Macro Econ Ch 1, 6, 7, 8, 9

Consumption in the United States is about ____________ of GDP, and it moves relatively little over time.

68%

The amount spent on a basket of goods in 2016 was $117. In 2017, that same basket cost $126. The annual rate of inflation from 2016 to 2017 was ______

7.70%

River City has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________

8.3%; 60%

If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to

94 million

Which of the following statements most likely lies within the realm of microeconomics?

An increase in labor costs will increase the additional cost of producing another bus.

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

Market-oriented

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices

Overstate

Over the long run, ____________ per hour is the most important determinant of the average wage level in any economy

Productivity

The value of what is produced per worker, or per hour worked, is called

Productivity

_________ is output per hour in the business sector

Productivity

Increased investment alone will guarantee economic growth

This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology

For most high-income countries of the world, GDP _________________ over time

has risen gradually

In the long run, the most important source of increase in a nation's standard of living is a:

high rate of economic growth.

Which of the government policies below is most unlikely to encourage per capita economic growth?

high taxes and new regulations on companies that spend a lot on new investment projects

A Saddleback College student who is enrolled in school fulltime and not seeking employment is considered

out of the labor force

Todd looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered

out of the labor force

One argument for why some countries are converging is that low-income countries may find it relatively easy to adopt technology ________.

that has already been invented and used in other countries

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time

the basket of goods and services

Capital deepening, which leads to increased economic growth, occurs when society increases ____________

the level of capital per person

If a nation's labor force receives a significant influx of young workers

the natural rate of unemployment is likely to increase

Insofar as government public policy is concerned, the best way to battle unemployment would be _____

to minimize recessions

Government expenditures for social security and unemployment insurance are, for GDP accounting purposes, considered:

transfers, and are not included in government spending as part of GDP

The unemployment rate measures

unemployed workers as a percentage of the labor force.

China's GDP is 50,000 billion yuan. The yuan/U.S. dollar exchange rate is 4. What is China's GDP in U.S. dollars?

$12,500 billion

The unemployment rate reported by the Bureau of Labor Statistics each month is calculated as follows

(Number of Unemployed / Number in Labor Force) x 100

Jonathan is creating a price index for a basket of consumer goods. The value of the price index in 2017 is 108 and the base year is 2015. The price index in 2015 is equal to ____

100

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals

14.4%

If the CPI increases by 3 percent over a year and average nominal income increases by 5 percent, real income has increased by how much

2 percent

During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.

2%

The Consumer Price Index (CPI) has risen ____________ per year in the United States over the last thirty years

2% to 4%

Use the following data to calculate the growth of real GDP between 1980 and 1990: nominal GDP in 1980 = $2,862.5 trillion; nominal GDP in 1990 = $5,979.6 trillion; price index in 1980 = 48.3; price index in 1990 = 72.7

38.8%

What is the unemployment rate if there are 4,500 people unemployed and 100,000 workers in the labor force?

4.50%

Which of the following would increase this year's GDP?

A commission charged by your broker when you sold 100 shares of Borden stock

Cyclical unemployment is associated with

A decline in the economy's output

When society has a higher level of capital per person, it is called _____________

Capital deepening

The largest expenditure component of GDP is

Consumption

The GDP Price Index or deflator is a price index that includes the following components of GDP

Consumption, Investment, Government plus Exports minus Imports

GDP can be compared across countries once it is adjusted for ____________ and population

Currency

Which of the following individuals is most likely to be frictionally unemployed?

Damien, who recently graduated from college and is looking for his first job

Another term used to describe negative inflation is

Deflation

With regard to the economy, the term negative inflation is synonymous with which of the following?

Deflation

_____ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate

Efficiency wage theory

When we want to measure wage inflation in the labor market, we use the

Employment Cost Index

Which of the following equations is the correct equation for GDP?

GDP = C + I + G + X - M

Your economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

GDP Deflator

If U.S. imports of goods and services exceed exports U.S.

GDP is less than the sum of consumption, investment, and government purchases.

An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical

GDP per capita

Suppose in a given economy the crime rate declines. Which statement describes how this would affect the relationship between GDP and the degree of change in the broad standard of living

GDP would understate the standard of living

Which expression describes a method for measuring productivity?

