Macro Exam 1 - Bonnal

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When the economy was expanding in early​ 2007, fewer than​ _______ percent of the unemployed had been jobless for more than 6 months.

20

The price index which is used to measure changes in the cost of living is the

Consumer Price Index​ (CPI).

If you were attempting to forecast the level of consumer spending by​ households, which measure of total production or total income might be most helpful in making your​ forecast?

Disposable personal income

In the circular flow of expenditure and​ income, why must the total value of production in an economy equal the total value of​ income?

Every penny spent on a good or service must end up as​ someone's income.

Most economists agree that the​ above-market wage paid in unionized industries significantly increases the unemployment rate in the United States.

False

Why is GDP an imperfect measurement of total production in the​ economy?

GDP does not include household production or production from the underground economy.

What happens if we measure GDP by adding up the value of every good and service produced in the​ economy?

GDP is overestimated because of double counting.

When a significant fraction of domestic production takes place in​ foreign-owned facilities, a​ country's difference between GDP and GNP is as​ follows:

GDP will be much larger than GNP.

Which one of the following is not a measure of the price​ level?

Government Price​ Index: an average of the prices paid by the government for goods and services used only by different government agencies.

All of the following are correct except

Gross domestic income does not include health insurance benefits received by the employees.

Why in microeconomics can we measure production in terms of​ quantity, but in macroeconomics we measure production in terms of market​ value?

If, in​ macroeconomics, we measured production using​ quantities, we would add tons of wheat grown by U.S. farmers to the number of iPods produced by​ Apple, to gallons of​ milk, and so on. When we measure total​ production, we​ can't just add together the quantities of every good and service because the result would be meaningless. Measuring production using market value in dollar terms allows us to add together many different goods and services.

While GDP is the most important measure of total production and total​ income, other measures of total production and total income are contained in the National Income and Product​ Accounts, each of which can be more useful than GDP for some purposes. Which of the following is a correct definition of one of these other​ measures?

National income equals GDP minus depreciation.

Suppose a house is built and sold in the year 2006. If the house is resold in the year​ 2017, is the value of the house included in Gross Domestic Product for 2017?

No. GDP for 2017 includes only production that occurs during 2017.

GDP deflator =

Nominal GDP / Real GDP x 100

Which of the following is the correct formula for calculating the unemployment​ rate?

Number of unemployed / labor force x100

Which of the following would be included in the gross national product​ (GNP) of the United​ States?

Production from a U.S. firm that operates in Mexico.

How does real GDP deal with the problem inflation causes with nominal​ GDP?

Real GDP separates price changes from quantity changes. By keeping prices​ constant, we know that changes in real GDP represent changes in the quantity of output produced. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years.

What is the difference between the consumer price index and the producer price​ index?

The consumer price index is an average of the prices of the goods and services purchased by the typical urban family of​ four, whereas the producer price index is an average of the prices received by producers of goods and services at all stages of the production process.

The production of LCD television sets in Australia increased by​ 20% this year as compared to last year. Those TV sets were no less advanced technologically than the sets sold in previous years.​ However, the value of the contribution LCD television sets made to​ Australia's nominal GDP during this year was the same as the previous year. Which of the​ following, if​ true, would best explain this​ outcome?

The price of LCD television sets declined in the past year.

How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both​ (1) discouraged workers and​ (2) people who work​ part-time but would prefer to work​ full-time?

The unemployment rate would increase.

What is the difference between the value of a​ firm's final product and the value added by the firm to the final​ product?

The value of a​ firm's final product is the sale​ price; value added is the difference between the sale price and the price of intermediate goods.

Which of the following is not one of the conditions someone needs to meet to be counted as​ unemployed?

They had worked only one hour per week during the previous four weeks.

The producer price index​ (PPI) tracks the prices firms receive for goods and services at all stages of production.

True

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the​ next?

When nominal GDP increases from year to​ year, the increase is due partly to changes in prices and partly to changes in quantities.

Which equation represents the relationship between GDP and the four major expenditure​ components?

Y = C + I + G + NX

GDP

Y= C + I + G + NX

Would the services of a real estate agent who helped sell​ (or helped​ buy) the house be included in GDP for​ 2017?

Yes. GDP for 2017 includes the market value of final goods and services. This includes real estate services.

Is the value of "intermediate goods and services" produced during the year included in "Gross Domestic Product ​(GDP)"? For​ example, is cottoncotton used to produce a new shirtshirt included in​ GDP?

Yes. The value of the cotton is not directly counted in​ GDP, but the production of cotton is included in the​ value-added method of measuring GDP

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available. You would be counted as

a discouraged worker.

To calculate personal income from national​ income, which of the following must the BEA​ do?

add government transfer payments

When a firm pays a wage that is higher than the market wage in order to increase worker​ productivity, the wage is called

an efficiency wage.

An underground economy involves all of the following except

buying and selling of goods and services by obtaining a permit from the government.

A breakdown of the four components of GDP shows that

consumption is by far the largest expenditure​ category, and that consumer spending on services far exceeds consumer spending on goods.

The country of Alaine produces​ 1,000 tons of corn during a year. It is valued at​ $500 per ton. A lobbyist for the corn industry in Alaine argues that the total value of corn production should be included in the​ country's GDP for the same year. The​ lobbyist's claim is based on the assumption that

corn is not used in the production of other goods.

Workers who lose their jobs because of a recession are experiencing

cyclical unemployment.

Which of the following do we subtract from GDP to obtain national​ income?

depreciation

When an unemployed person drops out of the labor​ force, it

does not affect the​ employment-population ratio.

