my econ lab questions
Which of the following is a true statement about real and nominal GDP?
If real GDP increases from one year to the next, we know that production of goods and services has risen.
The period between the high point of economic activity and the following low point is called
a recession.
The low point of economic activity is called
a trough.
Many economists prefer
the establishment survey because it is determined by actual payroll records rather than unverified answers.
An increase in the growth rate of GDP in the BRIC nations (Brazil, Russia, India, and China) will
increase U.S. net exports by increasing exports to these countries.
Government unemployment insurance tends to
increase the unemployment rate by lowering the opportunity cost of job search.
When there are part minus time workers , the official BLS measure of the unemployment rate _____________ the true degree of unemployment.
understates
When an unemployed person drops out of the labor force, the unemployment rate
understates the true degree of joblessness in the economy.
What are the four main determinants of investment?
Expectations of future profitability, interest rates, taxes and cash flow.
Which of the following would shift the aggregate expenditure line upward?
An increase in foreign real GDP
What are the four major categories of expenditure?
Consumption, investment, government purchases, and net exports
During the late nineteenth century in the United States, many farmers borrowed heavily to buy land. During most of the period between 1870 and the mid-1890s, the United States experienced mild deflation. Many farmers engaged in political protests during these years, and deflation was often a subject of their protests. Why would farmers have felt burdened by deflation during this period?
During deflationary periods, the real interest rate exceeds the nominal interest rate, and the real cost of borrowing increases.
Why might the unemployment rate continue to rise during the early stages of a recovery?
Employment growth may be slow relative to the growth in the labor force and some firms continue to operate well below their capacity even after a recession has ended
Which of the following is not a main determinant of net exports?
Expectations of future profitability in the United States.
Which of the following is true about the consumer price index?
It assumes that consumers purchase the same amount of each product in the market basket each month.
How would an increase in interest rates affect investment?
Real investment spending declines
Sarah is a fullminus−time student who is not looking for work. What kind of unemployment is Sarah experiencing?
Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.
Which one of the following is not a determinant of consumption spending?
The growth rate in the United States relative to the growth rates in other countries.
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 businesses and measures the employment rate.
The high point of economic activity is called
a peak
An economics student raises the following objection: "The textbook said that a higher interest rate lowers investment, but this doesn't make sense. I know that if I can get a higher interest rate, I am certainly going to invest more in my savings account." The problem with the student's argument is which of the following?
The student is confusing saving with investment.
Which of the following describes 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
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
True. If wages are increasing slower than the average price of goods and services, purchasing power falls
A decrease in the interest rate would cause the
aggregate expenditure line to shift upward, increasing equilibrium real GDP.
What is the meaning of the 45° line in the 45°-line diagram? In the 45°-line diagram, the 45° line shows
all the points where aggregate expenditure equals real GDP.
The period between the low point of economic activity and the following high point is called
an expansion.
Increases in real GDP would overstate the increase in the wellminus−being of a country over time if, over that time period, the
average hours worked per week increased.
Which of the following price indices comes closest to measuring the cost of living of the typical household?
consumer price index
The Consumer Price Index in December 2012 equaled 231. With a base period of 1982-84, the CPI of 231 means that the
cost of the market basket in December 2012 was 231 percent of the cost of the market basket in the base period
The most important determinant of consumption spending is
current personal disposable income
When a company reduces production and employment during economic recessions, those employees who lose their jobs are generally considered to be
cyclically unemployed
When an unemployed person drops out of the labor force, it
does not affect the employment-population ratio.
n the circular flow model, the value of total income for an economy ________ the value of total production.
equals
Since nominal incomes increase with inflation,
expected inflation does not affect the purchasing power of the average consumer.
When aggregate expenditure is greater than GDP, inventories will __________ and GDP and total employment will __________.
fall; increase
A person who is in between jobs but actively engaged in a job search is considered to be
frictionally unemployed
Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation
greater than 7 percent.
A rise in stock prices and housing prices
increases household wealth which in turn increases consumption and leads to an upward shift of the consumption function.
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.
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
The employment-population ratio measures the
percentage of the working age population that is employed.
The payment of government unemployment insurance reduces the severity of recessions by
preventing a huge drop in income and spending for the unemployed.
Which of the following is the best measure of the standard of living of the typical person in a country?
real GDP per person
Experts in hand-drawn animation who remain unemployed due to the film industry's switch to computer-generated animation are considered to be
structurally unemployed
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment.
The real interest rate equals
the nominal interest rate minus the inflation rate
If inflation is expected to increase,
the nominal interest rate will increase.
Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that
the price level in 2016 was less than the price level in the base year.
The two key factors that cause labor productivity to increase over time are
the quantity of capital per hour worked and the level of technology.
The natural rate of unemployment is
the sum of structural unemployment and frictional unemployment.
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
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
If an economy experiences deflation, the real interest rate
will be greater than the nominal interest rate.
If the inflation rate is 6 percent and the nominal interest rate is 4 percent, then the real interest rate is
-2 percent, which is the nominal interest rate minus the inflation rate.
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.
change; overminus−estimates