MACRO final exam study guide

You purchase a certificate of deposit that pays an advertised rate of 2.15% interest per year. Your real rate of return if the actual inflation rate is 1.85% is ____% [round to the nearest hundredth of a percent].

0.30

A fiscal policy contraction would lead to: a) no reaction on the IS curve. b) a movement along the IS curve. c) a right shift in the IS curve. d) a left shift in the IS curve.

a left shift in the IS curve.

trough

a low point in economic activity

economic indicators: initial unemployment claims

- tells you how many people lost their jobs and applied for unemployment insurance during the previous week - provides a timely indicator of what is happening as recently as last week

In 2021, the Federal Reserve Bank (the Fed) could have raised interest rates. Suppose the equilibrium unemployment rate (i.e., natural rate of unemployment) is 3.5% and the output gap is still -4% in 2021. Using Okun's Rule of Thumb, we would expect the actual unemployment rate to be _______ percent (round to the nearest tenth of a percent).

5.5

Why are broad indicators better than narrow indicators? a) Narrow indicators are harder to measure than broad indicators. b) Narrow indicators present economy-wide trends. c) Broad indicators better capture economy-wide effects. d) Narrow indicators present more refined forecasts.

Broad indicators better capture economy-wide effects.

Charles McCoy is a manager at a coffee shop and is making hiring decisions. With one worker, he can make 15 drinks that sell for $3 on average in a single hour. With a second worker, he can make an additional 12 drinks in a single hour. The marginal product of each additional worker decreases by three drinks with each additional hire. Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charles hire for each hour? a) Three b) Five c) Six d) Four

Four

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century? a) United States b) South Korea c) Argentina d) Spain

South Korea

nominal variable

a variable measured in dollars (whose variable may fluctuate over time)

When actual output is less than potential output (select ALL that apply): a) the output gap becomes negative. b) there is insufficient demand. c) the output gap becomes positive. d) demand-pull inflation occurs.

a) the output gap becomes negative. b) there is insufficient demand.

Rising marginal costs imply a) falling variable costs. b) an upward-sloping supply curve. c) a downward-sloping demand curve. d) rising fixed costs.

an upward-sloping supply curve.

When inflation is lower than expected, there is redistribution from: a) borrowers to the government. b) lenders to the government. c) lenders to borrowers. d) borrowers to lenders.

borrowers to lenders.

why are broad indicators better than narrow?

broad indicators better capture economy-wide effects

A negative supply shock causes: a) a surplus in consumer markets. b) demand-pull inflation. c) a decrease in unexpected inflation. d) cost-push inflation.

cost-push inflation.

Excess demand occurs when: a) there is a surplus in the market. b) supply is in excess of demand at the market price. c) demand is in excess of supply at the market price. d) demand and supply are equal at the market price.

demand is in excess of supply at the market price.

The rule of 70 tells us roughly: a) what the total amount of expenditure is in the economy. b) how much unemployment exists in the economy. c) how long it will take something to double if you divide 70 by its annual growth rate. d) how income is distributed in the country.

how long it will take something to double if you divide 70 by its annual growth rate.

Diminishing marginal benefit: a) is when buying an additional item yields a smaller marginal benefit than the previous item. b) is when buying an additional item yields a larger marginal benefit than the previous item. c) is not important in determining a consumer's purchase decision. d) is when consumers do not follow the rational rule.

is when buying an additional item yields a smaller marginal benefit than the previous item.

business cycles are persistent

it's a reasonable bet that current conditions will continue in the near future

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $20. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. a) greater; $200 b) less; $100 c) greater; $100 d) less; $200

less; $200

GDP deflator

measures the rising prices of all goods and services produced, you're adjusting dollar amounts describing what the economy produces. unlike CPI, it includes capital goods but excludes imported goods. it converts nominal GDP to real GDP

When you calculate marginal costs, they should include: a) only fixed costs. b) only variable costs. c) both the variable and fixed costs. d) the market price of the product.

only variable costs.

unexpected inflation: confuses the signals that prices send

price rises make it hard for producers to know whether it is due to increased demand for the product or a burst of unexpected inflation

Researchers have found a new strain of canola (a grain used to produce canola oil) that is resistant to pesticides and drought while yielding more canola oil. Holding all else constant, this research will: a) decrease the quantity supplied of canola oil. b) shift the supply curve for canola oil rightward. c) shift the supply curve for canola oil leftward. d) increase the quantity supplied of canola oil.

shift the supply curve for canola oil rightward.

Suppose there is a surplus of qualified architects in the United States. Over time, we would expect: a) the demand for qualified architects to fall. b) the salaries of qualified architects to rise. c) the supply of qualified architects to fall. d) the salaries of qualified architects to fall.

the salaries of qualified architects to fall.

A constant returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by: a) a larger proportion. b) a smaller proportion. c) the same proportion. d) exactly double the proportion.

the same proportion.

S&P 500

the stock market index that tracks the value of 500 large publicly traded firms—provides a useful summary of the state of the stock market. Stock prices are often the first sign of either a strengthening or weakening economy

aggregate expenditure

the total amount of goods and services that people want to buy across the whole economy—the sum of consumption, planned investment, government purchases, and net exports.