Since nominal incomes increase with​ inflation,

expected inflation does not affect the purchasing power of the average consumer.

When the economy is at full​ employment, which types of unemployment​ remain?

frictional and structural

The​ short-term unemployment that arises from the process of matching workers with jobs is called

frictional unemployment.

Since the late​ 1940s, the overall labor force participation rate

has risen because the decline in the labor force participation rate of adult men has been more than offset by the increase in the labor force participation rate of adult women.

The​ "normal" underlying level of unemployment in the economy is

he natural rate of unemployment. the sum of structural unemployment and frictional unemployment. the​ full-employment rate of unemployment.

In August​ 2015, which of the following demographic groups had a higher rate of unemployment than the unemployment rate for the total​ population?

high school dropouts

When examining the​ circular-flow diagram,

households can use some of their income to purchase goods from foreigners as imports.

In the​ circular-flow diagram, who supplies factors of production in exchange for​ income?

households,

Government unemployment insurance tends to

increase the unemployment rate by lowering the opportunity cost of job search.

Increases in the minimum wage will

increase unemployment among teenagers.

The unemployment rate that includes discouraged workers and people working​ part-time who would prefer​ full-time jobs

is higher than the official unemployment​ rate, and the difference between the two grows larger in recessions.

The computation of the average annual growth rate of real GDP

is more complex when examining data for a long period of time than when examining data for only a few years.

Potential GDP

is the level of real GDP attained when all firms are producing at capacity.

The chapter explains that it is impossible to know whether a particular nominal interest rate is​ "high" or​ "low" because

it all depends on the inflation rate.

If prices rise over​ time, then real GDP will be

larger than nominal GDP in years before the base year.

Unemployment rates are

lower for college graduates than for people without a high school​ degree, and vary greatly among ethnic groups.

In an economy with rising​ prices, compared to the base​ year,

nominal GDP is larger than real GDP in years after the base year.

The difference between a nominal variable and a real variable is that

nominal variables are calculated in​ current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.

Some countries have larger underground economies than do other​ countries, because

of government policies that are retarding economic growth.

The​ employment-population ratio measures the

percentage of the working age population that is employed.

Disposable personal income is equal to

personal income minus personal tax payments.

Disposable personal income is

personal income minus personal taxes.

The payment of government unemployment insurance reduces the severity of recessions by

preventing a huge drop in income and spending for the unemployed.

If the GDP deflator in 2012 has a value of​ 98.0, then

prices have decreased 2 percent between the base year and 2012.

Which of the following is the best measure of the standard of living of the typical person in a​ country?

real GDP per person

​Long-run economic growth in the United States is best measured using

real GDP per​ capita, which has been trending strongly upwards over the past century.

Over​ time, prices may change relative to each other. To take this change into​ account, the Bureau of Economic Analysis calculates

real GDP using chain weights.

The unemployment rate

rises during​ recessions, falls during​ expansions, and is always above zero.

Potential GDP is

sometimes​ greater, sometimes​ less, and sometimes equal to actual real GDP.

In calculating​ GDP, which levels of government spending are included in government​ purchases?

spending by​ federal, state, and local governments

The type of unemployment most likely to result in hardship for the people who are unemployed is

structural because this type of unemployment requires retraining to acquire new job skills.

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

structural unemployment.

GDP is best defined as

the market value of all final goods and services produced in a country in a period of time, typically one year.

When the economy is at full​ employment, unemployment is equal to

the natural rate of unemployment.

The difference between the nominal interest rate and the real interest rate is

the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.

The unemployment rate in the United States typically has been lower than the unemployment rates in Canada and countries in Western Europe because

the opportunity cost of job search is lower in Canada and countries of Western Europe and unemployed workers in those countries search longer for jobs.

Which of the following is included in the​ economist's definition of​ investment?

the purchase of new​ machines, factories, or houses

The two key factors that cause labor productivity to increase over time are

the quantity of capital per hour worked and the level of technology.

The natural rate of unemployment is

the sum of structural unemployment and frictional unemployment.

Real GDP is

the value of goods and services evaluated at base year prices.

What is the best use of the rule of 70 among those listed​ below?

to judge how rapidly real GDP per capita is growing over long time periods

The type of inflation that is a greater problem to society is

unanticipated​ inflation, since it causes greater redistribution of income between those making payments and those awaiting payments in the future.

When an unemployed person drops out of the labor​ force, the unemployment rate

understates the true degree of joblessness in the economy.

In​ 2014, the largest component of gross domestic income was

wages

Which component of gross domestic income is the​ largest?

wages

An important conclusion to draw from the​ circular-flow diagram is that

we can measure GDP by calculating the total value of expenditures on final goods and​ services, or we can measure GDP by calculating the value of total income.

The extent of job creation and job destruction is

what we would expect in a vibrant market system.

Nominal incomes generally increase with inflation because

when inflation is​ anticipated, average nominal incomes also increase by the same percentage as the rate of inflation.

What are the four major components of expenditures in​ GDP?

​Consumption, Investment, Government​ Purchases, and Net Exports

What are the four major categories of​ expenditure?

​Consumption, investment, government​ purchases, and net exports.

The three types of unemployment are

​frictional, structural, and cyclical unemploment.

The unemployment rate in the United States is usually​ ________ than the unemployment rates in most other​ high-income countries, partly because the United States has​ _________ requirements for the unemployed to receive government payments.

​lower; more stringent

Two important trends in the labor force participation rates of adults aged 20 and over in the United States since 1948 are the​ _________ labor force participation rate of adult women and the​ __________ labor force participation rate of adult men.

​rising; falling


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