Macro Exam 2

63. Table 8-11 Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Refer to Table 8-11. Nominal GDP for Tyrovia in 2018 equals A) $1,140. B) $880. C) $690. D) $560.

*A) $1,140.

14. Refer to Table 8-6. Consider the table of production and price statistics for a small economy in 2018. If the economy only produces the four goods listed below, what is GDP for 2018? A) $428,000 B) $267,000 C) $24,000 D) $1,424

*A) $428,000

74. Table 8-19 Refer to Table 8-19. Given the information above, calculate the GDP deflator in 2018. A) 114 B) 105 C) 95 D) 87

*A) 114

66. The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is A) 5% higher in year 2 than in year 1. B) 105% higher in year 2 than in year 1. C) 5% higher in year 1 than in year 2. D) 105% higher in year 1 than in year 2.

*A) 5% higher in year 2 than in year 1.

87. If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is A) 5%. B) 5.2%. C) 8%. D) 10%. E) 50%.

*A) 5%.

76. Table 8-19 Given the information above, calculate the rate of increase in the price level from 2017 to 2018. A) 8.6% B) 7.9% C) -7.9% D) -8.6%

*A) 8.6%

73. If the GDP deflator is 142, by how much have prices changed since the base year? A) Prices have increased by 42%. B) Prices have increased by 142%. C) Prices have decreased by 4.2%. D) Prices have increased by 58%.

*A) Prices have increased by 42%.

92) Structural unemployment is the result of A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. B) the search process of matching workers with jobs. C) the ups and downs in inflation. D) a slowdown in the economy.

*A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.

2. What is the largest component of spending in the United States? A) consumption spending B) investment spending C) government purchases D) net investment spending

*A) consumption spending

54. What is the largest component of spending in the United States? A) consumption spending B) investment spending C) government purchases D) net investment spending

*A) consumption spending

100) Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.

*A) frictional unemployment.

90. A student who just graduated from college but has not found a job would most likely be A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.

*A) frictionally unemployed.

44. During a business cycle expansion, total production ________ and total employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

*A) increases; increases

64. To examine how the total production of an economy has changed over time, it would be better to examine A) real GDP. B) nominal GDP. C) GDP at current prices. D) the GDP deflator.

*A) real GDP.

60. The "underground economy" is also referred to as A) the informal sector. B) the formal sector. C) the halfway economy. D) the net domestic product economy.

*A) the informal sector.

Refer to Table 8-2. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals A) $7,400. B) $6,400. C) $5,800. D) 2,440 units.

*B) $6,400.

Table 8-2 - Using the information in the above table, nominal GDP for this simple economy equals A) $7,400. B) $6,400. C) $5,800. D) 2,440 units.

*B) $6,400.

81. Table 9-1 Consider the data above for a simple economy. Refer to Table 9-1. The unemployment rate for this simple economy equals A) (100/1,000) × 100. B) (100/1,100) × 100. C) (100/15,000) × 100. D) (100/20,000) × 100

*B) (100/1,100) × 100.

58. GDP is not a perfect measure of well-being because A) the value of leisure is included in GDP. B) GDP is not adjusted for pollution. C) GDP is adjusted for changes in crime rates. D) GDP is adjusted for increases in drug addiction.

*B) GDP is not adjusted for pollution.

98) Which of the following policies would reduce structural unemployment? A) an increase in the minimum wage B) a job retraining program C) implementing an unemployment insurance policy D) building an online job database that helps workers find jobs

*B) a job retraining program

43. In 2016, Ford Motor Company's sales were rising. These events were caused by A) an economic recession. B) an economic expansion. C) an increase in advertising. D) improving quality of service.

*B) an economic expansion.

53. To calculate GDP by the expenditure method, one must add A) wages, rents, interest, and profits. B) consumption spending, investment spending, government purchases, and net exports. C) consumption spending, investment spending, government purchases, and exports. D) labor, natural resources, entrepreneurship, and capital.

*B) consumption spending, investment spending, government purchases, and net exports.

