ECO 2305 Exam 3- Rashid Al-Hmoud

Assume the average annual CPI values for 2019 and 2020 were 207.3 and​ 215.3, respectively. What was the percent increase in the CPI between these two​ years? a. 3.86 b. 1.04 c. 8.0 d. 0.96

a. 3.86 CPI= new-old/old*100 (215.3-207.3)/207.3*100= 3.86

If the number of employed is 190​ million, the​ working-age population is 230​ million, and the number of unemployed is 10​ million, then the unemployment rate is ​a. 5%. b. ​5.2%. ​c. 8%. ​d. 10%.

a. 5% (10/200=.05= 5%) Unemployment Rate= Unemployed/Labor Force

Which of the following is likely to increase measured​ GDP? a. Marijuana becomes legal to grow and sell. b. The do−it−yourself craze becomes increasingly popular and more people decide to improve their own homes. c. Tax rates increase and more people attempt to underreport their income for tax purposes. d. A greater number of women decide to stay at home and provide day care for their children under age 5.

a. Marijuana becomes legal to grow and sell.

Which of the following transactions represents the purchase of a final​ good? a. Your father buys a new John Deere riding lawn mower. b. Apple computer buys computer processors from Intel. c. The purchase of coffee beans by Starbucks. d. Delta buys a new European

a. Your father buys a new John Deere riding lawn mower.

The purchase of a new automobile is included in a. consumption expenditures on durable goods. b. consumption expenditures on nondurable goods. c. consumption expenditures on services. d. investment expenditures.

a. consumption expenditures on durable goods.

If the BLS counted persons that are on active military service in the totals for​ employment, the labor​ force, and the​ working-age population, this would a. decrease the measured unemployment rate. b. decrease the measured labor force participation rate. c. decrease the number of persons in the labor force. d. decrease the number of persons in the​ working-age population.

a. decrease the measured unemployment rate.

Nominal GDP will increase a. if either the price level or the quantity of goods and services produced rises. b. only if the quantity of final goods and services produced rises. c. only if the price level falls. d. only if the price level rises.

a. if either the price level or the quantity of goods and services produced rises.

Which of the following is not directly counted in​ GDP? a. intermediate goods b. consumer goods c. investment expenditures d. government purchases

a. intermediate goods

A​ full-time student who is not working is categorized as a. not in the labor force. b. frictionally unemployed. c. unemployed. d. a discouraged worker.

a. not in the labor force

Full employment is not considered to be zero​ unemployment, because a. people do not find jobs instantaneously. b. some people do not want a job. c. there are not enough jobs for everyone who wants one. d. some cyclical unemployment always exists.

a. people do not find jobs instantaneously.

A consumer price index of 160 in 1996 with a base year of 1982−1984 would mean that the cost of the market a. rose​ 60% from the cost of the market basket in the base year. b. rose​ 160% from the cost of the market basket in the base year. c. equaled​ $160 in 1996. d. equaled​ $160 in 1983.

a. rose​ 60% from the cost of the market basket in the base year. 160-100/100= 60% *use 100 as a base year*

If advances in​ robotics, automation, and artificial intelligence lead to the elimination of​ jobs, and the people who held those jobs need to learn new skills to find new​ jobs, those people would be considered a. structurally unemployed. b. seasonally unemployed. c. cyclically unemployed. d. frictionally unemployed.

a. structurally unemployed.

Suppose that nominal GDP in 2020 was less than real GDP in 2020. Given this​ information, we know for certain that a. the price level in 2020 was less than the price level in the base year. b. the price level in 2020 was greater than the price level in the base year. c. real GDP in 2020 was less than real GDP in the base year. d. real GDP in 2020 was greater than real GDP in the base year.

a. the price level in 2020 was less than the price level in the base year.

