ECO 210 Ch.8 & 9

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is:

28 years 70/2.5=^

A peak in the business cycle:

Is a temporary maximum point

In the modern economic growth process, it is typical to find that:

Leader countries continue to grow faster than follower countries

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:

The underground economy

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

8 percent unemployment rate = labor force - employed unemployment rate / labor force x 100

The period the output and living standards decline is referred to as:

A recession

In calculating the unemployment rate, part-time workers are: Question 16 options: A) Counted as employed because they are receiving payment for work B)Used to determine the size of the labor force, but not the unemployment rate C)Treated the same as "discouraged" workers who are not actively seeking employment D)Counted as unemployed because they are not working full-time

A) Counted as employed because they are receiving payment for work ****NOT: B) Used to determine the size of the labor force, but not the unemployment rate

The natural rate of unemployment: Question 24 options: A)Is equal to the total of frictional and structural unemployment B)Means that the economy will always realize its potential output C)Means that the economy will always operate at that rate D)Is a fixed unemployment rate that does not change over time

A) Is equal to the total of frictional and structural unemployment

When the economy goes into a recession and firms require less labor, managers tend to: Question 3 options: A) Lay off workers, and keep wages of remaining workers constant B) Reduce wages, to reflect the lower demand for labor C) Keep all of their workers, by spreading work more thinly D) Avoid cutting wages, for fear of drops in worker-productivity

A) Lay off workers, and keep wages of remaining workers constant

Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are: Question 1 options: A) Lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries B) Higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry C) Higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry D) Lower, because skilled workers tend to be primarily employed by government at the local, state, and Federal levels

A) Lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries

Economic growth can best be portrayed as a: Question 8 options: A) Rightward shift of the production possibilities curve B) Movement from a point inside to a point outside of the production possibilities curve C) Leftward shift of the production possibilities curve D) Movement from a point near the vertical axis to a point near the horizontal axis on the production possibilities curve

A) Rightward shift of the production possibilities curve

The higher the rate of unemployment: Question 15 options: A)The larger is the GDP gap B)The lower is the level of potential GDP C)The higher is the level of actual GDP D)The smaller is the GDP gap

A) The larger is the GDP gap

Modern economic growth often results in the following, except: Question 25 options: A)Less time for ordinary people to enjoy leisure activities because the primary focus is on production and work B)Movement towards democracy and the abolishment of feudalism C) Vast increases in wealth and living standards for many groups in the economy D) Spread of universal education and elimination of ancient social norms

A) Less time for ordinary people to enjoy leisure activities because the primary focus is on production and work ***NOT: B) Movement towards democracy and the abolishment of feudalism

The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percent of adults who are not in the labor force is: Question 20 options: A)30.3 percent B)20.6 percent C)25.3 percent D)13.9 percent

B) 20.6 percent ****NOT: D) 13.9 percent

The recurrent ups and downs in the level of economic activity extending over several years are referred to as: Question 10 options: A) Noncyclical fluctuations B) Business cycles C) Economic phases D) Business startups

B) Business cycles

The following factors tend to make the real GDP growth rate understate the growth of economic well-being, except: Question 18 options: A)More stress-free lifestyle B)Debasement of the environment C)Improved product quality D)Added leisure

B) Debasement of the environment

Which of the following does not correctly characterize modern economic growth? Question 2 options: A) It spread slowly across the globe, with some societies not having experienced it yet B) It has not affected the average lifespan of human beings C) It has occurred only in the last 200 or so years D) It drastically alters the culture and politics of society

B) It has not affected the average lifespan of human beings

Official unemployment rate statistics may: Question 6 options: A) Understate the amount of unemployment by excluding part-time workers in the calculations B) Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment C) Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment D) Overstate the amount of unemployment by including part-time workers in the calculations

B) Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

General sources of shocks that can cause business cycles include the following, except: Question 12 options: A) Monetary factors and financial instability B) Unemployment jumps and production drops C) Political events, either domestic or global D) Irregular occurrence of innovations and productivity changes

B) Unemployment jumps and production drops

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment? Question 11 options: A) Natural B) Structural C) Cyclical D) Frictional

