Macro chapters 21-24
Which of the following statements is an example of a minimum wage law?
A government regulation makes it illegal to hire a worker for less than $10 an hour.
What is the effect on Mexico's potential GDP? _______ Mexico's production function and _______ in Mexico's potential GDP occurs.
A movement up along; an increase
Which of the following events increases the amount of job-rationing unemployment?
An increase in the efficiency wage rate
What is a good that is used as a component of a final good? Is the value of intermediate goods included in the measure of GDP? _______ good is used as a component of a final good. We _______ add the value of intermediate goods produced to the value of final goods to measure GDP.
An intermediate; do not
The figure shows the flows of expenditure and income in an economy. In 2008, J was $1.5 trillion, R was $2.0 trillion, Z was $1 trillion, Q was $14.5 trillion, and U was $4.0 trillion. Calculate saving and consumption expenditure. >>> Answer to 1 decimal place.
Consumption expenditure is $8.08.0 trillion. Saving is $4.54.5 trillion.
Which of the following is an example of a final good or service?
Dan bought a Toyota Camry.
Who in the following statements is a discouraged worker?
Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
Who in the following statements is a full-time worker and who is a part-time worker?
Dan works at Subway for 8 hours each day from Monday through Friday. Mary works at Starbucks' for 4 hours each day on weekends.
The table shows some of the items in a country's National Income and Product Accounts in 2018. Use the expenditure approach to calculate GDP in 2018. Consumption expenditure 7.3 Government expenditure 1.9 Indirect taxes less subsidies 0.7 Depreciation 1.2 Net factor income from abroad 0.1 Investment 1.6 Net exports −0.4 Statistical discrepancy 0
GDP in 2018 using the expenditure approach is $10.410.4 trillion.
The national accounts of Parchment Paradise are kept on (you guessed it) parchment. A fire in the statistics office destroys some accounts, leaving only the data on the right. Calculate GDP (expenditure approach) and depreciation. GDP (income approach) 6,940 Consumption expenditure 7,000 Indirect taxes less subsidies 700 Interest, rent, and profit 220 Investment 160 Government expenditure 180 Wages 5,900 Net factor income from abroad 0 Net exports −300
GDP (expenditure approach) is $7,040 Depreciation is $120
The table shows some of the items in a country's National Income and Product Accounts in 2018. Calculate the country's GNP and the country's national income in 2018. Consumption expenditure 7.3 Government expenditure 1.9 Indirect taxes less subsidies 0.7 Depreciation 1.2 Net factor income from abroad 0.1 Investment 1.6 Net exports −0.4 Statistical discrepancy 0
GNP in 2018 is $10.510.5 trillion. National income in 2018 is $9.39.3 trillion.
The tables show the quantities of the goods that Harry bought and the prices he paid during two consecutive weeks. Harry's CPI market basket contains the goods he bought in Week 1. Calculate Harry's CPI in Week 2. What was his inflation rate in Week 2? Coffee 5 cups $3.00 iTunes songs 5 $1.00 Gasoline 10 gallons $2.00 Coffee 4 cups $3.25 iTunes songs 10 $1.00 Gasoline 10 gallons $3.00
Harry's CPI in Week 2 is 128.1128.1. Harry's inflation rate in Week 2 is 28.128.1 percent.
The figure shows the flows of income and expenditure in an economy. In 2009, Q was $1,300 billion, U was $250 billion, W was $550 billion, R was $150 billion, and Z was $80 billion. Calculate investment and saving.
Investment is $420 billion. Saving is $600 billion.
Who published The General Theory of Employment, Interest, and Money? In what year was it published? What was his theory? _______ published The General Theory of Employment, Interest, and Money in _______. His theory was that _______.
John Maynard Keynes; 1936 too little private spending is the cause of depression and recession
What type of macroeconomics holds the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth? _______ macroeconomics is the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth. According to Keynes, _______.
Keynesian too little private spending is the cause of depression and recession
Which of the following statements is an example of a union wage?
Members of the Air Line Pilots Association earn 25 percent more than other pilots.
An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2020 and 2021. The base year is 2020. Calculate nominal GDP in 2020 and 2021.
Nominal GDP in 2020 is $324324. Nominal GDP in 2021 is $420420.