3. Gross domestic product in the economy is measured by the A) total number of goods and services produced in the economy. B) dollar value of all final goods and services produced in the economy. C) total number of goods produced in the economy. D) total number of services produced in the economy.

*B) dollar value of all final goods and services produced in the economy.

103) The natural rate of unemployment is the amount of unemployment A) associated with the business cycle. B) equal to frictional plus structural unemployment. C) that exists when the economy goes into recession. D) that exists when the economy is in an expansion.

*B) equal to frictional plus structural unemployment.

83. The unemployment rate equals the number of unemployed divided by the ________, all times 100. A) number of employed B) labor force C) working-age population D) total population

*B) labor force

69. The measure of production that values production using current prices is called A) value-added GDP. B) nominal GDP. C) real GDP. D) underground GDP.

*B) nominal GDP.

95) People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.

*B) structural unemployment.

97) We say that the economy is at full employment if the unemployment rate is equal to A) zero. B) the natural rate of unemployment. C) the amount of cyclical unemployment. D) the sum of frictional and cyclical unemployment. E) the sum of structural and cyclical unemployment.

*B) the natural rate of unemployment.

89. Frictional unemployment is the result of A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. B) the process of matching workers with jobs. C) the ups and downs in inflation. D) a slowdown in the economy.

*B) the process of matching workers with jobs.

Refer to Table 8-4. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $2,100. C) $1,600. D) $1,400.

*C) $1,600.

62. Refer to Table 8-11. Real GDP for Tyrovia for 2018 using 2009 as the base year equals A) $1,140. B) $880. C) $690. D) $560.

*C) $690.

49. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals A) 3,090 units. B) $7,250. C) $8,750. D) $9,750.

*C) $8,750.

Refer to Table 8-1. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals A) 3,090 units. B) $7,250. C) $8,750. D) $9,750.

*C) $8,750.

82. Refer to Table 9-1. The labor force participation rate for this simple economy equals Table 9-1 A) (1,000/1,100) × 100. B) (1,000/15,000) × 100. C) (1,100/15,000) × 100. D) (1,100/20,000) × 100.

*C) (1,100/15,000) × 100.

75. Table 8-19 Refer to Table 8-19. Given the information above, calculate the GDP deflator in 2017. A) 87 B) 95 C) 105 D) 114

*C) 105

Refer to Table 8-14. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2018 equals A) 92.2. B) 102.6. C) 108.5. D) 109.1.

*C) 108.5.

77. Which of the following equations correctly measures GDP in an economy? A) GDP = C + I + G + X B) GDP = C + net I + G + NX C) GDP = C + I + G + NX D) GDP = C + G + I - taxes

*C) GDP = C + I + G + NX

70. The ________ is a measure of the price level and is calculated by dividing ________ by ________ and multiplying by 100. A) CPI; real GDP; nominal GDP B) GDP deflator; real GDP; nominal GDP C) GDP deflator; nominal GDP; real GDP D) PPI; nominal GDP; real GDP E) PPI; real GDP; nominal GDP

*C) GDP deflator; nominal GDP; real GDP

45. Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study? A) Avocado prices rise due to a late frost in California. B) The United Auto Workers sign a contract raising wages and benefits 7% over the next 3 years. C) Real GDP grows by 2.3% in the second quarter. D) Airlines raise ticket prices in response to rising fuel costs.

*C) Real GDP grows by 2.3% in the second quarter.

94) If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.

*C) cyclically unemployed.

85. Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________. A) increased; increased B) increased; decreased C) decreased; increased D) decreased; decreased

*C) decreased; increased

57. The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector A) produce goods and services no one wants. B) sell their goods and services to citizens in other countries. C) do not pay taxes to the government. D) employ illegal immigrants from other countries.

*C) do not pay taxes to the government.

59. The underground economy can be described as A) production of intermediate goods and services. B) economic production that includes mining. C) economic activity that is hidden from the government to avoid taxes or because the activity is illegal. D) production of infrastructure that spurs growth in the rest of the economy.

*C) economic activity that is hidden from the government to avoid taxes or because the activity is illegal.

