Macro Macmillan ch 8-10

The part of the business cycle that goes from economic peak to economic trough is known as a

recession.

Unemployment that often requires extended periods of retraining is _____ unemployment.

structural

The primary explanation for the extraordinary economic growth the United States has enjoyed over the past century is

technological progress.

June is a surgeon who took a job as a lifeguard at a local pool because she was unable to find a job in the medical field. June is considered to be

underemployed.

When _____ increase(s), each worker is producing more output per hour devoted to production.

worker productivity

If there are 3,000 in the population; 930 are employed; 70 are unemployed; and 100 are discouraged workers, what is the unemployment rate?

7%

Using the Rule of 70, assume it takes 10 years for the initial value to double. What is the growth rate?

7%

Training and education would result in improving ways to use which factor of production?

labor

_____ refer(s) to the ability of firms to open and close businesses without unnecessary restrictions or other burdens.

Competitive markets

_____ can turn small rates of growth into substantial increases in output and income over time.

Compounding

The _____ is an index of the average prices for all goods and services in the economy, including consumer goods, investment goods, government goods, services, and exports.

GDP deflator

Which of these would be protected by a patent?

an invention

When each additional unit of capital provides a smaller increase in output than the previous unit of capital, which of these has occurred?

diminishing returns to capital

According to the aggregate production function, output is determined by technology, physical capital, human capital, land and natural resources, and

labor

According to modern growth theory, economic growth is driven MOST by

new knowledge gained by technical change.

Which of these is NOT used to calculate GDP as part of the income approach?

personal consumption expenditures

Hiring unemployed workers to increase production is likely to produce _____ growth.

short-run

What is total factor productivity?

the portion of output that is not explained by the amount of inputs used in production

If there are 2,000 people in the population; 950 are employed; 50 are unemployed, what is the unemployment rate?

5%

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = f(A, L, K, H, N) = A × (L + K + H + N). If A equals 3 and L, K, H, and N equal 7, then how much output would this new colony produce?

84

Suppose the consumer price index in 2010 was 120 and its corresponding basket of goods was $23,000. If that same basket of goods cost $19,000 in 2006, what was the value of the CPI in that year?

99 To find the value of the CPI in 2006, divide the cost of the basket of goods in 2006 by its cost in 2010 and multiply by the value of the CPI in 2010. The equation is CPI = ($19,000/$23,000) × 120 = 0.826 × 120 CPI = 99.1, or 99.

Which of these would NOT lead to unemployment growth?

GDP growth

The U.S. economy grew about 0.55% from the third quarter of 2018 to the fourth quarter of 2018. What is the annualized% change in real GDP?

2.2% The annualized rate of change is the quarter rate multiplied by 4.

The mental and physical talents of people are included in

labor.

Developing countries tend to have a(n)

large labor force and little capital.

Reopening idled manufacturing plants to produce additional product will produce _____ growth.

short-run

The _____ shows the relationship between the interest rate earned on a bond and the length of time until the bond's maturity date.

yield curve

Assume the U.S. economy shrank about 0.25% quarter to quarter. What is the annualized percentage change in real GDP?

−1.0%

_____ is growth building on previous growth.

Compounding

Which of these is a durable good?

a car

Steve worked in a North Carolina furniture factory until it went out of business because foreign competition had cheaper labor costs. Now he is unable to find a new job because he is not qualified for any available jobs. This is an example of _____ unemployment.

structural

Which of these is NOT used to determine the Index of Economic Freedom?

the average population growth per year

_____ is the measure used to gauge the ability of individuals and businesses to make investment and production decisions freely.

The Index of Economic Freedom

_____ is the portion of output produced that is not explained by the number of inputs used in production.

Total factor productivity

What is real GDP per capita?

a rough estimate of a country's standard of living

How is real GDP per capita calculated?

real GDP divided by population

_____ constitute the bulk of income in our economy.

Wages and salaries

Using the Rule of 70, how long does it take for a value to double if the growth rate is 8%?

about 8.75 years

What is compounding?

growth building on previous growth

Which of these plays the MOST significant role in economic growth?

improvements in technology and ideas

If nominal GDP increases by 7.5% in one year, and inflation as measured by the GDP deflator grows by 7.5%, how much has real output increased?

0%

Which of these statements is NOT true about the production function?

The inputs in production function are limited to labor and capital.

Which of these statements is NOT true of nations that have higher levels of economic freedom?

These countries have low per capita gross domestic product (GDP).

Which of the statements is the best description of a business cycle?

alternating periods of increasing and decreasing economic output

Short-run growth is common when

an economy is recovering from an economic downturn.

Which of these would tend to cause inflation?

an increase in consumer income

An increase in a country's real GDP per capita generally translates into a _____ standard of living for most of its residents.

higher

An increase in a country's real GDP per capita generally translates into a

higher standard of living for most of its residents.

In September 2010, President Obama talked about a plan to spend more on U.S. infrastructure. Which of these would NOT be included in such a plan?

human capital improvements through on-the-job training

A U.S. automaker produces $1 million worth of automobiles in Japan. How much of that is added into the GDP of the United States?

none

The annualized percentage change in real GDP is 1%. What is the quarter-to-quarter percentage change in real GDP upon which this annualized rate was calculated?

0.25%

Which of these is NOT a significant driver of economic growth?

abundance of land and natural resources

An innovation that speeds up processing times and makes workers more productive is likely to produce _____ growth.

long-run

Real GDP is the total value of final goods and services produced in a country in one year

measured using prices in a base year.

Which of these is a fixed investment?

purchase of a manufacturing plant

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = f(A, L, K, H, N) = A × (L + K + H + N). If A equals 4, L and K equals 5, and H and N equal 15, then how much output would this new colony produce?

