Macro test 2
frictional unemployment
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015?
b. $1450
What does G represent in the Aggregate Expenditure Equation
government spending
What does M represent in the Aggregate Expenditure Equation
imports
The largest spending category in GDP is consumption
true
Enchante Inc., a designer clothing company, buys $400 worth of silk from a silk trader and $30 worth of accessories from AccessoriesRuS to produce each dress. If the value added by Enchante is equal to $200, then according to the value-added approach, the price of the designer dress should be:
A) $630.
A survey reveals that on a small island 1,000 people have jobs, 250 people are looking for jobs, and 450 people are neither working nor looking for work. The unemployment rate on the island is:
A) 20%.
An example of a factor that causes the natural rate of unemployment to rise is
A) a population boom that increases the number or young workers joining the labor force
A stock in a company is:
A) a share of ownership of a company held by a shareholder.
Nominal GDP:
A) has not been adjusted for changes in prices over time.
Suppose that nominal GDP is $1,000 in 2009 and nominal GDP is $1,500 in 2010. If the overall price level ____ between 2009 and 2010, we could say that real GDP _____.
A) increased by 50%; stayed constant.
Structural changes in an economy as well as changes in consumer tastes are reasons for
A) job creation and job destruction.
People who are counted as unemployed by the government are
A) people without a job who are actively seeking a job.
GDP is the:
A) total market value of all final goods and services produced in one year.
Which of the following would NOT be a part of GDP?
A) used car sales
Scenario: Price Index Suppose that in the base period a college student buys 20 gallons of gasoline at $2 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50. . (Scenario: Price Index) The price index for the second month is:
B) 106.4.
If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:
B) 5%.
If the CPI is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about:
B) 5.56%.
A survey reveals that on a small island initially 100 people have jobs, 25 people are looking for jobs, and 45 people are neither working nor looking for work. Suppose that 15 of the 45 people who weren't looking for work now begin looking for work. There are now 40 people looking for work and 100 people working. What happens to the unemployment rate?
B) It rises to 28.6%.
Suppose that roughly 8 million people in the United States were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the unemployment rate this month, all other things unchanged?
B) It will fall, because 2 million people are not in the labor force this month and are not counted as unemployed.
Which one of the following is an example of consumption expenditure?
B) Stephanie bought a laptop for her brother.
In 2010, _____ was the largest component of U.S. GDP, at approximately 70% of the total aggregate spending.
B) consumer spending
Which of the following would accurately characterize the portion of a firm's profit paid to the owner of one share of its stock?
B) dividend
Goods that are produced in a particular period but NOT sold in that period
B) end up in inventory and are included in investment.
The GDP deflator is:
B) equal to 100 in the base year.
If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's:
B) gross domestic product.
To be classified as unemployed, a worker must:
B) not have a job and must be actively looking for work.
An example of an intermediate good is:
B) steel purchased by aircraft manufacturers.
The total volume of business sales in the economy is much larger than GDP because:
B) the output approach to measuring GDP excludes intermediate transactions.
Unemployment rates tend to
B) vary depending upon age groups and ethnicities.
Aggregate Expenditure Equation
C + I + G + (X - M)
Assume that the real GDP of the United States is approximately $12 trillion and the population of the United States is approximately 300 million. What is per capita real GDP?
C) $40,000
Suppose there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is:
C) 14.28%.
Which one of the following price indexes measures the cost of living?
C) CPI
Which of the following statements is true concerning the producer price index?
C) The producer price index measures the cost of a basket of goods typically purchased by producers.
Suppose only two countries existed in the world. Country A imported $200 million worth of goods and services from country B. Country B imported $100 million worth of goods and services from country A. Net exports for:
C) country A equal -$100 million.
Goods and services sold to people in other countries are known as:
C) exports.
Ron quit his job in retail management and moved to Florida with his wife, a physician who opened a new practice there. He was not successful in his job search for the next four months. Ron's unemployment is known as:
C) frictional unemployment.
If more women enter or reenter the labor force, the natural rate of unemployment is expected to:
C) increase.
Which of the following would NOT be considered a government transfer?
C) payments by the Defense Department for a new weapons system
If the price level in the economy and the nominal wages both doubled, then real wages would:
C) remain unchanged.
The percentage of the labor force that is unemployed is the:
C) unemployment rate.
Discouraged workers is another term for the unemployed.
False
If the United States exports $500 of goods and services and imports $700 of goods and services, net exports are $1,200.