C) Cyclical *****NOT: B) Structural

A trough in the business cycle occurs when: Question 21 options: A)The inflation rate is at its lowest level B)The natural rate of unemployment is at a minimum point C)Employment and output reach their lowest levels D)Cyclical unemployment is at a minimum point

C) Employment and output reach their lowest levels

Full-time homemakers and retirees are classified in the BLS data as: Question 7 options: A) Unemployed B) Part of the labor force C) Not in the labor force D) Employed

C) Not in the labor force

A worker who loses a job at a call center because the company moved the call center operations to another country is an example of: Question 17 options: A)Disguised unemployment B)Frictional unemployment C)Structural unemployment D)Cyclical unemployment

C) Structural unemployment

Which of the following statements is correct? Question 14 options: A)Frictional unemployment is the result of friction between labor and management over how best to perform work B)Cyclical unemployment is also called wait unemployment because this unemployment depends on the timing of the business cycle C)Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology D)Search unemployment is the broadest unemployment category because it covers all other types of unemployment

C) Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology

Which statement is correct? Question 23 options: A)Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy B)Real output and employment generally show little variance over the business cycle C)The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle D)All sectors of the economy are affected to similar degrees by business fluctuations

C) The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle

GDP does not include which of the following activities? a.) Businesses installing anti-pollution equipment b.) Couples remodeling their own homes d.) Households spending to enhance security in their neighborhoods

Couples remodeling their own homes

Consider two scenarios for a nation's economic growth. Scenario A has real GDP growing at an average annual rate of 3.5%; scenario B has an average annual growth of 4.5%. The nation's real GDP would double in about: Question 5 options: A) 20 years under scenario A, versus 30 years under scenario B B) 12 years under scenario A, versus 16 years under scenario B C) 16 years under scenario A, versus 30 years under scenario B D) 20 years under scenario A, versus 16 years under scenario B

D) 20 years under scenario A, versus 16 years under scenario B 70 / 3.5 = 20 70 / 4.5 = 15.5555556 OR 16

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is: Question 19 options: A)17.5 years B)175 years C)40 years D)28 years

D) 28 years 70 / 2.5 = ^

The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is: Question 4 options: A) 5.8 percent B) 3.3 percent C) 7.8 percent D) 6.4 percent

D) 6.4 percent 125 (labor force) - 117 (employed) = 8 8 / 125 (labor force) = .064 .064 x 100 = 6.4%

The reasons why per capita GDP in the U.S. is significantly higher than in some other rich countries like, say, France include the following, except: Question 13 options: A)Differences in the tax structure and the resulting incentive effects of taxes B)Cultural differences between the U.S. and France regarding the right balance between labor and leisure C)U.S. citizens put in substantially more work hours than do citizens of France D)Differences is the communication technology due to language differences

D) Differences is the communication technology due to language differences

Which of the following is a measure of economic growth that is most useful for comparing living standards? Question 22 options: A)Decreases in the rate of unemployment B)Increases in real GDP C)Growth in nominal GDP D)Increases in real GDP per capita

D) Increases in real GDP per capita

If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by: Question 9 options: A) Four percentage points B) One percentage point C) Three percentage points D) Two percentage points

D) Two percentage points

Supply factors in economic growth include the following, except: a.) Improvements in technology b.) Expansion of capital stock c.) Better education and training d.) Increases in purchases of output

Expansion of capital stock

Gross domestic private investment, as defined in national income accounts, would include the following, except: a.) Government construction of new highways and dams b.) Changes to business inventories c.) All domestic construction done by the private sector d.) The value of all capital goods bought by business firms

Government construction of new highways and dams

Suppose a small economy produces only HD Tv sets. In year 1, 100,000 sets are produced and sold at a price of $1,200 each. In year 2, 100,000 sets are produced and sold at a price of $1,000 each. As a result :

Nominal GDP decreases, while real GDP stays constant

Full-time homemakers and retirees are classified in the BLS data as:

Not in the labor force

An example of intermediate goods would be:

Paper and ink bought by a publishing company

Real gross domestic product

Will increase if there is an increase in the level of output