80. The labor force equals the number of people A) employed. B) unemployed. C) employed plus unemployed. D) in the working-age population.

*C) employed plus unemployed.

78. Legalizing all forms of illegal activities A) reduces GDP and reduces the size of the underground economy. B) reduces GDP and increases the size of the underground economy. C) increases GDP and reduces the size of the underground economy. D) increases GDP and increases the size of the underground economy.

*C) increases GDP and reduces the size of the underground economy.

47. Which of the following is not directly counted in GDP? A) investment expenditures B) government purchases C) intermediate goods D) consumer goods

*C) intermediate goods

67. If the GDP deflator is less than 100, then for that year, nominal GDP ________ real GDP. A) equals B) is greater than C) is less than D) may be greater than or less than

*C) is less than

84. Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as A) employed. B) unemployed. C) not in the labor force. D) not in the working-age population.

*C) not in the labor force.

96) Emma is a road construction worker. During the winter months, Emma finds it more difficult to get work. The unemployment Emma experiences in the winter is A) structural. B) cyclical. C) seasonal. D) functional.

*C) seasonal.

Refer to Table 8-3. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $1,600. C) $1,400. D) $1,200.

*D) $1,200.

71. Table 8-18 A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above. Refer to Table 8-18. What is real GDP in 2018, using 2013 as the base year? A) $28,885 B) $11,790 C) $11,200 D) $10,275

*D) $10,275

72. If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years? A) 270% B) 50% C) 5% D) 2.7%

*D) 2.7%

91. Cyclical unemployment is the result of A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. B) the search process of matching workers with jobs. C) the ups and downs in inflation. D) a slowdown in the economy.

*D) a slowdown in the economy.

99) Minimum wage laws cause unemployment because the legal minimum wage is set A) below the market wage, causing labor demand to be greater than labor supply. B) below the market wage, causing labor demand to be less than labor supply. C) above the market wage, causing labor demand to be greater than labor supply. D) above the market wage, causing labor demand to be less than labor supply.

*D) above the market wage, causing labor demand to be less than labor supply.

52. The nominal GDP of the U.S. in 2016 was approximately $18.6 trillion. This means that A) the value of output in 2016 was around $18.6 trillion. B) total income in 2016 was around $18.6 trillion. C) total spending in 2016 was around $18.6 trillion. D) all of the above are true.

*D) all of the above are true.

79. The Bureau of Labor Statistics would categorize a retiree who is not working as A) employed. B) unemployed. C) a discouraged worker. D) out of the labor force.

*D) out of the labor force.

65. The GDP deflator is the A) difference between real GDP and nominal GDP multiplied by 100. B) difference between nominal GDP and real GDP divided by 100. C) ratio of real GDP to nominal GDP multiplied by 100. D) ratio of nominal GDP to real GDP multiplied by 100.

*D) ratio of nominal GDP to real GDP multiplied by 100.

46. Gross domestic product is calculated by summing up A) the total quantity of goods and services in the economy. B) the total quantity of goods and services produced in the economy during a period of time. C) the total market value of goods and services in the economy. D) the total market value of final goods and services produced in the economy during a period of time.

*D) the total market value of final goods and services produced in the economy during a period of time.

93) According to the text, economists consider full employment to occur when A) everyone who wants a job has a job. B) frictional unemployment equals zero. C) the sum of frictional unemployment and structural unemployment equals zero. D) the unemployment rate consists of only frictional and structural unemployment.

*D) the unemployment rate consists of only frictional and structural unemployment.

61. Real GDP is GDP in a given year A) adjusted only for anticipated inflation. B) adjusted only for unanticipated inflation. C) valued in the prices of that year. D) valued in the prices of the base year.

*D) valued in the prices of the base year.

86. Discouraged workers are A) workers who have a part time job but want a full time job. B) workers who find their current jobs unfulfilling and are considering a job change. C) workers who have consistently been looking for work for more than 4 weeks. D) workers who have stopped looking for work because they believe there are no jobs for them.

*D) workers who have stopped looking for work because they believe there are no jobs for them.