An economy produces only apples and oranges. The table shows the prices and the quantities of apples and oranges produced in 2020 and 2021. If the base year is 2021, calculate the economy's nominal GDP and real GDP in 2020.
Nominal GDP in 2020 is $5050. Real GDP in 2020 is $220220.
The table shows some data for an economy. If the base year is 2019, calculate the economy's nominal GDP and real GDP in 2020. Apples 60 $0.50 Oranges 80 $0.25 In 2020 Item Quantity Price Apples 160 $1.00 Oranges 220 $2.00
Nominal GDP in 2020 is $600600. Real GDP in 2020 is $135135.
Which of the following statements about potential GDP is correct?
On average over the business cycle, real GDP equals potential GDP.
Which of the following statements illustrates structural unemployment?
Outsourcing resulted in many job losses in the mid 2000s.
Table 1 shows the labor market schedule and Table 2 shows the production function schedule for the country of Moldovokia. What is potential GDP if a decrease in the population changes the quantity of labor supplied by 40 billion hours at each real wage rate? 15 60 20 20 50 30 25 40 40 30 30 50 35 20 60
Potential GDP is $2.02.0 trillion.
Which of the following is an example of consumption expenditure?
Rachel buying a TV.
An island economy produces only apples and pears. The table gives the quantities produced and prices in 2018 and 2019. The base year is 2018. Use the chained-dollar method to calculate real GDP in 2018 and 2019. In terms of what dollars is each of these two real GDPs measured?
Real GDP in 2018 using the chained-dollar method is $1,3841,384. Real GDP in 2019 using the chained-dollar method is $1,5861,586. Real GDP in 2018 and real GDP in 2019 are measured in 2018 dollars.
The table shows an economy's total production and the prices of the final goods it produced in 2020 and 2021. The base year is 2020. Calculate real GDP in 2020 and real GDP in 2021.
Real GDP in 2020 is $360360. Real GDP in 2021 is $460460.
Which of the following statements illustrates frictional unemployment?
Robin is quitting his current job to find another that has better prospects.
Which of the following is an example of an intermediate good or service?
Samsung buys compressors for manufacturing refrigerators.
Which of the following is an example of government expenditure on goods and services?
Secret service protection for the president
Who in the following statements is a part-time worker for economic reasons?
Sherrie is a graduate who started working at Safeway pharmacy for 4 hours each day, three days a week, as they do not currently have a full-time opening.
A Consumer Expenditure Survey in Sparta shows that people buy only juice and cloth. In 2018, the year of the Consumer Expenditure Survey and also the reference base year, the average household spent $20 on juice and $12 on cloth. The table sets out the prices of juice and cloth in 2018 and 2019. Calculate the CPI in 2019 and the inflation rate between 2018 and 2019. Juice $2 a bottle $5 a bottle Cloth $4 a yard $4 a yard
The CPI in 2019 is 193.8193.8. The inflation rate between 2018 and 2019 is 93.893.8 percent.
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2019. The average household spent $26 on juice and $56 on cloth in 2019 when the price of juice was $2 a bottle and the price of cloth was $8 a yard. In the current year, 2020, juice is $5 a bottle and cloth is $4 a yard. Calculate the CPI and the inflation rate in 2020.
The CPI in 2020 is 113.4113.4. The inflation rate in 2020 is 13.413.4 percent.
In Brazil, the reference base period for the CPI is 2000. By 2016, prices had risen by 187 percent since the base period. The inflation rate in Brazil in 2017 was 3.4 percent, and in 2018, the inflation rate was 3.7 percent. Calculate the CPI in Brazil in 2017 and 2018. Brazil's CPI in 2019 was 318. Did Brazil's cost of living increase or decrease in 2019? Brazil's cost of living _______ in 2019.
The CPI in Brazil for 2017 is 296.8296.8. The CPI in Brazil for 2018 is 307.8307.8. decreased
Alternative measures of the price level aim to improve on the CPI. Which of the following statements is true?
The PCEPI uses current quantities so it avoids the sources of bias in the CPI.
Which of the following is an example of government expenditure on goods and services?
The White House buying internet services.
