Macro Final

Other things the same, which of the following would increase productivity?

an increase in either human or physical capital

Normative conclusions

involve value judgments.

Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly's decision to buy the house change GDP?

it does not change GDP

Which of the following is an explanation for the existence of frictional unemployment?

job search

Human capital is the

knowledge and skills that workers acquire through education, training, and experience

Which of the following is an example of a renewable natural resource?

lumber

Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of

market prices

For the economy as a whole,

expenditure must equal income.

Economist Michael Kremer found that world growth rates fell as population increased. T/F

F

Expenditures by households on education are included in the investment component of GDP. T/F

F

For international trade to benefit a country, it must benefit all citizens of that country. T/F

F

If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300. T/F

F

In the circular-flow diagram, factors of production are the goods and services produced by firms. T/F

F

The U.S. economy has never experienced deflation. T/F

F

The effects of borrowing by the federal government would be studied by a microeconomist rather than a macroeconomist. T/F

F

When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is constant. T/F

F

When two variables move in opposite directions, the curve relating them is upward sloping, and we say the variables are positively related. T/F

F

U.S. GDP and U.S. GNP are related as follows

GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.

Consider two individuals — Howard and Mai — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases?

Howard is very good at knitting sweaters and at cooking tasty food, but Mai's skills in both of these activities are very poor.

Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that

Mary's productivity is higher than Sue's.

When economists are trying to explain the world, they are

Scientists

Government purchases include spending on goods and services by

federal, state, and local governments.

By far the largest category of goods and services in the CPI basket is

housing

Consumer goods that are produced, go into inventory, and are not sold during the current period are

included in current period GDP as inventory investment.

Which of these terms are used interchangeably?

"inputs" and "factors of production"

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015?

$3200

In the economy of Talikastan in 2015, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Talikastan's net exports in 2015?

-$250

U.S. GNP

. excludes production of foreigners working in the U.S. but includes production by U.S. citizens working in foreign countries.

Tom is an organic gardener. For several years, he produced only for his own consumption, but this year he has sold his vegetables at a farmer's market. The vegetables Tom produces

. ​are included in GDP for this year, but prior to this year the value of his vegetables was not included in GDP.

Suppose that some country had an adult population of about 25 million, a labor-force participation rate of 60 percent, and an unemployment rate of 6 percent. How many people were employed?

14.1 million

The Bureau of Labor Statistics counts a member of a surveyed household as an adult if that person is at least

16 years old

In the United States in 2015, consumption represented slightly less than

70 percent of the GDP

Changes in inventory are included in the investment component of GDP. T/F

T

Most job search in the U.S. economy takes place without intervention by the government. T/F

T

Which of the following is an example of a positive, as opposed to normative, statement?

When the minimum wage is increased, unemployment is a predictable consequence

Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

a general technological advance

Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram?

a. Dylan receives a salary for his work as a financial analyst for an investment firm. b. Kristin buys two business suits to wear to her job as a Chief Information Officer. c. Jim receives clean water in his home in exchange for paying his water bill. d. Caroline owns a nail salon and receives payments from her clients for her services. A

Which of the following statements is correct?

a. Few economic models incorporate assumptions. b. Different economic models employ different sets of assumptions. c. Good economic models attempt to mimic reality as closely as possible. d. Economic models, to be accepted, must be tested by conducting experiments B

Which of the following statements best captures the relationship between microeconomics and macroeconomics?

a. For the most part, microeconomists are unconcerned with macroeconomics, and macroeconomists are unconcerned with microeconomics. b. Microeconomists study markets for small products, whereas macroeconomists study markets for large products. c. Microeconomics and macroeconomics are distinct from one another, yet they are closely related. d. Microeconomics is oriented toward policy studies, whereas macroeconomics is oriented toward theoretical studies. C

Which of the following is not included in U.S. GDP?

a. The market value of an oil change that Ben performs on his own car. b. The market value of an oil change at Speedy Lube. c. The market value of oil purchased by Ben. d. Production of foreign citizens living in the United States that work in an oil packaging facility. A

Which of the following is a way to compute GDP?

a. add up the wages paid to all workers b. add up the quantities of all final goods and services c. add up the market values of all final goods and services d. add up the difference between the market values of all final goods and services and then subtract the costs of producing those goods and services C

Which of the following steps does an economist take when studying the economy?

a. devise theories b. collect data c. analyze data d. All of the above are correct. D

Which of the following transactions is not included in GDP?

a. oranges sold to households by a grocer. b. orange juice sold by a restaurant to its diners. c. oranges sold by a farmer to a grocery store. d. All of the above are included in GDP. C

A microeconomist — as opposed to a macroeconomist — might study

a. the effect of a national healthcare program on the nation's unemployment rate. b. the effect of new regulations on production in the pulp and paper industry. c. the effect of changes in interest rates on gross domestic product. d. the growth rate of production in the economy. B

Which of the following would likely be studied by a microeconomist rather than a macroeconomist?

a. the effect of foreign direct investment on economic growth b. the effect of a sales tax on the cigarette industry c. the effect of an investment tax credit on the economy's capital stock d. the effect of a war on government spending B

Which of the following values would be included in U.S. GDP for 2015?

a. the rent that Sam, an American citizen, would have paid on his home in Houston in 2015 had he not owned that home. b. the rent that Jim, an American citizen, paid on his apartment in San Francisco in 2015. c. the value of the legal services provided by Juan, an attorney and a Mexican citizen, who lived in San Antonio and practiced law there in 2015 d. All of the above would be included in U.S. GDP for 2015. D

Estimates of the values of which of the following non-market goods or services are included in GDP?

a. the value of unpaid housework b. the value of services provided by major household appliances purchased in a previous period c. the estimated rental value of owner-occupied homes d. All of the above are included in GDP. C

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the

amount of the other good that must be given up.

Real GDP is the yearly production of final goods and services valued at

constant prices

The consumption component of GDP includes spending on

durable goods, nondurable goods, and services

Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,

nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.

Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are sold at $300 each and 5000 pounds of bananas are sold at $3 per pound. In 2009, the base year, iPhones sold at $400 each and bananas sold at $2 per pound. For 2010,

nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 76.83

Every month, the Bureau of Labor Statistics surveys 160,000 business establishments to help determine the

number of jobs the economy has gained or lost.

The labor force equals the

number of people employed plus the number of people unemployed

Real GDP will increase

only when output increases

In the simple circular-flow diagram, households

own the factors of production.

When economists talk about growth in the economy, they measure that growth as the

percentage change in real GDP from one period to another

The inflation rate is defined as the

percentage change in the price level from the previous period.

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

raises GDP

A recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters.

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

surveying consumers.

Two alternative measures of the overall level of prices are

the GDP deflator and the consumer price index.

A decrease in the price of domestically produced nuclear reactors will be reflected in

the GDP deflator but not in the consumer price index.

In the circular-flow diagram, in the markets for

the factors of production, households are sellers and firms are buyers.

Which of the following is a good gauge of economic progress?

the growth rate of real GDP per person, but not the level of real GDP per person

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarter(s) does(do) these transactions raise consumption?

the second but not the first

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year