Macro Hw 3&4

All of the following would be included in GDP EXCEPT

-a person receiving his Social Security check

All of the following are growth success stories EXCEPT

-argentina

If expected inflation was 6% and actual inflation is 10%, who benefits?

-borrowers

All of the following are true EXCEPT -stopping high inflation in the US caused a recession in the 1980s -a cost of inflation is that consumers spend time trying to game inflation -high inflation and interest rate controls can cause negative real interest rates -capital gains taxes always account for inflation

-capital gains taxes always account for inflation

The production of a soccer ball that is purchased by a consumer would be classified as

-consumption

All of the following are true about monetizing debt EXCEPT -monetizing the debt is when countries print money to pay their debts -the US is viewed as more likely to monetize debt today than 20 years ago -countries avoid monetizing more when foreigners hold debt than when domestic citizens hold debt -countries avid monetizing debt because lenders will require higher interest rates

-countries avoid monetizing more when foreigners hold debt than when domestic citizens hold debt

An inflation rate that is less than last year, but is still positive is

-disinflation

If the inflation rate goes from 9% to 4%, what is this called?

-disinflation

All of the following are reasons many European countries have higher unemployment rates than the US EXCEPT -european countries tend to have more generous unemployment benefits -european countries tend to have a higher degree of unionization -european countries tend to have more employment protection laws -european countries tend to have more of their unemployment be frictional than the US

-european countries tend to have more of their employment be frictional than the US

GDP adjusts for the levels of crime between different countries

-false

Which of the following are included in GDP? (choose all that are correct)

-final goods -final services

Assume that you quit your job three weeks ago and that have not found a new job yet. You also have applied for unemployment benefits, but your claim was denied. You would be classified for the purposes of the unemployment survey as -employed -frictionally unemployed -structurally unemployed -not in the labor force

-frictionally unemployed

All of the following are a component of the factor income approach for calculating GDP EXCEPT

-imports

As labor regulations become more rigid (increased employment protection laws), then the amount of unemployment that is long term tends to -stay the same -increase -decrease -be eliminated

-increase

Assume that a person that was retired is now looking for a job, but has not found a job yet. This change will cause the unemployment rate to

-increase

All of the following have led to increased female labor force participation EXCEPT -birth control pill -shift in US economy from manufacturing based to more service based economy -increase in fertility rate -increased social acceptance of females working outside the home

-increase in fertility rate

Political stability primarily increases economic growth by encouraging

-investment

All of the following are true about the GDP deflator EXCEPT -it includes exports -it is a price index that can be used to measure inflation -in includes imports -it is used to adjust nominal GDP

-it includes imports

Which of the following countries is a growth success story?

-japan

GDP does not take into account which of the following?

-lesiure

The factors of production include all of the following EXCEPT

-money

The federal government would be more likely to monetize its debt if

-more debt becomes held by foreigners

High inflation combined with interest rate controls can harm an economy by resulting in all of the following EXCEPT

-more lending

All of the following are true EXCEPT -when inflation occurs, wages generally go up at the same rates as well -when inflation is occurring, the prices of all goods are not necessarily going up -nominal wages are adjusted for inflation -the CPI is the most commonly used price index to adjust prices for inflation

-nominal wages are adjusted for inflation

Which institution is primarily responsible for reducing the free rider problem?

-property rights

Which institution was at the heart of the failure of the "Great Leap Forward" in China? Correct!

-property rights

If a person has been unemployed for 8 months, they would typically be classified as experiencing

-structural unemployment

Landlocked countries tend to have a lower real GDP per capita.

-true

US GDP includes all of the production of US citizens around the world.

-true

If a country has a lot of economic activity in the underground economy, then GDP will ________ total production in a country

-understate

What is used to covert nominal GDP into real GDP?

-GDP deflator

What is included in the GDP deflator that is not included in the CPI? -exports -apples -rent -imports

-exports

Assume the growth rate of the money supply is 325%. What would we expect inflation approximately to be?