The table shows the quantities of the goods Suzie bought and the prices she paid during two consecutive weeks. Suzie's CPI market basket contains the goods she bought in Week 1. Calculate the cost of Suzie's CPI market basket in Week 1 and in Week 2. What percentage of the CPI market basket is gasoline? Calculate the value of Suzie's CPI in Week 2 and her inflation rate in week 2. Week 1 Item Quantity Price Coffee 10 cups $3.50 a cup Books 1 $25.00 each Gasoline 20 gallons $2.25 a gallon Week 2 Item Quantity Price Coffee 10 cups $3.50 a cup Books 2 $12.50 each Gasoline 10 gallons $2.75 a gallon Concert 1 ticket $95 each
The cost of Suzie's CPI market basket in Week 1 is $105.00105.00. The cost of her CPI market basket in Week 2 is $102.50102.50. Gasoline is 42.942.9 percent of the CPI market basket. The value of Suzie's CPI in Week 2 is 97.697.6. Suzie's inflation rate in Week 2 is −2.4 percent.
The graph illustrates the labor market in an economy. At full employment, 2,000 people a day job search. What is the equilibrium real wage rate and employment? Calculate the natural unemployment rate.
The equilibrium real wage rate is $55 an hour. Employment is 6,0006,000 workers per day. The natural unemployment rate is 25.025.0 percent.
The table gives information reported by the Bureau of Labor Statistics for February, 2019. What is the labor force participation rate? Item Millions Employment 157 Unemployment 6 Not in the labor force
The labor force participation rate is 63.263.2 percent.
The BLS reported that in June 2019, the labor force was 163.0 million, employment was 157.0 million, and the working-age population was 259.1 million. The BLS also reported that 17.3 percent of all employment in June 2019 was part time and that 4.3 million people worked part time for economic reasons. How many people worked part time for noneconomic reasons?
The number of people who worked part time for noneconomic reasons is 22.922.9 million.
An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2020 and 2021. The base year is 2020. Calculate the percentage increase in real GDP in 2021.
The percentage increase in real GDP in 2021 is 1.81.8 percent.
The table sets out information about the economy of Nautica. What is the quantity of labor employed, potential GDP, the real wage rate, and total labor income? 0 0 10 100 20 180 30 240 40 280
The quantity of labor employed is 3030 hours a day. Potential GDP is $240240 a year. The real wage rate is $0.600.60 an hour. Total labor income is $1818 a day.
The tables set out information about the economy of Athabasca. Calculate the quantity of labor employed, the real wage rate, and potential GDP.
The quantity of labor employed is 7575 million hours. The real wage rate is $2323 an hour. Potential GDP is $1,8001,800 million.
The interest rate is 25.5 percent a year in Ghana and 1.5 percent a year in Canada. The inflation rate is 17.2 percent a year in Ghana and 1.1 percent a year in Canada. Calculate the real interest rate in Ghana and Canada.
The real interest rate in Ghana is 8.38.3 percent a year. The real interest rate in Canada is 0.40.4 percent a year.
Ford Motor Company agreed to pay its workers $18 an hour in 1999 and $46 an hour in 2001. The CPI in 1999 was 166 and in 2001 was 180. Calculate the real wage rate in each year (to the nearest cent). Did these workers really get a pay raise between 1999 and 2001?
The real wage rate in 1999 was $10.8410.84. The real wage rate in 2001 was $25.5625.56. The workers did really get a raise between 1999 and 2001.
The table gives information about the economy of Nautica. Suppose that the government introduces a minimum wage of $0.80 an hour. What is the real wage rate, the quantity of labor employed, potential GDP, and unemployment? Does the unemployment arise from job search or job rationing? Is the unemployment cyclical? The unemployment _______ cyclical because _______.
The real wage rate is . 80.80 an hour and the quantity of labor employed is 2020 hours a day. Potential GDP is $240240 a year. Unemployment is 2020 hours a day. is not; it is created by the minimum wage and not by the phase of the business cycle
Which of the following statements illustrates diminishing returns?
The second billion hours of labor changes real GDP from $1 to $3 trillion and the third billion hours of labor changes real GDP from $3 to $4 trillion.