What is insufficient demand? a) too many buyers for too few goods b) too much supply for too few buyers c) slow-changing consumer preferences d) lower equilibrium quantity

too much supply for too few buyers

In 2004, Canada's GDP was approximately $1.13 trillion, and its population was about 32 million. What was Canada's approximate GDP per person in 2004? a) $35,290 b) $3,530 c) $43,500 d) $36,160

$35,290

Consider the graph of the labor market shown here. A wage rate of $25 could be an example of: (i) an efficiency wage. (ii) a minimum wage. (iii) a wage rate negotiated by a labor union. (iv) hysteresis. (in the photo, $23 is the market equilibrium)

(i), (ii), and (iii)

labor force participation rate

(labor force/working age population) x 100

unemployment rate

(unemployed/labor force) x 100

economic indicators: rate of inflation

- tells you what's happening with prices - rising inflation may indicate that the economy is producing above potential, while falling inflation suggest there may be unused resources

You open a savings account that pays 0.70% interest a year. Your real rate of return if the actual inflation rate is 0.95% is ____% [round to the nearest hundredth of a percent].

-0.25

You open a savings account that pays 0.75% interest a year. What is your real rate of return if the inflation rate is 1%? a) -0.25% b) -0.75% c) 1% d) 1.75%

-0.25%

During 2000 and 2001, nominal GDP in the United States grew by 3.2%, and the rate of inflation was 2.2%. What was the growth rate of real GDP between the two years? a) 4.4% b) 5.4% c) 1% d) 2.2%

1%

What is Fiji's GDP deflator if its nominal GDP is $5.48 billion (in current US$) and the real GDP is $5.21 billion? a) 103.9 b) 105.2 c) 122.3 d) 115.4

105.2 formula: GDP deflator = (nominal/real) x 100

In 1945, the United States recorded real GDP growth of -1% and nominal GDP growth of 1.6%. What was the inflation rate in 1945? a) 0.6% b) -2.6% c) -0.6% d) 2.6%

2.6% real GDP = nominal GDP - inflation rate

In December of 2018, West Virginia reported a civilian labor force of 784,904 people. The number of employed people was 743,292. The unemployment rate was _________ % [round to the nearest tenth of a percent].

5.3

The president of the World Bank is on his way to a meeting with the president of Colombia. He bumps into you in the hallway and wants to know how long it will take for Colombian per capita GDP to double. All he knows is that the average annual growth rate has been about 10 percent. You quickly tell him that, assuming Colombian per capita GDP keeps growing at the same pace into the future, it will take about ________ years because you understand the Rule of 70.

7

Gary Parker is willing to pay $940 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $620. It costs Apple $240 to produce this iPad. How much total economic surplus is generated if Gary purchases this iPad? $__________.

700

If the median value of the consumer confidence index is 92, which of the following consumer confidence index values indicates a particularly strong economy? a) 93 b) 91 c) 90 d) 99

99

Suppose there are only two countries, country A and country B. Country A imports $200 million worth of goods and services from country B. Country B imports $100 million worth of goods and services from country A. Net exports for country _____ equal _____. B; $200 million A; $200 million B; −$100 million A; −$100 million

A; −$100 million

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and infant deaths per 1,000 live births. What can explain this relationship? a)Infant mortality declines only when GDP per person is above $25,000 per year. b) As real GDP per person rises, infant mortality rises. c) As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition. d) As life expectancy increases, GDP per person increases at the same rate.

As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition.

Which of the following indicators might be a good predictor of investment? a) Business confidence b) Consumer confidence c) Initial unemployment claims d) Nonfarm payrolls

Business confidence

Total spending in the economy is calculated as: a) Y - C - I. b) C + I + G + (X - M). c) Y - I - G - NX. d) C + I + G + (M - X).

C + I + G + (X - M).

The equation for aggregate expenditure in an open economy is: a) Y - C - I. b) C - I - G - NX. c) C + I + G. d) C + I + G + NX.

C + I + G + NX.

Which indicator is a cross-check on GDP? a) Business confidence b) Employment cost index c) Stock prices: S&P 500 d) Real GDI

Real GDI

Which of the following is a broad indicator? a) The consumer price index b) Agricultural sector output c) Starbucks stock returns d) Labor demand in the agricultural industry

The consumer price index

The price of coffee at a local coffee shop is $2.50. Cheryl is willing to pay $8 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase? a) One b) Three c) Two d) Four

Three

inflation

a generalized rise in the overall level of prices, a rise in the cost of living, and a decline in the purchasing power of money

A normal good is: a) a good which is only purchased by high-income consumers. b) a good for which higher income causes a decrease in demand. c) a good which is normally purchased by many consumers. d) a good for which higher income causes an increase in demand.

a good for which higher income causes an increase in demand.

An individual supply curve is a) a graph with quantities of a product that a seller is willing to supply at different price points. b) a graph that plots how much a seller produces at different points in time. c) the quantity a seller is willing to supply at one particular price. d) a graph that plots the quantities of an item that a buyer plans to buy at different prices.

a graph with quantities of a product that a seller is willing to supply at different price points.

peak

a high point in economic activity

expansion

a period of increasing economic activity

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to _____ real GDP per worker (or productivity). a) negative​ b) a smaller increase in c) a larger increase in d) a decrease in

a smaller increase in

personal consumption expenditure deflator (GCE deflator)

a target for monetary policy

Human capital refers to improvements in: a) production processes, made possible by better machines and equipment. b) robotics technology that can substitute for human workers. c) technology made available to the workforce. d) a worker's skills, made possible by education, training, and knowledge.

a worker's skills, made possible by education, training, and knowledge.

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that: [check all that apply] a) the market value of total output must be equal to total spending. b) all inputs are provided by businesses. c) all flows of resources are matched by flows of money. d) total spending must equal total income.

a) the market value of total output must be equal to total spending. c) all flows of resources are matched by flows of money. d) total spending must equal total income.