160

_____ unemployment is the result of changes in the business cycle.

Cyclical

Which of these is considered part of the labor force?

an unpaid family worker

Real GDP per capita is _____ GDP divided by _____.

real; population

For a good or service to be counted in a given year's gross domestic product (GDP), what four criteria must be met?

-Have a market value-Be a final good or service-Be produced within a given country-Be produced within a certain time frame

If a set basket of goods costs $22,000 in the current year and $20,000 in the base year, how much have prices risen since the base year?

10%

If a set basket of goods costs $6,000 in the current year and $5,000 in the base year, what is the consumer price index?

120 The CPI is determined by dividing the cost of a typical market basket of consumer goods and services in the current year by its cost in the base year and multiplying by 100. The equation is CPI = ($6,000/$5,000) × 100 = 1.2 × 100 = 120.

Using the Rule of 70, how long does it take for a value to double if the growth rate is 5%?

14 years

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = Output= f(A, L, K, H, N) = A × (L + K + H + N). If A equals 4, L and K equal 5, and H and N equal 15, then how much output per person would this new colony produce?

32

Long-run growth occurs when

An economy finds new resources

Which is an example of an efficiency wage?

Because Susan gets paid above the market equilibrium rate, she is motivated to work hard and stay in her job.

_____ are short-run fluctuations in the macroeconomy that are also known as booms and busts.

Business cycles

The capital-to-labor ratio in country A is 1.25. The capital-to-labor ratio in country B is 0.72. The capital-to-labor ratio in country C is 1.84. The capital-to-labor ratio in country D is 0.61. Which country is most likely to have the highest labor productivity? Which of these correctly lists the countries in order from lowest to highest labor productivity?

D, B, A, C

_____ is usually measured by the annual percentage change in real GDP.

Economic growth

Use the following data to calculate GDP: consumption = $10 billion, investment = $2 billion, government spending = $2.5 billion, exports = $2 billion, imports = $3 billion.

GDP is $13.5 billion.

Which statement is NOT true about government spending?

Government purchases of goods and services are classified as durable goods, nondurable goods, and services.

_____ include(s) the wages and salaries of government employees and the purchase of products and services from private businesses and the rest of the world.

Government spending

What effect does overstating inflation have on real earnings in the long run?

It makes real earnings appear smaller than they actually are.

_____ can be used to calculate the number of years it takes for an amount to double in value.

The Rule of 70

How would hiring unemployed workers to increase production be illustrated on the production possibilities frontier?

The economy would move from a point inside the PPF to one on the PPF.

Which of these statements is true?

The unemployment rate is not perfectly correlated with employment numbers because people are constantly entering and leaving the labor force.

Rising prices that slow an economy can lead to all of these EXCEPT

an increase in demand for goods and services

According to the circular flow diagram, the _____ sector is responsible for taking inputs from the resource market and delivering goods and services to the product market.

business

When countries with small starting levels of capital reap large benefits from increased capital, allowing these countries to grow faster than countries with abundant capital, which of these has occurred?

catch-up effect

The difference between current unemployment and what the unemployment rate would be if the economy were at full employment is referred to as

cyclical unemployment.

Inflation was about 5.5% in the middle of 2008 but had fallen to near zero by the end of the year. This is an example of

disinflation.

What are diminishing returns to capital?

each additional unit of capital providing a smaller increase in output than the previous unit of capital

When _____ is positive, it reflects an improvement in the standard of living.

economic growth

David works as a software developer, but he recently took paternity leave after he and his wife had a child. David is considered to be

employed.

Investments in human capital are

improvements to the overall quality of workers and their productivity.

In September 2010, President Obama talked about a plan to spend more on U.S. infrastructure. Which of these would be included in such a plan?

improving interstate highways

In September 2010, President Obama talked about a plan to spend more on U.S. infrastructure. Which of these would NOT be included in such a plan?

increasing the number of U.S. Border Patrol agents

An outward shift of the production possibilities frontier illustrates _____ growth.

long-run

Jessie has been out of work for more than a year. A few months ago she gave up trying to get a new job until the economy gets better. Jessie is considered to be

marginally attached.

Which of these is classified as labor?

mental and physical talents of people

Labor, a factor of production, includes

mental and physical talents of people.

According to the aggregate production function, output is determined by technology, _____, human capital, land and natural resources, and labor.

physical capital

Suppose you saw a news article that quoted economists as saying that business investments have begun to decline. In which phase of the business cycle does this occur?

recession

The headline "Bailout Plan Rejected, Markets Plunge, Forcing New Scramble to Solve Crisis" appeared in the Wall Street Journal on September 30, 2008. What phase of the business cycle does this headline suggest the economy was in at that time?

recession

What phase of the business cycle does the headline "Consumer Confidence at Highest Level in Three Years" suggest?

recovery

Which of these is NOT a source of productivity growth?

reducing immigration

In the circular flow model, household spending becomes _____, and factor payments by businesses

revenue to businesses; wages and earnings to households

Which of these is NOT assessed in determining the Index of Economic Freedom?

right and freedom to vote

Moving from a point inside the production possibilities frontier to a point farther to the right but still within the PPF illustrates _____ growth.

short-run

When obstacles preventing resources from being fully used are loosened, the economy is likely to undergo _____ growth.

short-run

Long-term decline in consumer demand for a particular product is a cause of

structural unemployment.

What is real GDP?

the total value of final goods and services produced in a country in a year, measured using prices in a base year

Measures of real GDP are useful because

they allow for relatively accurate comparisons of output from year to year.

Which of these is NOT considered when measuring GDP per capita?

under-the-table payments