What is outlet​ bias? a. the tendency for households to spend their money at discount stores as prices rise b. the tendency for households to spend more money over time c. the tendency for consumers to purchase​ newer, more technologically advanced products even though they have higher prices d. the tendency for the quality of products to improve over time even though the CPI does not measure changes in quality

a. the tendency for households to spend their money at discount stores as prices rise

Jack lost his job six months​ ago, and​ he's been actively looking for a new job ever since. The Bureau of Labor Statistics would classify Jack as a. unemployed. b. a discouraged worker. c. out of the labor force. d. all of the above.

a. unemployed.

Nominal GDP is GDP in a given year a. valued in the prices of that year. b. adjusted for anticipated inflation. c. valued in the prices of the base year. d. adjusted for inflation.

a. valued in the prices of that year.

Consumption expenditures. $800 Investment expenditures. 200 Government purchases. 300 Exports. 100 Imports 200 Wages 800 Refer to the table above. Consider the data above​ (in billions of​ dollars) for an​ economy: Gross domestic product​ (in billions of​ dollars) for this economy equals a. ​$1,200. b. ​$2,200. c. ​$1,600. d. ​$1,400.

a. ​$1,200 GDP= C+I+G+(exports-imports) 800+200+300+(100-200)= $1200

Which of the following would be a consequence of substitution bias in the​ CPI? a. Judges would award child support payments that would not adequately keep up with the true cost of inflation. b. Businesses would​ over-compensate employees for inflation when giving cost of living raises. c. Social Security payments would not adequately compensate retired workers for inflation. d. The inflation rate based on the CPI would​ under-estimate the true level of inflation.

b. Businesses would​ over-compensate employees for inflation when giving cost of living raises.

Which of the following goods is directly counted in​ GDP? a. the lettuce that Subway purchases for its sandwiches b. a 12 inch Subway sandwich purchased by a student c. the plastic bags that Subway purchases to wrap its sandwiches d. the bread that Subway purchases for its sandwiches

b. a 12 inch Subway sandwich purchased by a student

If an American firm opens a production facility in​ India, the total value of the production will be included in the a. net domestic product of the U.S. b. gross domestic product of India. c. gross domestic product of the U.S. d. consumption of fixed capital for India.

b. gross domestic product of India.

During the Great​ Depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment a. increased the natural rate of unemployment. b. had no effect on the natural rate of unemployment. c. decreased the natural rate of unemployment. d. could have increased or decreased the natural rate of unemployment.

b. had no effect on the natural rate of unemployment.

Which of the following is not an example of a transfer​ payment? a. social security payments to retirees b. health insurance payments to an army private c. unemployment insurance payments d. social security payments to disabled persons

b. health insurance payments to an army private

A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will a. decrease GDP and increase​ well-being in the economy. b. increase GDP and decrease​ well-being in the economy. c. decrease GDP and decrease​ well-being in the economy. d. increase GDP and increase​ well-being in the economy.

b. increase GDP and decrease​ well-being in the economy.

In​ 1986, an Apple IIe computer with 65 kilobytes of memory cost around​ $1,500. Today, a​ $1,500 iMac computer​ (also made by​ Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI​ calculations? a. new product bias b. increase in quality bias c. outlet bias d. substitution bias

b. increase in quality bias

Suppose that homemakers are included as employed in the labor force​ statistics, rather than being counted as out of the labor force. This would a. increase the measured unemployment rate. b. increase the measured labor force participation rate. c. decrease the number of persons in the labor force. d. decrease the number of persons in the​ working-age population.

b. increase the measured labor force participation rate.

The size of the underground economy would tend to increase if the government of a country a. legalized drugs. b. increased income tax rates. c. legalized prostitution. d. decreased government regulations on businesses.

b. increased income tax rates.