Before monetary and fiscal policy intervention in 2020, there was a spending shock and a supply shock which (select ALL that apply) a) shifted the MP curve down b) shifted the MP curve up c) left the MP curve unchanged d) shifted the IS curve down (left) e) shifted the IS curve up (right) f) left the IS curve unchanged g) shifted the PC down (right) h) shifted the PC up (left) i) left the PC unchanged

c) left the MP curve unchanged d) shifted the IS curve down (left) h) shifted the PC up (left)

The Rational Rule for Buyers a) compares the cost of production of an item to the price of the item. b) only applies to buyers who are buying necessities as opposed to luxury items. c) compares the benefit of buying an additional unit of the item to the cost of that item. d) compares the total benefit of all units to the total price of all units purchased.

compares the benefit of buying an additional unit of the item to the cost of that item.

seasonally adjusted data

data stripped of predictable seasonal influences. The reason to do this is so that you can spot the changes in the underlying trends

The use of online banking _____ the _____ costs of high inflation. a) increases: shoe-leather b) decreases; shoe-leather c) increases; unit-of-account d) decreases; unit-of-account

decreases; shoe-leather

Gross domestic product is the value of all _____ produced in an economy over a given period. a) goods and services b) final goods and services c) intermediate goods and services d) consumer goods and services

final goods and services

Lagging indicators are variables that: a) predict monetary policy. b) tend to predict the future state of the economy. c) follow the business cycle with a delay. d) predict fiscal policy.

follow the business cycle with a delay.

Okun's rule of thumb

for every percentage point that actual output is less than potential output, the unemployment rate will be around half a percentage point higher ex: if you project the output gap will decline from zero to −2%, the unemployment rate will likely rise by about 1 percentage point, from, say, 5% to 6%

Typically, business cycles: a) do not display persistence. b) have short and sharp recessions, followed by long and gradual expansions. c) last over 20 years. d) have short and sharp expansions, followed by long and gradual recessions.

have short and sharp recessions, followed by long and gradual expansions.

In the market for outputs: a) households sell goods and services. b) households buy goods and services. c) firms buy resources. d) firms supply resources.

households buy goods and services.

In the market for inputs: a) firms buy goods and services. b) households sell resources. c) households sell goods and services. d) firms sell goods and services.

households sell resources.

The capital stock in an economy stops growing when: a) savings increases in the economy. b) investment equals depreciation. c) depreciation reaches zero. d) capital accumulation begins.

investment equals depreciation.

The steady state in the Solow growth model occurs when: a) depreciation reaches zero. b) savings increases in the economy. c) investment equals depreciation. d) capital accumulation begins.

investment equals depreciation.

Unemployment insurance can lead to: a) a reduction in the government budget deficit. b) an increase in the number of retirees. c) fewer unemployment benefit claims. d) longer unemployment durations.

longer unemployment durations.

Physical capital includes: [check all that apply] a) a worker's education or knowledge. b) money. c) machine tools. d) shares of stock.

machine tools.

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _____ frequently than they did before. This is an example of _____ costs. a) more; menu b) less; menu c) more; unit-of-account d) less; unit-of-account​

more; menu

The opportunity cost principle states that the true cost of something is the a) least desired alternative you have to give up to get it. b) economic surplus you receive from getting it. c) next best alternative you have to give up to get it. d) economic surplus you give up to get it.

next best alternative you have to give up to get it.

The real interest rate is the: a) percentage of the nominal interest that is inflation. b) economic growth rate adjusted for the effects of inflation. c) nominal interest rate plus the rate of inflation. d) nominal interest rate minus the rate of inflation.

nominal interest rate minus the rate of inflation.

Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $50,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a) occurs; only Samantha receives b) does not occur; only Ivan receives c) occurs; both Ivan and Samantha receive d) does not occur; neither Ivan nor Samantha receives

occurs; both Ivan and Samantha receive

When you calculate marginal costs for a seller, they should include: a) only variable costs. b) only fixed costs. c) the market price of the product. d) both the variable and fixed costs.

only variable costs.

Inflation can be measured by the: a) percentage change in GDP. b) absolute change in the GDP deflator. c) absolute change in the consumer price index. d) percentage change in the consumer price index.

percentage change in the consumer price index.

The broadest measure of economic activity is: a) the stock market. b) business confidence. c) real GDP. d) nonfarm payrolls.

real GDP.

aggregate expenditure

refers to the total amount of goods and services that people want to buy across the whole economy -- the sum of consumption, planned investment, government purchases, and net exports

nominal wage rigidity

reluctance to cut nominal wages (due to money illusion, since workers hate when their wage in dollars gets cut)

Technological progress is advanced through: a) consumption. b) research and development. c) government regulation. d) infrastructure.

research and development.

Suppose that an economy is in a recession. You would expect to see the unemployment rate: a) be zero. b) rise above the equilibrium unemployment rate. c) fall below the equilibrium unemployment rate. d) be equal to the equilibrium unemployment rate.

rise above the equilibrium unemployment rate.

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate: a) rises by 1%. b) falls by 1%. c) rises by 0.5%. d) falls by 0.5%.

rises by 0.5%.

In California, there has been a drought, and rural communities are fighting with urban areas over water. Which economic concept does this statement BEST represent? a) incentives b) scarcity c) equilibrium d) specialization

scarcity

underemployment

someone who has some work but wants more hours or whose job isn't adequately using their skills

Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the a) supply of peanut oil will increase. b) supply of peanut oil will fall. c) quantity supplied of peanut butter will fall. d) quantity supplied of peanut butter will remain unchanged.a left shift in the IS curve.

supply of peanut oil will increase.

Leading indicators are variables that: a) reflect the effects of monetary policy. b) tend to predict the future state of the economy. c) follow the business cycle with a delay. d) reflect the effects of fiscal policy.

tend to predict the future state of the economy.