The table gives information about the labor force in the economy of Sandy Island. Calculate the change in the unemployment rate from July 2020 to August 2020. Labor Market Data In October 2020 Employed 10,000 Unemployed 2,000 During November 2020 Lost jobs and didn't look for new ones 120 Quit jobs and retired 30 Looked for work and were hired 150 Discouraged workers 20 New graduates looking for work 40
The unemployment rate in October 2020 is 16.716.7 percent. The number of people unemployed at the end of November 2020 is 1,8701,870. The number of people employed at the end of November 2020 is 10,00010,000. The unemployment rate at the end of November 2020 is 15.815.8 percent.
The BLS survey reported the numbers in the table for a small community of 320 people. Calculate the unemployment rate and the labor force participation rate in this community. Worked at least 1 hour as paid employees 200 Were not working but had jobs or businesses from which they were temporarily absent 30 Had no employment and didn't want to work 35 Were available for work and had looked for employment last week 20 Were available for work and were waiting to be recalled to their previous job 6
The unemployment rate is 10.210.2 percent. The labor force participation rate is 88.088.0 percent.
The BLS survey found the numbers in the table for a small community. Calculate the unemployment rate and the labor force participation rate for this community. Total number of persons in the community 200 Worked at least 1 hour as paid employees or worked 15 hours or more as unpaid workers in their family business 40 Were not working but had jobs or businesses from which they were temporarily absent 20 Had no employment and were not available for work 5 Were available for work and had made specific efforts to find employment some time during the previous 4 weeks 5 Were available for work and were waiting to be recalled to a job from which they had been laid off
The unemployment rate is 20.020.0 percent. The labor force participation rate is 93.893.8 percent.
The table gives information reported by the Bureau of Labor Statistics for February, 2019. What is the unemployment rate? Labor force 163 Employment 157 Working-age population 258
The unemployment rate is 3.73.7 percent.
The table gives information reported by the Bureau of Labor Statistics for May, 2016. What is the unemployment rate in May, 2016? What is the labor force participation rate in May, 2016? Labor force 158,466,000 Employment 151,030,000 Working-age population
The unemployment rate is 4.74.7 percent. The labor force participation rate is 62.662.6 percent.
The Bureau of Labor Statistics reported that in June 2003, the labor force was 147.8 million, employment was 138.5 million, and the working-age population was 221.3 million. Calculate the unemployment rate and the labor force participation rate.
The unemployment rate was 6.36.3 percent. The labor force participation rate was 66.866.8 percent.
In 2010, U.S. exports of goods and services are $1,844 billion and imports of goods and services are $2,356 billion. What is the value of net exports?
The value of net exports in 2010 is −512 billion dollars.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Where do these activities appear in the National Income and Product Accounts of Japan?
The value of the wings appear as Japanese exports in the expenditure approach to measuring Japan's GDP and Japan's GNP.
The figure shows the flows of expenditure and income on Lotus Island. In 2016, R was $11 billion; W was $36 billion; U was $10 billion; J was $17 billion; and Z was $4 billion. Calculate total expenditure and total income.
Total expenditure is $67 billion. Total income is $67 billion.
The figure shows the flows of expenditure and income on Big Foot Island. In 2016, W was $64 billion; V was $24 billion; U was $13 billion; J was $21 billion; and Z was $3 billion. Calculate total expenditure and total taxes.
Total income is $101101 billion. Net taxes equal $1313 billion.
The figure shows the flows of expenditure and income in an economy. In 2013, U was $1.0 trillion, V was $1.5 trillion, W was $6.0 trillion, J was $1.0 trillion, and Z was $1.5 trillion. Calculate total income, net taxes, and GDP.
Total income is $9.5 trillion. Net taxes equal $2.0 trillion. GDP is $9.5 trillion.
GDP increased at an annual rate of 4.6 percent in the first quarter of 2019. Government expenditure grew at 7 percent, but consumption expenditure grew at a rate of 6.7 percent. Investment and exports shrank. Source: BEA, July 26, 2019 Use the figure to indicte the flows in which the items in the news clip occur. How can GDP increase at a rate of 4.6 percent if consumption expenditure increased at a rate of 6.7 percent? In the figure, _______. It is possible for GDP to increase by only 4.6 percent when consumption expenditure grew at a 6.7 percent rate because _______.
