E202 Macro Midterm Homework 1

True

"A wage rising slower than the rate of inflation is actually​ falling."

Decrease

As output​ (GDP) is​ increasing, the amount of cyclical unemployment would ____________.

D.

Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this​ argument, which of the following relevant issues is he​ ignoring? A. Structural unemployment is often a result of job dissatisfaction. B. Structural unemployment is often shorter than frictional unemployment. C. Structural unemployment is​ short-term unemployment that arises from the process of matching workers with jobs. D. Structural unemployment will exist in an economy that is innovative. E. Structural unemployment is limited to​ capital-intensive industries.

All of the above

Even perfectly anticipated inflation imposes costs.​ Why? A. Some wages will fail to keep up with anticipated inflation. B. Paper money loses its purchasing power by the rate of inflation. C. Menu costs.

D.

How do unemployment insurance payments LOADING... in the United States and social insurance programs in other countries increase the unemployment​ rate? A. They increase the opportunity cost of job search. B. They are paid as long as the unemployed person remains unemployed. C. The payments are costly and firms are forced to lay off workers. D. They decrease the opportunity cost of job search.

a. Microeconomics b. Macroeconomics c. Macroeconomics d. Microeconomics

Identify whether the following topics belong in microeconomics or​ macroeconomics: a. How does the price of corn change if the price of wheat​ increase? b. Identify the best measurement of total output in the US economy. c. How will an increase in government spending impact the inflation​ rate? d. The most efficient market structure is perfect competition.

0.8%

If a​ 3-month Treasury bill pays​ 5.5% and the change in the consumer price index​ (CPI) is​ 4.7%, what is the real interest rate​ (the true return to​ lending)?

a. Intermediate good b. Neither c. Final good d. Final good

Indicate whether each of the following is a final​ good, an intermediate​ good, or neither. a. Coffee beans purchased by a coffee shop = b. One share of Google stock = c. A new​ pick-up truck purchased by a consumer d. A new home purchased by a family

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

Inventories are part of investment and therefore included in GDP because...

Producer Price Index (PPI)

Is an average of the prices received by producers of goods and services at all stages of the production process.

Real Interest Rate

Is equal to the nominal interest rate minus the inflation rate.

Labor Force Participation Rate

Is the percentage of the​ working-age population in the labor force.

D. All of the above

Real GDP per capita LOADING... is often used as a measure of general​ well-being. While increases in real GDP often do lead to increases in the​ well-being of the​ population, why is real GDP not a perfect measure of​ well-being? A. GDP does not include crime rates or income distribution. B. The costs of pollution are not included. C. The value of leisure is not included. D. All of the above

Unemployment Rate

Rises during recessions, falls during​ expansions and is always above zero.

Unemployment rate

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

7.0%

Suppose an economy is given by the​ following: Population​ = 267 million Labor force​ = 136 million The number of people employed​ = 126.5 million The number of people unemployed​ = 9.5 million Given the information​ above, the unemployment rate is ____​%

68.3%

Suppose an economy is given​ by: Population​ = 289 million ​Working-age population​ = 161 million Labor force​ = 110 million The number of people employed​ = 101 million The number of people unemployed​ = 9 million The labor force participation rate for this economy is ____%

Cyclically unemployed

Suppose that the economy enters into a recession and​ that, as a​ result, Rusty Z. Wrench loses his job as a delivery truck mechanic and remains unemployed. When the economy​ recovers, Rusty's previous employer rehires him. What is the best classification for his time as an unemployed truck​ mechanic?

A. & D.

The BLS uses the establishment survey LOADING... to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage. A. It does not include information about​ self-employed people. B. It includes complete information about unemployment. C. It is based on​ unverifiable, self-reported survey responses. D. It is based on company payroll and not on unverifiable answers.

A. The firm purchased new machinery worth​ $50,000 for its production facility during that year.

The Council of Economic Advisors to the President of a country reported gross investment expenditure at​ $400,000 during a particular year. The group excluded from this valuation an amount of​ $50,000 spent by an existing domestic firm during the year.​ Mark, an​ economist, argued that this amount should have been included under the business fixed investment component of GDP. Which of the​ following, if​ true, would support​ Mark's argument? A. The firm purchased new machinery worth​ $50,000 for its production facility during that year. B. The firm exported products worth​ $50,000 to a neighboring country. C. The firm transferred machinery worth​ $50,000 from one of its closed facilities to one in operation. D. The firm sold off its existing machinery worth​ $50,000 and invested the proceeds in buying raw materials for production. E. The firm stalled production temporarily to lower the value of its inventory stock by​ $50,000.