Paint and paintbrushes are complements. If the price of paint rises, we can expect: a) the demand for paintbrushes to decrease. b) the quantity demanded of paint to increase. c) the quantity demanded of paintbrushes to remain unchanged. d) the demand for paintbrushes to increase.

the demand for paintbrushes to decrease.

In the Solow growth model, if a country reaches its steady state: a) the capital stock disappears. b) capital accumulation starts. c) capital accumulation keeps generating economic growth. d) the economy stops growing unless something else changes.

the economy stops growing unless something else changes.

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that: a) the equilibrium rate of unemployment is 3.75%. b) the labor force participation rate has fallen significantly. c) there is 2.25% actual unemployment.

the equilibrium rate of unemployment is 3.75%.

fiscal policy

the government's use of spending and tax policies to influence economic conditions in order to stabilize the economy

Which of the following can be classified as technological progress? [check all that apply] a) the invention of the light bulb b) a rise in the labor force participation rate c) an increase in the retirement age of a population d) a baby boom

the invention of the light bulb

Which of the following explains the shape of the aggregate production function? a) the impact of technological change b) the law of diminishing returns c) the development of human capital d) the profit maximization rule

the law of diminishing returns

inflation fallacy

the mistaken belief that inflation destroys purchasing power (in reality, when inflation brings prices up, it also bring wages up)

money illusion

the mistaken tendency to focus on nominal dollar amounts instead of inflation-adjusted amounts. it creates nominal wage rigidity

substitution bias

the overstating of inflation that occurs because people substitute goods and services whose prices rise by less. ex: The CPI measures the prices of a fixed basket of goods, so it assumes that people keep buying the same number of bananas no matter how expensive they get. In reality, consumers might buy substitute the banana with a cheaper way to achieve the same quality of life

The law of supply refers to a) the inverse relationship between price and quantity demanded. b) the positive relationship between price and quantity demanded. c) the inverse relationship between price and quantity supplied. d) the positive relationship between price and quantity supplied.

the positive relationship between price and quantity supplied.

monetary policy

the process of setting interest rates in an effort to influence economic conditions

An example of investment spending is: a) purchases of stock by a mutual fund. b) the purchase of a freezer by an ice-cream parlor. c) the purchase of government bonds by a private household. d) funds raised by the government in financial markets.

the purchase of a freezer by an ice-cream parlor.

expected inflation: shoe-leather costs for buyers

the time and effort it takes to continuously go to the bank often to withdraw money because the cost of holding money is high

structural unemployment

unemployment that occurs because wages don't fall to bring labor demand and supply into equilibrium

revisions

updates to earlier data estimates. sometimes, initial estimates are based on incomplete data

lagging indicators

variables that tend to follow business cycle movements with a bit of a delay. ex: unemployment tends to be a lagging indicator because managers who have invested in developing their staff are reluctant to make cutbacks until they're convinced they're really necessary

In 2018, there were 111.01 million people aged 16 years and older in Japan. There were also 68.3 million people in the labor force. What was the labor force participation rate? a) 38.47% b) 68.3% c) 50% d) 61.53%

61.53%

For the next three questions, consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the approximate value of the basket in 2015?

$1,337

calculate percent change in real value

% change in real value = % change in nominal value - % change in prices

calculate inflation rate (use CPI)

((price level this year - price level last year)/price level last year) x 100

hysteresis

any system that depends on its past; ex: long durations of high unemployment leads to a higher equilibrium unemployment rate, making it harder for the unemployed to find work

3 ways money is used

medium of exchange, unit of account, store of value

calculate real interest rate

real interest rate = nominal interest rate - inflation rate

economic indicators: Real GDI

- a useful crosscheck on GDP - gross domestic income (GDI) is calculated by adding up total income - every dollar of spending is also a dollar of income - GDI usually flashes warning signs for the economy sooner than GDP does because early reports of income data re often more reliable than spending data

economic indicators: business confidence

- business confidence surveys asks managers about their plans over the next few months or years - a leading indicator

If an economy has an output gap of 0%, this means the economy is: a) experiencing cyclical unemployment. b) unsustainable in the long run. c) at its highest sustainable rate of production. d) suffering from hyperinflation.

at its highest sustainable rate of production.

economic indicators: employment cost index

- tells you what's happening with wages - tells you how fast wages and benefits are rising - rising compensation is a sign of a healthy economy, and higher wages often translate into more spending - it measures the rise in labor costs for businesses - because higher costs often lead to higher prices, ECI is a leading indicator of inflationary pressure

expected inflation: menu costs for sellers

Inflation is costly because it leads businesses to devote valuable resources to reprinting menus, adjusting price tags, and reprogramming vending machines more often. it turns money into an unstable unit of account because prices are marked in dollars, but those dollars are worth less and so last year's price is no longer suitable this year

In order to be considered unemployed, the person must be [check all that apply]: a) available to work. b) over the age of 16. c) skilled. d) actively searching for work.

available to work over the age of 16 actively searching for work

annualized rate

most data are collected weekly, monthly, etc., but can be converted into an annualized rate to make it easier to compare growth rates measured cross different time periods

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will: a) fall by 2%. b) rise by 1.5%. c) rise by 3%. d) fall by 1.5%.

rise by 1.5%.