U is government expenditure on goods and services and J is investment; the sum of investment and net exports grew at a negative rate
What could induce Europeans to work the same hours as Americans and would that close the gap between potential GDP per worker in the two economies? U.S. potential GDP per worker per week is greater than that in Europe because _______. Europeans could be induced to work the same hours as Americans by _______ taxes and _______ unemployment benefits. Everything else remaining the same, if Europeans work the same hours as Americans, the gap between potential GDP per workers in the two economies _______.
U.S. workers are more productive per hour of work and they work longer hours than Europeans lowering; lowering becomes smaller but is not eliminated because U.S. workers are more productive per hour of work
The table shows some of the items in a country's National Income and Product Accounts in 2019. What was GDP as measured by the income approach in 2019? What was net domestic product at factor cost in 2019? Consumption expenditure 7.7 Government expenditure 2.0 Indirect taxes less subsidies 0.7 Depreciation 1.3 Net factor income from abroad 0.1 Investment 1.7 Net exports −0.5 Statistical discrepancy 0
Using the income approach, GDP in 2019 was $10.910.9 trillion. In 2019, net domestic product at factor cost was $8.88.8 trillion.
What is an example of U.S. consumption expenditure? _______ is an example of U.S. consumption expenditure.
Your purchase of a flight on american airlines
Which of the following is included in the measure of U.S. GDP?
a Hershey's Kiss produced and sold in the United States
Classify each of the following items as a final good or an intermediate good, and identify whether it is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. A DVD bought by a household. Item 2. Coffee beans bought by Starbucks. Item 3. New airplanes bought by United Airlines. Item 4. New battle ship bought by the U.S. navy. Item 1 is _______ and item 2 is _______. Item 3 is _______ and item 4 is _______.
a final good that is consumption expenditure; an intermediate good ;;;; a final good that is investment; a final good that is government expenditure
The quantity of labor demanded is the total labor hours that _____ during a given time period at a given _____. The demand for labor is the relationship between the _____ and the _____ when all other influences on hiring plans remain the same.
all the firms in the economy plan to hire; real wage rate; quantity of labor demanded; real wage rate
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices.
all the goods and services
Job search is the activity of looking for _____ job.
an acceptable vacant
Suppose a huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. What is the effect on the production function, the demand for labor, and the supply of labor? In what direction do the changes occur? When a huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce, there is ______ in the U.S. production function. There is _______ in the U.S. demand for labor and _______ in the U.S. supply of labor.
an upwards shift; an increase; no change
What does the production function separate? What does the shape of the production function illustrate? The production function separates _______. The production function _______.
attainable combinations of labor hours and real GDP from unattainable combinations displays diminishing returns
Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _____ and decreases during _____.
a recession; an expansion
Net taxes are taxes paid minus _____.
cash benefits received from governments
What is the effect of an increase in the income tax rate and more generous unemployment benefits on the labor market? An increase in the income tax rate _______ and more generous unemployment benefits _______.
decreases the supply of labor; decrease the supply of labor
What is the quantity of real GDP produced if the real wage rate is at the full-employment equilibrium level? If the real wage rate is at the full-employment equilibrium level, real GDP is _______.
equal to potential GDP, which is efficient but is not the most that can be produced
Which of the events in the table raise the real wage rate and which of the events lower the real wage rate? A rise in the real wage rate is a result of _______. A fall in the real wage rate is a result of _______. 1 The Middle East cuts supplies of oil to the United States. 2 The New York Yankees win the World Series. 3 U.S. labor unions negotiate wage hikes that affect all workers. 4 A huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. 5 Migration to the United States increases the working-age population.
events 3 and 4; event 5
Which of the events in the table increase potential GDP and which decrease potential GDP? An increase in potential GDP results from _______. A decrease in potential GDP results from _______. The Middle East cuts supplies of oil to the United States. 2 The New York Yankees win the World Series. 3 U.S. labor unions negotiate wage hikes that affect all workers. 4 A huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. 5 Migration to the United States increases the working-age population.
events 4 and 5; events 1 and 3
Which of the events in the table increase the equilibrium quantity of labor and which decrease the equilibrium quantity of labor? An increase in the equilibrium quantity of labor is a result of _______. A decrease in the equilibrium quantity of labor is a result of _______. Dell introduces a new supercomputer that everyone can afford. 2 A major hurricane hits Florida. 3 More high school graduates go to college. 4 The CPI rises. 5 An economic slump in the rest of the world decreases U.S. exports.