325%

All of the following are true about minimum wages and unions EXCEPT -there are fewer jobs available under them -they tend to increase unemployment rates -wages are taken to a level that is below market equilibrium levels -more labor is supplied than is demanded

wages are taken to a level that is below market equilibrium levels

If lenders and borrowers expect 4% inflation and lenders require an 8% return, what will the nominal interest rate be? Hint: enter your answer without a % sign Example: if the answer is 5%, enter 5

12

If the nominal interest rate is 9% and the inflation rate is -5%, what is the real interest rate (ractual)? Hint: enter your answer without a % sign Example: if the answer is 5%, enter 5

14

Use the following information about the CPI for the US for the next two questions: 2011 CPI - 225 2012 CPI - 230 2013 CPI - 233 What is the inflation rate for 2012? (growth in prices from 2011 - 2012)

2.22

Use the following values of the CPI for the question below: 2016 - 176 2017 - 181 2018 - 188 2019 - 192. What is the inflation rate for 2018? Hint: round to two decimal places and do not include a % sign Example: if the answer is 6.1144298743567%, enter 6.11

3.87

Assume the following: Employed - 175 million Labor force participation rate - 62% Total population - 338 million Children, military, institutionalized - 35 million What is the unemployment rate for this economy?

6.85

Assume you have a one-year loan that is due today. If the interest rate on your loan is 11% and inflation was 4% over the past year, what is the real interest rate (r real) on your loan?

7%

Using the rule of 70, how many years will it take GDP per capita to double if real GDP per capita grows at 5% per year? Hint: enter your answer without any units Example: if the answer is 20 years, enter 20

70/5= 14

If the money supply grows at 7%, velocity of money grows at 4% and real GDP grows at 3%, what is the inflation rate? Hint: enter your answer without a % sign Example: if the answer is 5%, enter 5

8

Assume the interest rate on a one-year loan is 12% and that lenders require a real return (r equilibrium) of 3% to lend money. What is expected inflation for the next year?

9%

Use the following information for the next 3 questions. Assume an economy's production is characterized by the prices and quantities below. Use 2019 as your base year if you need a base year. 2018: $2.00 per lb, 100 lbs of tomatoes; $10 per lb, 300 lbs of pecans 2019: $2.10 per lb, 120 lbs of tomatoes; $10 per lb, 340 lbs of pecans 2020: $2.10 per lb, 130 lbs of tomatoes; $11 per lb, 400 lbs of pecans

ex

All of the following are key institutions that promote robust economic growth EXCEPT Correct!

free universal public schooling

The type of unemployment that is short term and caused by the time it takes to match employers and employees is ________ unemployment.

frictional

All of the following are true EXCEPT -higher implicit taxes on working lowers the labor force participation rate -unemployment benefits lower the price of unemployment -frictional unemployment was a higher percentage of unemployment in 2010 than in 2005 -employment at will is not allowed in some countries

frictional unemployment was a higher percentage of unemployment in 2010 than in 2005

The US auto industry is characterized by a high degree of unionization. What would happen to unemployment in the US auto industry if the firms in the US auto industry were no longer unionized?

go down

Assume that Gregory is a graduate of K-State. While he was a student, he never had a job and never wanted or looked for a job. Now that he has graduated he is looking for a job and has not found one yet. Compared to when he was a student, the unemployment rate is now _______ and the labor force participation rate is now ________.

higher; higher

Which factor of production is being increased by your studying for this class?

human capital

Assume that a person that was retired is now looking for a job, but has not found a job yet. This change will cause the labor force participation rate to

increase

When compared to North Korea's economy, South Korea's economy

is more organized by markets

When real interest rates are negative

lenders become less willing to lend

All of the following would not increase GDP EXCEPT

marijuana being legalized in all 50 states

The first time GDP per capita started growing rapidly in a country was in the

mid 1800s

All of the following are factors of production EXCEPT -money equivalents -human capital -technical knowledge -physical capital

money equivalents

People mistaking changes in nominal prices for changes in real prices is called

money illusion

In which component of GDP are things like Medicare payments and Social Security checks included?

none

Assume that there is a civil war in a country and that investors are worried about their investments being destroyed in the fighting. This results in a substantially reduced level of investment in this country. What institution is primarily failing for this country?

political stability

Political stability and a dependable legal system all work to do all of the following EXCEPT

remove unnecessary regulation

South Korea has a higher GDP per capita than North Korea due to all of the following EXCEPT