The unemployment rate hit a​ 50-year low in September​ 2019, falling to​ 3.5%, and an unemployment measure that includes discouraged workers and the underemployed also dropped to its lowest level in nearly 19 years. This same​ month, the jobless rate for Asians fell to​ 2.5%, and the unemployment rate for Hispanics and African Americans was the lowest ever. While the unemployment rate​ fell, the labor force participation rate remained steady at​ 63.2%. Job​ growth, however, remained lower than in​ 2018, with new job openings skewing toward​ full-time positions rather than​ part-time positions. Refer to the Article Summary.​ If, as is stated in the article​ summary, the unemployment rate fell and the labor force participation rate remained​ unchanged, then the employment-population ratio a. remained the same. b. increased. c. decreased. d. More information is needed to answer the question.

b. increased.

Discouraged workers are classified by the BLS as a. unemployed. b. not in the labor force. c. employed. ​d. part-time employees.

b. not in the labor force.

Suppose the labor force stays​ constant, and the working population stays​ constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will a. decrease. b. remain constant. c. not change in way that can be predicted. d. increase.

b. remain constant.

A lumberjack loses his job because timber cutting restrictions are imposed by the EPA to protect the spotted owl habitat. This lumberjack would be a. seasonally unemployed. b. structurally unemployed. c. frictionally unemployed. d. cyclically unemployed.

b. structurally unemployed.

If the federal government implements programs so that the unemployed are more quickly matched with​ jobs, then a. the natural rate of unemployment could either increase or decrease. b. the natural rate of unemployment will decrease. c. the natural rate of unemployment will increase. d. the natural rate of unemployment will not change.

b. the natural rate of unemployment will decrease.

Mike has been unemployed for over a year. He​ hasn't looked for a job in the last three​ months, but​ he's just started looking for work again. Because Mike started looking for a new​ job, a. the working−age population increased. b. the unemployment rate increased. c. the unemployment rate decreased. d. the labor force participation rate decreased.

b. the unemployment rate increased.

If the number of unemployed workers is 19​ million, the number in the working−age population is 500​ million, and the unemployment rate is​ 4%, how many workers are in the labor​ force? a. 1 million b. 20 million c. 475 million d. 481 million

c. 475 million LF= 19/.04= 475

If the number of unemployed workers is 19​ million, the number in the working−age population is 500​ million, and the unemployment rate is​ 4%, what is the labor force participation​ rate? ​a. 4.75% ​b. 7.8% ​c. 95% ​d. 96.2%

c. 95% LF= 19/.04= 475 LFPR= LF/PW 475/500= 95%

A country in which a significant fraction of domestic production takes place in foreign owned factories and facilities is most likely a country where a. GDP is not comparable to GDP. b. GNP is much larger than GDP. c. GDP is much larger than GNP. d. GDP is equal to GNP.

c. GDP is much larger than GNP.

What impact would including members of the military in​ employment, labor​ force, and​ working-age population statistics have on the unemployment rate and the labor force participation​ rate? a. Including members of the military would increase the unemployment rate and reduce the labor force participation rate. b. Including the military would reduce both the unemployment rate and the labor force participation rate. c. Including members of the military would reduce the unemployment rate and increase the labor force participation rate. d. Including the military would increase both the unemployment rate and the labor force participation rate.

c. Including members of the military would reduce the unemployment rate and increase the labor force participation rate.

Which of the following is an example of a worker experiencing cyclical​ unemployment? a. a worker who changes jobs to move closer to her family b. a lifeguard who was hired during the summer season is laid off after summer is over c. a freightliner employee that got laid off because of the recession of 2007−2009 d. an assembly line worker who loses his job because of automation

c. a freightliner employee that got laid off because of the recession of 2007−2009

An example of business fixed investment spending is a. ​$200 million of unsold cars at a car dealership. b. a purchase of a bond by General Electric Corporation. c. a purchase of a computer by an accounting firm. d. a purchase of a home by a household.

c. a purchase of a computer by an accounting firm.

​Investment, as defined by​ economists, would not include which of the​ following? Ford a. builds another assembly plant in the United States. b. adds​ 1,000 new cars to inventories. c. buys U.S. government bonds. d. buys a new robotic machine​ (from a plant in​ Ohio) to assemble cars.

c. buys U.S. government bonds.