The CPI changes from 100 to 90. This means that: a) there is deflation. b) the base year index has been changed to 90. c) 90% of all prices have fallen. d) consumers now purchased 10% fewer goods due to inflation.

there is deflation.

convert nominal variables into real variables with the inflation adjustment formula (find something in today's dollars)

today's dollars = another time's dollars x (price level today/price level in another time)

economic indicators: Real GDP

-measures total production, total spending, and total income - the broadest measure of economic activity - measures the total size of the economy - Y = C + I + G + NX

Use the following information to answer the next 3 questions. Suppose a labor market is described by the demand equation, Qd = 1200 - 20w, and the supply equation, Qs = 10w - 300, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). The equilibrium wage in this market is $_______. (Round to the nearest integer.)

50

The GDP deflator is an index that tracks the: a) price that businesses pay over time for the inputs used in the production process. b) average price that consumers pay over time for a representative basket of goods and services. c) highest prices consumers pay over time for imported goods and services. d) price of all goods and services produced domestically.

price of all goods and services produced domestically

marginally attached

someone who wants a job and who has looked for a job within the past year, but who isn't counted as unemployed because they aren't currently searching for work

involuntarily part time

someone who wants full-time work and is working part-time because they haven't found a full-time job

Which of the following is (are) included in investment? [Select ALL that apply.] a) social security payments b) the construction of a highway by the federal government c) the purchase of $32,000 worth of stock d) the purchase of $45,000 worth of bonds e) the purchase of an aircraft by a domestic airline f) military spending

the purchase of an aircraft by a domestic airline

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if [select ALL that apply]: a) human capital increases. b) physical capital increases. c) the capital stock in the country depreciates. d) labor productivity falls. e) labor productivity increases. f) the depreciation rate increases.

a) human capital increases. b) physical capital increases. e) labor productivity increases.

The demand curve... [Select all that apply.] a) is a curve that shows the maximum willingness to pay for a product. b) is a curve that shows the marginal benefit gained from a product. c) is a curve that shows the production cost of a product. d) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

a) is a curve that shows the maximum willingness to pay for a product. b) is a curve that shows the marginal benefit gained from a product. d) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that [select ALL that apply]: a) the market value of total output must be equal to total spending. b) all flows of resources are matched by flows of money. c) total spending must equal total income. d) all inputs are provided by households.

a) the market value of total output must be equal to total spending. b) all flows of resources are matched by flows of money. c) total spending must equal total income. d) all inputs are provided by households.

Consumption is $151 billion, government expenditure is $70.2 billion, planned investment is $65.8 billion, and net exports amount to -$21 billion. Aggregate expenditure in this economy is $ _________ billion (round to the nearest tenth of a billion).

266

Gary Parker is willing to pay $840 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $490. It costs Apple $240 to produce this iPad. How much economic surplus does Gary receive if he purchases this iPad? $__________.

350

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $8.0. The price of the latte is $4.0. The cost to the coffee shop to produce the latte is $2.0. How much economic surplus does Kevin gain when he purchases the latte? $_________.

4

Charles McCoy is a manager at a Chipotle restaurant, and he has to decide how many workers to hire. One worker can make 20 burritos that sell for $7 on average in one hour. A second worker can make another 16 burritos in one hour. The marginal product of each additional worker decreases by four burritos, with each additional hire. The cost of ingredients is $2 per burrito no matter what the total quantity produced is. Given that workers are paid $21 per hour and have eight-hour shifts, how many employees should Charles hire for each hour? a) Four b) Seven c) Six d) Three e) Five

Four

calculate GDP deflator

GDP deflator = (nominal GDP/real GDP) x 100

You just bought two used textbooks for $25 each. How much does GDP change because of your purchase? a) GDP rises by $50. b) GDP falls by $50. c) GDP rises by $25. d) GDP does not change.

GDP does not change.

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions? a) GDP rises by $69,500. b) GDP rises by $31,500. c) GDP rises by $38,000. d) GDP rises by $6,500.

GDP rises by $38,000.

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and life expectancy. What can explain this relationship? a) As life expectancy increases, GDP per person increases at the same rate. b) Higher income per person allows for better health care, sanitation, and nutrition. c) Higher income per person leads to a higher mortality rate.

Higher income per person allows for better health care, sanitation, and nutrition.

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP? a) They are counted by subtracting Dale's opportunity cost in terms of lost income. b) They are counted at market value. c) They are not counted. d) They are counted by assigning a value that is equivalent to what it would have taken to pay a housekeeper to perform the same tasks.

They are not counted.

The price of smoothies at a local smoothie shop is $3. Cheryl is willing to pay $6 for her first smoothie each day. The marginal benefit to her of each additional smoothie falls by $2. How many smoothies should Cheryl purchase? a) One b) Two c) Three d) Four

Two

Which of the following is an indicator of excess capacity? a) Consumer confidence b) Inflation c) Business confidence d) Unemployment rate

Unemployment rate

The aggregate production function is represented as: a) Y = f(L, H, K). b) K = f(L, H, Y). c) L = f(Y, H, K). d) H = f(L, Y, K).

Y = f(L, H, K).

recession

a period of declining economic activity

efficiency wages

higher wages paid to encourage greater worker productivity

core inflation

inflation that excludes food and energy

To acquire human capital, a person would: a) sell books produced using a printing press. b) purchase a printing press rather than a very large television. c) learn to use a printing press. d) save to buy a printing press.

learn to use a printing press.