South Korea imposes no taxes on businesses

If inflation is 6% and expected inflation for that time period was 8%, this would

benefit lenders; harm borrowers

Assume the following: An international pharmaceutical company owns a patent for a new drug in Paraguay. A local Paraguayan company begins making a generic version of the drug. The international pharmaceutical company files a lawsuit to stop the production of the generic drug, but the courts find that the local company can continue making the drug after the company bribes a powerful politician. All of the following institutions have failed EXCEPT Correct!

competitive and open markets

All of the following are shortfalls of GDP EXCEPT

does not adjust for things like inflation and exchange rates

What kind of employment regulation is the most basic in the US?

employment at will

The primary source of inflation over the long run in an economy is

increasing the growth rate of the money supply

What is nominal GDP for 2018?

-$3200

What is real GDP for 2020?

-$4273

Assume that in a country pecans are $10 per pound and fireworks are $100 per case. For 2020, this country has produced 100 pounds of pecans and 50 cases of fireworks. What is 2020 GDP for this country?

-$6000

What is the GDP deflator for 2019?

-100

Assume that nominal GDP for 2021 is $4900 and that real GDP for 2021 is $4400. What is the GDP deflator for 2021?

-111.36

Assume that in a country 2020 nominal GDP is $500 and 2020 real GDP is $400. What is the 2020 GDP deflator for this country?

-125

Assume that real GDP is $3,652 in 2019 and real GDP for 2018 is $3210. What is the growth rate of real GDP for 2019?

-13.77%

Assume the 2019 CPI is 184 and the 2020 CPI is 191. What is the inflation rate for 2020?

-3.80%

If GDP in 2019 is $200 and GDP in 2020 is $210, what is the growth rate of GDP?

-5%

Assume for a year that the growth rate of the money supply is 8%, the growth rate of the velocity of money is 2% and the real economic growth rate is 4%. What is the inflation rate for this year?

-6%

Assume the GDP deflator for 2021 is 115 and the GDP deflator for 2022 is 123. What is inflation for 2022? This is the same as the growth rate of prices for 2022.

-6.96%

If real GDP per capita grows at 10% per year, how long will it take for real GDP per capita to double?

-7 years

Assume that Consumption decreases by $25 million, Investment increases by $10 million, Government Purchases increase by $60 million, Exports decrease by $30 million and Imports decrease by $55 million. What is the net change in GDP in $million? Hint: enter your answer without a $ sign and in terms of the number of millions Example: if the answer is $45 million, enter 45

-70

Which institution is primarily responsible for reducing the free rider problem?

-75%

Assume that Croatia's GDP per capita in 2014 is $20,000 and their GDP per capita is growing at a 5% rate and will continue to grow at a 5% rate in perpetuity. What will Croatia's GDP per capita be in 2042? Hint: enter your answer without a comma or $ sign Example: if the answer is $50,000, enter 50000

-80,000

Who is responsible for calculating GDP for the US?

-Bureau of Economic Analysis (BEA)

Which price index is most commonly used to adjust nominal prices to real prices?

-CPI

Use the following information about the CPI for the US for the next two questions: 2011 CPI - 225 2012 CPI - 230 2013 CPI - 233 What is the inflation rate for 2013? (growth in prices from 2012 - 2013)

1.3

If total unemployment is 9.1%, cyclical unemployment is 3.9% and frictional unemployment is 3.5%, what is the structural unemployment rate? Hint: enter your answer without a % sign Example: if the answer is 2.8%, enter 2.8

1.7

What of the following statistics is the best measure of the standard of living in a country? -GDP -GDP per capita -unemployment -inflation

GDP per capita

All of the following are true about GDP per capita EXCEPT -GDP per capita was very low everywhere in the year 1200 -higher GDP per capita is positively correlated with better health outcomes -GDP per capita is very similar today across all countries in the world -many people live in a country with a GDP per capita that is below average

GDP per capita is very similar today across all countries in the world

If all drugs were legalized everywhere in the US

GDP would increase

Which of the following is the equation for the factor income approach to calculating GDP?

Y = Wages + Rent + Interest + Profits

If an economy is experiencing inflation, that means

the average level of prices in the economy is rising