False
GDP formula
GDP = C + I + G + (X - M)
Real GDP formula
Nominal GDP/GDP Deflator
Out of the labor force
Out of paid workforce and/or not actively looking for a job
Unemployed
Out of work and actively looking for a job
Producer Price Index (PPI)
a measure of the (non-labor) costs of U.S. producers
In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9 million, unemployment of 12.4 million, and employment of 141.6 million. Based on these numbers the labor-force participation rate was
a. 154/234.9.
In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Italian adult non- institutionalized population was 51.070 million, the labor force was 24.710 million, and the number of people employed was 22.765 million. According to these numbers, the Italian labor-force participation rate and unemployment rate were about
a. 48.4% and 7.9%.
Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills.
a. Jenna and Mary are both frictionally unemployed.
Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the same, the unemployment rate
a. and the labor-force participation rate both increase.
Which of the following is not included in GDP?
a. carrots grown in your garden and eaten by your family
Which of the following is included in GDP?
a. medical marijuana purchased from a government-run pharmacy by a glaucoma patient
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
a. raises GDP.
If nominal GDP doubles and the GDP deflator doubles, then real GDP
a. remains constant.
The Bureau of Labor Statistics reported in 2005 that there were 50.40 million people over age 25 whose highest level of education was some college or an associate degree, 33.86 million of whom were employed and 1.27 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
b. 69.7% and 3.6%
The adult population in the town of Shelbyville is 150 thousand. If 100 thousand people are employed and 20 thousand are unemployed, then the labor force participation rate is approximately
b. 80%.
If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then
b. U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected.
If an unemployed person quits looking for work, then, eventually the unemployment rate
b. and the labor-force participation rate both decrease.
Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is
b. included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself.
If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP
b. increases.
A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP?
c. $1200
The consumer price index in 2014 was 400.5 then what is the inflation rate between 2014 and 2010 (the base year)?
c. 300.5
Wholesome Wheat Bakery buys $10.00 worth of flour from Mikes' Mill and uses the flour to make bread. Wholesome Wheat sells the bread to the public for $22.00. Taking these two transactions into account, what is the effect on GDP?
c. GDP increases by $22.00
Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they use to sell her. Which of the following statements is consistent with the way GDP is computed?
c. GDP will fall if Jennifer marries Thomas but not if she marries Darin.
Rachel babysits for her sister for no pay. When she babysits for someone else she charges $8 an hour. When is Rachel's babysitting included in GDP?
c. When she babysits for someone else, but not when she babysits for her sister.
The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland's
c. net factor payments from abroad are negative, and its GDP is larger than its GNP.
What does C represent in the Aggregate Expenditure Equation
consumption
Employed
currently working for pay
In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9 million, a labor force of 154 million and employment of 141.6 million. Based on these numbers the unemployment rate was
d. 12.4/154.
In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult non- institutionalized population was 110.272 million, the labor force was 65.362 million, and the number of people employed was 62.242 million. According to these numbers, the Japanese labor-force participation rate and unemployment rate were about
d. 59.3% and 4.8%.
The Bureau of Labor Statistics reported in 2005 that there were 59.98 million people over age 25 whose highest level of education was a high school degree or equivalent, 36.40 million of whom were employed and 1.93 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
d. 63.9% and 5.0%
Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?
d. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value, if Jim provides this information.
In June 2009 the Bureau of Labor Statistics reported a U.S. foreign-born population of 35.3 million. Of these, 22.7 million were employed and 1.4 million were unemployed. Based on these numbers what were the unemployment rate and the labor-force participation rate of the foreign-born U.S. population?
d. None of the above is correct.
Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate
d. and the labor-force participation rate are both unaffected.
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,
d. nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.
Suppose an economy produces only eggs and ham. In 2009, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2010, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2009,
d. nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.
If real GDP doubles and the GDP deflator doubles, then nominal GDP
d. quadruples.
Employment Cost Index (ECI)
estimates the average cost of labor compensation to employers
What does X represent in the Aggregate Expenditure Equation
exports
A high unemployment rate implies a high level of GDP.
false
What does I represent in the Aggregate Expenditure Equation
investment
labor force participation rate formula
labor force/working age population x 100
What does (x-m) represent in the Aggregate Expenditure Equation
net exports
Unemployment rate formula
number of unemployed/labor force x 100
International Price Index
prices of merchandise that is exported or imported
GDP Deflator
the average price of all goods and services included in GDP
national account systems (NAS)
the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation
Labor force
the number of employed plus the unemployed
Net Exports
the value of a country's exports minus the value of its imports
Consumer spending, or personal consumption expenditures (C)
the value of the goods and services purchased by, or on the behalf of, U.S. residents
cyclical unemployment
unemployment caused by a business cycle recession
natural rate of unemployment
unemployment rate that would exist in a growing and healthy economy
structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available