refer to the above table. You are given information on Jasmin's consumption for 2005 and 2015. Using 2005 as the base year compute the price index for 2015. The index equals
136.842.
Considering the data from the table shown above, assuming that the market basket cost of light bulbs and volleyballs in the base year was $4500, what would be the price index for the year 2015?
177.78
Currently, economists estimate that the natural rate of unemployment in the United States is about
5 percent.
Suppose that for the economy of Springfield, we have the following information for 2013: consumption expenditures = $4,000; wages = $3,500; gross private domestic investment = $1,300; government expenditures = $2,000; exports = $900; imports = $1,100. Using the expenditure approach what would the Gross Domestic Product (GDP) be for Springfield in 2013?
7100
Which of the following types of goods is subject to the free-rider problem?
A public good
Which of the following might be a method that the government could use to promote the production of a good that generates positive externalities?
All of the above are correct.
Which of the following is true of unemployment?
All of the above.
Suppose that the market price of good X equals the firm's cost of producing that good, but it does not reflect any costs imposed on society. Which of the following is FALSE?
An external benefit is associated with good X.
The cost of inflation to society includes I. The opportunity costs of resources used by people to protect themselves against inflation II. The costs associated with recalculating prices
Both I and II
Who is considered officially unemployed?
Monica graduated from college last summer but is still unemployed despite her spirited search.
Describe the major types of unemployment.
Frictional unemployment is the continuous flow of people from job to job. Seasonal unemployment refers to changes in employment related to seasonal-type of work, such as work at summer resorts or winter ski lodges. Structural unemployment refers to unemployment of workers over lengthy intervals resulting from skill mismatches Cyclical unemployment has to do with those unemployed due to a downturn in business activit
What are the three goals of the Employment Act of 1946?
Full employment, price stability, and economic growth
Which of the following is NOT an example of a transfer payment?
Interest payments on government bonds
How has the pattern of fluctuations in overall U.S. business activity changed since World War II?
It has become less volatile.
A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account. Refer to the above figures. A negative externality exists that has not been corrected. Price and quantity will be
P1 and Q1.
A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account. Refer to the above figures. Which of the panels would be consistent with the situation in which external benefits exist?
Panel 2
Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. The quantity demanded of medical services is
QM.
The GDP deflator is not a fixed-quantity price index, but the CPI is. What is the significance of this fact?
The GDP deflator reflects not only changes in prices, but also changes in consumption patterns as consumers substitute between goods
Which of the following measures gives the earliest warning of increasing inflation?
The Producer Price Index
Refer to above figure in which negative externality existed. The government imposes a $1.00 pollution tax on the producer. Supply shifts leftward.
The amount of the tax shifted to the consumer depends on the consumer's reaction.
What is unemployment and what is the unemployment rate? What are the costs of unemployment?
Unemployment refers to someone who is without a job but who is actively looking for work. The unemployment rate is the proportion of the labor force, which is the people 16 and older who either are working or are looking for work, that is unemployed.
A severe and prolonged recession is called
a depression.
An example of a market failure is
a firm is dumping toxic waste that is making people sick.
Under present U.S. law, cocaine is an example of
a government-inhibited good.
An individual in the labor force whose employment was involuntarily terminated is
a job loser.
Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs?
a market failure
For the CPI. the value of the index in the base year
always equals 100.
Orchards provide services to beekeepers because the bees use the pollen to make honey. This is an example of
a positive externality, and too few orchards exist in society.
The peak phase of the business cycle represents
a temporary maximum output level of Gross Domestic Product (GDP).
Ups and downs in business activity are referred to as
business fluctuations.
All of the following are ways that the government can correct for positive externalities EXCEPT
by assessing an effluent fee
Unemployment is measured as
all adults in the civilian labor force who are willing and able to work and who are actively looking for work, but have not found a job
A period of time in which the overall pace of business activity is rising is known as
an expansion.
Refer to the above figure. The points between B and C are known as
an expansion.
Government payment of a per-unit subsidy for medical care causes
an increase in the quantity of medical care demanded above the quantity demanded in the absence of the subsidy
To be officially classified as unemployed, a person must be
at least 16, not working and actively seeking employment.
A person who is currently not working and has stopped looking for a job because he or she is convinced there is no job available is classified as a
discouraged worker.
If all prices in the economy go up from one year to the next, the CPI index, using the previous year as the base would
be greater than 100.
Why are public goods provided by the government, rather than by the private sector?
because it would be difficult for a private sector firm to make a profit providing a public good, since consumers who benefit would not have to pay for it
The labor-force participation rate shows the percentage of
non-institutionalized working-age people who are actually working or seeking employment
To correct for negative externalities, the government
can impose a tax.