Which of the following price indices comes closest to measuring the cost of living of the typical​ household? a. GDP deflator b. household price index c. consumer price index d. producer price index

c. consumer price index

If the price level rose in three consecutive years from 100 to 120 to​ 140, then the annual inflation rate over those years would a. increase. b. equal​ 20%. c. decrease. d. remain the same.

c. decrease. (120-100/100)= 20% (140-120/120)= 16% *it decreased from 20% to 16%*

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of​ joblessness? a. people employed in the underground economy b. unemployed persons falsely report themselves to be actively looking for a job c. discouraged workers d. inflation

c. discouraged workers

The Bureau of Labor Statistics would categorize a person as​ _________ if they were temporarily away from their job because they were ill. a. a discouraged worker b. unemployed c. employed d. out of the labor force

c. employed

A student who just graduated from college but has not found a job would most likely be a. structurally unemployed. b. cyclically unemployed. c. frictionally unemployed. d. seasonally unemployed.

c. frictionally unemployed.

The output of U.S. citizens who work in Canada would be included in the a. gross national product of Canada and the gross national product of the United States. b. gross domestic product of the United States. c. gross domestic product of Canada. d. gross national product of Canada.

c. gross domestic product of Canada.

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index. Which of the following is not one of the steps taken to reduce the​ bias? a. using statistical methods to reduce the size of the quality bias b. updating the market basket every two​ years, rather than every 10 years c. incorporating substitutions by consumers when prices of specific products rise rapidly d. conducting a point−of−purchase survey to track where consumers actually make their purchases

c. incorporating substitutions by consumers when prices of specific products rise rapidly

Gross national product​ (GNP) of the United States is the market value of all final goods and services a. consumed by residents of the United States anywhere in the world. b. consumed within the United States. c. produced by residents of the United States anywhere in the world. d. produced within the United States.

c. produced by residents of the United States anywhere in the world.

Emma is a road construction worker. During the winter​ months, Emma finds it more difficult to get work. The unemployment Emma experiences in the winter is a. functional. b. cyclical. c. seasonal. d. structural.

c. seasonal.

When the price of gasoline​ rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called a. increase in quality bias. b. outlet bias. c. substitution bias. d. discrimination bias.

c. substitution bias.

Frictional unemployment is the result of a. a slowdown in the economy. b. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. c. the search process of matching workers with jobs. d. the ups and downs in inflation.

c. the search process of matching workers with jobs.

Suppose that a simple economy produces only four goods and​ services: sweatshirts, dental​ examinations, coffee​ drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above​ table, nominal GDP for this simple economy equals Product. Quantity. Price Sweatshirts. 50. $35 Dental examinations 40. 75 Coffee drinks. 1,000. 4 Coffee beans. 2,000. 0.50 a. ​3,090 units. b. ​$7,250. c. ​$8,750. d. ​$9,750.

c. ​$8,750. 50(35) + 40(75) + 1000(4) = 8,750 *coffee beans are used in production of the coffee drinks, don't include in the calculations)

Total Population. 20,000 Working−Age Population. 15,000 Employment. 1,000 Unemployment. 100 Consider the data in the table above for a simple economy. The labor force participation rate for this simple economy equals a. 1,100/20,000 x 100 b. 1,000/15,000 x 100 c. 1,000/1,100 x 100 d. 1,100/15,000 x 100

d. 1,100/15,000 x 100

Total Population. 20,000 Working−Age Population. 15,000 Employment. 1,000 Unemployment. 100 Consider the data in the table above for a simple economy. The unemployment rate for this simple economy equals a. 100/15,000 x 100 b. 100/1,000 x 100 c. 100/20,000 x 100 d. 100/1,100 x 100

d. 100/1,100 x 100

Assume the market basket for the consumer price index has two products—bread and milk—with the following values in 2013 and 2020 for price and​ quantity: Product: Quantity Base Year​ (2013) 2020 Price: Price Milk. 50. ​ $1.20. $1.50 Bread. 100. 1.00. 1.10 The Consumer Price Index for 2020 equals a. 85 b. 86 c. 118 d. 116

d. 116 CPI= (cost of basket in current/cost of basket in base)* 100 2013: 1.20(50)+1.00(100)= 160 2020: 1.50(50)+1.10(100)= 185 CPI= (185/160)*100= 115.6= 116