88. If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is A) 4%. B) 5.2%. C) 60%. D) 76%. E) 80%.

*E) 80%.

32. The formula for calculating the CPI is A) (Expenditures in the current year/Expenditures in the base year) × 100. B) (Expenditures in the current year × Expenditures in the base year)/100. C) (Expenditures in the base year/Expenditures in the current year). D) (Expenditures in the base year × 100)/(Expenditures in the current year).

A) (Expenditures in the current year/Expenditures in the base year) × 100.

37. Refer to Table 9-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2017 and 2018? A) 2.9% B) 3.5% C) 4.6% D) 5%

A) 2.9%

13. If the working-age population is 20 million and labor force is 13 million, the labor force participation rate is A) 65 percent. B) 35 percent. C) 153 percent. D) 60 percent.

A) 65 percent

6. Which of the following terms refers to a flow of funds from savers to firms through financial​ markets? A. direct finance B. business finance C. indirect finance D. financial engineering

A. direct finance

10. Some countries have larger underground economies than do other​ countries, because A. of government policies that are retarding economic growth. B. of low tax rates and tax regulations that prevail in these nations. C. the informal sector can produce much more than the formal sector. D. of government policies that are accelerating economic growth.

A. of government policies that are retarding economic growth.

42. The​ short-term unemployment that arises from the process of matching workers with jobs is called A.frictional unemployment. B.seasonal unemployment. C.structural unemployment. D.cyclical unemployment.

A.frictional unemployment.

24. Refer to Table 9-1. The unemployment rate for this simple economy equals A) (100/1,000) × 100. B) (100/1,100) × 100. C) (100/15,000) × 100. D) (100/20,000) × 100.

B) (100/1,100) × 100.

34. Monthly expenditures for a family of 4 in 2017 averaged $1,400. In 2018, the cost of the same purchases was $1,500. If 2017 is the base year, what was the CPI in 2018? A) 110 B) 107 C) 100 D) 93

B) 107

16. If Samantha quits her job voluntarily and actively searches for other work, then she is considered A) structurally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) not to be unemployed.

B) frictionally unemployed

22. If Samantha quits her job voluntarily and actively searches for other work, then she is considered A) structurally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) not to be unemployed.

B) frictionally unemployed.

28. Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.

B) structural unemployment.

38. The most widely used measure of inflation is based on which of the following price indices? A) the producer price index B) the consumer price index C) the GDP deflator D) the wholesale price index

B) the consumer price index

8. What are the four categories of​ income? A.​ Labor, Capital, Natural​ Resources, and Entrepreneurship. B. ​Wages, Interest,​ Rent, and Profit. C. ​Consumption, Investment, Government​ Purchases, and Net Exports. D. ​Wages, Salaries,​ Interest, and Dividends.

B. ​Wages, Interest,​ Rent, and Profit.

25. Refer to Table 9-1. The labor force participation rate for this simple economy equals A) (1,000/1,100) × 100. B) (1,000/15,000) × 100. C) (1,100/15,000) × 100. D) (1,100/20,000) × 100.

C) (1,100/15,000) × 100.

27. If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.

C) cyclically unemployed.

23. The labor force equals the number of people A) employed. B) unemployed. C) employed plus unemployed. D) in the working-age population.

C) employed plus unemployed.

26. During the Great Depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment A) increased the natural rate of unemployment. B) decreased the natural rate of unemployment. C) had no effect on the natural rate of unemployment. D) could have increased or decreased the natural rate of unemployment.

C) had no effect on the natural rate of unemployment.

39. The producer price index measures the prices that firms A) pay for imported natural resources that go into the production process. B) receive for the goods and services they export. C) receive for the goods and services they use at all stages of production. D) pay for labor, whether or not the labor is foreign or domestic.

C) receive for the goods and services they use at all stages of production.

17. Structural unemployment is the result of A) voluntary job quitting by workers. B) changing labor needs by firms during the year. C) technology changes or foreign competition. D) changes in the family structure. E) downturns in the business cycle.