event 1; events 2 and 3
U.S. gross domestic product is the market value of all the _______ produced _______ in a given time period.
final goods and services; within the United States
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same
U.S. unemployment rate lowest since 2008 The Labor Department said that the economy added 146,000 jobs in November, and the unemployment rate fell to 7.7% from 7.9% in October. But it fell mainly because workers dropped out of the labor force. Source: CNN Money, December 7, 2012 Explain how the new jobs change the labor force and the unemployment rate. New jobs _______ the labor force and _______ the unemployment rate.
increase or do not change; lower
The tables set out information about the economy of Athabasca. Suppose the labor force participation rate of Athabasca increases. How do employment, the real wage rate, and potential GDP change? When the labor force participation rate of Athabasca increases, employment _______. When the labor force participation rate of Athabasca increases, potential GDP _______, and the real wage rate _______.
increases increases;decreases
The Commerce Department reported that retail sales increased 1.3 percent in June. Net exports were up 0.8 percent in the first quarter and inventories held by businesses rose by 0.3 percent in June. Total sales by businesses rose 0.3 percent. Source: Commerce Department, 2013 What is the effect of the rise in net exports on GDP? The rise in net exports _______.
increases GDP
Which of the following are included in the expenditure approach to measuring GDP?
investment; government expenditure on goods and services;net exports of goods and services
What is the value of the CPI in the base period? The value of the CPI in the base period _______.
is 100 no matter what reference base period is chosen
What is a discouraged worker? A discouraged worker _______.
is a marginally attached worker who has not made specific efforts to find a job within the previous four weeks because previous unsuccessful attempts were discouraging
Keynesian macroeconomics is the view that the market economy _____ and needs _____ to achieve full employment and sustained economic growth.
is inherently unstable; active government intervention
Which of the following statements about the efficiency wage is true? The efficiency wage _______.
is paid by firms who can't directly monitor the work effort of their employees
What is the supply of labor? How does the quantity of labor supplied change as the real wage rate rises? The supply of labor _______. The quantity of labor supplied _______ as the real wage rate rises because _______.
is the relationship between the quantity of labor supplied and the real wage rate when all other influences on work plans remain the same increases; hours per person increase and labor force participation increases
The unemployment rate is the percentage of the people in the _____ who are unemployed.
labor force
Use your graph to explain the difference in the two labor market outcomes. The labor market equilibrium occurs at a lower real wage rate and greater hours per worker in Korea than in the United States because Korea's labor is _______ productive and its supply of labor (per worker) is _______ than the U.S. supply.
less;greater
Use the information in the schedules above to draw this economy's production function. Label it. Draw a point to show equilibrium employment and potential GDP. At the full-employment quantity of labor, what is the real wage rate? Quantity of labor demanded (billions of hours per year) 0 2 4 Real GDP (billions of 2012 dollars) 0 70 100 Real wage rate (2012 dollars per hour) 50 30
meet at 2,70; 30 an hour
What are the main sources of bias in the CPI? Why is CPI bias a problem? The main sources of bias in the CPI are _______. CPI bias is a problem because it _______.
new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias distorts wage agreements linked to the CPI
What is the view of classical macroeconomics? According to classical macroeconomics, _______. Classical macroeconomics predicted that the Great Depression _______.
no remedy by government can improve on the performance of the market would eventually end but offered no method for ending it more quickly
Suppose the New York Yankees win the World Series. What is the effect on the production function, the demand for labor, and the supply of labor? In what direction do the changes occur? When the New York Yankees win the World Series, there is ______ in the U.S. production function. There is _______ in the U.S. demand for labor and _______ in the U.S. supply of labor. A. no change;
no shift no change; no change
Suppose the CPI rises. What is the effect on the production function, the demand for labor, and the supply of labor? In what direction do the changes occur? When the CPI rises, there is _______ in the U.S. production function, and _______ in the U.S. demand for labor. There is _______ in the U.S. supply of labor.
no shift; no shift no change
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
The labor force is the number of people employed plus the _____.
number unemployed
How is total expenditure in the United States calculated? Total expenditure in the United States is equal to consumption expenditure plus investment _______.