If the number of employed is 190​ million, the number of unemployed is 10​ million, and the​ working-age population is 250​ million, then the labor force participation rate is ​a. 4%. ​b. 5.2%. ​c. 60%. ​d. 80%.

d. 80% LFPR= labor force/potential workers Labor force= employed+unemployed 190+10= 200 LFPR= 200/250= 0.8= 80%

Which of the following is an example of a worker experiencing frictional​ unemployment? a. An employee is laid off because the economy is suffering a recession. b. A United Airlines pilot loses her job because of lack of demand for air travel. c. A computer programmer loses her job because it is outsourced to India. d. A worker quits his job at the U.S. Post Office to find more interesting work.

d. A worker quits his job at the U.S. Post Office to find more interesting work.

The nominal GDP of the United States in 2019 was approximately​ $21.7 trillion. This means that a. total income in 2019 was around​ $21.7 trillion. b. the value of output in 2019 was around​ $21.7 trillion. c. total spending in 2019 was around​ $21.7 trillion. d. All of the above are true.

d. All of the above are true.

Which of the following is true about the consumer price​ index? a. It accounts for people switching to goods whose prices have fallen. b. It frequently updates the price changes of new products added to the market​ basket, as these have a tendency to fall. c. It filters out the part of price increases that occurs because of quality improvements in products. d. It assumes that consumers purchase the same amount of each product in the market basket each month.

d. It assumes that consumers purchase the same amount of each product in the market basket each month.

Sarah is a full−time student who is not looking for work. What kind of unemployment is Sarah​ experiencing? a. structural b. cyclical c. frictional d. Sarah is not experiencing unemployment of any​ kind, because she is not currently part of the labor force.

d. Sarah is not experiencing unemployment of any​ kind, because she is not currently part of the labor force.

Which of the following could cause nominal GDP to decrease next​ year, but real GDP to​ increase? a. The price level rises and the quantity of final goods and services produced rises. b. The price level rises and the quantity of final goods and services produced falls. c. The price level falls and the quantity of final goods and services produced falls. d. The price level falls and the quantity of final goods and services produced rises.

d. The price level falls and the quantity of final goods and services produced rises.

Which of the following could cause nominal GDP to increase next​ year, but real GDP to​ decrease? a. The price level falls and the quantity of final goods and services produced rises. b. The price level rises and the quantity of final goods and services produced rises. c. The price level falls and the quantity of final goods and services produced falls. d. The price level rises and the quantity of final goods and services produced falls.

d. The price level rises and the quantity of final goods and services produced falls.

When an economy is at its natural rate of​ unemployment, which of the following will be​ true? a. Only structural unemployment as a result of technological change will exist in the economy. b. The labor force participation rate will be​ 100%. c. The unemployment rate will be​ 0%. d. The unemployment rate will be greater than​ 0%.

d. The unemployment rate will be greater than​ 0%.

The purchase by a household in China of an automobile produced in the United States is included in a. U.S. consumption expenditures. b. U.S. investment expenditures. c. U.S. government purchases. d. U.S. net exports.

d. U.S. net exports.

Which of the following would reduce the labor force participation​ rate, all else​ equal? a. a decrease in the unemployment rate b. an increase in the number of people in the labor force c. an increase in the unemployment rate d. an increase in the working−age population

d. an increase in the working−age population

The consumer price index is the a. cost of a market basket of goods and services typically consumed in the current period. b. average of the prices of new final goods and services produced in the economy over a period of time. c. cost of a market basket of goods and services typically consumed in the base year. d. average of the prices of the goods and services purchased by a typical urban family of four.