C) technology changes or foreign competition

11. Based on the table below, in​ 2011, the value of the GDP deflator is A. 126.4 B. 119.5 C. 116.57 D. 112.5

C. 116.57

9. Why is GDP an imperfect measurement of total production in the​ economy? A. The BEA does not include the value of new houses in GDP. B. GDP measures total income paid to the factors of​ production, not production. C. GDP does not include household production or production from the underground economy. D. The official measure of GDP does not include intermediate goods and services.

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

40. Workers who lose their jobs because of a recession are experiencing A. structural unemployment. B. seasonal unemployment. C. cyclical unemployment. D. frictional unemployment.

C. cyclical unemployment.

41. Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called A.frictional unemployment. B.seasonal unemployment. C.structural unemployment. D.cyclical unemployment.

C.structural unemployment.

35. Refer to Table 9-9. Suppose that the data in the table above reflect the price levels in the economy. Given that data, we can say that the cost of living rose by ________ between 2017 and 2018? A) 2% B) 5% C) 8% D) 13%

D) 13%

36. Refer to Table 9-8. Suppose that the data in the table above reflect the price levels in the economy. What is the inflation rate in between 2017 and 2018? A) 2% B) 5% C) 10% D) 20%

D) 20%

14. If 160 million people are employed, 15 million people are unemployed, and the population is 280 million people, the unemployment rate is A) 57 percent. B) 62.5 percent. C) 9.4 percent. D) 8.6 percent.

D) 8.6 percent

33. If the CPI changes from 125 to 120 between 2017 and 2018, how did prices change between 2017 and 2018? A) Prices increased by 5%. B) Prices decreased by 5% C) Prices increased by 25%. D) Prices decreased by 4%.

D) Prices decreased by 4%.

19. The natural rate of unemployment is the A) unemployment rate that would prevail with zero inflation. B) rate associated with the highest possible level of GDP. C) difference between the long-run and short-run unemployment rates. D) amount of unemployment that the economy normally experiences.

D) amount of unemployment that the economy normally experiences

18. Which of the following would decrease the unemployment rate? A) an increase in the minimum wage B) an increase in the efficiency wage C) an increase in labor union membership D) government aid to retrain unemployed workers

D) government aid to retrain unemployed workers

15. If Jose is 22-years old, is available to work but does not have a job and made no specific efforts to find a job for the previous month, Jose is classified in the Current Population Survey as A) unemployed. B) employed. C) not in the working-age population. D) not in the labor force.

D) not in the labor force

30. What are the three main types of unemployment? A) frictional, seasonal, and cyclical B) temporary, permanent, and volunteer C) cyclical, structural, and temporary D) structural, frictional, and cyclical

D) structural, frictional, and cyclical

31. When the labor market is at full employment A) there is only cyclical unemployment in the economy. B) there is only structural unemployment in the economy. C) the unemployment rate is 0%. D) there is no cyclical unemployment in the economy.

D) there is no cyclical unemployment in the economy.

12. An underground economy involves all of the following except A. avoiding tax payment on the earned income. B. trying to avoid government regulations. C. dealing in illegal goods and​ services, such as drugs or prostitution. D. buying and selling of goods and services by obtaining a permit from the government.

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

7. What are the four major categories of​ expenditure? A.​ Labor, capital, natural​ resources, and entrepreneurship. B. Final​ goods, intermediate​ goods, production, and income. C. ​Wages, interest,​ rent, and profit. D. ​Consumption, investment, government​ purchases, and net exports.

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

21.Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called a. the natural rate of unemployment. b. cyclical unemployment. c. structural unemployment. d. frictional unemployment.

c. structural unemployment.

20. Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes is called a. the natural rate of unemployment. b. cyclical unemployment. c. structural unemployment. d. frictional unemployment.

d. frictional unemployment

5. A(n) ​ _____ is a financial security that represents partial ownership of a​ firm, while a​ _____ is a financial security that represents a promise to repay a fixed amount of funds. ​A. stock, dividend B. bond, stock C. interest​ payment, stock D. stock, bond

​* D. stock, bond