D.

The difference between microeconomics and macroeconomics is A. microeconomics studies how individuals make decisions while macroeconomics studies how government makes decisions. B. macroeconomics studies smaller parts of the economy such as markets and​ individuals, while microeconomics studies the economy as a whole. C. microeconomics studies smaller parts of the economy such as GDP and​ inflation, while macroeconomics studies the economy as a whole. D. microeconomics studies smaller parts of the economy such as markets and​ individuals, while macroeconomics studies the economy as a whole.

Y = C + I + G + NX

The equation that sums up the components of Gross Domestic Product (GDP)?

Households

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

Total expenditure; Total Income

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

A.

The​ working-age population in Concordia was estimated to be 6.5 million in a certain year. The​ country's labor department announced that the total number of unemployed people in the country had gone up to​ 460,000 during this year​ while, the total number of people out of the labor force decreased to​ 2,000,000. Oscar​ Lewis, a student of labor economics believes that the labor department data is flawed. Which of the​ following, if​ true, would strengthen the argument that the data understates​ unemployment? A. Skilled workers who were forced to shift to​ part-time jobs because of an economic downturn are also considered employed. B. Businesses in the country often complain about labor​ shortage, whether skilled or unskilled. C. The labor bureau in Concordia does not consider​ full-time students or retirees as people in the labor force. D. Five percent of the​ country's labor force consists of legal immigrants with work permits. E. The country has high income​ taxes, but an inefficient tax payment monitoring system.

​1. Wages 2. Interest​ 3. Rent 4. Profit.

What are the four categories of​ income?

1. Consumption 2. Investment 3. Government Purchases 4. Net exports.

What are the four major categories of​ expenditure?

Consumer Price Index (CPI)

What index is used to measure the average prices paid by a typical​ family?

C.

When a minimum wage is enacted or increased across a​ country, the unemployment rate A. will increase and the impacts will be spread evenly across all groups of workers. B. is not affected because the minimum wage does not affect firm hiring decisions. C. will increase some but the impacts will be much larger for some groups of workers. D. will decrease because workers will have more money which will increase demand and cause firms to hire more workers.

Households can use some of their income to purchase goods from foreigners as imports.ho

When examining the​ circular-flow diagram,...

All of the above

When the economy is at full​ employment, A. all remaining unemployment is either frictional or structural. B. the unemployment rate is greater than zero. C. the natural rate of unemployment prevails.

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

Which of the following would be included in the gross national product​ (GNP) of the United​ States? A. Production from a Canadian firm that operates in Montana. B. Production from an Hungarian citizen who works in​ Denver, CO. C. Production from a U.S. firm that operates in Mexico. D. All of the above are included in the GNP of the U.S.

C. GDP does not include household production or production from the underground economy.

Why is GDP an imperfect measurement of total production in the​ economy? A. The official measure of GDP does not include intermediate goods and services. B. The BEA does not include the value of new houses in GDP. C. GDP does not include household production or production from the underground economy. D. GDP measures total income paid to the factors of​ production, not production.

All of the above

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy? A. Underemployed people are considered employed. B. It does not account for inaccurate responses to the Current Population Survey. C. It fails to account for illegal activities. D. Discouraged workers are not considered unemployed.

$8.21

Year Nominal Average Hourly Earnings CPI 2008 ​$16.00 202 2009 ​$17.00 207 2010 ​$18.00 209 What is the real average hourly wage in​ 2009?

70,288

Your father earned​ $34,000 per year in 1984. To the nearest​ dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is​ 104?

Gross Domestic Product GDP

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

Cyclical unemployment

unemployment caused by a recession.

Efficiency Wages

​"Paying good wages and keeping your people working for you is good business...Imagine that you have​ 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for​ you." What is​ Costco's CEO referring​ to?

B.

​"The economy would operate more efficiently if frictional unemployment were eliminated.​ Therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible​ level." Eliminating all frictional unemployment A. will be good for the economy because the total unemployment will fall. B. will not be good for the economy since the presence of frictional unemployment increases economic efficiency. C. will be good for the economy since the presence of frictional unemployment increases job destruction. D. will not be good for the economy since the presence of frictional unemployment decreases job creation.