Macro Exam 2 Review

Rocky Gap Furniture hires ten employees working eight hours each to produce 100 rocking chairs. What is the productivity of these workers?

1.25 chairs per hour; 100/80=1.25

If 2010 is the base year, then the consumer price index for 2012 is:

125; divide 2012 cost of basket over 2010 cost of basket

If the growth rate in an economy is 3.5%, then its GDP will double in about:

20 years; 70/3.5=20

If the CPI is 200 one year and 206 the next year, the annual rate of inflation as measured by the CPI is approximately

3 percent; 200-206/200*100=3

If the growth rate in an economy is 2%, its GDP will double in about:

35 years

If the inflation rate is 4 percent and the nominal interest rate is 9 percent, the real interest rate is

5 percent; 9%-4%=5%

If output equals A x (5k+2L), what output if A equals 2,000, capital equals 10 and labor equals 100?

500,000

Assuming the total population is 150 million, the labor force is 100 million, and 94 million workers are employed, the unemployment rate is

6 percent; 100,000,000-94,000,000/100,000,000*100=6%

Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The labor force participation rate is

60 percent; 50+10/100*100=60

Last year, the consumer price index (CPI) was 115 while the consumer price index for this year is 125. The rate of inflation is:

8.7%; 125-115/115*100=8.7%

Which of the following is the best example of an investment as defined by economists?

a firm buying personal computers for its secretarial staff

Cyclical unemployment results from

a recession in the economy

The recent global financial instability:

all of the answers are correct: harmed standards of living. slowed down economic growth. caused severe credit crunches.

Which of the following resources is an example of infrastructure?

an elementary school

People who are not currently employed, but say they want a job, are counted as unemployed only if they

are actively seeking employment

Alternating periods of macroeconomic expansion and contraction are known as:

business cycles

The largest component of GDP is:

consumption expenditure

When the economy is operating at the natural rate of unemployment:

cyclical unemployment is zero.

The higher the productivity of a nation, the:

higher is its standard of living.

Inflation can be caused by

increases in aggregate demand or decreases in aggregate supply

Investment in human capital is important because:

it increases labor productivity.

One important reason economists track business investment is that:

it is a leading indicator of the business cycle

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is:

not in the labor force

Gross Domestic Product includes final goods and services, but not intermediate goods because

the value of the intermediate goods is already included in the value of the final goods

Which of the following is NOT an investment in human capital?

researching automated production techniques

Using Exhibit 1, what is the real GDP in 2001 using 2002 prices (2001 base year)?

$130

Using exhibit 1, what is nominal GDP in 2001?

$175

Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is:

$40,000

Given the following hypothetical data: C=$3,000; I=$1,200; G=$2,000; X-M=$500; depreciation=$200; transfer payments=$800; net domestic product is

$5,500; $3,000+$1,200+$2,000-$500-$200 = 5,500

A wholesale nursery purchases six dozen gladiolus bulbs for $5. The nursery sells the six dozen resulting flowers to a wholesale florist for $10. The wholesale florist delivers the flowers to a retail florist for $15. The flowers are sold by the retail florist for $75 to the bereaved Jones family to use at great-grandfather Jones's wake. What is the value added by the retail florist?

$60; $75-$15=$60

Use the information in exhibit 7-2 to calculate the consumer price index in the current year.

CPI=200

Net Exports is equal to:

Exports minus Imports

Calculating GDP using expenditure approach

GDP = Consumer Spending+Investment+Government Spending+Exports(x)-Imports(m)

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

GDP=$3,060 $2,000+$600+$500-$40=$3,060

If the CPI this year is 162 and last year it was 170, what do we know about the inflation rate this year?

It is negative

Jennifer received news that she is getting a 5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 7%. Based on the given information, which of the following is true?

Jennifer is losing purchasing power by 2%

Which of the following people would be counted as unemployed?

a downhill ski instructor who looks for work during the summer

Which of the following transactions is not included in GDP?

Someone sells drugs in a vacant lot

Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6 percent. Which of the following is true?

Your real wage fell; 3%-6%=-3%

When the government enforces contracts between two parties, it is acting in its role to promote economic growth by:

ensuring a stable legal system

In a simple circular flow diagram, total spending on goods and services in the product market:

equals the total income earned in the resource market.

Your cousin recently graduated for Harvard Law School and has not found a job after looking for one last week. She can be described as

frictionally unemployed

In the absence of copyright and patent laws:

it is difficult for innovators to profit from their efforts.

Physical capital include:

manufactured products that are used to produce other goods and services

Which of the following is NOT a factor in the production function?

money

Which of the following would be included in GDP?

payment of the monthly telephone bill by Mr. Laconic

Which of the following items is NOT included in gross private domestic investment?

purchases of common stock

Economic growth is most commonly measured by

real GDP per capita

Which of the following two things can people do with money received as disposable personal income?

spend money or put it into savings

During the 1970s, when handheld calculators became popular and replaced slide rules in performing computations, workers in the slide rule industry lost their jobs. These workers' unemployment status is:

structural

Frictional unemployment refers to unemployment that results from

taking the time to find the best job

Which of the following occurrences is the key explanation for the high economic growth in the United States in the past century?

technology improvements