Module 2 Quizzes

Which of the following transactions is not counted in GDP

A consumer prepares meals for his family

Which of the following policies would reduce structural unemployment

A job retraining program

Cyclical unemployment is the result of

A slowdown in the economy

When the economy is at full employment

All of the above

Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of the joblessness in the economy?

All of the above

Why might the unemployment rate continue to rise during the early stages of a recovery

Because both A and C are true

Which groups tend to have above-average unemployment rates, and which groups tend to have below-average unemployment rates?

Black teenagers as a group have lover unemployment rates than white teenagers

Which of the following policies would reduce frictional unemployment?

Building an on-line job database that helps workers find jobs

An underground economy involves all of the following except

Buying and selling of goods and services by obtaining a permit from the government

What index is used to measure the average prices paid by a typical family? An average of the price of the goods and services purchased by a typical family is the

Consumer price index (CPI)

What are the four major components of expenditures in GDP

Consumption, Investment, Government Purchases, and Net Exports

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

Demanders; suppliers

Which of the following is an example of structural unemployment?

Due to technological change, typewriter workers lose jobs and must retrain to find jobs in other inductries

Inventories are part of investment and therefore included in GDP because

Firms produce goods, however sometimes the goods may be unsold at the time GDP is computed

The advice to "keep searching, there are plenty of jobs around here for which you are qualified", would be most appropriate for which of the following type of unemployment?

Frictional unemployment

A person who is in between jobs but actively engaged in a job search is considered to be

Frictionally unemployed

Which of the following is considered to be a problem in using GDP as a measure of national well-being

GDP is not adjusted for changes in crime and other social problems

Why is GDP an imperfect measurement of total production in the economy

GDP is not included household production of production from the underground economy

National income is

GDP minus depreciation

How does the size of a country's GDP affect the quality of life of the country's people?

Generally, the more goods and services people have, the better off they are

All of the following are correct except

Gross domestic income does not include health insurance benefits received by the employee

When examining the circular-flow diagram,

Households can use some of their income to purchases goods from foreigners as imports

Which of the following is an example of cyclical unemployment

In an economic downturn, a manufacturing plant reduces production and temporarily lays off workers.

An advantage of the household survey over the establishment survey of the labor market is that the household survey

Includes the number of self-employed persons

During the expansion phase of the business cycle, production, employment, and income

Increase

An increase in unemployment insurance payments would, in effect, ________ the amount of time spent searching for a job, which would increase __________ unemployment

Increase; frictional

The BLS uses the establishment survey to collect information on economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage.

It is based on company payroll and not on unverifiable answers. It does not include information about self-employed people.

Even perfect anticipated inflation imposes costs. Why?

Menu costs, Paper money loses its purchasing power by the rate of inflation, Some wages will fail to keep up with anticipated inflation

Personal income is

National income minus retained corporate earning plus government transfer payments and interest on government bonds

One major component of GDP that can be negative is

Net Exports

The difference between a nominal variable and a real variable is that

Nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation

Which of the following formulas does the Bureau of Labor Statistics use to calculate the Unemployment rate?

Number of unemployed/number in labor force *100

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

One-half to one percentage point

Which one of the following accurately describes the relationship between frictional unemployment and job search?

People are said to be frictionally unemployed when they are between jobs and searching for new jobs.

WHich of the following would be included in the gross national product GNP of the United States?

Production from a U.S. firm that operates in Mexico

A good measure of the standard of living is

Real GDP per capita

The internet has ________ to size of menu costs

Reduced

How does the U.S. economy create and destroy millions of jobs each year?

Some businesses are expanded, while others are contracting. In the market system, new firms are constantly entering and exiting various industries.

The type of unemployment most likely to result in hardship for the people who are unemployed is

Structural because this type of unemployment requires retaining to acquire new job skills

Which of the following, if true, would best explain this to Justin

Structural unemployment in the country is at 3 percent while frictional unemployment is at 4 perent

In calculating the consumer price index for the year, the BLS uses the quantities in the market basket, rather than quantities purchased during the current year. This gives rise to

Substitution bias

Menu costs are

The costs to firms of changing prices

Creating a goal of zero percent unemployment for an economy is not feasible nor is it desirable because

The economy needs some short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets

How would the equilibrium interest rate respond to a change from an income tax to a consumption tax

The equilibrium interest rate would fall

Which one of the following depicts an accurate description of the household survey and the establishment survey?