plus government expenditure on goods and services plus net exports
What is the CPI? What is the value of the CPI in the reference base period? The CPI tells us the _______ in the reference base period. The CPI in the reference base period is by definition equal to _______.
price level in a given period expressed as a percentage of the price level; 100
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
Job rationing is a situation that arises when the _____ is _____ the full employment equilibrium level.
real wage rate; above
Potential GDP is the value of _____ when all the economy's factors of production - labor, capital, land, and entrepreneurial ability- are _____.
real GDP; fully employed
During the past 50 years, Singapore has seen huge changes: rapid population growth and the introduction of newer and newer technologies. Singapore has modest unemployment benefits, no minimum wage, and weak labor unions. Does Singapore's unemployment arise mainly from job search or job rationing? Unemployment in Singapore mainly arises from job _______. But some job _______ might arise from _______.
search rationing; efficiency wages
A cost of living index is a measure of the change in the amount of money that people need to spend to achieve a given _____.
standard of living
The economy is at full employment when all unemployment is _______.
structural and frictional
What is the effect of an increase in unemployment benefits on the labor market and potential GDP? When unemployment benefits increase, the _______.
supply of labor decreases, and potential GDP decreases as a movement occurs down along the production function
The table shows the CPI in Genovia. Calculate the inflation rates in 2018 and 2019. Did the CPI rise in 2019? Did the inflation rate increase in 2019? In 2019, Genovia's CPI _______ and its inflation rate _______.
te in 2018 was 4.04.0 percent. Genovia's inflation rate in 2019 was 3.83.8 percent. increased;decfeased
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
The PCE price index is an average of the current prices of _____ included in the consumption expenditure component of GDP, expressed as a percentage of _____ year prices.
the goods and services; base
What is gross national product? Gross national product is _______.
the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country
Which of the following is an example of investment?
the purchase of a new espresso machine by Starbucks
Potential GDP is the value of real GDP when _______.
the unemployment rate equals the natural unemployment rate
When does the time spent on job search fall? The time spent on job search falls when _______.
unemployment benefits decrease
U.S. potential GDP is the value of the goods and services produced in the United States _______.
when the U.S. economy +is at full employment
Classical macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, and that government intervention _____ improve the efficiency of the market economy.
works well; a natural consequence of an expanding economy; cannot
Monetarist macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, but that fluctuations in the _____ generate the business cycle.
works well; a natural consequence of an expanding economy; the quantity of money
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
An efficiency wage is a real wage rate that is set _____ the full-employment equilibrium wage rate to _____.
above; induce greater work effort
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
Describe two examples of people who work part time for economic reasons and two examples of people who work part time for noneconomic reasons. Marla is an associate at JCPenney who wants to work 40 hours week but works 25 hours a week because sales at JC Penney are slow. Marla works part time for _______ reasons. Joe is a server at Olive Garden who wants to work 40 hours a week but works 15 hours a week because the number of patrons at Olive Garden has decreased. Joe works part time for _______ reasons. Michelle is a student who wants to work 20 hours a week at Cost Cutters so she can attend school. Cost Cutters schedules her for 20 hours a week. Michelle works part time for _______ reasons. Florence is semi-retired and wants to work 15 hours a week at Walgreens so she can spend time with her grandchildren. Walgreens schedules her for 15 hours a week. Florence works part time for _______ reasons.
economic; economic noneconomic; noneconomic
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
If an effective minimum wage were abolished, what do you predict would happen to the equilibrium real wage rate and the quantity of labor employed? If an effective minimum wage is abolished, the equilibrium real wage rate _______ and the quantity of labor employed _______.
falls; increases
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
What is the effect of the bias in the CPI? The bias in the CPI leads to _______ in government outlays and to _______ in taxes.
increases; decreases
How does the slope of the production function illustrate diminishing returns? The slope of the production function becomes _______ steep as the quantity of _______ increases because of diminishing returns.
less; labor
The production function is a relationship that shows the _____ quantity of _____ that can be produced as the quantity of _____ employed changes and all other influences on production remain the same.
maximum; real GDP; labor
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
The labor force participation rate is the percentage of the _____ who are members of the labor force.
working-age population