When inflation is higher than expected, there is redistribution from: a) borrowers to the government. b) lenders to the government. c) borrowers to lenders. d) lenders to borrowers.

lenders to borrowers.

levels vs. changes in the business cycles

levels refer to the peaks and troughs and measure the level of output, while changes refer to GDP growth/declines like recessions or expansions

calculate output gap

output gap = ((actual output - potential output)/potential output) x 100

output gap

the difference between actual and potential output, measured as a percentage of potential output

cyclical unemployment

unemployment that is due to a temporary downturn in the economy

economic indicators: stock market

- tells you about the future expected profits of businesses - stock prices come to reflect investors' expectations about the future strength of corporate profits

You have four friends. Which of your friends can be described as "cyclically unemployed"? a) Regan, who is in a nursing home b) Keele, who lost her job after her company lost a lot of customers during an economic downturn c) Arthur, who quit his job to look for a better job d) Martha, who is a full-time stay-at-home parent

Keele, who lost her job after her company lost a lot of customers during an economic downturn

You have four friends. Which of your friends can be described as "structurally unemployed"? a) Dolly, a recent graduate who is looking for the job that best suits her qualifications b) Kirstie, who was fired for being inefficient at her job c) Kevin, who does not like the company he works for d) Marty, who cannot find a job, though he is willing to accept less than the existing wage

Marty, who cannot find a job, though he is willing to accept less than the existing wage

hyperinflation

extremely high rate of inflation

What would you expect to happen to the demand for a luxury good today, if the government announces it will stop taxing that luxury good next year? a) There will be no impact on the demand for the luxury good. b) The demand for the luxury good will shift to the right today. c) The demand for the luxury good will shift to the left today. d) Consumers will stop their consumption of the luxury good altogether.

The demand for the luxury good will shift to the left today.

consumer price index (CPI)

average price consumers pay over time for a representative basket of goods and services

Joshua Murphy is planning on studying late into the night for his economics exam. He is contemplating how many coffees to buy tonight. Joshua should not buy an additional coffee during the evening if the marginal a) cost of purchasing one more coffee is positive. b) benefit of purchasing one more coffee exceeds the marginal cost. c) benefit of purchasing one more coffee is less than the marginal cost. d) benefit of purchasing one more coffee is positive.

benefit of purchasing one more coffee is less than the marginal cost.

Demand-pull inflation is inflation resulting from: a) a surplus. b) excess supply. c) excess demand. d) insufficient demand.

excess demand.

Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _________, and the quantity of apartments bought and sold will __________. a) rise or fall; fall b) rise or fall; rise c) fall; rise or fall d) rise; fall or rise

fall; rise or fall

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a) cost-benefit b) opportunity cost c) marginal d) interdependence

interdependence

Variable costs are the costs that a) vary with the quantity of output produced. b) are incurred to build factories and assembly plants. c) are independent of the amount of output produced. d) stay fixed with the quantity of output produced.

vary with the quantity of output produced.

An equilibrium in a market occurs: a) when the quantity supplied equals the quantity demanded. b) when suppliers have sold all the goods and services that they have produced. c) at the halfway point on a demand curve. d) at the halfway point on the price axis.

when the quantity supplied equals the quantity demanded.

If technology advances: a) human capital becomes less useful. b) physical capital becomes less productive. c) GDP per capita declines. d) workers can produce more with fixed amounts of physical and human capital.

workers can produce more with fixed amounts of physical and human capital.

indexation

workers who want to protect themselves from the effects of the rising cost of living insist that their employment contracts include indexation clauses which automatically adjust their wages in line with the CPI

An underemployed person is one who is: a) employed in the underground economy. b) working but whose skills are not fully utilized. c) retired or outside of the labor force. d) cyclically unemployed.

working but whose skills are not fully utilized.

An involuntarily part-time worker is one who: a) is marginally attached to the labor force. b) has taken a part-time job in order to go to school full-time. c) works full-time but wants to find a part-time job. d) works part-time but wants to find a full-time job.

works part-time but wants to find a full-time job.

Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision: - The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500. - She thinks gas will cost her about $1,200 for the year. - The annual insurance premium for her car is $800. - Maintenance and repairs will cost about $300 for the year. - Using Lyft to get to work would cost her $4,000 for the year. The cost of the car for the year is: a) $4,000. b) $3,800. c) $1,500. d) $7,800.

$3,800. (do not include the 4,000 of the Lyft)

For the next three questions, consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the value of the basket in 2016?

1,400

In 2014, the action movie John Wick made about $14.5 million in its opening weekend. In 2017, John Wick: Chapter 2 made about $30.5 million in its opening weekend. The consumer price index in 2014 was 235.6. If the consumer price index in 2017 was 244.7, the first John Wick movie make in 2017 dollars was $ ______ million [round to the nearest tenth of a million].

15.1 formula: another time's dollars x (current CPI/another time's CPI)

Use the following information to answer the next 3 questions. Suppose a labor market is described by the demand equation, Qd = 1200 - 20w, and the supply equation, Qs = 10w - 300, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). If the government imposes a minimum wage of $55, the number of workers unemployed is _________ million. (Round to the nearest whole million.)

150

Use the following information to answer the next 3 questions. Suppose a labor market is described by the demand equation, Qd = 1200 - 20w, and the supply equation, Qs = 10w - 300, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). The equilibrium number of employed workers in this market is ________ million. (Round to the nearest integer.)

200

For the next three questions, consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the approximate inflation rate in 2016?

4.7%

Which statement BEST illustrates the law of demand? a) An increase in food prices encourages more individuals to buy more food as a result of scarcity. b) Consumers buy more iPhones because prices have fallen. c) Tesla produces more cars as prices increase. d) Fewer people visit Disneyland because incomes have fallen.

Consumers buy more iPhones because prices have fallen.

How do interest rates affect investment in the economy? a) Lower interest rates lower the cost of borrowing for firms, and so investment rises. b) Lower interest rates lower the after-tax profit for firms, and thus investment falls. c) Higher interest rates lower the cost of borrowing for firms, and so firms save more in banks. d) Higher interest rates increase government expenditure and thus raise investment.