The household survey interviews households and measures the unemployment rate whereas the establishment survey interviews business and measures the employment rate.

Capital can be differentiated between physical capital and human capital. Human capital is

The knowledge and skills workers acquire from education and training or from their life experiences

Gross domestic product (GDP) is

The market value of all final goods and services produced in a country during a period of time.

The difference between the nominal interests rate and the real interest rate is

The nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate

If the economy is experiencing deflation

The nominal interest rate will be lower than the real interest rate

If inflation is expected to increase,

The nominal interest rate will increase

Which of the following desribes the effect of the business cycle on the inflation rate and the unemployment rate

The unemployment rate increases and the inflation rate falls during recessions

Currently, the Bureau of \Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate if homemakers were included in these numbers?

The unemployment rate would decrease and the labor force participation rate would increase

The gross national product (GNP) of the United States is Equal to

The value of final goods and services produced by U.S. factors of production

The personal Income (PI) of the United States is equal to

The value of the total income received by all households in the United States

Which of the following is not one of the conditions someone needs to meet to be counted as unemployed

They had worked only one hour per week during the previous four weeks

Transfer payments are not included in GDP calculations becasue

Transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service

The unemployment rate is calculated as follows

Unemployment rate= Number of unemployed/labor force * 100

Which component of gross domestic income is the largest

Wages

Nominal incomes generally increase with inflation because

When inflation is anticipated, average nominal incomes also increase by the same percentage as the rate of inflation

When a minimum wage is enacted or increased across a country, the unemployment rate

Will increase some but the impacts will be much larger for some groups of workers

Which equation represents the relationship between GDP and the four major expenditure ecomponents

Y=C+I+G+NX

Suppose that the inflation rate turns out to be much lower than most people expected, in that case,

a borrower will lose from the situation while a lender will gain.

If consumers decide to be more frugal and save more out of their income, than this will cause

a shift in the supply for loanable funds to the right

Which of the following is the best example of human capital?

a worker gets a college degree

Which of the following contribute(s) to shorter recessions, longer expansions, and less severe fluctuations in real GDP?

all of the above

Which of the following would you expect to increase the equilibrium interest rate?

an increase in the budget deficit

The consumer price index is the

average of the prices of the goods and services purchased by a typical urban family of four

When a company reduces production and employment during economic recessions, those employees who lose their jobs are considered to be

cyclically unemployed

During the recession phase of the business cycle, production, employment, and income

decrease

When an unemployed person drops out of the labor force, it

does not affect the employment-population ratio

The natural rate of unemployment is the amount of unemployment

equal to frictional plus structural unemployment

Since nominal incomes increase with inflation

expected inflation does not affect the purchasing power of the average consumer

The three types of unemployment are

frictional, structural, and cyclical

Crowding out occurs when

governments must borrow funds which causes interest rates to rise and thus private investment is reduce

The circular-flow diagram shows that all sources of income are owned by

households

Which of the following does not lead to long-run economic growth

increase in average wages

The rule of 70

is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double

Some countries have larger underground economies than do other countries, because

of government policies that are retarding economic growth

Full employment is not considered to be zero unemployment, because,

people do not find jobs instantaneously

The employment-population ratio measures the

percentage of the working age population that is employed

Disposable personal income is

personal income minus personal taxes

The two key factors that cause labor productivity to increase over time are

quantity of capital per hour worked and level of technology

The unemployment rate

shows the percentage of the labor force that is considered unemployed.

Experts in hand-drawn animation who remains unemployed due to the firm industry's switch to the computer-generated animation are considered to be

structurally unemployed

Many economists perfer

the establishment survey because it is determined by actual payroll records rather than unverified answers?

The average price of goods and services in the economy is generally also known as

the price level

The circular-flow diagram shows that ________- should equal ________.

total expenditure; total income

When an unemployed person drops out of the labor force, the unemployment rate

understands the true degree of joblessness in the economy

The largest component of gross domestic income is

wages

Eliminating all frictional unemployment

will not be good for the economy since the presence of frictional unemployment increases economic efficiency