Midterm #2 ECON-120

A very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2014 and 2019 are shown in the table above. *Refer to Table 8-5.* What is nominal GDP in 2014?

$3,320

If real GDP per capita in Ireland is estimated to be $7,400 in 2019, what will real GDP per capita be in 2024 if real GDP per capita grows at an annual rate of 2.8%?

$8,496

Consider the data above for a simple economy. *Refer to Table 9-1.* The unemployment rate for this simple economy equals

(150/1,350) × 100.

Which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita?

*all of the above* (-Countries that are relatively poor are more likely to experience wars and revolutions. -Countries that are relatively poor are likely to have a lower quality of health care. -Many of these developing countries do not have a functioning court system that can enforce laws.)

A very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2014 and 2019 are shown in the table above. *Refer to Table 8-5.* What is real GDP in 2019, using 2014 as the base year?

......

*Refer to Table 10-1.* Using the table above, what is the approximate growth rate of real GDP from 2017 to 2018?

.......

*Refer to Table 9-3.* Assume the market basket for the consumer price index has three products — Cokes, hamburgers, and CDs — with the following values in 2014 and 2019 for price and quantity: The Consumer Price Index for 2019 equals

121

A car that is produced in 2018 is not sold until 2019. According to the definition of GDP, in which year's GDP should it be counted?

2018

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%

*Refer to Table 9-5.* Consider the following values of the consumer price index for 2019 and 2020. The inflation rate for 2020 was equal to

3.9 percent.

*Refer to Figure 11-1.* Suppose the per-worker production function in the figure above represents the production function for the U.S. economy. If the United States decided to double its support of university research, this would cause a movement from

B to C.

GDP is not a perfect measure of well-being because

GDP is not adjusted for pollution.

In a small European country, it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million. What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise to $12 million, assuming no technological change and no change in the hours of work?

GDP would increase further, but by less than $1 million.

During an expansion, how do inflation and unemployment typically change?

Inflation rises and unemployment falls.

In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?

It shifted up.

Structural unemployment is the result of

a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.

Which of the following is not one of the three sources of technological change?

additional amounts of existing capital

During the expansion phase of the business cycle, which of the following eventually increases?

all of the above (production, income and employment)

Using the market for loanable funds, which of the following has the potential to raise the real interest rate?

an increase in the demand for loanable funds

The response of investment spending to an increase in the government budget deficit is called

crowding out.

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are

cyclically unemployed.

If a country passes a labor law limiting the number of hours of work per week, GDP would ________ and leisure would ________.

decrease; increase

Which of the following is not one of the key services provided by the financial system?

decreasing taxes

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

demanders; suppliers

When additions of input to a fixed quantity of another input lead to progressively smaller increases in output, we say we are facing

diminishing returns.

Suppose that in 2019 real GDP grew in Estonia by 3% and that the population increased by 5%. Therefore in 2019, Estonia experienced

economic growth, but not an increase in living standards.

Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no longer charges Chuck for her work. As a result, GDP ________ because ________.

falls; Marla's architectural design services are no longer bought by Chuck once they're married

Which of the following would decrease the unemployment rate?

government aid to retrain unemployed workers

Which of the following policies are designed specifically to directly promote technological change in an economy?

government subsidization of research and development

The increased generosity of unemployment insurance programs in Canada as compared to the United States should

increase the duration of unemployment in Canada as compared to the United States.

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 period of time from 1,000,000 B.C. to 1300 A.D. was a period of

no sustained economic growth.

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

not in the labor force.

If real GDP increases we know for sure that

output has risen.

The nominal interest rate equals the real interest rate ________ the inflation rate.

plus

Enforcing property rights in an economy will

raise the level of investment.

The best measure of the standard of living is

real GDP per capita.

What two factors are the keys to determining labor productivity?

technology and the quantity of capital per hour worked

Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP?

the sale of a new door to homeowner

Which of the following are included in gross domestic product for an economy in a given year?

the value of final goods produced in that year

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

unemployed persons falsely report themselves to be actively looking for a job

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

Unemployment insurance and other government transfer programs are more prevalent since the 1950s.

How are intermediate goods treated in the calculation of GDP?

Their value is not counted separately, but included as part of the value of the final good for which they are an input.