Lower interest rates lower the cost of borrowing for firms, and so investment rises.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory? a) The cost of the employees hired and the number of packages purchased. b) The cost of purchasing electricity, raw milk, and sugar. c) The cost of the raw milk purchased from the farmers. d) The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Which of the following are variable costs for Amul Food Factory? (Select ALL that apply.) a) The cost of sugar. b) The cost of buying industrial freezers. c) The cost of the raw milk purchased from farmers. d) The cost of buying the robotic assembly lines.

a) The cost of sugar. c) The cost of the raw milk purchased from farmers.

Complements-in-production a) allows a business to produce goods together. b) allows a business to have alternative uses of its resources by manufacturing other products using the same inputs. c) use substitute inputs in production. d) are always priced the same.

allows a business to produce goods together.

The cost-benefit principle states that a decision should be pursued only if the a) costs are negative. b) costs are greater than the benefits. c) benefits are positive. d) benefits are greater than the costs.

benefits are greater than the costs.

A rise in population in a country: a) leads to a downward shift of the aggregate production function. b) always raises the standard of living in a country. c) leads to an increase in the level of technology in an economy. d) boosts real GDP but not necessarily real GDP per person.

boosts real GDP but not necessarily real GDP per person.

In 2014, Venezuela experienced inflation of about 69%. In 2015, the inflation rate rose to around 181%, and by 2017, the inflation rate was over 4,000%. This scenario describes: a) deflation. b) economic growth. c) money illusion. d) hyperinflation.

hyperinflation

Following a significant recessionary period in which there were periodic wage freezes, workers negotiate higher wages. However, the higher wages lead to a decrease in the number of new workers getting hired, so unemployment persists in the region. The scenario described here is an example of: a) efficiency wages. b) frictional unemployment. c) hysteresis. d) a government mandated minimum wage.

hysteresis

The rational rule suggests you should continue with an activity until your _____ benefit _____ your _____ cost. a) total; exceeds; total b) total; equals; total c) marginal; equals; marginal d) marginal; is less than; marginal

marginal; equals; marginal

GDP is defined as the: a) market value of all consumer goods purchased within an economy. b) market value of all final goods and services produced within a country in a given year. c) value of all intermediate goods produced within a country in a given year. d) value of all output produced by businesses within a country in a given year.

market value of all final goods and services produced within a country in a given year.

producer price index (PPI)

measures the price of inputs into the production process

Which of the following lists the functions of money? a) medium of exchange, store of value, and unit of account b) carrier of exchange, unit of account, and measure of inflation c) store of value, store of interest, and buffer against inflation d) medium of exchange, measure of inflation, and benchmark of quality

medium of exchange, store of value, and unit of account

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: a) find the average quantity produced by the ten suppliers. b) take one-tenth of the individual supply of each supplier and add it up. c) take the individual supply of one supplier. d) multiply the individual supply of one of the suppliers by ten.

multiply the individual supply of one of the suppliers by ten.

The Producer Price Index is an index that tracks the: a) price that businesses pay over time for the inputs used in the production process. b) average price that consumers pay over time for a representative basket of goods and services. c) highest prices consumers pay over time for imported goods and services. d) price of all goods and services produced domestically.

price that businesses pay over time for the inputs used in the production process.

What kind of data adjustment removes the effect of sales spikes due to the holiday season? a) seasonally adjusted data b) annual data c) nominal data d) real data

seasonally adjusted data

business cycle

short-term fluctuations in economic activity, consists of short sharp recessions and long gradual expansions. it reflects the tendency for actual output to deviate from potential output

Money illusion is the: a) increase in the amount of money that it takes to purchase goods and services when prices rise. b) inability to understand that prices always rise. c) tendency to focus on nominal values instead of inflation-adjusted values. d) illusion that one's earnings this year are higher than they were last year.

tendency to focus on nominal values instead of inflation-adjusted values.

An upward-sloping supply curve shows that a) there is a positive relationship between price and quantity supplied. b) there is an inverse relationship between price and quantity supplied. c) sellers are willing to sell less when the prices are higher in the market. d) there is no relationship between price and quantity supplied.

there is a positive relationship between price and quantity supplied.

If a store runs a sale on a product to clear out its stock, we can conclude that: a) there was a shortage of the product in the store. b) the demand for the product is larger than the supply of the product. c) there was a surplus of the product in the store. d) the product must be very close to its expiration date.

there was a surplus of the product in the store.

economic indicators: consumer confidence

- tells you what consumers are thinking - provides useful information about how much consumers are likely to spend in coming months - a leading indicator

economic indicators: nonfarm payrolls

- tracks how many jobs are created each month - tells you if the labor market is improving - provides an early and quite reliable look at how quickly the economy is creating jobs

Suppose a labor market is described by the demand equation, Qd = 200 - 3w, and the supply equation, Qs = -300 + 7w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $45, ________ Million workers will be willing to work in this market. (Round to the nearest whole million.)

50

Aggregate expenditure is the sum of four components:

Consumption: When households buy goods and services Planned investment: When businesses purchase new capital Government purchases: When the government buys goods and services Net exports: Spending by foreigners on American-made exports, less spending by Americans on foreign-made imports.