Many economists would argue that some frictional unemployment
cannot and probably should not be eliminated.
A price index is the
cost of a market basket of goods and services today expressed as a percentage of the cost of the same market basket during a base year.
Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment. Matt would be
counted as frictionally unemployed.
The natural rate of unemployment does NOT include which of the following?
cyclical unemployment
In 2009, policy makers in the United States were dealing with a recession. Workers who were laid off due to the economic slowdown would be
cyclically unemployed.
Providing public goods is a(n)
economic function of government.
Typically during a recession,
incomes fall, and unemployment rises.
As a share of total national income, government spending generally has
increased over the last fifty years.
An increase in the labor force participation rate
is consistent with either a rise or a fall in the unemployment rate.
Ms. Smith is given a voucher for an apartment in a public housing project. The apartment
is not a public good.
Excluding indirect business taxes and depreciation, Gross Domestic Income (GDI)
is the sum of all income paid to the factors of production.
All of the following generate positive externalities EXCEPT
lower marginal tax rates.
A situation in which the market system allocates too many resources to the production of a given activity is known as
market failure.
Market failures take place when
market transactions lead to underproduction or overproduction of a good.
My brother decides to leave his empty soda can on someone's lawn. This is an example of a
negative externality.
The real rate of interest is the
nominal rate of interest minus the anticipated rate of inflation.
A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account. Refer to the above figures. An external cost exists. This will lead to a(n)
overproduction equal to Q1 minus Q2.
Measures of student performance have not increased even though per-pupil government subsidies have increased because
parents and children value the last unit of educational services received less than the cost.
Government spending as a percent of national income
peaked during World War II.
Public goods are desired because
people want and value them but the private sector will not make them available.
The U.S. antitrust laws
promote competition.
Public goods are
provided to additional users at no additional cost.
The purpose of an effluent fee is to
reduce the amount produced of a good and to raise the market price.
In its most ideal form, a price system allows
resources to move from lower-valued uses to higher-valued uses through voluntary exchange.
Over the past 40 years, there has been an increase in spending on public education without a significant increase in student performance. One explanation given by economists on why student performance has not improved is that
schools are providing high-priced services that are not valued by parents.
The fact that a number of lifeguards lose their jobs at the end of each summer would be counted as
seasonal unemployment.
According to your text, one reason for flat or falling achievement scores even in the face of substantially higher education subsidies may be that
some of the funds are going to social services rather than to enhance learning activities.
Which of the following is NOT a transfer payment?
spending on national defense
Environmental regulation reduces the demand for West Virginia coal and the unemployment rate in West Virginia increases. This is an example of
structural unemployment.
Fully anticipated inflation occurs when
the actual inflation rate equals the anticipated inflation rate.
Changes in leading indicators signal
the changes that will occur in the economy.
External costs can be defined as
the cost associated with private production, but partially borne by society.
An effluent fee is more effective when imposed on
the firm or producer of the product which generates pollution.
The nominal rate of interest is
the interest rate observed in today's market.
The real interest rate is
the nominal interest rate minus the anticipated inflation rate.
The real rate of interest is defined as
the nominal rate of interest minus the anticipated inflation rate.
The trough of a contraction is
the point in time at which the level of national business activity reaches a minimum before expanding again.
Refer to the above figure. In the absence of a subsidy,
the quantity Qo and price Po would prevail in the market.
Personal income is
the sum of all incomes received by households.
The purchasing power of money increases when
there is deflation.
A government subsidy is typically used
to correct a positive externality.
The purpose of an effluent fee imposed on a firm is
to reduce output by increasing production costs thereby reducing resources used.
Suppose that a per-unit subsidy is granted to each individual who consumes a product providing external benefits to society at large. Each individuals demand curve will shift ________, and the market demand curve for the product will shift ________.
to the right; to the right
Medicare and Social Security are examples of
transfer payment programs
Suppose medical care makes up 5 percent of the CPI index, and that prices rise in the medical care area faster than in the rest of the economy. An elderly couple spends 15 percent of their income on medical care. For this couple, the CPI
understates the inflation rate because of the importance of medical care for this family.
A new entrant is an individual
who has never held a full-time job lasting two weeks or longer but is now seeking employment.
Discouraged workers
would not be considered as unemployed
An increase in the price of electricity, ceteris paribus, indicates that
electricity is relatively more scarce than it was before.
The theory of public choice suggests that
government agencies tend to be inefficient because they are subject to institutional arrangements in which managers do not have an incentive to be efficient.
A difference between the market and the public sector is that
government can use force, while the market does not.
If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is
higher than optimal
When an individual is frictionally unemployed, the unemployment arises from
imperfect labor market information which requires individuals to search for appropriate employment.
