Macro Econ HW set 2 + Practice exam 2

Product Units Produced Market Price Doors 5 $100 Windows 4 $50 Table 9.1 Total Market Value In the Table above, the total market value of the two products is

$700. (5*100)+(4*50)

By 1933, the worst year of the Great Depression, the unemployment rate rose to almost ____%.

25

From 1929 to 1933, GDP fell by almost ____ %.

27

In 2003, the U.S. civilian, non-institutionalized population consisted of about 220 million individuals. About 147 million people were in the labor force, of which almost 138 million were employed. The number of people unemployed was about

9 million 147 - 138 = 9 = 9 million

A country reports the total expenditures on the fixed CPI basket for the past three years. The cost of the CPI basket in 2008 was​ $23,000, the cost of the CPI basket for the base​ period, 2009, was​ $23,805, and the cost of the CPI basket in 2010 was​ $24,500. The CPI for 2008 is

96.6

The CPI stands for

Consumer Price Index.

The total production within an economy is measured as

Gross Domestic Product.

Which outcomes are consistent with falling aggregate supply?

Rising prices, falling GDP, rising unemployment rate

Which outcomes are consistent with rising aggregate demand?

Rising prices, rising GDP, falling unemployment rate

Which of the following is NOT an assumption of the classical​ model?

Wages and prices are fixed.

The Dehydrated Water Company produced 500 pounds of output while the Uncombusted Ash Company produced 400 pounds of output.

We cannot tell which company added more product to the economy without knowing the prices at which the products are sold.

The natural unemployment rate occurs

at the full employment level of unemployment.

In the above​ figure, the economy is initially at point B. If the government decreases transfer​ payments, there is

a shift to AD2.

In calculating​ GDP, we must

add the market value of exports and subtract the market value of imports.

People expect their incomes will decrease next year. As a​ result, the​ ________ will shift​ ________.

aggregate demand​ curve; leftward

Which of the following changes does NOT shift the​ short-run aggregate supply​ curve?

an increase in the price level

Which of the following does NOT shift the aggregate demand​ curve?

an increase in the price level

Moving along the aggregate demand​ curve, a decrease in the quantity of real GDP demanded is a result of

an increase in the price level.

The value of used goods​ ________ counted as part of GDP​ ________.

are​ not; because they were counted during the period when they were counted as new goods.

To be counted as employed by the​ BLS, in the week before the survey the person must have worked for pay​ ________.

at least 1 hour

The AD curve shows the sum of

consumption​ expenditure, investment, government expenditures on goods and​ services, and net exports.

If nominal GDP increases this​ year, then real GDP

could​ increase, decrease, or not change.

As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their​ skills, the economy experiences

frictional unemployment.

A classical model of the economy predicts

full employment in the long run.

Inflation is defined as a

general upward movement of prices.

The expenditure approach values​ ________ and the income approach values​ ________.

goods and services at market​ prices; goods and services at factor prices

The​ short-run aggregate supply curve

has a positive slope.

Rightly or wrongly, most citizens in the United States expect that presidents

have control over economic outcomes.

An increase in nominal GDP could result from an increase in i. production. ii. prices. iii. taxes and subsidies.

i and ii

After calculating net domestic product at factor​ cost, to calculate GDP using the income​ approach, in part we must add

indirect taxes and depreciation.

A general upward movement of prices is called

inflation.

Economists agree that the CPI

is a possibly biased measure of the cost of living.

Real GDP can increase if the i. quantities of goods and services produced decrease and prices fall by a smaller percentage. ii. quantities of goods and services produced decrease and prices fall by a larger percentage. iii. quantities of goods and services produced decrease and prices do not change. iv. quantities of goods and services produced increase.

iv only

The CPI overstates inflation because the average consumer buys

less of those goods whose relative price has risen.

Along a​ short-run aggregate supply​ curve, a decrease in the price level means that

less output is produced as firms decrease production.

When the unemployment rate is greater than the natural unemployment​ rate, real GDP is

less than potential GDP.

In the United States, child labor laws

limit the amount and type of work that children can perform.

When calculating Gross Domestic Product, all output is converted to a common unit by

multiplying the units produced by the market price.

If a person is not working by choice then we can conclude that person is

not in the labor force.

Two years ago, Brenda quit her job to take care of her children. She has not looked for a job since then. According to official U.S. statistics, Brenda is

not in the labor force.

As a result of the oil price hikes and international competition in the​ 1970s, ________. When governments and businesses downsizing in the​ 1990s, ________.

structural unemployment​ increased; structural unemployment increased

How would you best describe a manufacturing employee who has been fired because he was replaced by a robot​ (new technology) and does not have the skills necessary to help operate the​ robot?

structurally unemployed

Structural unemployment includes people who become unemployed from

technological changes.

Gross Domestic Product measures

the amount of production in an economy.

The Great Depression challenged

the long-run model that was based on Classical assumptions.

An individual holds​ $10,000 in a checking account and the price level rises significantly. Hence

the​ individual's real wealth and consumption expenditure decrease.

Prior to the Great Depression, the predominant economic policy of the U.S. federal government was

to balance the budget and keep expenditures to a minimum.

In a small economy with two businesses, a dentist performed 200 hours worth of cavity filling and a carpenter made 50 chairs. Total GDP is

unknown with the information given because GDP is only an estimate.

For a politician, the question, "Are you better off now than you were four years ago?" implies that

voters care more about where they were rather than where they are today.

One of the legacies of Keynesian economics is that

voters expect the President of the United States to address macroeconomic issues.

According to the income approach to measuring​ GDP, the largest income category is

wages.

