EC 202 Spring Term 2019 Exam 1

The above table shows some (but not all) national income accounting data for a hypothetical country. According to these data, the value of GDP is ________ billion.

$2100

If the CPI was 122.3 at the end of last year and 124.5 at the end of this year, the inflation rate over these two years was...

1.8%

The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. In 2018, urban consumers each buy 300 oranges at $2 each and 850 pens at $1. The CPI in 2018 is __________________.

160

Suppose there are currently 100 people unemployed, 1500 people employed, and 2000 people in the working age population. The labor force participation rate equals 100 times...

1600/2000

Suppose the current unemployment rate is 5%, the labor force is 400 million people, the labor force participation rate is 80% and the working-age population is 500 million people. What number of people are unemployed?

20 million people

In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million are in the working age population. How many people are not in the labor force?

5 million

Transfer payments are not part of government expenditure on goods and services because transfer payments...

do not represent the purchase of a final good or service.

All people in the working-age population can be divided into...

employed, unemployed or not in the labor-force.

Net exports of goods and services equal the...

exports of goods and services minus imports of goods and services.

Which of the following is a final good?

flour purchased at the store to bake cookies at home.

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as...

frictionally unemployed

Gross Domestic Product is equal to the sum of consumption expenditure, investment, net exports, and...

government expenditure on goods and services.

The largest category in the CPI basket is...

housing.

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

increases; does not change

In the national income accounts, the purchase of a new house counts as...

investment.

When more labor is unemployed than the amount at the natural unemployment rate, then real GDP ________ potential real GDP.

is less than

The natural unemployment rate...

is the unemployment rate that occurs when the economy is at full employment.

Normally in the United States the relationship between nominal and real GDP for a given year is...

nominal GDP is greater than real GDP because of price increases.

Because pollution reduces economic welfare, on this count real GDP as measured...

overstates a nation's standard of living.

The working-age population can be divided into two groups,

people in the labor force and people who are not in the labor force.

The largest component of GDP in the expenditure approach is...

personal consumption expenditures.

If depreciation is less than gross investment, then net investment is...

positive.

In the United States, GDP is typically measured...

quarterly.

Which of the following items are considered capital goods?

shares of Ford stock traded on the New York Stock Exchange; the Taco Bell store nearest you

Compared to the other sources of expenditure that make up GDP, net exports is currently:

small and negative.

GDP does not directly include intermediate goods because...

that would count the intermediate goods twice.

Which, if any, of the following causes reported GDP to be less than total economic production?

the exclusion of household production.

Suppose that the price level was 100 in 2008, 110 in 2009, and 130 in 2010. Over these three years,

the inflation rate was positive and accelerating.

Suppose that the unemployment rate equals 4.5% and that the natural unemployment rate is 5.5%. We can conclude that...

the output gap is positive.

Assume the inflation rate falls from 4% to 2%. This means that...

the price level is increasing more slowly.

Full employment means that...

there is no cyclical unemployment.

When a recession ends, the turning point that immediately follows is called a...

trough

A major characteristic of structural unemployment that differentiates it from frictional unemployment is that structural unemployment...

usually lasts longer than frictional unemployment.

Which of the following purchases is included in personal consumption expenditures when determining gross domestic product?

vacation expenses for a spring trip to Fort Lauderdale.

In the period of rapid, unexpected inflation, resources can be lost...

when firms use resources to forecast inflation.

An economic expansion rather than a recession occurs...

when growth in real GDP is positive.

When an individual who has not been working but has been looking for work decides to terminate the search process, the official unemployment rate...

will fall.

The labor force participation rate is the percentage of the __________ who are in the labor force.

working-age population

The _______ is the total number of people aged 16 years and older (and not in jail, hospital or institutional care) while the _______ is the number of people employed and the unemployed.

working-age population; labor force

If the population is 300 million, with 70 million under the age of 16 and institutionalized, another 70 million not in the labor force, 10 million unemployed and 150 million employed the unemployment rate is...

6.25%

Suppose initially that the working-age population is 220 million, the labor force is 150 million, and the unemployment rate is 10%. 5 million new jobs are created and filled by 5 million people who had previously been discouraged workers. What is the new unemployment rate?

9.7%

ABC news in Australia reported that the average annual wage in 2008 was $13,308. To calculate the real wage rate in Australia, you would need to know...

Australias price level in 2008.

Which of the following correctly describes "frictional unemployment"?

Frictional unemployment is a normal occurrence in a growing economy.

According to the Bureau of Economic Analysis, in the second quarter of 2012 personal consumption expenditures grew by 1.7%, gross private domestic investment grew by 3.0%, government expenditure on goods and services decreased by -0.9%, imports grew by 2.9%, and exports grew by 6.0%. Given these data, it is most likely that...

GDP growth was positive in the second quarter.

_________ gross domestic product is the market value of ____________ linked back to the prices of a single year.

Real; total production

Reported GDP increases when, in fact, total production is unchanged when...

There is a shift from household production to market production; a previously illegal activity is legalized

Using the official measure of unemployment, which of the following would NOT be counted as employed?

a person who performs traditional housework and does not work outside the home for pay.

Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that...

an expansion occurred after January 2011.

Looking at the components of the income approach we see that...

compensation of employees is the largest category.

Unemployment caused by the fluctuation of the business cycle is called ___________.

cyclical