Econ 202 midterm

Workers today are more productive than they were in the past because they:

are better educated and so have more human capital

Expansions are periods when

both real GDP and employment grow

Expansions are periods when_________

both real GDP and employment grow

In the factor markets:

© firms buy resources.

(Table: Peanut Butter and Jelly Prices) Use Table: Peanut Butter and Jelly Prices. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2019?

$49

If a country has a population of 1,000 people, an area of 100 square miles, and a GDP of $5 million, then its GDP per capita is:

$5,000.

In February 2020, the Bureau of Labor Statistics calculated the unemployment rate to be 3.5%. If frictional unemployment was 1% and structural unemployment was 2%, then the cyclical rate of unemployment was:

0.5%.

(Table: Unemployment and Employment Data) If marginally attached workers are included, the number of persons in the labor force in this economy is million. Table: Unemployment and Employment Data (in millions) Population-170 Employed-95 Unemployed and looking for work-5 Discouraged workers-3 Retired-30

103

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2017, $140 in 2018, and $160 in 2019 Based on this information, and assuming 2017 is the base year, the price index in 2019 was:

123.07.

If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is 0 7.7 0 8.3 © 50 0 92 %

7.7

Determine whether each description refers to nominal gross domestic product (GDP) or real GDP.

A measure of an economy's output using current prices. © nominal GDP A measure of an economy's output using constant prices. © real GDP A measure of output that is adjusted for inflation. © real GDP A measure of output that is not adjusted for inflation. © nominal GDP

The potential output of an economy depends on three factors: human capital, physical capital, and technology. For each item below, indicate whether it affects human capital, physical capital, or technology.

An improvement in adult literacy © human capital b. An increase in the college student population © human capital c. The development of smaller mp3 players © technology d. The acquisition of computers by companies © physical capital e. New distribution techniques • technology

The actions of individuals in an economy can compound upon one another, leading to outcomes that magnify the actions of individuals. This can be summarized using which phrase?

The whole is greater than the sum of its parts.

The Japanese car maker Honda owns production facilities in Marysville, Ohio. If the cars made there are sold exclusively in the United States, in which category would the cars be counted?

U.S. GDP

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, cach productivity (or real GDP per worker). successive increase in physical capital leads to_________ productivity ( or real gdp per worker)

a smaller increase in

Categorize each item below as a component of Gross Domestic Product (GDP): consumption, investment, government purchases, or net exports

a. A ticket to a local sporting event. consumption b. A 55-cent taco consumption c. A public school teacher's salary government purchascs d. A dollhouse sold abroad net exports

Altering government spending and/or taxes in an effort to affect overall spending is a use of:

fiscal policy.

Structural unemployment CANNOT be caused by:

fluctuations in the business cycle.

Throughout the twentieth century, nations in Latin America had disappointing growth rates, primarily due to:

low rates of national savings, political instability, and a lack of emphasis on education.

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs more frequently than normally. This is an example of the_________ costs of inflation.

menu

If an economy experiences deflation, then the

overall price level is declining.

The nominal interest rate equals the real interest rate:

plus the rate of inflation.

The productivity function measures productivity as:

real GDP per worker.

When the price level increases and incomes remain constant, -

real income decreases

Real GDP per capita is NOT an adequate measure of

the well-being of each person in an economy.

The unemployment rate is the ratio of all people who are:

unemployed to those in the labor force.

Which item would NOT be included in GDP for 2019?

your purchase of your neighbor's 2015 Toyota

What is the main goal of policymakers in regard to the business cycle?

© limit the volatility of the business cycle by reducing the size of both recessions and economic booms

A binding minimum wage results in:

an increase in structural unemployment.

Unemployment is at the natural rate of unemployment if there is no:

cyclical unemployment.

Unit-of-account costs refer to the:

decreased reliability of money as a unit of measurement.

Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is

4

Use the rule of 70 to answer the question If Ireland took 15 years to double its real GDP per capita, what was its average annual GDP per capita growth rate during this period?

4.67%

Households Consumer spending = $400 Taxes = $100 Goods and services markets Government purchases of goods and services = $100 Government Firms Imports = $30 Exports = $30 Rest of world

400

Assume that the consumer price index is 124.0 for 2018 and 130.7 for 2019. What was the inflation rate between these two years?

5.40%

Households Consumer spending = $400 Taxes = $100 Goods and services markets Government purchases of goods and services = $100 Government Firms Imports = $30 Exports = $30 Rest of world

500

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth Significant technological progress, with all other factors remaining unchanged, is BEST indicated by a move from: Real GDP per worker (constant dollars) $120,000 Productivity using 2020 technology 90,000 B 60,000 Productivity using 1940 technology 30.000 10 20 30 40 50 60 70 80 90 100 Physical capital per worker (2000 dollars)

BtoC.

Which statement describes capital income as it pertains to the capital and labor income measure of gross domestic product (GDP)?

Capital income includes profits from business, rents carned from land and buildings, interest from financial assets such as bonds, and royalties from copyrights and patents but excludes income from the self-employed.

Which transaction is not included in gross domestic product?

Francis receives her social security check.

The economist of the 1930s who argued that the Great Depression was caused by inadequate spending was:

John Maynard Keynes.

What is the difference between real and nominal gross domestic product (GDP)?

Nominal GDP for a given year is measured in dollars of that year, whereas real GDP is measured in dollars of some base year.

Select the best definition of labor productivity

Output per worker

________refers to spending to develop and implement new technologies.

Research and development

What does productivity, or labor productivity, measure?

The amount of goods or services that can be produced by one worker in one hour of work

The potential output of an economy depends on three factors: human capital, physical capital, and technology. For each item below, indicate whether it affects human capital, physical capital, or technology.

a. An improvement in adult literacy © human capital b. An increase in the college student population © human capital c. The development of smaller mp3 players technology d. The acquisition of computers by companies © physical capital e. New distribution techniques • technology

Indicate whether each of the following items is an input in the aggregate production function for GDP.

a. Contributions to Social Security • Is not an input b. Bonds issued by an automaker © Is not an input c. Profits of a large investment company © Is not an input d. A significant amount of oil discovered in Texas © Is an input

Which of the items, ceteris paribus, would cause an understatement of a nation's living standard by real gross domestic product per capita?

an increase in amount of leisure time

Andre recently moved to Boston with his partner Deja, who has a new job as an economics professor at Harvard. Andre is an experienced surgeon who is interviewing with several hospitals in Boston. Andre is:

frictionally unemployed.

Over the past year, Hakeem has been working very hard. His employer has taken notice and given Hakeem a 6% raise. During this past year, overall prices in the economy have increased by 4%. Hakeem's real wage has:

increased by 2%.