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

If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI​ basket, then a. changes in the CPI are unrelated to the true rate of inflation. b. changes in the CPI accurately reflect the true rate of inflation. c. changes in the CPI understate the true rate of inflation. d. changes in the CPI overstate the true rate of inflation.

d. changes in the CPI overstate the true rate of inflation.

​Investment, as defined by​ economists, would include the purchase of a a. government bond. b. corporate bond. c. share of stock in ExxonMobil. d. computer by an accounting firm.

d. computer by an accounting firm.

Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing​ ________ unemployment in the near future. a. structural b. permanent c. cyclical d. frictional

d. frictional

The unemployment rate equals the number of unemployed divided by the​ ________ , all times 100. a. total population b. number of employed c. working−age population d. labor force

d. labor force

The​ "new product​ bias" in the consumer price index refers to the idea that a. consumers switch to new goods when the prices of old goods​ increase, and the CPI overestimates the cost to consumers. b. consumers prefer new​ goods, even if they are worse in quality than old​ goods, and this causes the CPI to underestimate the cost to consumers. c. consumers switch to old goods when the prices of new goods​ increase, and the CPI underestimates the cost to consumers. d. new​ products' prices often decrease after their initial​ introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

d. new​ products' prices often decrease after their initial​ introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

Real GDP will increase a. only if the price level falls. b. only if the price level rises. c. if either the price level rises or the quantity of final goods and services produced rises. d. only if the quantity of final goods and services produced rises.

d. only if the quantity of final goods and services produced rises.

If real GDP in 2022​ (using 2021​ prices) is lower than nominal GDP of​ 2021, then a. nominal GDP in 2022 equals nominal GDP in 2021. b. real GDP in 2022 is larger than real GDP in 2021. c. prices in 2022 are higher than prices in 2021. d. output in 2022 is lower than output in 2021.

d. output in 2022 is lower than output in 2021.

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause a. the number of discouraged workers to increase. b. no change in the unemployment rate. c. the unemployment rate to decrease. d. the labor force participation rate to decrease.

d. the labor force participation rate to decrease.

All else​ equal, if technological change results in a permanent increase in structural​ unemployment, then which of the following would also​ increase? a. cyclical unemployment b. seasonal unemployment c. frictional unemployment d. the natural rate of unemployment

d. the natural rate of unemployment

Gross domestic product understates the total production of final goods and services because of the omission of a. exports. b. inflation. c. intermediate goods. d. the underground economy.

d. the underground economy.

Suppose in​ 2020, you purchased a house built in 2014. Which of the following would be included in the gross domestic product for​ 2020? a. the value of the house in 2020 minus depreciation b. the value of the house in 2014 c. the value of the house in 2020 d. the value of the services of the real estate agent

d. the value of the services of the real estate agent

In​ 2020, Kendall​ Ford, an automobile​ dealership, spent​ $20,000 on a new car lift for its repair​ shop, $2,000 on a new copy machine for its sales​ division, and​ $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at​ $400,000 on January​ 1, 2020 and unsold cars and trucks were valued at​ $900,000 on December​ 31, 2020. What is Kendall​ Ford's total investment spending in​ 2020? a. ​$22,000 b. ​$1,022,000 c. ​$322,000 d. ​$522,000

d. ​$522,000 Dealership Cost + Repair Expenses+ Closing Stock (Unsold cars and trucks were valued on December​ 31, 2013) -Opening Cost (Unsold cars and trucks were valued at​ on January​ 1, 2013) ($20,000+$2000+$900,000-$400,000= 522,000)

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. ​a. not; overstate ​b. also; overstate ​c. not; understate ​d. also; understate

​a. not; overstate

During a business cycle​ expansion, total production​ ________ and total employment​ ___________. a. decreases; increases b. increases; increases c. increases; decreases d. decreases; decreases

​b. increases; increases

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. a. do not​ change; under−estimates b. do not​ change; over−estimates ​c. change; over−estimates ​d. change; under−estimates

​c. change; over−estimates