A recent news story reported that the Organization of Petroleum Exporting Countries is expected to increase the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the market for gasoline? a) an increase in the quantity and the price b) an increase in the quantity and an unpredictable change in the price c) an unpredictable change in both the price and the quantity d) an unpredictable change in the price and a decrease in the quantity

an increase in the quantity and an unpredictable change in the price

In 2022, the Federal Reserve started contractionary policy. In the IS-MP-PC framework, which curve(s) shift(s) where in response to this policy (select ALL that apply): Incorrect Response a) shifts the MP curve down b) shifts the MP curve up c) leaves the MP curve unchanged d) shifts the IS curve down (left) e) shifts the IS curve up (right) f) leaves the IS curve unchanged g) shifts the PC down (right) h) shifts the PC up (left) i) leaves the PC unchanged

b) shifts the MP curve up f) leaves the IS curve unchanged i) leaves the PC unchanged

The moral of the story of the Solow growth model is that: a) capital accumulation alone cannot lead to sustainable economic growth. b) capital accumulation is the key to sustained economic growth. c) technological advance cannot sustain continuous economic growth. d) human capital growth does not lead to economic growth.

capital accumulation alone cannot lead to sustainable economic growth.

Rapid growth in poorer countries leads to: a) divergence in real GDP per person between poorer countries and richer countries. b) inadequate enforcement of property rights. c) higher dependency ratios. d) convergence in real GDP per person between poorer countries and richer countries.

convergence in real GDP per person between poorer countries and richer countries.

The cost-benefit principle states that _____ are the incentives that shape decisions. a) opportunity costs b) incomes c) costs and benefits d) framing effects

costs and benefits

To say that business cycles are persistent means that: a) they typically have short and sharp recessions, followed by long and gradual expansions. b) they usually last over 20 years. c) current conditions typically continue in the near future. d) growth rates in a cycle will always be higher than growth rates in the previous cycle.

current conditions typically continue in the near future.

Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is interested in buying such a car and is willing to pay up to $55,000. Ivan hears Samantha is looking for this particular car and offers to sell it to her for $70,000. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a) occurs; both Ivan and Samantha receive b) does not occur; only Ivan receives c) does not occur; neither Ivan nor Samantha receives d) occurs; only Samantha receives

does not occur; only Ivan receives

Hyperinflation is: a) a period of high money growth in an economy. b) extremely high rates of inflation. c) very high rates of economic growth. d) inflation that occurs when the economy is in a recession.

extremely high rates of inflation.

Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should ignore all of the following costs when calculating the opportunity costs of leaving college EXCEPT the a) tuition costs she has already paid to her college. b) skills she may gain from her final year of economics courses. c) time she will spend working on the app instead of studying. d) 90 credit hours she has already completed for her degree.

skills she may gain from her final year of economics courses.

The marginal benefit of consuming an item is a) the difference between what the consumer is willing to pay and the actual market price of the item. b) the additional benefit from buying one more unit of that item. c) the total benefit from buying several units of the item. d) the additional number of consumers who buy a unit of an item.

the additional benefit from buying one more unit of that item.

Fill in the blanks below using the following choices: (A) If the congestion effect of using a highway increases, then the demand for that highway __________. (B) If the network effect of using a social media platform increases, the demand for advertising by businesses on that platform ________. a) (A) increases; (B) increases b) (A) decreases; (B) decreases c) (A) increases; (B) decreases d) (A) decreases; (B) increases

(A) decreases; (B) increases

King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is: a) $5 and your forgone enjoyment of the taco. b) $5 and your forgone enjoyment of the taco and the nachos. c) your forgone enjoyment of the taco. d) $5.

your forgone enjoyment of the taco.

economic indicators: unemployment rate

- tells you the share of the labor force that wants a job and hasn't been able to find one - a measure of excess capacity

Which economic indicator tells you about the future expected profits of businesses? a) S&P 500 b) Initial unemployment claims c) Nonfarm payrolls d) Consumer price index

S&P 500

real variable

a variable that has been adjusted to account for inflation

consumer price index (CPI)

an index that tracks the average price consumers pay over time for a representative "basket" of goods and services, used to measure inflation

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that the: a) economy is experiencing an economic downturn. b) labor force participation rate has fallen significantly. c) economic growth rate has decreased by 2.25%. d) equilibrium rate of unemployment is 2.25%.

economy is experiencing an economic downturn

unexpected inflation: distribution

increases in unexpected inflation redistributes from lenders toward borrowers (increased=LB) decreases in unexpected inflation redistributed from borrowers to lenders (decreases=BL)

The four stages of the business cycle are: a) expansion, growth, contraction, and depression. b) peak, recession, trough, and expansion. c) consumption, investment, government expenditure, and net exports. d) full employment, potential GDP, recessionary gap, and inflationary gap.

peak, recession, trough, and expansion.

frictional unemployment

unemployment due to the time it takes for employers to search for workers and for workers to search for jobs

leading indicators

variables that tend to predict the future path of the economy. Important leading indicators include business confidence, consumer confidence, and the stock market. Leading indicators help you get a better sense of where the economy is headed because they tend to change first. ex: consumers lose confidence in the economy before they start to substantially cut back their consumption

5 rules to track the economy

1. track many indicators 2. broad indicators beat narrow indicators 3. seek just-in-time data 4. find the signal amid the noise (average it out, or disregard outliers) 5. adjust your outlook when data differs from expectations (not just whether something increase or decreases, but also the extent of it. ex: you predict a 10% increase, but it only increases by 5%)

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 124.07 in January 1989. If the current consumer price index is 250.34, the cost of the four-year degree in current dollars is $ ___________ [round to the nearest cent - i.e., hundredth of a dollar].

54,281.02

Suppose that an economy is overheating. You would expect to see the unemployment rate: a) be zero. b) fall below the equilibrium unemployment rate (natural rate of unemployment). c) be equal to the equilibrium unemployment rate(natural rate of unemployment). d) rise above the equilibrium unemployment rate (natural rate of unemployment).

fall below the equilibrium unemployment rate (natural rate of unemployment).