Macroeconomics Test #2
An example of business fixed investment spending is
A purchase of a computer by an accounting firm
If consumers decide to be more frugal and save more out of their income, then this will cause
A shift in the supply curve for loanable funds to the right
Cyclical unemployment is the result of
A slowdown in the economy
An exmaple of a transfer payment is
A welfare payment
Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Nominal GDP for Tyrovia in 2016 equals (Refer to Table T-11)
$1,140
Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals (Refer to Table T-3)
$1,200
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. The real average hourly earnings for 1965 in 2010 dollars equal (Refer to Table V-14)
$18.14
Consider the table of production and price statistics for a small economy in 2013. If the economy only produces the four goods listed below, what is GDP for 2013? (Refer to table T-6)
$428,000
You lend $5,000 to a friend for one year at a nominal interest rate of 10%. Inflation during that year is 5%. As a result, you will receive _____ at the end of the year, but that money has a purchasing power of _______
$5,500; $5,250
The value added of CANOES-R-US for each canoe equals (Refer to Scenario S-1)
$500
Suppose that a simple economy produced only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals (Refer to Table T-2)
$6,400
The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?
$66,565
Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Real GDP for Tyrovia in 2016 equals (Refer to Table T-11)
$690
A very simple economy produces three goods: movies, burgers, and bikes. The quantities and their corresponding prices for 2011 and 2016 are shown in the table above. What is the nominal GDP in 2016? (Refer to Table T-17)
$7,035
Suppose that a sinple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are being used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals (Refer to Table T-1)
$8,750
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. The real average hourly earnings for 1965 in 1982-1984 dollars equal (Refer to Table V-14)
$8.28
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately
$84,775
Consider the data above for a simple economy. The unemployment rate for this simple economy equals (Refer to Table U-1)
(1,000/1,100) x 100
Consider the data above for a simple economy. The labor force participation rate for this simple economy equals (Refer to Table U-1)
(1,100/15,000) x 100
Assume the market basket for the consumer price index has two products--bread and milk--with the following values in 2011 and 2016 for prices and quantity: The Consumer Price Index for 2016 equals (Refer to Table V-2)
116
Assume the market basket for the consumer price index has three products--Cokes, hamburgers, and CDs--with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals (Refer to Table V-3)
121
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. The percentage change in real average earnings from 1965 to 2010 equals (Refer to Table V-14)
24.6 percent
If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?
3.5%
Assume the average annual CPI values for 2015 and 2016 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years
3.86
Consider the following values of the consumer price index for 2015 and 2016. The inflation rate for 2016 was equal to (Refer to Table V-5)
3.9 percent
Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you payed?
8 percent
Which of the following describes a situation in which the person is hurt by inflation?
A person paid a fixed income during an inflation period
Which of the following goods is directly counted in GDP?
A 12-inch Subway sandwich purchased by a student
Structural unemployment is the result of
A persistent mismatch between the skills and characteristics of workers and the requirements of the jobs
Suppose that in 2016, all prices in the economy double and that all wages and salaries also double. In 2016 you
Are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same
Short Answer: Why would a firm pay efficiency wages?
Because it raises productivity through selective workers who are more productive
When actual inflation is less than expected inflation
Borrowers lose and lenders gain
The total amount of physical capital available in a country is known as the country's
Capital Stock
The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket
Changes; Overestimates
Which of the following is NOT a durable good?
Clothing
Investment, as defined by economists, would include the purchase of a
Computer by an accounting firm
According to the summary, the Chinese economy is trying to move away from an export based economy, while at the same time imports have declined. This decrease in exports and decrease in imports will (Refer to the Article Summary)
Decrease net exports is the decline in exports is greater than the decline in imports
Increasing the amount of consumption spending and reducing the amount of savings _____ investment expenditures, and _______ long-run economic growth in the economy
Decreases; Decreases
Borrowers are ______ of loanable funds, and lenders are ________ of loanable funds
Demanders; Suppliers
The labor force equals the number of people
Employed plus unemployed
In the circular flow model, the value of total income for an economy ________ the value of total production
Equals
Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?
GDP will decrease
Which of the following is NOT an example of a transfer payment?
Health insurance payments to an army private
Which of the following it NOT directly counted in GDP?
Intermediate goods
Which of the following increases labor productivity?
Inventions of new machinery, equipment, or software
In a closed economy, public saving plus private savings is equal to
Investment
The purchase by a foreign government of an airplane produced in the United States is included in the U.S.
Investment expenditures
The purchase of a new home is included in
Investment expenditures
When the government runs a budget deficit, we would expect to see that
Investment will fail
The cost to firms of changing prices
Is called a menu cost
An efficiency wave
Is higher than the market wage and tends to increase productivity
A firm can fund an expansion of its operations by
Issuing bonds
Which of the following would be directly counted in GDP in 2016?
Kitchen cabinets purchased from Home Depot in 2016 to be installed in a house built in 1997
The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ______ the quantity demanded of loanable funds
Lower; Greater; Greater
Which of the following is likely to increase measured GDP?
Marijuana becomes legal to grow and sell
Between 2015 and 2016, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?
Net exports will increase GDP by $16 billion
The "new product bias" in the consumer price index refers to the idea that
New products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers
The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation but ______ quality increases. This causes the CPI to _______ the cost of the market basket
Not; Overstate
Real GDP will increase
Only if the quantity of final goods and services produced rises
The Bureau of Labor Statistics would categorize a retiree who is NOT working as
Out of the labor force
Short Answer: What effect does the payment of government unemployment insurance have on the unemployment rate?
Raises unemployment rate because it lowers opportunity cost and makes you look for jobs longer
The producer price index measures the prices that firms
Receive for the goods and services they use at all stages of production
If prices in the economy rise, then
The purchasing power of a dollar declines
What two factors are the keys to determining labor productivity?
Technology and the quantity of capital per hour worked
Human capital refers to which of the following ?
The accumulated knowledge and skills workers acquire from education and training or from their life experiences
Liquidity refers to
The ease with which a financial security can be traded for cash
Value added equals the market price of the firm's product minus
The price of intermediate goods
Based on the graph of the labor market above, if a minimum wage of $8 per hour is imposed, which of the following will result? (Refer to Figure V-1)
The quantity of labor demanded by firms will fall
Frictional unemployment is the result of
The search process of matching workers with jobs
Gross domestic product is calculated by summing up
The total market value of final goods and services produced in the economy during a period of time
Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016?
The value of the services of the real estate agent
Which of the following are NOT considered part of government purchases?
Welfare benefits
Which of the following transactions represents the purchase of a final good?
Your father buys a new John Deere riding lawn mower
In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the EBA
values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up