GDP/workers

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

Government

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending

Government

In growth accounting studies, the usual approach uses an aggregate production function to estimate how much of per capita economic growth can be attributed to growth in physical capital and human capital. After these are measured, the residual is attributed to ____________.

Growth in technology

Inflation implies that the level of all prices ____

Increase

Which of the following best describes the relationship between economic growth and literacy?

Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

A payment is said to be ________________ if it is automatically adjusted for inflation

Indexed

______ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800

Industrial Revolution

What name is given to the index based on the prices of exported or imported merchandise?

International Price Index

To achieve a high standard of living, a nation should

Promote economic growth

___________ are associated with a reduction in output and rising unemployment

Recessions

Resources exist in limited supply, and as a result, economics is the study of how societies make decisions based on __________

Scarcity

_______ allows workers to do what they are best at to increase production.

Specialization

Robert has worked as a dishwasher for 15 years but has been fired because it has become cheaper to use a dishwashing machine. Robert does not qualify for any available jobs, many of which are in computer programming. Robert is

Structurally unemployed

When the price of a good rises, consumers tend to purchase less of it and buy a relatively less expensive good. This behavior creates ____________ bias in the CPI, so the Bureau of Labor Statistics makes adjustments to the fixed basket of goods

Substitution

Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth

Technology

The highest point of the economy, before a recession begins, is called the peak; conversely, the lowest point of a recession, before a recovery begins, is called the ____________.

Trough

For the purposes of calculating GDP using the expenditure approach, which of the following is not included in the government purchases account?

Welfare payments to the poor

Which of the following is most likely a topic of discussion in macroeconomics?

a decrease in the unemployment rate

The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay

adverse selection of wage cuts

The labor force consists of

all adults who are working or actively seeking work

In macroeconomics, the connection from inputs to outputs for the entire economy is called ______________

an aggregate production function

Cyclical unemployment arises when

business activity in the macroeconomy declines

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ___

business cycle

Specialization

can lead to an increase in overall production

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

cost of living adjustments

The type of unemployment that occurs because of a recession is called

cyclical unemployment

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as

cyclically unemployed

Real GDP is calculated by

dividing nominal GDP by the appropriate price index times 100

Comparisons of per capita gross domestic product (GDP) between countries

do not necessarily provide a good measure of relative living standards

The unemployment that occurs as workers move between jobs is called _____

frictional unemployment

The effects of inflation are seen in

goods, services, wages and income levels

Since the negative effects of inflation depend in large part on having inflation unexpectedly affect one part of the economy but not another—say, increasing the prices that people pay but not the wages that workers receive—one practice to help take some of the sting out of inflation is _______

indexing payments

The percentage change in the price level from one-time period to the next, whether the price level is measured in terms of money or as a price index, will be the ____

inflation rate

Which of the following best describes a monetary policy tool?

interest rates

Which of these policies would likely stimulate economic growth?

investing in research and development

Macroeconomics

is concerned with the expansion and contraction of the overall economy.

Some low-income and middle-income economies around the world have shown a pattern of convergence, in which the growth of their economies ____________

is faster than that of high-income countries

Julie chooses to go to university fulltime rather than to work. Julie

is not part of the labor force

A nation can achieve higher economic growth if

it devotes more resources to research and development

GDP is the

market value of an economy's production of final goods and services in a one year period.

The basic difference between macroeconomics and microeconomics is

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy

Suppose that a central bank decides to lower interest rates to boost the economy. This is an example of a _______ policy

monetary Monetary policy uses tools to influence the banking system, and a key part of the banking system is the cost of borrowing; i.e., interest rates.

GDP is comprised of consumer spending, investment spending, government spending, and

net exports

Transfers of assets, such as stock sales are:

not included in GDP because they do not increase domestic production

The Producer Price Index is based on prices paid for supplies and inputs by

producers of goods and services

Tracking the ____________ over time is important because it is closely tied with other economic variables and provides a general idea of the nation's well-being

real GDP

The __________________ is the nominal interest rate minus the rate of inflation

real interest rate

Macroeconomic topics do not usually include

the profit maximizing decisions of an individual manufacturer

GDP is

the value of all final goods and services produced domestically

Frictional unemployment is

unemployment that occurs as workers move between jobs

When the demand for labor rises, ____________, all else being held constant

wages increase