Macro Economics Test 1

Which equation summarizes the expenditures approach to measuring GDP?

GDP = C + I + G + (X - M)

During periods of inflation, which of the following events does NOT occur?

People on a fixed income have increased standards of living.

What is real GDP in 2014 if nominal GDP in 2014 is $15,000 billion, the GDP deflator in 2014 is 110, and the GDP deflator in 2010 was 100?

$13,636 billion

John earns $2,000. His taxes are $250 and he spends $1,500. Therefore, his savings must be:

$250

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2006 was

109.2.

Cedar Valley Furniture uses 5 workers, each working 8 hours, to produce 80 rocking chairs. What is the per hour productivity of these workers?

2 chairs per hour

Unemployment rates over the past 50 years have tended to hover around:

5% to 6%.

According to the circular flow model, the value of the household sector and the value of the business sector will:

Always be equal

At the peak of the business cycle, the economy is typically operating:

At its capacity

GDP measures the final value of goods and services produced to avoid the problem of:

Double counting.

Gross domestic product is the total market value of all:

Final goods and services produced in the United States by labor and property.

_____ unemployment includes workers who voluntarily quit their jobs to search for better positions.

Frictional

Which of the following is correct about the GDP and GNP?

GDP < GNP if Net Foreign Factor Incomes received are positive.

A simple circular flow diagram shows that the factors of production are:

Purchased by businesses

GDP excludes:

The market value of unpaid work in the home.​

A business cycle is:

The periodic fluctuation of economic activity

The local Chevrolet dealership has an increase in inventory of 25 cars in 2006. In 2007, it sells all 25 cars. Which of the following statements is correct?

The value of the cars in inventory will be counted as part of 2006 GDP, and the value of the cars sold in 2007 will not increase 2007 GDP.

During a typical economic recocery

Unemployment drops

Which ONE of the following would be included in the GDP calculations?

a hamburger purchased by a hungry restaurant patron

In a simple circular-flow diagram, total income and total expenditure are

always equal because every transaction has a buyer and a seller.

Which of the following does NOT increase productivity?

an increased money supply

When an economy's production capacity is expanding:

domestic investment exceeds depreciation.

The consumption component of GDP includes spending on

durable goods, nondurable goods, and services.

The GDP deflator is an index that includes prices of all but:

imports.

GDP includes outputs produced _____ but it does not include outputs produced _____.

inside the United States by foreign citizens; outside the United States by U.S. citizens

An increase in physical capital per worker will:

lead to more output per worker.

The nonaccelerating inflation rate of unemployment is the unemployment rate associated with ____ inflation and ____ unemployment:

low; low

Which of the following values is an example of a nonmarket transaction NOT included in the national income and product accounts?

mowing your own lawn

If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself, then GDP

necessarily falls.

The logic behind the catch-up effect is that

new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

not counted. ​

Total spending in an economy is the sum of:

personal consumption plus gross private investment plus government spending plus net exports.

The consumer price index does NOT include:

property taxes.

In national income accounting, government purchases include:

purchases by Federal, state, and local governments.

Economic growth is most commonly measured by:

real GDP per capita.

The broadest measure of inflation is:

the GDP deflator.

On-the-job training can lead to an increase in:

the quality of the labor force.

20. The capital consumption allowance:

Is an allowance for depreciation.

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person?

It was unchanged.

An economic recovery that produces too few jobs to significantly reduce the unemployment rate is known as a(n):

Jobless Recovery

Which of the following is correct about the Natural Rate of Unemployment (NRU)?

NRU is the full employment level of unemployment.

The sum of all income, including wages, salaries and benefits, profits, rental income, and interest, is called:

National income

GDP can be found either by adding up all of the __________ or all of the __________ in the economy.

Spending; income

Which of the following persons is considered to be unemployed?

Tiffany, who is going on interviews, hoping to get her first job

GDP per capita tells us the living standards of the

average person in the economy.

The natural unemployment rate includes

both frictional and structural unemployment.

Transfer payments are:

excluded when calculating GDP because they do not reflect current production.

Inflation is a:

general rise in prices.

The natural rate of employment:

is the rate at which the actual inflation rate is equal to people's inflationary expectations.

Suppose an economy produces only eggs and ham. In 2005, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham are sold at $4 per pound. In 2004, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2005,

nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.

The unemployment rate is defined as the ________ divided by the ________.

number unemployed; number in the labor force

A production function:

shows the output that is produced using different combinations of inputs combined with existing technology.