Econ Exam 1 Practice Quiz

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: 7%. 4.2%. 14.29%. 10%.

14.29%. Unemployment Rate (%): unemployed / labor force. x 100%

The price measure MOST widely used to determine the inflation rate in the United States is the _____. GDP deflator producer price index consumer price index national income account

consumer price index

Deflation is a: decreasing aggregate price level. decrease in unemployment. decline in wages. recession.

decreasing aggregate price level.

The total income of households after taxes and government transfers is called: disposable income. aggregate spending. private savings. investment.

disposable income.

In general, expansions are characterized by: constant employment. decreasing employment. falling unemployment. increasing unemployment.

falling unemployment.

GDP is the total dollar value of all: government production in a given period. wages paid to producing workers in a given period. intermediate goods and services produced in the economy in a given period. final goods and services produced in the economy in a given period.

final goods and services produced in the economy in a given period.

A nation's exports minus its imports: is net exports. is equal to net transfer payments. is always a positive number. equals its private investment.

is net exports.

The real interest rate is the nominal interest rate _____. less the rate of inflation multiplied by the rate of inflation plus the rate of inflation divided by the rate of inflation

less the rate of inflation

Which item would NOT be included in GDP for 2019? The production of a television show The hiring of a new police officer The purchase of a new work truck Your purchase of your neighbor's 2015 Toyota

your purchase of your neighbor's 2015 Toyota

The rate of unemployment is found by dividing the: number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed.. unemployed and discouraged workers by the labor force.. labor force by the number of people seeking work.. number of people looking for work by the population..

number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed.

The unemployment rate is the: percent of the labor force that is unemployed. average length of time someone is unemployed. number of people unemployed. the labor force minus the number of people unemployed.

percent of the labor force that is unemployed.

The producer price index is often regarded as a warning sign of inflation because: prices of inputs will ultimately be reflected in prices of final products. commodity producers can sell whatever they want at higher prices. producers are likely to have monopoly control over prices. consumers have to pay the prices charged.

prices of inputs will ultimately be reflected in prices of final products.

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 2017?

$40 Market basket = (Q(a) x P(a)) + (Q(b) x P(b))

When the price level increases and incomes remain constant, _____. real income decreases everyone becomes wealthier real wealth increases lenders are better off

real income decreases

According to the information presented in the Table, GDP is:

$188 billion. GDP = C + I + G + (X - IM)

If the wage rate is $40 per hour, and the price level is 2, then the real wage is _____ per hour. $20 $2​ $40 $80

$20 Wage rate / price level = real wage

The total population is _____ million.

278

What is the total value added of all stages of production of furniture in this production schedule?

$1,200 Make sure you subtract anything that is duplicated, ex... intermediate good or good being counted twice

Consider an economy that produces only smartphones and laptops. Last year, 10 smartphones were sold at $800 each, and 5 laptops were sold at $1,000 each, while this year, 15 smartphones were sold at $900 each, and 10 laptops were sold at $1,100 each. Real GDP this year, using last year as a base year, is:

$22,000. RGDP is calculated by using quantities of given year multiplied by prices of base year.

Assume that an economy produces only lemonade and cookies. If 2019 is the base year, real GDP in 2019 was:

$445. Real GDP is same as base year, so your use quantities and prices from 2019.

If, during 2019, the Republic of Sildavia recorded a GDP of $75 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2019 in Sildavia were:

$46 billion. GDP can also be calculated by adding wages, profits, interest, and rent.

Total expenditures on GDP by the household sector are:

$600 billion. The household sector is labeled as personal consumption.

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:

$630 Add up the price of products and value added to get the total.

Considering 2018 as the base year, real GDP between 2018 and 2019 grew at a rate of:

-39.47%. RGDP is calculated by using quantities of given year multiplied by prices of base year. Then rate of growth is calculated by (given year - base year) / (base year)

If 99 million people are working, and 1 million are unemployed but actively seeking work, then the unemployment rate is _____%. 5 1 100 10

1

Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume that the unit prices of these goods are as follows for the years noted and that 2018 is the base year. What is the value of the price index in 2018?

100 The price index for base year is always 100.

Calculate the GDP deflator for 2019.

104 GDP deflator is calculated by nominal GDP divided by same year RGDP x100.

The total population is _____ million.

232 Total population is everyone added together.

Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million.

27 Labor force participation rate: labor force / population 16 & older x 100% Then subtract labor force by employed.

The unemployment rate is _____%.

3.85

If marginally attached workers are included in the labor force and counted as unemployed, the unemployment rate is _____%.

3.85 Make sure to add employed, discouraged, and people seeking together and then divide unemployed by that.

If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about:

5.56%. Inflation Rate = [Price Index (Year 2) - Price Index (Year 1)] / Price Index (Year 1) x 100

If marginally attached workers are included, the number of persons in the labor force in Estill County is:

6,500. Labor force is discouraged, people seeking, and employed added together.

If marginally attached workers are included in the labor force and counted as unemployed, the unemployment rate is _____%.

7.2 Add discouraged, and unemployed looking for job, and then divide that by those who are employed then multiply by 100

Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million.

8 Labor force participation rate: labor force / population 16 & older x 100% Then subtract labor force by employed.

Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____%, and the real interest rate is _____%. 9; 6 6; 9 9; 3 6; 12

9; 6

Which transaction is included in the nation's gross domestic product? A construction company purchases lumber to build a new house. A college student buys a pizza and has it delivered to her dorm room. A college student buys a used textbook from his roommate. A group of college students volunteer to rake leaves at an assisted living facility for senior citizens.

