Macroeconomics- Exam 2

Inflation can be caused by

increases in aggregate demand or decreases in aggregate supply

Economic growth is most commonly measured by:

real GDP per capita.

Which of the following people would be counted as unemployed?

a downhill ski instructor who looks for work during the summer

Which of the following is the best example of an investment as defined by economists?

a firm buying personal computers for its secretarial staff

Cyclical unemployment results from

a recession in the economy

Which of the following resources is an example of infrastructure?

an elementary school

The largest component of GDP is:

consumption expenditure.

When the government enforces contracts between two parties, it is acting in its role to promote economic growth by:

ensuring a stable legal system.

In a simple circular flow diagram, total spending on goods and services in the product market:

equals the total income earned in the resource market.

(Table) According to the table below, when using the expenditure approach, GDP is:

$1,770 billion.

What is real GDP in 2014 dollars if nominal GDP in 2014 is $15,000 billion, the GDP deflator in 2014 is 110, and the GDP deflator in 2010 was 100?

$13,636 billion

Using Exhibit 1, what is the real GDP in 2001 using 2002 prices (2001 base year)? YEAR | QUANTITY | PRICES APPLES | BANANAS APPLES | BANANAS 2001 100 | 50 $1.00 | $1.50 2002 150 | 30 $0.80 | $1.00

$130

Using Exhibit 1, what is nominal GDP in 2001? YEAR | QUANTITY | PRICES APPLES | BANANAS APPLES | BANANAS 2001 100 | 50 $1.00 | $1.50 2002 150 | 30 $0.80 | $1.00

$175

Which of the following transactions is not included in GDP?

Someone sells drugs in a vacant lot.

Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6 percent. Which of the following is true?

Your real wage fell.

If the growth rate in an economy is 3.5%, then its GDP will double in about:

20 years.

If the CPI is 200 one year and 206 the next year, the annual rate of inflation as measured by the CPI is approximately

3 percent

If the growth rate in an economy is 2%, its GDP will double in about:

35 years.

Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is:

$40,000.

Given the following hypothetical data: C = $3,000; I = $1,200; G = $2,000; X - M = -$500; depreciation = $200; transfer payments = $800, net domestic product is

$5,500

Use the information in Exhibit 7-2 to calculate the consumer price index in the current year.

CPI = 200

(Table) Suppose the Bureau of Labor Statistics collects the data presented in the following table: Year | Cost of Basket 2010 $200 2011 $230 2012 $250 If 2010 is the base year, then the consumer price index for 2012 is:

CPI= (cost in current period / cost in base period) x 100 (250/200) x 100= 125.

Investment in human capital is important because:

it increases labor productivity.

Which of the following is NOT a factor in the production function?

money

Which of the following would be included in GDP?

payment of the monthly telephone bill by Mr. Laconic

The recent global financial instability:

slowed down economic growth. harmed standards of living. caused severe credit crunches. *all of the above.

Which of the following two things can people do with money received as disposable personal income?

spend money or put it into savings

During the 1970s, when handheld calculators became popular and replaced slide rules in performing computations, workers in the slide rule industry lost their jobs. These workers' unemployment status is:

structural.

A wholesale nursery purchases six dozen gladiolus bulbs for $5. The nursery sells the six dozen resulting flowers to a wholesale florist for $10. The wholesale florist delivers the flowers to a retail florist for $15. The flowers are sold by the retail florist for $75 to the bereaved Jones family to use at great-grandfather Jones's wake. What is the value added by the retail florist?

$75 - $15= $60

Last year, the consumer price index (CPI) was 115 while the consumer price index for this year is 125. The rate of inflation is:

% change in price= [(CPI in current year / CPI in original year) x 100] - 100 [(125/115) x 100] - 100= 8.7%.

The economy is probably heading into a recession when the National Activity Index equals:

(below than -0.7) -0.94.

(Table) According to the table, what is the unemployment rate of this economy? Population 500 # employed 300 # unemployed 50

(unemployed/labor force) x 100 (labor force is the total # of those employed and unemployed) (50/350) x 100= 14.3%

Which of the following items is NOT included in gross private domestic investment?

*purchases of common stock new equipment purchased by businesses residential housing increases in business inventories

Rocky Gap Furniture hires ten employees working eight hours each to produce 100 rocking chairs. What is the productivity of these workers?

1.25 chairs per hour

If the inflation rate is 4 percent and the nominal interest rate is 9 percent, the real interest rate is

5 percent

If output equals A × (5K + 2L), what is output if A equals 2,000, capital equals 10, and labor equals 100?

500,000

Assuming the total population is 150 million, the labor force is 100 million, and 94 million workers are employed, the unemployment rate is

6 percent

Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The labor force participation rate is

60 percent

:-)

CHAPTER 5 1) Business cycles 2) Recession and Expansions 3) GDP 4) What GDP does not measure 5) Measuring GDP a. Value Added b. Expenditure Approach c. Income Approach 6) Real vs. Nominal GDP 7) GDP growth CHAPTER 6 1) Civil Adult Population 2) Labor Force 3) Unemployment Rate 4) Labor Force Participation Rate 5) Discouraged Workers 6) Types of Unemployment 7) Components of Natural Rate of Unemployment 8) Inflation 9) Sources of Inflation 10) Real wages and real interest rates 11) Why is inflation so unpopular? CHAPTER 7 1) Measuring economic growth and standard of living 2) Short Run and Long Run Economic Growth 3) Power of Compounding and Rule of 70 4) Production Function and factors of production 5) Productivity and ways to improve productivity 6) Total factor productivity 7) The role of the government in Economic Growth ANALYTICAL QUESTIONS 1) Calculate GDP (expenditure and value added approach) 2) Calculate net domestic product 3) Calculate nominal GDP, Real GDP and GDP growth 4) calculate CPI from a basket 5) calculate unemployment rate, labor force, labor force participation rate 6) calculate inflation 7) calculate real wage and real interest rate 8) rule of 70

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

GDP = 2000 + 600 + 500 + 45 - 85 = GDP = $3,060

If the CPI this year is 162 and last year it was 170, what do we know about the inflation rate this year?

It is negative.

Jennifer received news that she is getting a 5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 7%. Based on the given information, which of the following is true?

Jennifer is losing purchasing power by 2%.

People who are not currently employed, but say they want a job, are counted as unemployed only if they

are actively seeking employment

Alternating periods of macroeconomic expansion and contraction are known as:

business cycles.

When the economy is operating at the natural rate of unemployment:

cyclical unemployment is zero.

Your cousin recently graduated from Harvard Law School and has not found a job after looking for one last week. She can be described as

frictionally unemployed

Jennifer did not work during college. She just obtained a bachelor's degree in marketing, and she is now looking for a marketing job in the retail industry. Jennifer is considered:

frictionally unemployed.

The higher the productivity of a nation, the:

higher is its standard of living.

One important reason economists track business investment is that:

it is a leading indicator of the business cycle.

In the absence of copyright and patent laws:

it is difficult for innovators to profit from their efforts.

Physical capital includes:

manufactured products that are used to produce other goods and services.

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is:

not in the labor force.

Which of the following is NOT an investment in human capital?

researching automated production techniques

Frictional unemployment refers to unemployment that results from

taking the time to find the best job

Which of the following occurrences is the key explanation for the high economic growth in the United States in the past century?

technology improvements

Gross Domestic Product includes final goods and services, but not intermediate goods because

the value of the intermediate goods is already included in the value of the final goods

(Table) According to the table, the number of people in the labor force is: Employed 85 Unemployed seeking work 25 Discouraged workers 15 Unpaid family members working 15-plus hours 5 Retired 10

115.