Which statement is TRUE? (a) Inflation does not necessarily mean that the cost of living is rising. (b) The affordability of goods and services declines if wages rise faster than prices. (c) Inflation is more selective than unemployment in which people it affects. (d) Inflation always improves living standards because it leads to wage increases. (e) Inflation is to be avoided under all conditions.

(c) Inflation is more selective than unemployment in which people it affects.

Based on the above​ table, the unemployment rate is

10 percent.

Consumers in a country buy only two​ goods, sneakers and manicures. The prices and quantities purchased by urban households are in the table above. The reference base year is 2009. The inflation rate between 2009 and 2010 is

10.3 percent.

The reference base period for the CPI has an index number of

100.

There are several reasons why the aggregate demand curve is downward sloping. Which of the following correctly describes one of these​ explanations?

A fall in the price​ level, holding foreign prices and the exchange rate​ constant, increases net exports.

What is a four basic macroeconomic outcome?

All of the above are macroeconomic outcomes.

In the circular​ flow, how are the​ "value of​ production", "income", and​ "expenditures" related?

Expenditures on GDP equals the value of production which equals income.

Which outcomes are consistent with falling aggregate demand?

Falling prices, falling GDP, rising unemployment rate

Which outcomes are consistent with rising aggregate supply?

Falling prices, rising GDP, falling unemployment rate

In the above​ figure, which part corresponds to a destruction of part of the​ nation's capital​ stock?

Figure A

In the above​ figure, which point corresponds to an increase in​ technology?

Figure C

Janet is receiving a 15% pay raise. If the rate of inflation is 12% then

Janet's purchasing power is rising.

Which of the following are NOT among the criteria for inclusion of a person in the civilian labor force?

Must be literate

Which statement best describes inflation?

The price of every commodity in the economy is going up.

In the classical​ model, what occurs if a wage of​ $20/hour results in unemployed​ workers?

The wage rate will​ drop, more workers will be​ hired, and the unemployment rate falls.

Which of the following is​ true?

To be classified as​ employed, you must work at least 1 hour per week at a paid job or 15 hours or more as unpaid workers in your family business.

The CPI market basket is determined by

a consumer survey.

Which of the following increases aggregate​ demand?

a decrease in taxes

Consumption expenditure includes spending

by households.

The largest expenditure category in the United States is

consumption expenditure.

The expenditure approach to measuring GDP is done by using data on only

consumption​ expenditure, investment, government expenditure on goods and​ services, and net exports of goods and services.

If we compare the CPI to a perfect cost of living​ index, we find that they are

different because the CPI uses a fixed basket and has some measurement difficulties.

One of the far-reaching effects of the Great Depression was that it

discouraged economists from looking for an alternative to the long-run model.

The​ working-age population includes

employed and unemployed people over the age of 16.

In calculating the unemployment​ rate, part-time workers over the age of 16 are counted as

employed.

The purchase of a new Boeing fighter jet by Israel is classified in the U.S. GDP accounts as

export expenditure.

Real GDP is the value of final goods and services produced in a year

expressed in the prices of a base year.

Investment is the expenditure done by

firms

The following are all final goods except

flour used by the baker to make cup cakes.

Which type of unemployment is a permanent and healthy phenomenon in a dynamic​ economy?

frictional

Which of the following would be considered unemployed as part of normal labor market​ turnover? ​ i) Juliet, who was fired when the company where she worked went bankrupt in a recession. ​ ii) Hannah, who quit her job to find one that better suited her skills. ​ iii) Charlotte, who started looking for a job upon graduation from high school.

ii and iii.

Which of the following is classified as a final good or​ service? i. tires bought by GM to put on new Tahoes ii. mustard bought by Subway to put on its sub sandwiches iii. your purchase of online access to the Wall Street Journal

iii only.

Higher unemployment benefits create

incentives for longer job searches and higher frictional unemployment.

In measuring the unemployment​ rate, part-time workers are​ ________ and discouraged workers are​ ________.

included as​ employed; excluded

Suppose the Bureau of Labor Statistics uses Ballpark Franks as the hot dogs used when calculating the consumer price index. During​ 2015, Oscar Mayer aggressively reduces prices. Consumers respond by purchasing more Oscar Mayer and less Ballpark Franks. The 2010 CPI is likely to

overstate the average prices paid by consumers.

One reason that the aggregate demand curve has a negative slope is that when the domestic price level​ rises,

people substitute toward more imported goods and services.

The Bureau of Labor Statistics​ (BLS) compiles information about employment by

performing a monthly survey of​ 60,000 households.

According to classical​ theory, total employment and real Gross Domestic Product​ (GDP) are

positively related.

Gross Domestic Product is equal to the market value of all the final goods and services​ ________ in a given period of time.

produced within a country

We distinguish between the​ long-run aggregate supply curve and the​ short-run aggregate supply curve. In the long run

real GDP equals potential GDP.

Frictional unemployment is the result of

the normal process of jobs being created and destroyed.

An aggregate supply curve depicts the relationship between

the price level and the aggregate quantity supplied.

Investment is defined as

the purchase of new capital goods by firms.

In the macroeconomic long​ run,

there is full employment and real GDP is equal to potential GDP.

Full employment is the level of unemployment that occurs

when cyclical unemployment is zero.

The formula for the CPI is

​(Cost of CPI market basket at current period prices​ ÷ Cost of CPI market basket at base period​ prices) × 100.

The idea that supply creates its own demand is known as

​Say's law.

A decrease in government expenditure shifts the AD curve​ ________ and a decrease in taxes shifts the AD curve​ ________.

​leftward; rightward

Moving upward along the SRAS results in a​ ________ in the price level and​ ________ in real GDP.

​rise; an increase