A college student buys a pizza and has it delivered to her dorm room.

A price index: Always includes a base year. Is used to measure the cost of a market basket across different years. Is normalized so that it equals 100 in the base year. All of the above are true.

All of the above are true.

Which equation breaks GDP down into the four sources of aggregate spending? GDP = C + I + G - X - IM. GDP = C - I - G - X + IM. GDP = C + I + G + X - IM. GDP = C + I + G + X + IM.

GDP = C + I + G + X - IM.

Equation for inflation rate between years

Inflation Rate = [Price Index (Year 2) - Price Index (Year 1)] / [Price Index (Year 1)] x 100

Which statement about gross domestic product is FALSE? It is the total output of final goods and services. It is the total output of all final and intermediate goods and services. It grows during an expansion. It is aggregate output.

It is the total output of all final and intermediate goods and services.

Which statement is TRUE? The labor force is the same as the population. The labor force is the total number of people working plus those who are unemployed. The number of people not working but who have looked for work in the past year is equal to the number of unemployed people. The unemployment rate is the number of people unemployed expressed as a percentage of the population.

The labor force is the total number of people working plus those who are unemployed.

RGDP for base year is equal to nominal GDP in base year. True or false?

True. Nominal and Real GDP are equal in base year because they have not had to adjust RGDP for inflation.

The value of _____ is counted in GDP. glass for windshields purchased by a car manufacturer a used car sold by a dealer a share of stock in a car manufacturer a new car sold by a dealer

a new car sold by a dealer

IGNORE If the dollar amount of nominal GDP decreases, then it is possible that ____. aggregate output decreases by more than prices aggregate output decreases by less than prices increase aggregate output increases by more than prices aggregate output increases and prices decrease

aggregate output decreases by more than prices

When inflation rises unexpectedly, borrowers will _____, and lenders will _____. benefit; benefit be hurt; be hurt be hurt; benefit benefit; be hurt

benefit; be hurt

Menu costs of inflation are the: costs associated with money becoming a less reliable unit of measurement. costs associated with businesses changing prices. costs of transactions associated with avoiding the inflation tax. revenue the government gets from printing money.

costs associated with businesses changing prices.

Unit-of-account costs of inflation are the: costs associated with money becoming a less reliable unit of measurement. transfers the government gets from printing money. costs of transactions associated with avoiding the inflation tax. costs associated with businesses changing prices.

costs associated with money becoming a less reliable unit of measurement.

Shoe-leather costs are the: high price of leather goods. increased cost of transactions due to inflation. effect of inflation on transportation costs.​ effect of inflation on the prices of food, clothing, and other necessities.

increased cost of transactions due to inflation.

An INCREASE in the number of discouraged workers tends to: lower the number of people who are frictionally unemployed. raise the official unemployment rate. increase the number of people who are structurally unemployed. lower the official unemployment rate.

lower the official unemployment rate.

In official unemployment statistics, discouraged workers are: included in the labor force. counted as underemployed. counted as employed. not included in the labor force.

not included in the labor force.

Income divided by the price level is _____ income. national disposable personal real

real

Real per capita GDP is: rarely used as a tool to compare countries' possible resources. real GDP divided by the population. real GDP divided by the amount of capital available in the economy. not a useful measure of human welfare.

real GDP divided by the population

The scale MOST often used to compare economic performance in other years is: the business cycle. real GDP. fiscal policy. the circular-flow diagram.

real GDP.

In the circular-flow model, households: sell products in the market for goods and services. buy resources in the factor markets. issue stocks and bonds to raise capital. receive transfer payments from the government.

receive transfer payments from the government.

If the price level and nominal GDP both doubled, then real GDP would: increase by half. also double. remain unchanged. decrease by half.

remain unchanged.

A survey reveals that, on a small island, initially, 1,000 people have jobs, 200 people are unemployed but are looking for jobs, and 200 people are neither working nor looking for work. Suppose that 100 of the 200 people who weren't looking for work now begin looking for work and that half of the new entrants find a job. The unemployment rate: rises to 28.6%. rises to 21.4%. Nothing happens to the unemployment rate. rises to 19.2%.

rises to 19.2%.

A survey reveals that, on a small island, initially, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for jobs. Suppose that 10 of the 30 people who weren't working or looking for work now begin looking for work. There are now 20 people without jobs but looking for work and 40 people working. The unemployment rate: rises to 33.3%. falls to 25%. Nothing happens to the unemployment rate because these people weren't working before, and they aren't working now. rises to 50%.

rises to 33.3%.

In the circular-flow diagram, firms: buy services outside of investment spending. sell goods and services. buy goods outside of investment spending. sell labor.

sell goods and services.

The inflation or deflation rate is: the change in a price index divided by the new index number. the change in a price index divided by the initial value of the index. the difference between the initial price index number and the new price index number. computed by dividing the old price index number by the new price index number.

the change in a price index divided by the initial value of the index.

The price index in the current year is the cost of the market basket in ____ year divided by the cost of the market basket in ____ year times 100. a past; a future the base; the current a future; a past the current; the base

the current; the base

Which item would NOT be included in this year's GDP? the hiring of a new school teacher the production of a television show the purchase of a new hybrid truck the purchase of your neighbor's house, which was built in 2010

the purchase of your neighbor's house, which was built in 2010

The MOST important use of GDP is as a measure of: rates of return in financial markets. changes in the price level. the size of the economy. the level of unemployment.

the size of the economy.